Biden’s CFPB candidate brings this to the attention of credit servicers and credit bureaus
President Biden’s candidate to head the Consumer Financial Protection Bureau promised the office would come to the rescue of student loan borrowers, consumers trying to correct inaccurate credit reports, and homeowners hard hit by the coronavirus pandemic.
Rohit Chopra’s comments before the Senate Banking Committee on Tuesday were among the highlights of a far-reaching endorsement for him and Gary Gensler, a veteran regulator appointed to lead the Securities and Exchange Commission.
The Democrats raised concerns about the CFPB’s lack of surveillance of student loans during the Trump era. And lawmakers asked questions about mortgage loan rules and issues with consumer credit reporting.
The hearing also highlighted the partisan divisions on the direction of the federal financial supervisory authorities and the scope of their responsibilities. Republican lawmakers questioned whether it is appropriate for the SEC to regulate activities such as environmental impacts that are outside the economic interests of shareholders, while Democrats pushed Gensler to include political and climate-related disclosures in SEC rules.
Here are five key areas where Chopra and Gensler have been pressured by lawmakers about what action they would take or how they would behave.
Some senators raised specific questions about the rule of law and whether Chopra was planning to break away from a previous Democratic candidate, former CFPB director Richard Cordray, who was often used by Republican lawmakers and corporations for what they call “regulation through enforcement.” “designated, was convicted.
Senator Pat Toomey, R-Pa., Wanted to know if Chopra would repeal a rule set in January by then CFPB director Kraninger that clarifies the difference between regulations and regulatory guidance.
“Are you committed to complying with this law, this rule, or do you intend to reconsider and change this rule passed this year?” Toomey asked.
Chopra replied, “Regulatory advice should really be there to help institutions understand how best to comply.”
At another point, when asked about his views on any unfair, misleading, or abusive act or practice, Chopra said, “We must enforce the law as it is written.”
Mortgages, credit reports
The 2008 financial crisis and the regulatory response to it were of great concern to both Chopra and Gensler.
Senator Jon Tester, D-Mont., Asked how the CFPB will help affected members and how the office will decide which ones Businesses deserve enforcement action. The CFPB typically investigates consumer complaints, recommendations from other agencies, and issues raised during regulatory reviews to identify and investigate wrongdoing.
Chopra drew on lessons from the period of crisis several times to explain how the office should respond to the financial strain on consumers in the current economy.
“We learned from the last crisis that regulators overlooked some of the links between the mortgage market and our economy,” Chopra said. “We saw the illegal foreclosures of active duty members not long ago. It will be vital for the CFPB to monitor these markets. So we don’t see any more deja vu of this crisis. “
Senator John Kennedy, R-La., Asked if mortgage managers were blamed for the foreclosure escalation and the resulting economic crisis. Gensler was Chairman of the Commodity Futures Trading Commission from 2009 to 2014.
“They were there in ’08 and ’09.” Said Kennedy. “Why didn’t anyone go to jail? Who has called? Someone in the judiciary must have said, “We’re not going to put these thieves in jail.” “”
Gensler replied that the CFTC was a law enforcement agency. In an immediate follow-up question, Senator Catherina Cortez Masto, D-Nev., Noted that Gensler was not serving in the Justice Department at the time during the foreclosure crisis and the CFTC had no law enforcement agency.
Kennedy also asked Chopra questions about the difficulty consumers are having in making changes to inaccurate credit reports and the CFPB’s plans to do so.
“The credit bureaus make their money with the companies, they don’t make their money with the consumers,” said Kennedy. “When a business as a consumer reports a debt to the credit bureau that I have not paid, the credit bureau is less concerned about the accuracy of that information than if the credit bureau was depending on me, the consumer, to pay their bills. Is that a fair assessment? “
Chopra responded by stating that despite the requirements of the Fair Credit Reporting Act, consumers have difficulty changing inaccurate information.
