For our webinar last week, “The Times at the CFPB are A-Changing: Perspectives on the CFPB Under Acting Director Uejio and Director Chopra,”  we were joined by special guest former CFPB Director Richard Cordray.  The webinar looked at the changes that the CFPB is likely to undergo under the leadership of Messrs. Chopra and Uejio and how the two men are likely to approach the use of the CFPB’s regulatory, enforcement, and supervisory authorities.

Alan Kaplinsky, a member of the firm’s Consumer Financial Services Group, moderated the webinar.  Also participating from Ballard Spahr were Chris Willis, Co-Chair of the firm’s Consumer Financial Services Group, John Culhane, a partner in the Group, and Heather Klein, an associate in the Group.

Before introducing the webinar participants, Alan mentioned the work that Ballard attorneys are already doing for clients to help them prepare for the “new CFPB” under Acting Director Uejio and Director Chopra.  He indicated that we are assisting companies that are subject to the CFPB’s supervisory and enforcement authority or only its enforcement authority by identifying the areas relevant to their businesses on which the “new CFPB” is likely to focus and helping them conduct internal reviews of their policies, procedures, customer communications and practices so they can proactively address any deficiencies.

Having worked with both Messrs. Uejio and Chopra during his tenure as CFPB Director, Mr. Cordray shared his thoughts on how each of them is likely to approach his new role at the CFPB.  He indicated that Mr. Uejio’s prior experience at the CFPB has allowed him to become well-versed not only in operational issues such as personnel and budget but also as to policy issues.

Mr. Cordray expects Mr. Uejio to put the CFPB on a path that is more in line with the agency’s vision for carrying out its mission that prevailed under Mr. Cordray’s leadership.  Consistent with Mr. Uejio’s own statement to CFPB staff, Mr. Cordray expects Mr. Uejio’s priorities to include providing assistance to consumers experiencing financial difficulty as a result of the pandemic and taking actions to promote racial equity and fairness.

With regard to Mr. Chopra, President Biden’s nominee for Director, Mr. Cordray indicated first that he expects Mr. Chopra to be quickly confirmed by the Senate, with confirmation occurring by the end of February to mid-March.  Mr. Cordray described Mr. Chopra as a “creative and talented public servant” whose views are aligned with how the CFPB operated under Mr. Cordray’s leadership.  At the same time, Mr. Cordray called Mr. Chopra “his own person” and expects him to take the CFPB in new directions.  He expects Mr. Chopra to vigorously pursue ways for the CFPB to support consumers financially injured by the pandemic.  (Mr. Cordray referenced an April 2020 white paper he co-authored that outlined immediate actions the CFPB could take to address the pandemic.)  He also identified student loans as another likely priority for Mr. Chopra.

Mr. Cordray indicated that he considers Mr. Chopra to be well-versed in all key CFPB  issues and skilled at building relationships across government, both federal and state.  As a result, he expects to see more cooperation between the CFPB and other federal agencies as well as state agencies and attorneys general.  With regard to rulemaking, Mr. Cordray indicated that he would be surprised if Mr. Chopra did not attempt to restore ability-to-repay requirements to the CFPB’s small dollar loan rule and that he believes there will be sustained efforts directed at arbitration reform that could involve both the CFPB and Congress.

Other key takeaways from the webinar include the following:

• Heather Klein discussed the possible implications of positions taken by Mr. Chopra as FTC Commissioner for his new role as CFPB Director.  Heather indicated that in his dissents to FTC settlements and other statements, Mr. Chopra has criticized the FTC for failing to fully use its available authority to pursue wrongdoing and to effectively penalize larger companies and their individual managers or board members.  Based on these comments, Heather indicated that Mr. Chopra can be expected to attempt to maximize the use of the CFPB’s statutory authorities, including in some cases favoring the resolution of matters through public litigation over speedy resolutions through consent orders as a way to discourage improper behavior in the marketplace.  Based on his criticism of consumer reporting agency data security practices, Heather raised the possibility that under Mr. Chopra’s leadership, the CFPB might use its supervisory authority over larger consumer reporting agencies and its UDAAP authority to probe the data security practices of consumer reporting agencies.  Heather also indicated that Mr. Chopra’s comments suggest that as CFPB Director he would support additional regulation of first party creditor collection practices and the robust use of disparate impact analysis in fair lending matters.
• John Culhane discussed how Mr. Chopra might approach student lending issues based on his tenure as CFPB Student Loan Ombudsman and the three annual reports that were issued by the Ombudsman’s Office during his tenure.  John observed that in those reports, student loan servicers were frequently equated with mortgage loan servicers and, in industry’s view, unfairly criticized for engaging in unlawful conduct based in substantial reliance on anecdotal, unverified information from student loan complaints.  John indicated that as CFPB Director, he expects Mr. Chopra will want the CFPB to quickly enter into a Memorandum of Understanding with the Department of Education and will encourage the submission of consumer complaints to the CFPB.  John also indicated that Mr. Chopra’s priority issues are likely to include the administration of federal benefits, the delivery of military benefits and compliance with the Servicemembers Civil Relief Act, co-signer issues and pandemic relief, collections, and fair lending, particularly with regard to servicing outcomes.  John also noted that as FTC Commissioner, Mr. Chopra submitted a comment letter to the CFPB on its proposed debt collection rule in which he expressed concern that student loan lenders or servicers might unbundle accounts to increase the number of collection calls they are permitted to make to a borrower.  He indicated that as CFPB Director, Mr. Chopra might seek evidence that that lenders or servicers are engaging in this practice.
• Chris Willis discussed how the CFPB’s approach to enforcement under Director Chopra’s leadership is likely to differ from its approach under former Director Kraninger’s leadership.  Chris indicated that he expects more civil investigative demands to be issued and fewer cases resulting from issues discovered in examinations to be resolved through the confidential supervisory process, with more cases referred instead for public enforcement.  He also indicated that he expects a shift away from bringing cases against smaller entities often with limited financial means to more cases being brought against larger, mainstream financial services companies that result in larger monetary relief and penalties.  Chris shared his view that fair lending is likely to be invigorated under Director Chopra’s new leadership, with the CFPB addressing not only traditional fair lending issues such as redlining and judgmental underwriting, but also looking at fair lending issues arising from the use of new technologies such as alternative data and machine learning for various purposes such as fraud, underwriting, pricing, and collections.