Facts Matter: Correcting the Record on the Biden-Chopra CFPB’s Own Brand of Debanking

What Happened?

Senator Elizabeth Warren and former CFPB Director Rohit Chopra claim that banks sued the CFPB to stop a debanking rule.

In a Senate hearing today titled “Investigating the Real Impacts of Debanking in America,” Senator Elizabeth Warren (D-Mass.) attempted to rebrand the Consumer Financial Protection Bureau (CFPB) with the Trump Administration by stating: “the CFPB is the one agency that is actively working to stop unfair debanking.” Senator Warren made the same claim in a letter to President Trump.

These comments follow an interview on CNBC at the end of January when former CFPB Director Rohit Chopra offered an even more surprising (and false) take:

“When the CFPB put into place a policy view that banks should not be banking based on certain characteristics, you know, they sued us for that just a few weeks ago. We put into place a proposed rule that would prevent debanking people based on political speech or religious views. So, I really think that we have to make sure that what these banks are saying is actually what they're doing.”

Why Does It Matter?

The CFPB has never proposed a debanking rule. The banking industry certainly never sued it on one!

In well-documented ways, the Biden-Chopra CFPB regularly distorted its own data and legal authorities to try to win campaign headlines for the Biden-Harris campaign. In particular, former Director Chopra led a “junk fees” reelection campaign that ultimately became the Biden Administration’s failed attempt to show voters that it was doing something to fight inflation. Former Vice President Harris even announced CFPB rules as media moments in the White House with then Director Chopra.

After the Trump Administration’s election win, all of the banking regulators testified that they would stop advancing rules that they had proposed under the prior administration – but former Director Chopra was the lone outlier. Weeks after the election, former Director Chopra continued to finalize rules that had been proposed by the Biden-Chopra CFPB, but now under headlines that were clear attempts to rebrand the rules as stopping “debanking,” in an effort to court the new administration.

In her remarks and letter to President Trump today, Senator Warren seizes on this rebranding effort, by highlighting a list of CFPB rules that purport to “address the threat of debanking.” This rebranding effort might meet the CFPB’s own definitions of deceptive marketing, as the assertions are clearly and factually wrong. 

• Senator Warren calls out the CFPB’s “Larger Participant Rule” as a rule that “address[es] the threat of debanking.”  The formal name of this rule is “Defining Larger Participants of a Market for General-Use Digital Consumer Payments Applications.” Senator Warren’s debanking mistake is almost understandable, because former Director Chopra’s CFPB issued a press release headlined: “CFPB Finalizes Rule on Federal Oversight of Popular Digital Payment Apps to Protect Personal Data, Reduce Fraud, and Stop Illegal “Debanking.”” 

But the rule doesn’t have anything to do with “debanking” and even less about protecting political speech or religious views. It also doesn’t even apply to banks!

• Similarly, Senator Warren also identifies “Prohibitions on Unfair Banking” as one of “five separate rules that address the threat of debanking.” Again, her mistake might be attributable to former CFPB Director Chopra’s aggressive rebranding, as we think this is the “debanking rule” that he referenced in his CNBC interview.

The problem is this wasn’t a debanking rule. It wasn’t even a rule. And that’s not just a semantic point. It’s important because the Biden-Chopra CFPB tried to rewrite 50 years of discrimination law by updating an examination manual.

Since the late 1960s, racial discrimination in financial services has been the subject of a series of laws passed by Congress and then clarified through decades of court opinions, including Supreme Court case law. It’s a highly calibrated, deeply fraught subject matter area that reflects a “major question” for the American economy and, indeed, our broader society.

In 2022, former Director Chopra released an update to the CFPB’s examination processes regarding Unfair Deceptive Acts and Practices that dramatically expanded the CFPB’s approach to discrimination. The Biden-Chopra CFPB argued that its examiners should be able to essentially use “I know it when I see it” views to call out new forms of discrimination that impact people “of a particular race” as unfair, even in those instances where existing law did not apply.

Those examiners would be operating under the darkness of the bank examination process, where banks have little opportunities to push back – and are generally prohibited by the CFPB from even discussing what they are being told by examiners with third parties. Further, the CFPB directed its examiners to collect companies’ proprietary algorithms and, more importantly, consumers’ demographics and other personal information.

If the CFPB wanted to update decades of discrimination laws, Congress set out a process under the Administrative Procedure Act. But, rather than following the law, the CFPB tried to create this entirely new regulatory apparatus without seeking notice and comment from the public, much less Congressional authorization. The Eastern District court of Texas agreed with our concerns and ordered the CFPB to stop.