“Accuracy is critical to the functioning of the credit reporting system,” he said. “I think the idea of making sure consumers can argue and get answers is part of the FCRA.”
However, Chopra said that large tech companies must also be asked about the accuracy of the information they collect.
“These are some of the big problems we face not just with credit bureaus, but also with the bulk databases that are being collected by big technology companies that are increasingly part of financial services,” he said.
Democratic lawmakers criticized Kraninger for failing to impose severe penalties on malefactors. Chopra, currently a member of the Federal Trade Commission, assured them that he would be stricter.
“If victims of fraud and misconduct are not treated fully, it will not only harm them but also other businesses,” he said. If you tear someone down and don’t have to pay them back, what’s a sanction? “
Lawmakers also repeatedly voiced concerns about rising student loan debt, which now stands at $ 1.7 trillion, with most of the losses being attributable to defaults on federal government-backed loans. The CFPB, under former Republican leadership, ceased to oversee student lenders and service providers.
Senator Tina Smith, D-Minn., Said her constituents are struggling to participate in income-based repayment plans and the public credit program, which allows federal employees to extend credit after 120 qualifying payments.
The Biden government has suspended federal student loan payments until September. But Smith raised questions about the CFPB’s oversight of student loan service providers.
Chopra, who previously served as the CFPB’s student loan ombudsman, said he plans to work closely with the Department of Education to hold student loan service providers accountable.
“Some of the problems we’ve seen on the mortgage service are creeping into the student loan market in my opinion,” Chopra said.
Chopra promised to take action against service providers who do not allow borrowers to restructure loan payments or prevent them from enrolling in forbearance or forgiveness programs.
“When servicers or debt collection agencies misrepresent these options, it’s a big problem,” he said. “It is important that loan servants keep their commitments.”
Chopra, who is also on the board of directors of Federal Deposit Insurance Corp. as CFPB director. was asked how much he would try to influence this agency’s agenda.
While Trump-nominated FDIC chairman Jelena McWilliams will lead the agency through 2023, experts have speculated that members appointed by Biden could wield significant power as members of the FDIC board. The FDIC’s Bylaws provide that two members, including the CFPB Director and the Currency Auditor, may submit written requests to the Agency’s Executive Secretary to convene the FDIC Board of Directors.
Senator Cynthia Lummis, R-Wyo., Urged Chopra not to force a vote on new guidelines that were not approved by McWilliams.
“Chairman McWilliams was confirmed by the Senate to set the direction for the FDIC,” said Lummis. “Since you are not the chairman of the FDIC board, you undertake not to force votes on matters that the FDIC chair did not put on the board’s agenda.”
Chopra said he was unaware of the specific FDIC rules.
“I’m not actually familiar with these procedural rules, but I am happy to answer questions for the record,” said Chopra.
In light of the ongoing discussions about corporate policy spending following the January 6th Capitol Hill riots, Democrats on the Committee encouraged Gensler to expand disclosure requirements.
Senator Bob Menendez, DN.J., who introduced laws requiring companies to disclose their political contributions and require shareholder approval for donations, urged Gensler to require companies to disclose their political contributions.
“The fact that so many companies reassessed their policy contribution plans after the January 6th attack on the Capitol shows how quickly they realized that the potential contributions have a material impact on their reputation and the profitability of their business.” said Menendez. “Do you agree that political contributions from listed companies constitute material information?”
Gensler suggested that investors would benefit from knowing corporate policy contributions without endorsing any particular rule.
“Disclosures are critical to investors in promoting capital formation,” said Gensler. “Without anticipating any specific issue, I can assure you that once this is confirmed in the materiality standard that governs all of these disclosure decisions, I will be grounded. … I think the Commission should take this into account given the strong investor interest. “
Republicans on the committee signaled opposition to the SEC’s political considerations or social policy requirements.
“Securities laws are not the right vehicle to regulate climate change, correct racial injustices, or intimidate businesses about political issues,” Toomey said.