In Rohit Chopra's first appearance before the Senate Banking Committee since being confirmed as director of the Consumer Financial Protection Bureau, Republican members made clear that they view him as the chief architect of a “hostile takeover” of the Federal Deposit Insurance Corp. late last year.
Sen. Pat Toomey of Pennsylvania, the ranking Republican on the Senate Banking Committee, led the charge by calling the CFPB “more out of control than ever,” and claiming that Chopra had “recklessly destroyed institutional norms” at the FDIC.
Toomey even went so far as to quote King Louis XIV of France, who famously said “L’etat c’est moi,” which roughly translates as “I am the state.“
“All political authority rests with one man,” Toomey said. “Sometimes it seems the CFPB under Director Chopra believes it has similar authority.”
But Chopra would have none of the Republicans’ political rhetoric. Rather than back down, he instead sought to turn the GOP’s talking points about a power play at the FDIC on its ear.
Chopra accused former FDIC Chair Jelena McWilliams of flouting the rule of law by refusing to advance a bank merger policy
“We have to be committed to upholding the rule of law on how these agencies are governed,” Chopra said. “We cannot simply make up the fact that a chair can overrule a super-majority of the board.”
To which Toomey responded: “Your version of the events is extremely different from the version of others, and so this is not a productive path to go down.”
When Sen. Bill Hagerty, R-Tenn., picked up the same line of questioning, telling Chopra near the end of the two-hour hearing that he had “successfully led a coup at the FDIC,” Chopra again pushed back hard on his version of events.
“You’re right, what happened at the FDIC was sad … [but] I would totally dispute what you’ve laid out,” Chopra said. “The law is clear, the bylaws are clear and the precedent is clear. The chairperson does not have the right to simply nullify the super-majority of the board. That’s not even how any corporate board works either.”
The hearing was sparsely attended by lawmakers and had few notable moments. Lawmakers who did show up questioned Chopra about a range of issues from medical debts on credit reports to the CFPB’s civil money penalty fund to the bureau's upcoming small-business data collection rule.
Sen. Bob Menendez, D-N.J., asked Chopra about allegations of widespread fraud and
"The banks are well aware of these scams but have done little to enhance Zelle's security or reimburse defrauded consumers," Menendez said. "Are you familiar with the rampant fraud happening on Zelle and has the CFPB seen an increase in complaints?"
Chopra said he had to be careful about discussing a particular company but acknowledged that the CFPB is aware of fraud through peer-to-peer payment transfers.
Sen. Elizabeth Warren, D-Mass., repeated her calls for the Federal Reserve to break up Wells Fargo, the $1.9 trillion-asset San Francisco bank. She urged Chopra to hold Wells accountable for repeatedly violating consumer protection laws dating to the 2016 phony- accounts scandal.
“It appears cheating customers is in Wells Fargo’s DNA,” Warren said. “It’s clear we’re dealing with the baddest of the bad. Fines have just become the cost of doing business for Wells.”
Chopra reiterated his promise to crack down on large financial institutions that are
“I see federal enforcers and regulators are very quick to lay the hammer down on small guys ... but there is a totally different standard for large firms that break the law over and over again,” he said.
Sen. John Kennedy, Republican of Louisiana, began his questions by asking about the CFPB's proposed rule on small-business data collection, and then went on to question whether Chopra had ever been in business himself.
Chopra declined to comment because the rule is still being worked on, which didn't keep Kennedy from making comments about the agency and its director.
"I know how objective you are," Kennedy said. "I know about your objectivity."
"What kind of business were you in?" Kennedy asked. "Have you ever had to make a payroll?"
Chopra responded that early in his career he worked as a consultant at McKinsey & Co. Chopra most recently spent three years as a board member of the Federal Trade Commission in the Trump administration. He earned an MBA from the University of Pennsylvania’s Wharton School.
"I don't believe I ever paid employees," Chopra replied.
To which Kennedy responded: "You were a consultant? You just paid yourself, is that what it was?"
Sen. Thom Tillis, R-N.C., asked Chopra about a policy change that the CFPB made in March that for the first time states that discrimination on the basis of age, race or sex — regardless of intent — violates the federal prohibition on “unfair, deceptive or abusive acts or practices," known as UDAAP.
Tillis told Chopra that he was “a little bit concerned with the process” that led to the change in the consumer bureau's UDAAP exam manual. He asked Chopra if the CFPB had sought feedback from industry before making the change, and alleged that Chopra had only met with three industry groups in his first few months at the agency.
Since becoming director in October, Chopra has vowed to use the consumer bureau's UDAAP enforcement authority to root out discrimination in consumer financial products.
“This is already a clear legal prohibition and I have not heard any suggestion that discrimination does not violate the unfairness prohibition,” Chopra said.
Toomey also took issue with the change. He told Chopra that the CFPB was required to take public comment into account and should engage in a rulemaking before enacting a new policy on discrimination.
“The CFPB is attempting to supervise for disparate impact not only lately, but in all consumer financial services and products,” Toomey said, referring to the legal theory that discrimination, regardless of intent, can have a disproportionately negative effect on protected classes.
Toomey said he wants Congress to pass legislation that would subject the CFPB to the appropriations process and other “needed reforms.” Since the CFPB was created in 2010, Republicans have sought, unsuccessfully, to pass legislation that would change the agency’s structure.
“The current Congress won’t do that,” Toomey said. “The next one should.”