Data shows that Biden-Chopra CFPB regulations force Americans out of the banking system. This harms the economy and creates the Biden-Chopra CFPB’s own brand of debanking.

In his television interview, former Director Chopra studiously avoided making any assertion that banks are actually debanking Americans. It’s a complex issue with deep roots in the way bank regulators, particularly the thousands of unchecked bank examiners, can push supervised institutions into difficult corners.

As former CFPB Director Raj Date recently explained: 

“It is difficult for non-bankers, even those within the financial services industry, to appreciate the sheer magnitude and invasiveness of the supervisory process. At least 10,000 examiners serve at the various federal bank regulatory agencies, double that if you include state bank regulatory agencies. And in my experience every examiner requires 10-20 bank, consultant, or law firm employees to prepare for, respond to, and remediate examiner findings.”

But it’s also important to consider the CFPB’s recent approach to policymaking and how – by prioritizing reelection headlines and slogans over facts – the Biden-Chopra CFPB has advanced a torrent of rules that make it harder for hardworking Americans to grow their financial lives. In many cases, these rules push consumers on the margins out of the banking system. This will harm the American economy.

For instance:

• The Biden-Chopra CFPB issued a credit card rule that they are now claiming would help with “debanking,” but the agency openly-conceded the rule would raise interest rates for the vast majority of credit card holders, in some cases, pushing consumers out of the credit card market entirely.

This will particularly harm the nearly 50 percent of subprime card consumers who pay their bills on time through hard work and smart budgeting – and will now have a harder time obtaining credit, managing their debt, and growing their credit histories.

The banking industry is suing the CFPB to stop this rulemaking from happening, but new leadership at the CFPB can re-propose the rule to mitigate its impact on interest rates and adverse impacts to credit access.

• The Biden-Chopra CFPB has similarly finalized a rule setting a government price on bank overdraft fees, which they now call an “anti-debanking” rule. But over 90 percent of banks responding to our survey indicate that the CFPB’s rule would reduce the amount of liquidity they are able to offer consumers. Further, consumers choose to use this important service and, according to Federal Reserve survey, more than 80 percent of consumers who overdrew their accounts knew the fee in advance. Importantly, CBA’s consumer research shows that consumers who regularly overdraft – more often than not – already lack credit alternatives in the banking system. These consumers report that they were just as likely to choose pawning or selling personal items as they were to choose using a credit card. 

While former President Biden and former Vice President Harris campaigned on their CFPB “getting rid of overdraft fees,” bank-led innovations have resulted in these fees being reduced by more than 50 percent since before the pandemic—all without legislation or regulation—while still enabling consumers to have access to this important service to manage their finances. Unfortunately, the Biden-Chopra CFPB rule greatly diminishes consumers’ choices and control of their finances. 

The cumulative impact of this rule, along with a similar rule proposed by the Federal Reserve board, could result in 30 to 50 percent of customers at a regional bank losing access to low and no-cost checking products.

The Consumer Bankers Association (CBA), along with other financial trades and banks, sued the Biden-Chopra CFPB for overstepping the limits on its authority set by Congress and, even more importantly, failing to account for the impacts of its rule on the American consumer.

It’s time to reboot the CFPB.

The fact is if policymakers are concerned about Americans being pushed out of the well-regulated and highly-competitive banking system, they need to start with fixing the Biden-Chopra CFPB policies that, in their own way, “debank” Americans.

The Trump Administration has a unique and important opportunity to institute meaningful reforms to the CFPB.

As CBA recently explained, in the many cases where the CFPB has issued policies without consulting the public, or reached beyond what they are authorized by Congress to do – especially in those instances where consumers stand to lose access to or pay higher costs for credit – new leadership at the CFPB can cut away hundreds of pages of unnecessary regulation almost instantly. The CFPB can simply announce an intent to reconsider interpretive rules stating that, in the meantime, the Bureau does not intend to rely on those interpretations in its supervisory and enforcement work and that private parties should not assume that those interpretations represent the Bureau’s current understanding of the law.

With other regulations, new leadership can pause pending effective dates and then work with industry, consumers, and other public stakeholders to roll back rules that The Wall Street Journal recently described as “hatched based on a foregone conclusion.” 

On behalf of America’s leading retail banks, CBA stands ready to work with the new Administration in its efforts to bring back American consumers’ choice and control over their own financial lives and make the American economy stronger than ever.