Rohit Chopra Testifies in CFPB Semi-Annual Report to Congress

Last week, the House Financial Services Committee and Senate Banking Committee convened for the Consumer Financial Protection Bureau’s (CFPB) semi-annual report to Congress. CFPB Director Rohit Chopra testified in both chambers about the bureau’s initiatives.

Chopra, Democrats, and Republicans seem to agree that action is needed on mortgage trigger-lead practices and cracking down on financial fraud. Democrats praised the recent U.S. Supreme Court ruling that upholds the CFPB’s funding structure. Currently, the CFPB receives funding through the Federal Reserve, which transfers earnings to the bureau.

Republicans searched for clarification on why the CFPB is entitled to funding when the Federal Reserve has been running on a net deficit.

Questions from CA and NV Members of Congress and Senators
The following were questions from members of Congress in California and Nevada:

• Catherine Cortez Masto (D-NV) inquired about the CFPB’s plan to create a repository of “repeat offenders” in the financial services space and highlighted her bills targeting fraud against veterans.
• Maxine Waters (D-CA) noted that “82 percent of Americans, including 77 percent of Republicans, support the (CFPB),” citing a bipartisan poll.
• Brad Sherman (D-CA) clarified that title insurance is not a “junk fee” and raised concerns about fraud in the auto loan space, stating that “manufactured identities cost the auto loan industry $2 billion.”
• Juan Vargas (D-CA) emphasized the need for more transparency in remittance transactions.
• Young Kim (R-CA) asked about the CFPB’s buy-now-pay-later guidance and asserted there would be a formal rulemaking process.
• Steven Horsford (D-NV) raised concerns about unscrupulous actors in the credit repair marketplace. He also noted that service members are particularly targeted by fraudsters, citing data in Nevada about how service members are adversely impacted by fraudulent schemes.
• Laphonza Butler (D-CA) did not attend the hearing.

Major Themes During CFPB Hearing Before Congress
During the hearing, members of Congress and senators spoke on a variety of issues. These were the most notable for credit union leaders to consider:

• The Community Reinvestment Act: Emanuel Cleaver (D-MO) raised concerns about Navy FCU’s lending practices and praised Chopra for advocating that states extend Community Reinvestment Act (CRA) requirements to non-bank entities. Sen. Tina Smith (D-MN) inquired about racial lending disparities, to which Chopra responded that “the Community Reinvestment Act plays a certain role” in addressing these issues.
• The CFPB’s “Junk Fee” Initiative: Chopra claimed the CFPB has returned significant amounts in “junk fees” to consumers. When asked for clarification on specific fees, Chopra noted that not all fees, such as title insurance and some closing costs, are not considered “junk fees” from his perspective.
• Overdraft Services: Cynthia Lummis (R-WY) highlighted the importance of overdraft fees for maintaining “safe and secure banking systems” and providing free services such as checking accounts, online banking, and debit cards. Chopra pointed out that the proposed overdraft rule exempts small financial institutions.
• Credit Card Late Fee: Similar to overdraft fees, Chopra noted that smaller financial institutions are exempt from the credit card late fee rule.
• Buy-Now-Pay-Later (BNPL): Chopra received questions about the CFPB’s interpretive rule on BNPL products, which extends some of the same protections for credit card holders to those using BNPL products. The public comment period on the interpretive rule is open until August 1.
• Medical Debt and Credit Reports: The CFPB proposed a rule to remove most medical debts from credit reports, with the comment period closing August 12.

On several occasions, Chopra noted that smaller institutions, like credit unions, are exempt from certain rulemaking. The California and Nevada Credit Union Leagues will continue to advocate for policies that create an even playing field for credit unions.