(Bloomberg) — Rohit Chopra’s crackdowns on illegal car repossessions, home foreclosures and bank overdraft fees made him a hero to consumer groups and a foe of lenders.
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But his future as head of the Consumer Financial Protection Bureau is jeopardized now that Republican Donald Trump is returning to the White House. In his second term, the president-elect will have the power to fire Chopra, if he doesn’t resign first, after a US Supreme Court ruling in 2020 made the CFPB director an at-will employee and susceptible to termination for any reason.
“We expect Chopra to be out of his seat almost immediately after the inauguration,” said Isaac Boltansky, the Washington-based director of policy research at the trading firm and investment bank BTIG LLC.
Since its formation after the 2008 financial crisis, the CFPB’s regulations and very existence have been challenged repeatedly in the courts. Removing Chopra would be a resounding victory for businesses that have tried to weaken independent regulators: reining in an aggressive approach to consumer finance and eliminating a strong voice on critical banking regulation.
As a member of the Federal Deposit Insurance Corp.’s board, Chopra raised concerns earlier this year about a plan to dial back US regulators’ landmark bank-capital proposal. He privately described the significant reduction in capital requirements as closer to a giveaway to Wall Street banks, Bloomberg reported in September.
Firing Chopra would give the Trump administration a “two-for-one” win because it increases influence over two agencies, said Brian Knight, a senior research fellow and director of innovation and governance at the Mercatus Center at George Mason University.
A representative for the CFPB didn’t provide comment.
Removing the heads of most financial regulators if they don’t want to exit isn’t so simple if the agencies are set up with boards or commissions. If Gary Gensler, chair of the Securities and Exchange Commission, were to decide to stick around until his term ends in 2026, this could lead to a protracted legal challenge to the Supreme Court over whether Trump can simply demote Gensler from his leadership role and make him a simple commissioner, or fire him outright.
In the latter case, the Trump administration may have to first provide proof of “for cause” grounds for removal, which can include malfeasance and neglect of duty.
The CFPB, Federal Housing Finance Agency and the Office of the Comptroller of the Currency are helmed by single directors who aren’t protected. The high court’s 2020 decision made it easy to remove the CFPB and FHFA chiefs. By statute, the head of the OCC can be “removed by the president, upon reasons to be communicated by him to the Senate.”
Chopra, appointed by President Joe Biden to a five-year term, hasn’t shied away from taking on the largest banks and financial services companies, including Goldman Sachs Group Inc., Wells Fargo & Co. and JPMorgan Chase & Co.
The CFPB survived a legal threat earlier this year, when the high court upheld its funding structure. But a number of Biden-era CFPB regulations are in limbo. The courts are still deliberating a rule that would cap credit-card late fees at $8, and the fintech industry recently sued over buy now, pay later regulation. The agency’s “open banking” rule, which would require financial firms to provide free access to customer data, faces a legal challenge from bank lobbying groups.
“They actually had, like, a 50-page lawsuit ready within hours of us being finished,” Chopra said at a conference last month in Las Vegas. “I haven’t read their lawsuit, and I don’t think they’ve read the rule.”
JPMorgan Chief Executive Officer Jamie Dimon fired back at Chopra the next morning, demonstrating the banking sector’s frustration with a regulator that some say has taken an overly aggressive approach to enforcement.
“Rohit is a very smart guy who has one major flaw, which I’ve told him personally, is that you use your brains to justify what you already think,” Dimon said.
–With assistance from Lydia Beyoud.
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Source: finance.yahoo.com