CFPB Director's Congressional Testimony

On November 29, CFPB Director, Rohit Chopra, testified to the House Financial Services Committee (HFS) for the "Semi-Annual Report of the Bureau of Consumer Financial Protection" and before the Senate Banking Committee (SB) on November 30.

Industry Impact

One of the top issued discussed which could greatly impact our industry was the CFPB’s proposed rule on personal financial data rights to implement Section 1033 of the Consumer Financial Protection Act of 2010 (CFPA). Dodd-Frank authorizes rules requiring “a covered person [to] make available to a consumer, upon request, information in the control or possession of such person concerning the consumer...” The complexity of the issues has already led to the banking trades’ request for additional time to comment on the proposal. NCBA is concerned about the unintended effect of increased liability and compliance costs on small businesses and third-party servicers. Small businesses with limited resources may ultimately be disadvantaged by the rule’s requirements. Additional time is also needed to allow industry to understand how this proposed rule may intersect with the CFPB’s consumer reporting rulemaking and a possible revised definition of consumer. Comments on the proposed rule are due December 29, 2023.

Other Key Takeaways

• Throughout the hearings, prepared talking points about the CFPB’s constitutionality and funding structure were utilized by members of both parties.
• Other  topics included, the Larger Participant rule, the Fair Credit Reporting Act (FCRA) proposal, small business data collection rulemaking, upcoming CRA resolution vote, junk fees, credit card late fee proposal, and earned wage access (EWA) rulemakings.
• Democrats largely supported the Bureau’s attempts to crack down on junk fees, credit card late fees, and the removal of medical debt from credit reports under FCRA.
• Republicans were opposed to the CFPB’s funding structure and overly burdensome rulemaking. Some Republicans, including HFS Chairman McHenry noted their support for the Section 1033 proposal, however expressed the need for privacy protection laws that will not be subject to “the whims of any given Administration”.
• Ranking Member Maxine Waters (D-CA) in addition to praising the CFPB, opposed claims that the CFPB is unconstitutional and was critical of the committee for not holding a large bank CEOs hearing like the one already scheduled for SB in December.

Key Issues

• Section 1033/Personal Financial Data Rights — Chopra noted that the CFPB’s proposal includes consumer safeguards that require permission be given for the use and collection of data and the need for data privacy legislation to go in tandem with the proposed rule. Some legislators felt the rule went beyond the CFPB’s scope, while others supported the CFPB’s use of the rule as an opportunity to provide financially vulnerable customers more control over their data.
• Larger Participant Rule — Democrats support the larger participant rule, that allows supervision and examination of large nonbank entities. Chopra noted, “the most popular nonbank apps would be covered.”
• Fair Credit Reporting Act/Credit Header Data/Credit Reporting Agencies — Republicans were critical of attempts to eliminate medical debt on credit reports and prohibit its use as a factor in underwriting decisions. Chopra noted the Bureau’s attempt to to think of all the various ways to protect data, without undermining banks and lenders that are “legitimately” using it for financial services. There were also discussions about what constitutes a consumer reporting agency as well as the classification of “credit header data”.
• Small Business Data Collection Rule — There was a lot of attention paid to the upcoming CRA resolution to repeal the CFPB’s small business data collection rule, which recently passed the Senate. Some members discussed the benefits of increased transparency and reduced financing costs by creating competition, others expressed numerous concerns its impact will have on small businesses.
• Junk Fees/Credit Card Late Fee Proposal — As expected, there was partisan divide over what exactly constitutes a “junk fee” with Republican members pressing for an exact definition of the rule and opposition to regulatory actions to crack down on fees.
• Earned Wage Access — Chopra noted he hopes to have additional guidance on Earned Wage Access (EWA) in the coming months.