Thursday, August 11 2022

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

Just in headline and first two paragraphs of his announcementThe chamber described Chopra, director of the Consumer Financial Protection Bureau, as “out of control,” “ideologically driven,” “radical,” “extreme,” and “stubborn.”

Sounds pretty bad.

repeat offender…[are] a matter of course for many market-dominating companies.

– CFPB Director Rohit Chopra

If you are a banker, that is.

However, if you’re a consumer of financial services, you should interpret this broadside as the Chamber expressing anger at a government regulator doing the work it’s paid to do – in this case, to protect consumers from abuse by the protect the financial services industry.

Indeed, it is correct to view the Chamber’s attack on Chopra in the context of similar campaigns by the business community against President Biden’s appointees and nominees intent on regulating the industries under their jurisdiction.

These include the flagrant and hypocritical effort over the past year to portray Saule Omarova, a banking law expert at Cornell Law School who had been appointed currency examiner, as a closet communist. These efforts eventually led to Omarova withdrawing her name from consideration for the post.

Also in the past year the chamber and other industry lobbies attacked David Weil, an employment law expert at Brandeis and former Labor Department official.

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

Notwithstanding the fact that these were matters falling directly within the purview of the payroll and hours department of the agency where Weil had previously served and of which he was again nominated to head. The chorus of industry disapproval became so deafening that Weil retired his name earlier this year.

Then there is the Amazon and Meta Platforms (formerly Facebook) campaign against Federal Trade Commission Chair Lina Khan, aimed at forcing her to withdraw from FTC cases against the companies, largely for her expertise developed about how they do business. (She didn’t.)

The business community’s objection to Chopra stems from the pro-consumer direction the agency has taken under his leadership after dedicating itself to serving business interests during the Trump administration. Recall that in 2017 Trump installed his budget director Mick Mulvaney as acting director of the CFPB.

Mulvaney boasted before a bankers’ meeting that his appointment was to “keep Elizabeth Warren up late, which doesn’t bother me at all.” The bankers laughed appreciatively. (Democratic Sen. Elizabeth Warren of Massachusetts was instrumental in founding the CFPB; Chopra happened to start his public career as a clerk in her office.)

Mulvaney promptly suspended a CFPB regulation designed to prevent payday lenders and other profiteers from abusing low-income customers who could not repay the loans by charging fees, among other things.

He abruptly withdrawn a federal lawsuit against four alleged abusive counselors. And he closed an investigation into World Acceptance Corp. ab, a payday lender in his home state of South Carolina that had been accused of abusive practices but had done so contributed at least $4,500 to his congressional campaigns.

Kathy Kraninger, Mulvaney’s successor, continued his efforts to eviscerate the agency. Sometimes she approved comparisons with investigative targets that required it not pay any compensation to consumers.

Chopra is not cut from this stuff. As CFPB chairman, he has targeted credit card late fees and bank overdraft fees, which he rightly describes as “garbage fees” that “allow big financial institutions to delight in their customers,” which he said makes them feel “outpaced.” a January press conference Announcing an investigation into these allegations.

(As Helaine Olen of the Washington Post notedafter Chopra fired his shot across the banks’ bows by noting that they collect $15 billion a year in overdraft fees, several attempted to slash their fees.)

Chopra has also launched an investigation into buy-now-pay-later lending companies, which he suspected Misleading consumers about their debts 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 right away, but also gets the debt right away.”

He has also launched an investigation into payment platforms operated by Google, Apple, Facebook, Amazon, Square and PayPal to see if they are used to conduct “invasive financial surveillance and … use this data to enhance behavioral advertising, engage in price discrimination, or sell to third parties.”

These initiatives are likely to give financial services firms goosebumps. No wonder, then, that the Chamber has launched its campaign Association with American Bankers Assn., the Consumer Bankers Assn. and the Independent Community Bankers of America.

Reading the chamber’s filing against Chopra, one can hardly help feeling that when Hamlet’s Queen Gertrude might saythe body protests too much.

The Chamber expresses outrage at Chopra’s observation (in a lecture in March at the University of Pennsylvania) who “repeat violations… [are] a matter of course for many market-dominating companies.” He mentioned in particular large banks, big tech and big pharma.

The Chamber calls this view “extreme and inaccurate”.

Is that so? Just take a look.

Start with banks. Since 2000, JPMorgan Chase, the nation’s largest commercial bank, has been fined more than $30 billion in nearly 200 cases by state, federal and industry regulators, the authorities said Violation Tracker maintained by Good Jobs First.

The total includes a $920 million estimate imposed by the Commodity Futures Trading Commission in 2020 for an eight-year program of manipulation of the precious metals and US Treasury markets convened by the CFTC commissioner “unprecedented” in its scope..

That was at least the third market manipulation allegation JPMorgan has faced in recent years, including a bid-fixing in California’s electricity market in 2010 and 2011 for which the bank paid a $410 million penalty.

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

In 2015, when JPMorgan, Barclays, Citigroup, Royal Bank of Scotland and UBS all pleaded guilty to federal felony charges related to foreign exchange market manipulation, Securities and Exchange Commission member Kara M. Stein objected to the SEC granting them a waiver of severe penalties on what it called a waiver “the relapse of these institutions.”

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

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

Big pharma? Johnson & Johnson, Merck and Pfizer, three of the largest pharmaceutical companies in the world, all have billions in severance pay to clarify allegations of misconduct or in personal injury claims.

In 2009, Pfizer paid penalties totaling $2.3 billion, including a $1.195 billion fine that federal prosecutors described as “the largest fine ever imposed in the United States,” and pleaded guilty to one indictment guilty at the federal level; it belonged to the company fourth such settlement for the past decade for illegally promoting his drugs.

These are all obviously “dominant companies”. In these circumstances, Chopra’s observation of corporate relapse was not “extremely and inaccurately” but benevolent.

Still, it’s really not Chopra’s observation, accurate as it was, that got under the skin of the Chamber. It’s the prospect of more far-reaching regulatory action.

In a letter dated 28The chamber chided Chopra for directing the agency’s auditors to look for “discriminatory” behavior and linking this to the agency’s statutory authority to regulate “unfair, deceptive and abusive acts or practices.”

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

That’s an odd position, considering that “discrimination” certainly falls under 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 bureau has the power to protect consumers from “unfair, deceptive or abusive acts and for reasons of discrimination.”

The Chamber certainly knows this, because it quotes exactly this language in its letter and puts the “and” in italics for emphasis. However, it is not for us to question the Chamber’s decision to have its attorneys torture legislative diction in a seven-page, one-line letter to Chopra.

However, it behooves us to question who the audience is intended to be for the Chamber’s campaign against Chopra, which includes a “six-figure digital ad campaign.”

That relevant digital display is a nearly two-minute video praising American financial firms for working with the CFPB “to ensure fair regulations are made” and complaining that Chopra is “breaking tried and tested norms of policymaking.” Chopra, the ad states, “has an oversized and distorted view of his role and power.”

Translating this corporate language into English is easy. The chamber complains that the cordial relationship companies had with Chopra’s Trumpian predecessors has been broken. The “good norms of policymaking” she upholds were those that shaped policy to the benefit of the banks.

But those weren’t the norms envisaged by Warren or the CFPB’s first director, Democrat Richard Cordray, a serious regulator the chamber and other business lobbies also hated.

The Chamber of Commerce is playing a long game here. It knows it has no prayer to oust Chopra as long as a Democrat holds the White House. But if the administration and Congress go Republican, the CFPB will take a big hit on the back. In that case, consumers should be ready to hold onto their wallets.

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