Half a Year and Counting: A Reaction to the First Months of Director Chopra’s Fair Lending Regulatory Agenda

In September 2021, Rohit Chopra was confirmed as the third Director of the Consumer Financial Protection Bureau (CFPB). After receiving his bachelor’s degree from Harvard as well an MBA from Wharton, Director Chopra worked in management consulting with McKinsey & Company, previously served as a Federal Trade Commission (FTC) Commissioner, and was the CFPB’s first Student Loan Ombudsman. Senate Banking Committee Chair Sherrod Brown (D-OH) praised Director Chopra as a “bold and experienced” nominee who would return the agency to its “central mission.” Senator Elizabeth Warren (D-MA) offered similar comments, hailing Director Chopra as a “terrific” pick to lead the CFPB. Accordingly, Director Chopra is widely viewed as an assertive regulator who will seek to leverage the full authority of the CFPB, and he has assembled a leadership team that includes several CFPB alumni and veterans.

The early days of the Chopra CFPB have been especially active, with the agency issuing marketing monitoring orders to several Big Tech players about their payments businesses and inquiries directed to leaders in the rapidly growing “Buy Now Pay Later” space. The agency has also issued research reports on overdraft fees and a Request for Information on so-called “junk fees” charged by financial institutions. However, fair lending issues are widely perceived to be on the forefront of Director Chopra’s policy priorities.

In that vein, and consistent with his focus on Big Tech, data privacy, and algorithmic bias at the FTC, Director Chopra has made crystal clear that fair lending—and in particular, algorithmic discrimination—and other practices that adversely impact communities of color will be a top agency priority. For example, in remarks announcing the settlement of a traditional redlining case, Director Chopra focused largely on “digital redlining.” He specifically called out companies that gather “massive amounts of data and use it to make more and more decisions about our lives, including loan underwriting and advertising” and encouraged data scientists, engineers, and others with “detailed knowledge of the algorithms and technologies used by those companies and who know of potential discrimination or other misconduct” to report potential fair lending violations to the CFPB. These comments have led many to believe that Director Chopra may potentially pursue new or novel fair lending theories related to artificial intelligence, machine learning, and related underwriting with algorithms.

Similarly, the Biden Administration’s focus on racial equity and the racial wealth gap could lead Director Chopra to focus his efforts on a variety of fair lending concerns, including collections and services issues, foreclosures, evictions, and credit reporting, or issues specifically stemming from the pandemic, such as potential discrimination in the issuance of PPP loans. And many industry observers believe the CFPB will pursue somewhat controversial “disparate impact” theories to pursue fair lending violations.

Indeed, Director Chopra has also made clear that the agency will focus on large companies and market players, seek to pursue a broad range of remedial measures—including individual liability where appropriate—to redress consumer harms, and partner closely with state authorities in enforcing consumer financial protection laws. The latter likely includes exploring ways to expand the CFPB’s authority to enforce federal consumer protection laws and access remedies such as the civil monetary penalty funds authorized under the Consumer Financial Protection Act.

Additionally, comments by the CFPB at an industry fair lending conference in November of 2021 restated its goals of using its authority to narrow the racial wealth gap and ensure markets are clear, transparent, and competitive. In addition to the areas noted above, the comments indicated an intent to specifically focus on:

• Appraisal bias in home valuation;
• Special purpose credit programs or “SPCPs”;
• Small business lending and the implementation of Section 1071 of Dodd-Frank;
• Limited English Proficiency consumers; and
• Unfair and discriminatory practices, including illegal practices outside of the ECOA and the HMDA.

If his initial actions and related commentary from the CFPB are any indication, Director Chopra will pursue a bold new approach to CFPB rulemaking, supervision, and enforcement in the areas of fair lending and beyond.