This week, Nick and Goldy sit down with Rohit Chopra, the Director of the Consumer Financial Protection Bureau, to explore the agency’s efforts to lower financial costs for working Americans. From cracking down on credit card late fees to tackling medical debt on credit reports and regulating bank overdraft charges, Director Chopra sheds light on the CFPB’s various initiatives to promote transparency and competition in financial products and services. Chopra argues that by advocating for consumer rights and protections, the CFPB is shaping a more equitable economic landscape for all Americans.
UPDATE: This episode was recorded before yesterday’s breaking news that a Texas judge issued a last-minute order temporarily blocking the CFPB’s plan to cap credit card late fees. Find more information about the injunction, and the Chamber of Commerce’s case against the cap, here: https://www.cnn.com/2024/05/11/business/credit-card-late-fees-regulation-cfpb/index.html
Rohit Chopra is the Director of the Consumer Financial Protection Bureau (CFPB), a federal agency dedicated to protecting consumers in the financial marketplace. Prior to leading the CFPB, he served as a Commissioner at the Federal Trade Commission, where he focused on promoting fair competition and protecting consumers from deceptive practices.
Twitter: @chopracfpb, @CFPB
Further reading:
Submit a complaint about a financial product or service
CFPB Bans Excessive Credit Card Late Fees, Lowers Typical Fee from $32 to $8
Website: https://pitchforkeconomics.com
Twitter: @PitchforkEcon
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Nick’s twitter: @NickHanauer
Nick Hanauer:
The rising inequality and growing political instability that we see today are the direct result of decades of bad economic theory.
President Biden:
It’s time to build our economy from the bottom up and from the middle out, not the top down.
Nick Hanauer:
Middle-out economics is the answer.
President Biden:
Because Wall Street didn’t build this country. Great middle class built this country.
Nick Hanauer:
The more the middle class thrives, the better the economy is for everyone, even rich people like me.
Speaker 3:
This is Pitchfork Economics with Nick Hanauer, a podcast about how to build the economy from the middle-out. Welcome to the show.
Goldy:
So something I’m not sure you know about me, Nick, is that I have never subscribed to cable television.
Nick Hanauer:
Well, I did not know that.
Goldy:
Do you want to know why?
Nick Hanauer:
Why?
Goldy:
Because they could never tell me what it would cost. I found it so frustrating every time I got some special offer, “Oh, this package for $20 a month for the first six months and then regular pricing thereafter.” And not only couldn’t they tell me what that regular pricing would be, they couldn’t tell me it was $20 a month or whatever it was, plus taxes and fees. And every time I called them to find out what would be the total monthly bill, they couldn’t tell me. Maybe they wouldn’t tell me because it was different depending on your zip code and all this. But don’t worry, you’ll see it on your first bill, and then you can decide whether you want to cancel or not.
Nick Hanauer:
Trust us.
Goldy:
And I found-
Nick Hanauer:
Trust us.
Goldy:
… the lack of transparency in the cable bill, I didn’t care. Maybe it was just $5, $6 a month more, I could have afforded it, maybe. I don’t know. I’ve got no idea because they wouldn’t tell me. And just out of anger, out of just personal principle, I could not purchase cable TV for that simple reason because they wouldn’t tell me what the price was. And, of course, that type of lack of transparency runs throughout our economy. You wouldn’t know, Nick, because you probably don’t pay your own bills.
Nick Hanauer:
No.
Goldy:
And if you did, you wouldn’t care. But that’s the way most of us live.
Nick Hanauer:
No, I know. And today, Goldy, we are super lucky to have a really special guest joining us. Rohit Chopra, who is the director of the Consumer Financial Protection Bureau, we were with him in Washington, DC, a couple of weeks ago, and then he spoke at the middle-out conference last week. But the work they are doing to try to get this nonsense and nonsense like that under control is truly breathtaking. And one of the things that’s really happened to the American economy is that we’ve financialized so many things and the financial products industry basically has made it their business model to make things so complicated and so unfair that no one can tell. And they’re generating all these ridiculous profits basically by exploiting the fact that they have power and ordinary consumers don’t, right? You just don’t have that many options. In fact, sometimes you have no option. This agency, of course, has been quite controversial because the financial products industry absolutely hates it.
