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A Return of Cordray-Era Enforcement at the CFPB?

Will we see more aggressive enforcement of federal consumer protection laws with Biden’s pick for CFPB director?

“We’re birds of a feather,” said former CFPB Director Richard Cordray of Biden’s pick of Robit Chopra as his nominee for Consumer Financial Protection Bureau (CFPB) Director, according to Bloomberg News.

Cordray is remembered by many within the real estate industry for his aggressive enforcement of federal consumer protection laws, such as RESPA, and for his failure to provide clear guidance as to what was expected to avoid legal action. The CFPB instead was accused of “regulation by enforcement” through consent orders and administrative rulings that set new compliance standards without notice or a public comment period. The most well-known example of this approach was Cordray’s 2015 administrative ruling requiring PHH to pay $109 million to the Bureau, in which he ignored previous HUD guidelines under RESPA (the ruling was overturned by the D.C. Circuit Court of Appeals
in 2018.)

Legal observers anticipate a return to hardline enforcement by the CFPB under President Biden’s pick for its Director, Rohit Chopra. Chopra helped now-Senator Elizabeth Warren set up the Bureau in 2010, and worked for Cordray until 2015. He currently serves in one of the democratic spots on the Federal Trade Commission (FTC). Based on his record at both the FTC and the CFPB, he is expected to adopt Cordray’s regulatory and enforcement philosophy in running the Bureau once he is confirmed by the Senate.

Top Enforcement Priorities: COVID Relief and Racial Equity

Acting Director David Uejio, who worked at the CFPB with both Cordray and Chopra, announced in a January 28 blog post that the Bureau’s first top priority will be obtaining relief for consumers facing hardship due to COVID-19 and the related economic crisis. “It’s going to take urgent action for the CFPB to step up to this challenge,” he said. “One thing we can do immediately is focus our supervision and enforcement tools on overseeing the companies [such as mortgage servicers, student loan servicers, credit card issuers, and Payment Protection Program lenders] responsible for COVID relief.”

Uejio named racial equity as the CFPB’s other top priority. “I am going to elevate and expand existing investigations and exams and add new ones to ensure we have a healthy docket intended to address racial equity,” he said in his blog post. “This, of course. means that fair lending enforcement is a top priority and will be emphasized accordingly. But we will also look more broadly, beyond fair lending, to identify and root out unlawful conduct that disproportionately impacts communities of color and other vulnerable populations.”

How CFPB Enforcement May Change

While the immediate focus of the Bureau will be on COVID-19 and racial equity, changes now can be expected in the enforcement of all laws under the CFPB’s jurisdiction, according to observers of Chopra’s tenure at the CFPB and the FTC.

•    Larger enforcement targets: Former CFPB Director Kathy Kraninger, who resigned on January 20 at the request of the Biden administration, focused her enforcement efforts on smaller companies engaging in more clear-cut violations of the law. Chopra consistently advocated for stronger enforcement efforts against large companies at the FTC, and is expected to follow Cordray’s approach of pursuing more mainstream financial companies that result in consent orders with larger monetary penalties and consumer restitution.

•    More stringent settlement terms: Chopra voted against several FTC settlements that he considered too favorable to the industry while at the FTC. He likely will encourage his staff to be tough when negotiating settlements to ensure no repeated offenses in the future, resulting in more onerous terms and larger penalties.

•    A broader array of remedies and defendants: Besides pursuing strong monetary remedies, Chopra is expected to use all of the tools in the CFPB’s arsenal to revamp business practices and punish alleged wrongdoers, such as dismissing senior management and directors, changing executive compensation, banning certain business practices, and pursuing all parties who benefited from the alleged harm.

•    More publicity of enforcement actions: Like Cordray, Chopra will likely favor the liberal usage of press releases to announce consent orders.

There’s no doubt that CFPB enforcement will dramatically change in the Biden administration. What is unknown at this time is whether the new leadership will put into place a more trans-parent compliance process with rulemaking, bulletins and statements of policy that will prevent a reversion back to the “regulation by enforcement” of the Cordray era. Either way, it’s important now to have in place a regulatory compliance system to mitigate your risks.

Sue Johnson is the former executive director of RESPRO, the Real Estate Services Providers Council Inc. She retired in 2015 and is now a strategic alliance consultant.

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