During a Senate Banking Committee hearing today, Consumer Financial Protection Bureau Director Rohit Chopra fielded questions on the agency’s proposed rule to further limit credit card late fees as well as allegations that he bypasses regulatory review by issuing policy changes through agency guidance and press announcements. Committee Republicans were particularly critical, with Ranking Member Tim Scott (R-S.C.) saying the agency “routinely and brazenly acts outside of the scope of its authority.”
“Director Chopra has created uncertainty in the marketplace by attempting to regulate through speeches and issuing blog posts under the guise of ‘clarifying guidance,’” Scott said. “The result of rulemaking and enforcement by blog post? Fewer consumers are actually protected and fewer options of financial products will be made available.”
Chopra and committee Democrats pushed back against critics, arguing that the CFPB isn’t enacting new policies but simply implementing existing statutes. “The thing we hear from small firms is they really want to know how existing law applies,” Chopra said. “We have so many changes in technology and these small firms don’t have the ability to hire so many lawyers, so I have continued a practice of my predecessor Director [Kathleen] Kraninger to issue these advisory opinions and other guidance documents. They do not create any new obligations. They simply restate what the existing laws are.”
In terms of the credit card late fees, Chopra said that the rule still allows card issues to recover their costs, but the agency is seeking to make that process “more rigorous and make sure it reflects market realities.” Some committee members were skeptical. Sen. Thom Tillis (R-N.C.) said the CFPB data used in drafting the rule doesn’t account for the costs incurred by banks to manage card accounts.
“If these accounts cost more than the revenue stream to sustain them, how do they make it up?” Tillis asked. “They make it up in one of two ways, right? They don’t bank with a given customer or they find a way to get the revenue to cover the loss from a losing proposition. So it seems like we are moving down a path where you are going to artificially cap what you may need to justify even having that relationship.”