Goldy:
Right. And let’s be clear, this is the thing that Elizabeth Warren helped create, and then Congress blocked her appointment to it, so she ran for Senate instead.
Nick Hanauer:
Yeah, no, but it’s super interesting. Anyway, getting to talk to Rohit about this will be super interesting. He is an incredibly smart guy, a very impressive character. So with that, let’s just chat with Rohit.
Rohit Chopra:
This is Rohit Chopra. I’m the director of the Consumer Financial Protection Bureau, or CFPB.
Nick Hanauer:
So, Rohit, can you give our listeners kind of a little bit of context? What is the CFPB, and what is its work?
Rohit Chopra:
Well, one of the things we learned the hard way in our country is, when regulators are asleep at the switch or fail, the results are catastrophic. And that’s exactly what happened in the 2008 financial crisis. And so what we did is a lot of people organized to make sure that it didn’t happen again, and they started a new agency responsible for policing the worst of Wall Street’s excesses and abuses when it comes to mortgages and credit cards, student loans, and more. So we are here to hold those powerful actors accountable and make sure that individual families have some real voice and power in the system.
Nick Hanauer:
That’s fantastic. So can you expand on that explanation and kind of run our listeners through sort of the range of actual stuff that you work on that they would understand and that would impact their lives?
Rohit Chopra:
When I think about how I manage my own finances, it’s really like how so many others do. Families are looking at their monthly budget and the items that are busting it, and that’s why your mortgage or rent is a big deal to you. It’s why your credit card bill and the interest rate and fees matter a lot. You track your bank account to see if it’s being drained by junk fees. Your student loan payment can make the difference about your economic life in the future. So we really think of what we do as about everyone’s daily financial life, and we’re here to make sure that Wall Street, other financial institutions aren’t cheating you. And so what we do is, we bring a lot of law enforcement actions, like against Wells Fargo and other large banks. We really take lots of consumer complaints every month, over a hundred thousand where it doesn’t go into a black hole, we tell the bank or financial company to respond and fix the problem.
We are going on site into these financial companies to kick the tires to see what they’re up to. We’re developing rules to make sure that our longstanding laws are fit for the digital future. And the list goes on and on. And I think what we’re really trying to do is avoid an economy built on abuse and rather have a financial system that is actually helping people get ahead.
Nick Hanauer:
What are the worst abuses that you see?
Rohit Chopra:
Well, the list is really so long when it comes to financial companies. I think we’ve seen really gut-wrenching issues like illegal foreclosures. We saw how some of the largest banks illegally took people’s homes, sometimes without even the documents to show they had the right to foreclose, and even did it to military families. We’ve seen student loan servicing companies engage in serious screw-ups that really affected the financial futures of people across the country. We’ve seen how much the financial industry has, in some ways, become addicted to fees for fake services or fees that are so grossly expensive for what people actually want. And of course, our top issue year after year is the systemic inaccuracies on people’s credit reports. These credit reports can make the difference about whether you pass an employment verification check, can rent an apartment to get a loan. And when you are dealing with a problem on your credit report, your financial life can be in a tailspin. So we see those problems all over, and we make it our mission to fix it because we see how much it affects people’s lives.
Nick Hanauer:
Can you give me an example of charges for a fake service? What do you mean by that?
Rohit Chopra:
For the past few years, we launched an effort to really attack the junk fees that have been creeping across the financial system and really the economy writ large, and now it’s an all of government attack, and we’ve seen the billions and billions of dollars of these fees that are just all over the place. We found one type of fee that really drove us nuts. It was a paper statement fee where the company was neither printing nor mailing the statement, just purely a fake service knowing that they could start putting it on people’s bills and who has the time to make that call and battle a call center chain to be able to get the refund. And so we want to stop this situation of people being more than nickel than dime. It’s billions of dollars for things they don’t earn. And what I’m really sick and tired of is, we want American businesses to make money based on providing a real service or product that is competitively priced, not to figure out ways how to tire us out, exhaust us, or manipulate us, and to paying for things we don’t even want.
