The testimony of Rohit Chopra, director of the Consumer Financial Protection Bureau (CFPB), before the Senate Banking Committee on April 26 offered important insights into the next moves to be expected from the regulator.
Chopra centered his speech around three areas: Big Tech firms, repeat offenders and open banking.
During the hearing, republican lawmakers accused the agency, and in particular Chopra, of exceeding its authority to regulate and seeking an accumulation of power for himself. Senator Pat Toomey gave as examples the change in the rules of adjudication and Chopra’s attempts to involve the CFPB in competition and antitrust law.
“King Louis XIV famously said, ‘L’etat c’est moi,’ meaning ‘I am the state.’ All political authority rested with one man. It seems the CFPB under Director Chopra believes it has similar authority,” said Sen. Toomey.
Democrat lawmakers were more positive in their comments and questions, but they seem to want the agency to do more.
The CFPB’s director opened his remarks with a message for Big Tech firms, using as an example the rise of Big Tech in China and how these companies are using their power to amass vast amounts of data and using it in a way that raises many questions.
“Currently, the United States is lurching toward a consolidated market structure where finance and commerce co-mingle fueled by uncontrolled flows of consumer data.”
In Chopra’s view, the outsized influence of Chinese tech conglomerates over the financial service ecosystem comes with risks and raises a host of questions about privacy, fraud, discrimination and more. Although he didn’t suggest that the same is happening in the U.S., he expects the agency’s investigation of this space, based on orders sent in October to Google, Amazon, Facebook, PayPal and Block, to shape further policy discussions.
The second area of interest is a shift in the agency’s priorities to focus on repeat offenders and large players.
Director Chopra argued that when large players repeatedly violate the law, agencies are more lenient than when smaller businesses do, and this is “highly inappropriate.”
He cited as an example of this new approach the lawsuits filed against very large firms FirstCash and TransUnion. During Chopra’s tenure at the CFPB, more litigation and more enforcement actions are expected.
Perhaps, the most interesting area is the one that Mr. Chopra left for the end of his testimony, and where the agency hasn’t made significant progress yet: a more extensive use of rulemaking.
Chopra has mentioned on several occasions that the approach to regulations pursued by federal banking agencies is “excessively complicated,” and he wants to simplify the use of rulemaking.
Interestingly, the area where Chopra would like to push for new regulation is under section 1033 of the Consumer Financial Protection Act, promoting competition in financial markets via open banking.
Since President Biden issued an executive order in July 2021 to promote competition in several industries and Rohit Chopra was later confirmed as director of the CFPB, one of the priorities for the agency is to use its authority to give consumers more control over their data. Thus, new rules to facilitate consumers switching providers and for third-party providers to access accountholders data is a distinct possibility.
But Chopra’s plan does not seem to end there. He also suggested that the agency will explore how small financial institutions can “leverage technology and systems like FedNow to capture market share while still preserving their relationship banking model.”
Read more: CFPB’s New Procedural Rules May Be a Game-Changer
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