Rohit Chopra, director of the Consumer Financial Protection Bureau, testifies during a Senate Banking, Housing and Urban Affairs Committee hearing on April 26, 2022.
Tom Williams | Cq-roll Call, Inc. | Getty Images
Rohit Chopra has lofty plans for the Consumer Financial Protection Bureau to tackle artificial intelligence threats, medical-debt reporting, exorbitant bank card fees and other so-called junk surcharges.
But that agenda is under threat by a legal argument targeting the agency’s funding structure, which a federal appeals court ruled unconstitutional last yr. When the CFPB was created 12 years ago as a response to the worldwide financial crisis, Congress selected to fund it through transfers from the Federal Reserve Board of Governors as an alternative of appropriations.
Republican lawmakers have panned the agency’s concept for years. Amongst its harshest critics is Rep. Andy Barr, R-Ky., who has called the CFPB “probably the most unchecked, unaccountable agency in the entire federal government.” He has accused Chopra of acting “unilaterally and arbitrarily” without proper oversight.
The Supreme Court is slated to listen to the appeal to the lower court ruling in early October.
The potential “avalanche of litigation” and corresponding uncertainty injected into the market are top concerns for Chopra, who was appointed CFPB director in October 2021.
“This just isn’t the primary time the CFPB has been subjected to those attacks,” Chopra told CNBC in an interview this week. “And it has emerged to proceed to do its essential work for the general public.”
With that in mind, Chopra laid out a few of the CFPB’s top policy objectives in the approaching months:
Consumer debt
Consumer debt will reach or exceed the trillion-dollar mark this yr, based on Chopra, with bank card debt and auto loans making up the majority of that quantity.
“Recent and used cars really surged in price throughout the pandemic and lots of people took on big auto loans to try this,” Chopra said. The agency will goal unnecessary repossessions within the auto loan market, he said.
Chopra also expects the restart of student loan payments in October to affect consumer credit markets.
“Now we have already done some initial evaluation to suggest that there are a set of student loan borrowers who’re already struggling on their bank card or auto loans,” he said. “So, we’d anticipate that might potentially worsen.”
The CFPB, in partnership with the Education Department, will goal the scholar loan servicers accountable for payment plans and collections to encourage alternatives to the usual repayment plan, equivalent to an income-driven model that enables borrowers to pay on schedule and avoid delinquency.
“We’re also talking ceaselessly to state attorneys general and state regulators to be sure that those student loan-servicing firms are holding up their end of the cut price,” Chopra said.
Medical debt
Chopra said that tens of tens of millions of Americans are battling medical debt. One in five is affected by a complete $88 billion in unpaid medical bills currently in collection, based on CFPB reporting.
Total U.S. medical debt reached over $195 billion in 2019, with about 100 million adults owing roughly $500 to over $10,000 in debt, based on a 2022 report by the Kaiser Family Foundation.
“Medical debt has ballooned as a pain point for Americans,” Chopra said. “They often are stuck in all kinds of red tape between their insurance company (and) the hospital.”
The crisis is compounded by debt collectors that add medical debt to credit reports as a method of coercion. Chopra said the CFPB is “looking hard about whether it’s appropriate for medical debt to be in your credit report.”
The agency has already ordered these firms in addition to credit-reporting agencies to face down on collecting, furnishing or reporting on invalid medical debt. Equifax, TransUnion and Experian have obliged with applicable policy changes.
Junk fees
The CFPB recently fined Bank of America roughly $150 million for illegally double-charging a few of its customers for insufficient account balances. The motion is the most recent taken by the agency to handle the Biden administration’s goals toward reducing junk fees, or extraneous surcharges for goods and services.
“We would like to be sure that these illegal junk fee practices are eradicated from the market,” Chopra said. “A junk fee is commonly something that’s charged, where you are getting no service in any way, you didn’t want it or it is not priced in a way that’s subject to fair competition.”
The agency’s crackdown on junk fees has prompted some policy changes at big banks, he added.
“Lots of them are eliminating their reliance on junk fees and making their fees way more reasonable,” Chopra said. “I believe we have seen over the past yr and a half changes which might be resulting in billions of dollars in fewer fees on an annual basis.”
GOP members of the House have criticized Chopra’s bank card fee policies. Rep. Blaine Luetkemeyer, R-Mo., has said the CFPB has “no authority” on the problem because junk fees just isn’t a legal term.
“Because there isn’t a such word on the market. There isn’t a authority. So, I believe we as a gaggle have to be pushing back,” said Luetkemeyer, who sits on the House Financial Services Committee.
Artificial intelligence
Chopra can be concerned that artificial intelligence could disrupt banking in a negative way for consumers.
If firms use AI for loan verifications, for instance, they’d run the chance of noncompliance if the system fails to supply an “opposed motion” notice stating clearly why the loan was denied, based on Chopra.
“If the algorithm or AI cannot clearly explain the way it’s making decisions, if it’s only a black box, lenders really cannot use it, because otherwise they can not comply with the fundamental protections that exist already under the law,” he said.
Banks which have transitioned from call centers to automated customer-support models also risk violating federal protections, he said. Chopra said the CFPB is looking into the training methods for chatbots regarding sensitive personal data.
“It is very clear that a number of that is going to reshape banking, and we wish to be sure that we take steps today to be sure that the technology evolves in a way that’s following the law,” he said.