So we’ve looked at all these fees, Nick. We’ve looked at the overdraft fees, where we found banks manipulating the order of payments in order to extract billions of dollars of more. We’ve looked at credit card junk fees, where the credit card companies found a loophole to charge an extra $10 billion, and we’ve done rules to eliminate them. So the list really goes on and on. But I think we want an economy where businesses feel they’re going to make money by doing something honestly, transparently, and competitively and not use our data and use their consultants and lawyers to figure out how to fleece us.
Nick Hanauer:
Yeah. It just feels like, especially for financial products, they’ve made it all so complicated that you can’t really figure out what you’re paying for anymore.
Rohit Chopra:
You don’t even know what the real price is. You don’t know what’s hidden in the thousands and thousands of words of fine print. You don’t even know what to do with the disclosure that really says, “Hey, we’re going to do whatever we want, our data, our dollars, all of that really matters.” And I just think this is a fundamental shift in the thinking of the past few years that has been great. We are here to shape a market that actually works for people. We know this stuff needs to be regulated. In our country, we would constantly have these financial panics because the financial system would blow up and harm people. We know it needs to be regulated now. We need to focus on all the ways to make sure it’s competitive and fair and really go after when it’s exploitative, or sometimes just ridiculous, of how they’re seeking to juice their profits.
Nick Hanauer:
And I mean, this is a conversation we’ve had on the pod before because we’ve let so many industries consolidate. It’s not like you can go someplace else and escape this nonsense, right? There’s not enough competition really in a lot of these markets for consumers to have actual choice.
Rohit Chopra:
Well, sometimes, Nick, you don’t have a choice in the first place for these three credit reporting conglomerates, Equifax, TransUnion, Experian. We aren’t even the customer where their product for mortgage servicers or student loan servicers, we don’t get to pick them. So, in some cases, we’re just captive. In other places, you’re right, it’s so consolidated that the choice isn’t meaningful. In other cases, they make you cut through so much red tape to switch that it gives them the license to really not feel that you can switch at any moment, that you can’t vote with your feet. It’s part of the reason why we’re doing so much to make it faster and simpler to switch your bank account or your credit card, looking at ways to streamline mortgage refinancing or other key loans, and taking a very hard look at the ways that competition can be distorted or where the creep of consolidation is harming people.
Nick, we just published a whole set of research about the credit card industry, and what we found was that a fairly small set of players dominate the market. And what did we find? Some of those big players were charging much more than the smaller players, and there’s some evidence that they’re coordinating on certain things, and that’s just not working for our markets and is costing Americans tens of billions of dollars extra just to participate in that system.
Nick Hanauer:
Have you guys ever kind of ballpark the aggregate amount of nonsense that is going on? I mean, how much are we talking?
Rohit Chopra:
The scale is enormous. If you look at when it comes to financial products, remember, we have tens of dollars in outstanding loans, mortgages, credit cards, student loans, auto loans. So even when we’re talking about tiny changes in interest rates, it adds up to such a huge amount of money. And then, on top of that, all of the fees at your closing of a mortgage, all of the fees when it comes to your auto loan. And so that’s why I don’t have a blockbuster figure for you, but it is so much larger than many other parts of our lives economically, and that’s why we feel we constantly have to make sure that we are driving fairness, transparency, and competition.
Nick Hanauer:
So obviously, your work benefits. I suspect 99% of us, and yet there’s a lot of pushback. Tell us about that. How does the financial services industry feel about your work?
Rohit Chopra:
So look, we’re lucky in that when the public hears about what we’re doing regardless of their geography or their ideological beliefs, it’s great to see how much they want their government doing that. Now, of course, there is a well-funded army of lawyers and lobbyists who have always been out to destroy this agency. And this is my second time at this agency. Since day one, there has been efforts to defund us to limit our ability to take law enforcement actions against these big financial players. And we’re right now in the middle of a Supreme Court contest where the Supreme Court is now weighing our constitutionality for the second time. And in many ways, I see this as really just a reason about how much money is at stake. If cheating is easier than competing, boy, can you make a lot of money on it, and boy, are you going to want to get the public to not have real regulators and enforcers on their side?
Nick Hanauer:
So what’s in the future for the organization? What’s on the horizon?
