The Potential Trajectory of CFPB in 2021 Under the Biden Administration and the Recent Issuance of the CFPB’s Finalized Advisory Opinions Policy

With the Biden Administration coming to Washington in January, a shift at the CFPB seems inevitable. Rumors on who may be at the helm the Bureau continue to grow, with many top candidates being current and former CFPB staffers with ties to Sen. Elizabeth Warren (the quasi-founder of the Bureau). The short list of possible directors to lead the consumer agency, according to CFPB experts and insiders, include: 

  • Richard Cordray (first Director of the CFPB at its inception);
  • Rohit Chopra (a commissioner at the Federal Trade Commission and formerly served as assistant director at the CFPB until 2015);
  • Patrice Ficklin (founding director of the CFPB’s Office of Fair Lending and Equal Opportunity);
  • Rep. Katie Porter (D-Calif., sits on the Financial Services Committee in the House of Representatives):
  • Adam Levitin (law professor at Georgetown University, where he specializes in bankruptcy, commercial law and financial regulation);
  • Bharat Ramamurti (a former economic advisor to Sen. Warren during her recent bid for the Democratic presidential nomination and was previously Warren’s senior counsel on banking and economic policy).

Though this list is based on what is expected of the Biden Administration no definitive decisions have been made. 

While some are focused on who will lead the Bureau, others are focusing on what actions the Biden Administration’s CFPB will take. If Democrats gain control of the Senate in addition to the presidency, they will likely try to enact expansions to the bureau’s power and jurisdiction. For example, the Biden campaign indicated an intention to establish a public credit-reporting agency under the CFPB as an alternative to current consumer reporting agencies to minimize racial disparities. Use of the public agency would be required for all federal lending programs. The Biden campaign also indicated that it would empower the CFPB to take action against exploitative student debt lenders as part of its broader effort to allow student debt to be discharged during bankruptcy. Assuming Republicans maintain control of the Senate, these types of broad jurisdictional changes are unlikely to be enacted.

The Brookings Institute has listed and discussed five things that they believe the Biden Administration will focus on when it comes to the CFPB. Please note that the commentary below is provided by the Brookings Institute and does not reflect our firm’s opinion on the matter.

  1. COVID-19 is the top priority for FinReg
    1. President-elect Biden inherits an economy infected by the COVID virus, which in turn threatens people and businesses, damaging financial institutions and markets. This is structurally different than the situation President-elect Obama inherited when the disease infecting the economy was based in financial markets and institutions. Thus, while the Obama administration had to prioritize restoring the financial system, and hence financial regulation, the Biden administration must focus on the root cause of the problem: getting COVID under control. 
    2. Restore the CFPB
  2. Whereas the Bureau collected $12 billion in fines for consumer abuses during the inaugural Director Richard Cordray’s tenure, in the second quarter of this year, CFPB collected only $8. We can expect the Biden Administration to restore the efficacy and power of the CFPB. 
  3. Embrace FinTech’s potential while protecting against bias
  4. New regulators need to focus on new tools to use fintech for good. They should not fear embracing change as the status quo is failing far too many. A corollary to focusing on the future is to not continue unnecessary past conflicts. New regulators should resist the temptation to go back to what was on their desks four, eight, or twenty years ago. Instead, focus on new potential solutions to problems.
  5. Transformative change is needed, but incremental change is still desirable 
  6. More and more every day Americans find themselves unable to remain afloat during this economic time. All banks should be required to offer low-cost, no overdraft, safe bank accounts. The banking industry’s largest trade association, the American Bankers Association has urged all banks to offer these non-controversial accounts. Regulators should step up the pressure include requiring these be offered. President-elect Biden should prioritize simple steps like this, that produce tangible immediate results to improve the financial system for working people. This is not in lieu of transformative change but is a way to fix the system while working to change it.
  7. Appoint quality people
  8. President-elect Biden should prioritize appointing strong financial regulators with sound judgment and strong will to act. There has been a troubling trend over prior administrations to wait too long to nominate financial regulators. As the Bipartisan Policy Center’s research found, growth in delays in regulators has been more of a function of delays in nomination than in consideration by the Senate. President-elect Biden can reverse this by quickly nominating a new comptroller of the currency, filling existing vacancies in the Federal Reserve Board, FDIC Board, SEC, and devising an aggressive game plan to fill future vacancies. Nominate and hopefully confirm quality candidates quickly. This may require greater consultation with the Republican controlled Senate than the Biden Administration had wished, but plenty of quality potential regulators with bipartisan appeal exist. Find them and move them through the process. Then let them and their agencies do the hard work, while the White House turns its attention to other matters.

As for the current administration’s CFPB, the Bureau is adding an additional feature to the future of the CFPB. On November 30th the CFPB finalized its Advisory Opinions Policy (Policy). The Policy will provide financial firms with a formal method to seek advisory opinions from the CFPB to gain clarity on vague or unclear CFPB regulations and policies. 

The Policy allows for any person or entity to submit requests for advisory opinions from the CFPB. Requests for an advisory opinion can be sent via email to advisoryopinion@cfpb.gov. CFPB staff will review these specific requests for clarification and determine when to distribute a formal advisory opinion. Once advisory opinions are issued, they will be made public through the Federal Register and on the CFPB website so that others with similar questions can be informed on the Bureau’s position.

The CFPB will prioritize responding to “open questions” within its purview that can legally be addressed through an interpretive rule. The Bureau said it will issue an advisory opinion if it views the opinion as an “appropriate tool” for answering firms’ questions. Though what qualifies as an “appropriate tool for answering questions” remains subjective. 

In the Policy, the CFPB signaled that it will not issue advisory opinions on interpretive issues that are subject to ongoing investigations, enforcement actions or planned rulemaking. The implementation of this Policy will provide clarity and formal/binding staff opinions for the industry to rely on when current regulatory policy is unclear. 

Please join us at Shipkevich PLLC on Wednesday, December 16th at 2pm EST/11AM PST for our end of the year webinar where we will touch upon this discussion of the future of the CFPB and what we expect to see from the Biden Administration. Other topics will include a 2020 legislative recap; a summary of key enforcement actions by the CPFB, FTC, and State Attorneys General in the debt relief space; and what to generally expect on both the state and federal level in the debt relief space come 2021. 

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