Senate Republicans: CFPB Is Lawless, Radical

GOP Senators’ letter to CFPB leader could offer glimpse of agency’s future oversight.

Senate Banking Committee Republicans charged Monday that CFPB Director Rohit Chopra is running a “lawless and unaccountable agency.”

“Rather than operating as a tough, but fair and sensible regulator, the CFPB is again pursuing a radical and highly-politicized agenda unbounded by statutory limits,” the Republicans, led by committee ranking member Sen. Patrick Toomey of Pennsylvania, wrote in a letter to Chopra. “It has adopted an arrogant regulatory ethos: the CFPB can do whatever it wants.”

The letter is a clear indication of how GOP lawmakers feel about the Biden Administration’s director and how they are likely to provide oversight of the agency if Republicans take control of the Senate in the November elections.

Background on the Issue

The agency has largely been treated as a political football on Capitol Hill.

When it was created as part of Dodd-Frank, Republicans charged that the Obama Administration agency was overzealous in its rulemaking and enforcement. When former President Trump appointed Acting Director Mick Mulvaney and later Director Kathleen Kraninger, the agency took far more of a hands-off posture toward business, much to the chagrin of congressional Democrats.

Under the Biden Administration, the agency has returned to a strict regulatory regime, which once again has angered Republicans.

The Republican allegations also follow a campaign by the U.S. Chamber of Commerce, which has portrayed the CFPB as a rogue and unaccountable agency.

Inside the Letter

In their letter, the Republican senators said, “The CFPB’s actions, which have been uncontrolled and unwarranted, will ultimately lead to costlier credit, or no credit at all, for millions of Americans.”

The Republicans’ charges further include allegations that the CFPB:

–Has launched a misguided attack on the overdraft policies used by financial institutions. Such programs allow consumers to essentially take out short-term loans, they said, adding that prohibiting financial institutions from charging fees for overdraft could result in the programs being eliminated.

“Charging fees that customers chose to pay should not be disturbing or illegal, and yet, the CFPB appears to have developed a particular disdain for banks charging their customers for services, pejoratively calling overdraft protection ‘junk fees,’” the letter stated.

–Has changed agency rules to allow the CFPB to supervise a nonbank if the agency determines that it is posing risks to consumers. The new rule allows Chopra to make public a decision to supervise the nonbank.

“As your recent remarks about banks that charge overdraft fees demonstrate, nonbanks whose practices are legal but are not in line with your liberal policy views will now be at risk of heightened scrutiny and reputational harm from the CFPB,” the GOP members wrote.

Senator Patrick Toomey of Pennsylvania

–Has adopted new rules that allow the agency to bypass an administrative law judge and rule on substantive legal matters. “As a result, you can now authorize CFPB staff to bring an enforcement case based on a novel legal theory and then you can personally rule that it is a valid theory,” they contended.

–Is attempting to harm the customer relationships at Fifth Third Bank, which the agency has sued over allegations that the financial institution opened accounts for customers without their consent. In March, the senators charged, the CFPB sent a letter to the bank’s customers about whether Fifth Third was acting in their best interests.

“While the CFPB has a responsibility to investigate potential fraud, this mass email was not a legitimate investigative or litigation tool, but rather a means to damage the bank’s customer relationships,” the senators wrote.

The group urged Chopra to “reverse course and stop using inappropriate tactics to harm financial institutions’ reputations and customer relationships in order to advance your liberal policy preferences.”