Director Rohit Chopra’s Written Testimony to the Senate Banking, Housing, and Urban Affairs Committee

Chairman Brown, Fellow Toomey and Distinguished Members of the Committee, I am pleased to appear before you today in conjunction with the submission of the semi-annual report to Congress by the Consumer Financial Protection Bureau (CFPB).

During my first six months as director, the Consumer Financial Protection Bureau refocused its efforts to align with the goals Congress set for the agency. I have described some of the highlights of this work below.

Focus enforcement on repeat offenders and other major market players

When small businesses break the law, federal law enforcement is often quick to impose crippling penalties. But when big players repeatedly break the law, agencies are much more lenient. It is highly inappropriate.

I undertake that the CFPB will not go down this path. The CFPB diverts law enforcement resources away from small business investigations and instead focuses on repeat offenders and big players implicated in large-scale damages.

For example, in recent months we have filed lawsuits against two very large companies, FirstCash and TransUnion, for violating enforcement orders and other consumer financial protection laws. In both cases, the entities voluntarily consented to an injunction and committed on clear notice of their obligations. The CFPB alleges that the two companies violated their orders and continued to violate the law.

The CFPB and the New York Attorney General also recently filed a lawsuit against MoneyGram, one of the world’s largest remittance providers, for violating rules imposed by Congress on the transfer market. money, despite plenty of chances to come into compliance.

During my tenure, the CFPB will not only focus on large players engaged in widespread damage, but will also enforce the law as written. I expect this could lead to more litigation, but also lend greater legitimacy to the agency’s actions.

Improve transparency through guidance

Laws work best when they are easy to understand, easy to follow and easy to apply. During my tenure, the CFPB will significantly increase its publication of guidance documents, such as advisory opinions, compliance bulletins, policy statements and other publications. We have already started doing this on a wide variety of topics.

These efforts help entities comply with laws passed by Congress by providing further clarity where needed or drawing attention to an already clear legal requirement. They also promote consistency among the many government actors responsible for enforcing federal consumer finance law, including other federal regulators and state and tribal attorneys general across the country. The CFPB is particularly interested in areas where guidance can support the compliance efforts of small institutions and new entrants.

Rethinking our approach to regulation

When Congress and the President enact laws that direct or authorize the enactment of regulations, agencies should not ignore them.1 I am committed to ensuring that the CFPB takes meaningful steps to implement the legislative directives.

By the time I became director, the CFPB had made no significant progress in developing several rules authorized by Congress in the Consumer Financial Protection Act, including under Section 1033, a provision that could increase competition and choice in consumer financial markets. In addition, the agency is working to implement Section 1071 of the Act, regarding small business data. This is not a discretionary rule and the CFPB is subject to a court order to ensure its timely implementation.

In December 2021, Congress amended the Fair Credit Reporting Act to help survivors of human trafficking and required the CFPB to implement the regulations within 180 days. The CFPB has already released a proposal for public comment and is working to complete rulemaking to meet the deadline set by Congress.

More generally, I fear that the approach to regulation pursued by federal banking agencies is overly complicated. I asked CFPB staff to focus on simplicity and “clear lines” as much as possible. We also review the rules the agency inherited from the Federal Reserve Board of Governors to identify opportunities for improvement.

The CFPB has also launched a new process to allow the public to more freely exercise the constitutional right to petition the government. Our new process will allow us to hear directly from the public about potential regulations that should be developed or amended.

Listen and learn from the business community

While large depository and non-custodial institutions have direct access to the CFPB through our oversight program, many other companies also have an interest in CFPB policies. During my confirmation process, I received feedback that the CFPB was extremely responsive to large financial institutions, but not sufficiently committed to listening and learning from local financial institutions and the broader business community. I take this criticism seriously and have ordered a number of changes to the agency’s approach to the status quo.

A key priority for me has been to engage with institutions without direct access to the CFPB, including small banks and credit unions. I have had the good fortune to meet with many state-based associations to speak directly with community banks and credit unions, and I hope to meet with all of these associations during my tenure.

The CFPB also works with a wide range of other businesses and associations, including healthcare providers, car dealerships, farmers, hoteliers, retailers, and more. Although these industries generally engage in business practices that fall outside the CFPB’s authority, they are deeply affected by the laws the agency administers. These efforts will help the CFPB better meet the needs of businesses across the economy.

Promotion of competition

In our market system, one of the best ways for consumers to protect themselves is to switch suppliers who treat them badly. That is why Congress has established as its primary objective that the CFPB seek to ensure that markets for consumer financial products and services are fair, transparent and competitive.

Competition leads to innovation, attractive prices, quality service and benefits that are sometimes difficult to quantify. But when consumers can’t select their provider or when switching is complex or difficult, it can lead to stagnation, unwanted fees, and poor treatment. Indeed, in many markets for consumer financial products and services, such as loan servicing and credit reporting, consumers have no choice of provider.

In addition to implementing the rules under Section 1033, we will launch other initiatives to identify ways to lower barriers to entry and increase the pool of companies competing for customers by based on quality, price and service. We are particularly interested in ways that smaller financial institutions can leverage technology and systems, like the planned FedNow program, to capture market share while preserving their banking relationship model.

Preparing for the era of Big Tech and Big Data in banking

America’s consumer credit infrastructure is the plumbing for an enormous amount of economic activity. New technologies and systems can bring us faster payments and new opportunities to connect customers and financial providers. During my tenure, the CFPB will be very focused on what the future holds and how we can collectively shape it in a way that aligns with American values.

Currently, the United States is moving towards a consolidated market structure where finance and commerce intertwine, fueled by uncontrolled flows of consumer data. This is the market structure that has emerged in China, where Alipay (operated by Ant Group, formerly known as Alibaba) and WeChatPay (operated by Tencent) predominate. Alipay is part of the same conglomerate that dominates e-commerce, and WeChatPay is connected to the dominant messaging app.

These super apps have access to an extraordinary set of consumer and business data, including the financial firms with which they may compete. In recent years, Chinese tech and finance giants have developed so-called “social scoring” that goes beyond credit performance and is based on analyzing unrelated user habits. with credit and banking.2

The outsized influence of these dominant tech conglomerates over the financial services ecosystem carries risks and raises a host of questions about privacy, fraud, discrimination, and more. The CFPB is currently investigating these questions as part of our investigation into Big Tech’s entry into US consumer payments. The agency issued a series of orders to Google, Facebook, Amazon, Apple, PayPal and Block (formerly Square) to better understand key issues with their consumer payment plans. We plan to publish reports of our research to contribute to critical policy discussions about the future of consumer credit and relationship banking in our country.

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Thank you again for giving me the opportunity to appear before you, and I look forward to answering your questions.