CFPB’s Chopra Weighs in on Open Banking at Hill Hearing

At the latest hearing focused on the Consumer Financial Protection Bureau, things got heated even before Director Rohit Chopra uttered a word.

At the Wednesday (June 14) hearing before the U.S. House Committee on Financial Services, titled “The Semi-Annual Report of the Bureau of Consumer Financial Protection,” opinions on the job the Bureau is doing — indeed, whether the agency should exist at all — were sharply divided along party lines, with Democrats defending the CFPB and Republicans attacking it.

Divided Opinions

Subcommittee Chair Rep. Andy Barr (R-Ky.) contended in his opening statement that while “clear rules, and expectations of how to comply with those rules, benefit all participants in the consumer financial marketplace, under [Chopra’s] leadership, the CFPB is doing the exact opposite.” He alleged that the CFPB “identifies consumer harm in one instance for a specific product” and “from there … extrapolate[s] that harm occurred everywhere and everyone should be under suspicion. In fact, every act is presumed abusive until the CFPB or a court decides maybe they aren’t.”

He charged the agency with using “compliance bulletins, circulars, and advisory opinions to sow doubt and confusion in the marketplace.”

And with a nod to recent proposed rulemaking on credit cards, where late fees would be capped, Barr charged that interest rates would increase on consumers who don’t pay late.

In her own opening remarks, Maxine Waters (D-Calif.), the ranking member, said that by challenging the constitutionality of the CFPB itself, “Republicans are focused on undermining the CFPB, the only federal agency with a singular mission of protecting consumers.” She stated that the Constitution remains “clear — Congress can fund the executive branch, including the CFPB, banking regulators and other agencies however it likes, and has done so for nearly 250 years.”

CFPB Director Weighs in on Bank Runs and More

Chopra’s written testimony took stock of the current state of the U.S. consumer, and of high debt levels on open banking — and bank runs, too.

Per that testimony, which built on the CFPB’s semiannual report released last week: “Overall, current indicators of distress on consumer credit remain muted, though there are modest signs of increased delinquency.”

And he outlined the ongoing initiatives to “accelerate the shift in the United States to open banking, allowing consumers to more easily switch and gain access to new products, while protecting personal financial data.”

During questioning from Committee members — and specifically on the bank runs that were seismic events in March, Chopra said the bank runs were accelerated by digital channels and social media.

The banking turmoil, he said, “woke people up to uninsured deposits” adding that regulators need to make sure that “people know how to keep their money safe.” Separately, recent rulemaking tied to small business lending — mandating broader data collection — has taken shape because there’s been a lack of insight on the part of the government into lending patterns.

Rep. French Hill (R-Ariz.) queried Chopra on Rule 1033, tied to open banking. The agency is on track for an October deadline for that rule. The scope of the proposals includes traditional depository institutions, said Hill, but does not extend to nonbank entities — and he asked for the CFPB’s thought process around open banking.

In response, Chopra said open banking represents the “future of finance” and sought to clarify that what has been sought by the CFPB is “transaction. And cash flow data.” By getting that account-level data “and we include non-banks,” said Chopra, “that’s going to give [lenders] the ability to say ‘maybe this credit score’s something I shouldn’t rely on. Maybe I should look at the [borrower’s] actual income and expenses.’” Later during the hearing, he said that as the rule debuts in October, “we want to make sure that standards are giving the ability for consumers and all market participants,” to choose which providers they want, which in turn will have a positive impact throughout the industry. “When a consumer has the power to vote with their feet, you’ll see how our system will give them better service as well,” he added.

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