Rohit Chopra:
Well, we’re really seeing the financial industry change. It’s not just about the big banks. It’s not just about the credit reporting conglomerates. It’s not just all those mortgage servicers and student loan companies, and debt collectors. Now, we’re starting to see big tech companies lurch in, and more and more, we’re seeing that those big tech companies want lots of our financial data. They want to know what we’re spending on. They want to know how much we’re willing to pay. And all over the country, you see people paying, tapping with Apple Pay, Google Pay, different financial apps, and all of that data is really valuable. You can combine it with someone’s geolocation, their web browsing history, so much more. And I think we’re lurching to a place where that’s going to create the conditions for personalized pricing. In the digital world, we are looking at the future of banking when it comes to gaming platforms.
More and more video game platforms in virtual worlds are now incorporating new types of currencies. We saw Facebook and other try to create their own currency five years ago. It didn’t go through. But we’re not just looking at yesterday’s problems, we’re looking at all the ways that hacks, scams, and frauds can be present in the digital world. And we don’t want to just watch. We want to act and be clear about how to make sure that every individual is going to have dignity, not be discriminated against, and be treated fairly. We know that those are really big-ticket issues for the future of our financial system and our economy. I also think we are now helping to lead an all of government effort on making the economy fair. And that means making sure that there’s real rules, that firms follow them, and that people are actually able to understand the true price and product features of anything they’re looking to buy.
And we have a lot of work to do across every sector of the economy to do it. And we know that an economy is only going to work if it’s really working for everybody. The small players, the medium-sized players, individual entrepreneurs, consumers, families, people at all ages of rural, urban, everything in between, rather than just a small clique of big corporations dictating everything for us.
Nick Hanauer:
And that’s what we mean when we talk about middle-out economics, building the economy from the bottom up and the middle out.
Rohit Chopra:
It’s also not just about economics, it’s really about human dignity too. I think a lot of the reasons why people get very worked up about these junk fees. For some people, it may be just an inconvenience. For others, it may send them in a tailspin of taking on debt or not being able to make ends meet. But for everyone, it just feels insulting. It feels that they are not being dignified for their individual life. And I think an economy is not just about measuring standard of living, and economy is also about how people are treated and what people feel in their day-to-day life when it comes to not just staying afloat but also getting ahead.
Nick Hanauer:
Yeah, I think that’s a really profound point, just reiterating that it’s not just how much you make, it’s how you treat it in the economy. And I think part of the reason everybody’s so off is, people just feel like they’re being taken advantage of at every turn.
Rohit Chopra:
Yeah. I will say also that one of the things I’m so really passionate about in our work at the CFPB is, we really are seeing how so many different facets of our life are turning into finance. We see that higher education in our country, which used to be much, much more affordable, is now a trillion-dollar debt market. We see that going to the emergency room or going to a medical facility can turn into a scourge of medical debt and medical credit reporting. And we’ve worked hard on this medical debt issue, and I’m really glad that Equifax, Experian, and TransUnion are cutting down on all of the medical being parked on people’s credit reports, a lot of it inaccurate or not even owed in the first place. And so people across the country are getting calls saying, “We’re accusing you of owing this money even though you might’ve already paid it, and we’re hijacking your credit report.”
And so we’re going to be proposing rules to ban some of that coercion. But it speaks to how things that were once part of a different way the economy operated have been morphed into… And weaponized by the finance and especially consumer finance system.
Nick Hanauer:
Wow, that’s so interesting. It’s such important work, but in the weeds, right? It’s so technical, it’s so hard for people to understand in some ways, and yet so immediate in others. What a challenge.
Goldy:
It’s designed to be hard to understand.
Nick Hanauer:
No. Yeah, exactly. That’s how it works.
Goldy:
Yeah.
Rohit Chopra:
Well, that’s why we do what we do is because in many cases, wherever we are in the country, it’s not that hard to understand. People know they feel it in their bones that something is not right. And why is it that when they went to the hospital and they’re getting multiple bills and they think, “Yeah, this is covered, or I only owe one copay, not four copays.” And the worst is people just feeling like they have to give up and surrender. And that just feels so damn un-American to me that people should feel they can give up rather than pushing forward and expecting that they’ll be treated fairly.
Nick Hanauer:
So, Rohit, if you could snap your fingers to make the world a better place in your purview, what would you do? What’s the glorious future?
