Hiltzik: Bankers hate a banking regulator that sides with consumers

The US Chamber of Commerce really piled on the grim adjectives when it announced its campaign against financial regulator Rohit Chopra two weeks ago.

In just the title and the first two paragraphs of his adthe chamber described Chopra, director of the Consumer Financial Protection Bureau, as “out of control”, “ideologically oriented”, “radical”, “extreme” and “heavyweight”.

Sounds pretty bad.

Recurrences…[are] on par with the course for many mainstream companies.

— Rohit Chopra, CFPB Director

If you are a banker, of course.

If you’re a consumer of financial services, however, you should interpret this broadside as the chamber expressing its irritation with a government regulator that is doing the job it’s paid for – in this case, protecting consumers from industry abuse. financial services.

It is appropriate, indeed, to view the chamber’s attack on Chopra in the context of similar campaigns the business community has waged against Biden appointees and appointees who intended to regulate industries under their jurisdiction. .

This includes the crude and hypocritical efforts last year to portray Saule Omarova, a banking law expert at Cornell Law School who had been appointed Comptroller of the Currency, as a closet communist. These efforts ultimately resulted in Omarova being dropped from her name for the position.

Also last year, bedroom and other industry lobbies attacked David Weil, a labor rights expert at Brandeis and a former Department of Labor official.

Weil’s alleged offense was to take “positions on critical issues” such as “whether an employee would be exempt from overtime, finding joint employment relationships, and whether a worker is an employee or an independent contractor.”

Never mind that these were matters that fell squarely within the bailiwick of the agency’s wage and hour division, where Weil had served in the past and was reappointed to head it. The chorus of industry disapproval grew so deafening that Weil retired his name earlier this year.

Then there’s the campaign by Amazon and Meta Platforms (formerly Facebook) against Federal Trade Commission Chairman Lina Khan to force her to recuse herself from FTC proceedings against the companies, largely because it has developed an expertise on how they conduct their business. (She did not do it.)

The business community’s objection to Chopra is based on the pro-consumer direction the agency has taken under him after its inaction over business interests under the Trump administration. In 2017, let us recall, Trump installed his budget director, Mick Mulvaney, as acting director of the CFPB.

Mulvaney bragged at a convention of bankers that his appointment “apparently kept Elizabeth Warren up late at night, which I don’t mind at all.” The bankers laughed appreciatively. (Democratic Senator Elizabeth Warren of Massachusetts had been instrumental in establishing the CFPB; Chopra, in this case, launched her public career as a staffer in her office.)

Mulvaney quickly suspended a CFPB regulation designed to prevent payday lenders and other profiteers from abusing low-income customers who couldn’t repay loans by charging them fees, among other sordid practices.

He abruptly withdrew a federal lawsuit against four allegedly abusive installment lenders. And he closed an investigation into World Acceptance Corp., a payday lender in his home state of South Carolina, which had been accused of abusive practices but had contributed at least $4,500 to his congressional campaigns.

Kathy Kraninger, Mulvaney’s successor, continued her efforts to gut the agency. She sometimes approved settlements with investigative objectives that required them to pay nothing in compensation to consumers.

Chopra is not cut from this fabric. As chairman of the CFPB, he took on credit card late fees and bank overdraft fees, which he aptly calls “junk fees” by which “big financial institutions feast on their customers,” leaving them feeling “cheated,” as he put it in a press conference in January announcing an investigation into these charges.

(As Helaine Olen of the Washington Post observedafter Chopra fired the bank’s bows by noting that they were collecting $15 billion a year in overdraft fees, several decided to lower their fees.)

Chopra also launched a survey of “buy now, pay later” credit companies, which he says could be mislead consumers about their debt and obligations. “Buy now, pay later is the new version of the old layaway plan,” he said in December, “but with modern, faster twists where the consumer gets the product immediately but also gets the debt immediately”.

It has also launched an investigation into payment platforms operated by Google, Apple, Facebook, Amazon, Square and PayPal, seeking to determine whether they could be used to conduct “invasive financial monitoring and … use this data to further behavioral advertising, price discrimination, or sell to third parties.

These initiatives are likely to give financial services companies goosebumps. It is therefore not surprising that the chamber launched its campaign in in conjunction with American Bankers Assn., the Consumer Bankers Association. and the Independent Community Bankers of America.

