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Financial Services Law Insights and Observations

Chopra testifies at congressional hearings

Federal Issues CFPB House Financial Services Committee Senate Banking Committee Section 1071 Consumer Finance Overdraft Junk Fees UDAAP

Federal Issues

On December 14, CFPB Director Rohit Chopra testified at a hearing titled Consumers First: Semi-Annual Report of the Consumer Financial Protection Bureau held by the House Financial Services Committee on the CFPB’s most recent semi-annual report to Congress (covered by InfoBytes here). Chopra’s prepared statement focused on: (i) the current state of the economy and household finance; (ii) promoting an open, competitive, and a decentralized market; and (iii) actions by Congress where bipartisan support is expected. Chopra also cited concerns regarding the accuracy of medical debt credit reporting and noted that the CFPB is continuing “to examine how medical debt burdens are impacting household balance sheets.”

House Financial Services Chairwoman Maxine Waters (D-CA) praised Chopra’s leadership in her opening statement, stating that the Bureau has combated “redlining, housing discrimination, illegal evictions, and foreclosures, and has worked tirelessly to root out appraisal bias.” However, Ranking Member Patrick McHenry (R-PA) argued that the Bureau’s “lack of transparency is of grave concern.” McHenry discussed the CFPB’s six compliance bulletins, five advisory opinions, five interpretive rules, and seven circulars published this year, which he considers to have fostered “uncertainty” within the financial services industry. McHenry also warned Chopra that he can expect “much more thorough” oversight next year when Republicans take control of the House and when McHenry becomes the chair of the House Financial Services Committee.

During the hearing, Chopra acknowledged that the Bureau's Section 1071 Rulemaking “is on track to issue a final rule by March 31, 2023”—a deadline established by court order in July as a result of a stipulated settlement reached in February 2020 with a group of plaintiffs, including the California Reinvestment Coalition, related to the collection of small business lending data (covered by InfoBytes here). Chopra added that the Bureau wants to ensure it has “an implementation period that gives the smaller firms more time, and the ability to make sure it’s not duplicative with existing requirements under the Community Reinvestment Act.”

During the hearing, Republican committee members inquired about the agency’s creation and use of the term “junk fees” to describe, among other things, legal fees that banks charge for financial products and services. According to Rep. Blaine Luetkemeyer (R-MO) “there is no such word in financial services lexicon,” and the Bureau is “making up a word and then using it to go out and enforce something that doesn’t exist.” Republican committee members also inquired about the Bureau’s recent updates to its UDAAP exam manual. As previously covered by a Buckley Special Alert, in March, the CFPB announced significant revisions to its UDAAP exam manual, in particular highlighting the CFPB’s view that its broad authority under UDAAP allows it to address discriminatory conduct in the offering of any financial product or service. Rep. Andy Barr (R-KY) commented that “this is not interpretive guidance,” and said Chopra is “trying to change the law.”

Chopra reiterated the Bureau’s priorities in his December 15 testimony before the Senate Banking Committee. During the hearing, Ranking Member Sherrod Brown (D-OH) noted that Republican lawmakers proposed legislation to subject the CFPB to appropriations and to change the CFPB's single-director structure to a commission. Chopra was also questioned by Ranking Member Patrick Toomey (R-PA) who raised concerns regarding the Bureau’s “overreach and pursuit of a politicized agenda.” He further argued that “the Dodd-Frank Act exempted the CFPB from appropriations,” and “empowers the CFPB to simply take funds from the Fed, which is itself also not subject to appropriation, thereby doubly insulating the CFPB from any congressional control.” Other topics discussed during the hearing included, among other things, military lending, credit cards, and overdraft fees.