The Consumer Financial Protection Bureau – created as part of the 2010 Dodd-Frank legislation – has had a rocky existence during its short lifetime. At inception, the CFPB was given broad powers and sharp swords with which to enforce them. The agency was just starting to get comfortable with itself when the Trump administration installed leaders that were more anti-regulation and whom critics say chose to accommodate industry instead of protecting consumers. Now, under the Biden administration, the agency is likely to be resurrected in an even more powerful form.
President Biden has vowed to return the CFPB to its roots – protecting consumers – and to combat racial and economic inequality through regulation and enforcement actions. Biden committed to use agency tools to provide access to affordable housing and assistance to small disadvantaged businesses primarily owned by people of color.
The COVID-19 pandemic has caused unprecedented financial hurdles for Americans, amplifying racial and economic inequality. The early days of Biden’s presidency were devoted to providing consumers pandemic relief, giving Americans the first look at a Biden-led CFPB. From a moratorium on the foreclosure of federally backed mortgages, forbearance periods for student loans and the prevention of landlords exercising their eviction rights, we can see that Biden’s CFPB will likely prioritize consumer protection over industry concerns.
President Biden nominated Rohit Chopra, currently a commissioner of the Federal Trade Commission, as his CFPB director. Chopra is a CFPB founding member and served as the agency’s first student loan ombudsman. Known to be an aggressive enforcer, we can expect him to pursue greater civil penalties across the board. He has stated he will prioritize student loan servicing, increase regulation of the payday lending industry, strengthen debt collection regulation and tackle violations of fair lending rights.
What does this mean for financial service institutions? Expect an agency not afraid to take the industry to task for violations and vigorously enforce regulations, which some say were ignored under the previous administration. The financial service industry must stay on top of ever-changing regulatory developments. The industry would be wise to ensure compliance with fair lending statutes through comprehensive internal review of fair lending policies and procedures. During the Biden administration, CFPB powers will likely grow, plausibly ensuring even more regulation on an already highly regulated industry.
* This article first appeared in The Journal Record on May 26, 2021, and is reproduced with permission from the publisher.