Reading the House bill against Chopra, it’s hard to avoid the impression that, as Queen Gertrude from Hamlet might saythe body protests too much.

For example, the chamber expresses outrage at Chopra’s observation (in a conference in March at the University of Pennsylvania) that “repeated offenses… [are] compared to the course for many dominant companies. He specifically mentioned the big banks, Big Tech and Big Pharma.

The Chamber qualifies this view as “extreme and inaccurate”.

Is it true? Let’s see.

Start with the banks. According to offense tracker maintained by Good Jobs First.

The total includes a $920 million assessment imposed by the Commodity Futures Trading Commission in 2020 for an eight-year program to manipulate the precious metals and US Treasury markets that the CFTC commissioner called “unmatched” in scope.

It was at least the third charge of market manipulation JPMorgan had faced in recent years, including a bid-rigging scheme in the California electricity market in 2010 and 2011 for which the bank paid a fine. of $410 million.

Then there’s Wells Fargo, which has almost made its name synonymous with consumer abuse.

In 2015, while JPMorgan, Barclays, Citigroup, Royal Bank of Scotland and UBS pleaded guilty to federal felony charges linked to manipulation of the foreign exchange market, Kara M. Stein, a member of the Securities and Exchange Commission, objected to the SEC granting them a waiver of serious sanctions because of what she called “the recidivism of these institutions.”

In total, the five banks had received 23 sanction waivers for misconduct in the previous nine years.

Big tech? In 2019, the Federal Trade Commission fined Facebook $5 billion for violating the terms of a privacy practices agreement it entered into with the same agency in 2011.

Big pharmacy? Johnson & Johnson, Merck and Pfizer, three of the world’s largest pharmaceutical companies, all have paid multi-billion dollar settlements to resolve allegations of wrongdoing or in personal injury lawsuits.

In 2009, Pfizer paid fines totaling $2.3 billion, including a $1.195 billion fine, which federal prosecutors called “the largest criminal fine ever imposed in the United States for any matter ‘, and pleaded guilty to a federal charge; it was society fourth such settlement over the previous decade for the illegal promotion of its drugs.

These are all clearly “dominant companies”. Under these circumstances, Chopra’s observation of corporate recidivism was not “extreme and inaccurate”, but charitable.

However, it is really not Chopra’s observation, as precise as it is, that got under the chamber’s skin. This is the prospect of more extensive regulatory actions.

In a letter of June 28the chamber faulted Chopra for asking agency reviewers to monitor “discriminatory” behavior and linking it to the agency’s statutory power to regulate “unfair, deceptive and abusive acts or practices”.

The chamber’s position is that “discrimination” and “unfairness” are two different things and that the law only gives the CFPB authority over the latter.

This is a curious position, given that “discrimination” surely falls into the category of unfair things, but also because the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which created the CFPB, specifically states that the board has the power to protect consumers from “unfair, deceptive or abusive acts and discrimination”.

The chamber surely knows this because it cites that exact language in its letter, italicizing the “and” for emphasis. Either way, it’s not for us to question the chamber’s decision to have its lawyers torture legislative diction in a seven-page, single-spaced letter to Chopra.

It’s up to us, however, to ask who the audience for the chamber’s campaign against Chopra, which includes a “six-figure digital ad campaign,” is supposed to be.

The digital ad in question is a nearly two-minute video praising U.S. financial firms for working with the CFPB “to try to ensure fair regulations are passed” and grumbling that Chopra “breaks proven standards in policy-making.” Chopra, the ad says, “has an inflated and distorted view of her role and her power.”

Translating this corporate language into English is easy. The chamber’s complaint is that the warm relationship the companies had with Chopra’s Trumpian predecessors has been severed. The “proven standards of policy-making” she cherishes are those that shape policies to benefit banks.

But these were not the standards envisioned by Warren or by the CFPB’s first director, Democrat Richard Cordray, a serious regulator who bedroom and other business lobbies also hated.

The Chamber of Commerce is playing a long game here. He knows he has no prayers to unseat Chopra as long as a Democrat holds the White House. But if the administration and Congress swing to the Republicans, the CFPB will have a big target painted on its back. In this case, consumers should be prepared to hold on to their wallets.