Rohit Chopra:
I think we would be a better country if we did not have phrases like student debt and medical debt. I think there are just certain things that, when you monetize them, when you create a financial industry around them, it can set up the conditions for real, real unsavory and unfair economy. I realized that it’s not totally avoidable, but I just think those two things are so fundamentally different. It’s not like financing a home or a car, and I just think that there’s some real, real big problems when we have a trillion, trillion and a half, two trillion of this type of debt weighing on people.
Nick Hanauer:
So can we zero in on credit cards a little bit? Credit card fees have expanded dramatically, aren’t they up close to 30%? And there’s all sorts of nonsense that goes on there. And I think you’re being sued too, aren’t you? Can you talk about that a little bit?
Rohit Chopra:
So there’s over a trillion dollars in credit card debt. It has really pushed up in recent years. We estimate that Americans are paying roughly $130 billion in interest in fees each year. We see credit cards out there charging 30% interest. And it’s one of those places where, when those interest rates get that high, more people can get into persistent debt. So we’ve really, given how common this product is for American families, we want to make sure it’s working. We’re trying to crack down on places the credit card industry has seized on loopholes, including rules, reforming credit card, late fees. And the rule is pretty simple. It’s that there’s a law in the books that says your penalty fees have to be reasonable and proportional. So we’re saying, “You got to show us what your costs are. Why is your fee reasonable?” And we’re telling people, if you want to just keep it at $8 or below, that’s fine, but you can’t create a huge profit model based on it.
Yes, we’re getting sued. Yes, the Congress has started the process to repeal the rule, and it’s clear that the credit card industry is going to fight back very hard. But, Nick, here’s what’s actually more bothersome. I think when people are wanting to buy goods and they have seen some of the cost of goods over the years, it’s true that they’re paying more for them. And I think it’s not just that they’re paying more for certain goods. And yes, even though inflation has come down, even when they’re paying for those goods, they’re then paying a second bout of inflation when it comes to credit card interest rates. And that inflation, I think, is purely about profits. We have seen the credit card industry jack up interest rates faster and bigger than even the Fed has raised interest rates. And we have seen that that adds up to billions and billions of dollars. And so it’s almost like double-dipping on price hikes. One consolidated industry might force through price hikes on a specific product, but then you’re paying even more because of the interest rates on some of these credit cards.
Nick Hanauer:
Wow, you have a big job.
Rohit Chopra:
It’s okay. We’re here to do it, and we’re here every day to make sure that we’re doing something with this agency because we are just not going to let something like that subprime mortgage crisis happen again. And one of the good things about being focused on these consumer products is that, again, more than a hundred thousand people a month are filing cases with us to fix their problems. We refuse to be blindfolded. We are going to always hear from people every day, and we got to respond to that. And what happened with that last financial crisis is one of the biggest regulatory failures in American history. We can never let it happen again. And unfortunately, we’ve got to get every regulatory agency working for the public rather than just for the entities they regulate, and time after time, whether it’s the financial crisis, the opioid crisis, we cannot let the largest and most powerful companies in our economy set the rules. The people and their elected officials set the rules, and the regulators have to make sure they stay up-to-date and enforce them.
Nick Hanauer:
One final question. Why do you do this work?
Rohit Chopra:
I think that I don’t want to be someone who’s just mad. I think it can become really easy to feel ticked off about how the system is working, but the only way that I can channel that energy is to find a way to fix it. And I think we’re lucky here at the CFPB, we have a whole crew of people, roughly 1,700 people, who are really every day just trying to fix things. And we’re lucky that the results we’ve delivered are real billions of dollars that are back into people’s pockets. But a sense that there is not going to be just someone watching on the sidelines while people get ripped off. And I really love that.
Nick Hanauer:
I love that. That’s a great answer. That is a great answer. Well, thank you so much for being with us. This is really fantastic.
Rohit Chopra:
Thanks everyone.
Nick Hanauer:
Goldy, one of the things that we talk about so often is economic inequality and the way that it’s polarized our society. But I think that what Rohit said about the economy being more than just the prices you pay and the money you make, that it really is about how people are treated, is so true. It’s just so true. Economic policy needs to not just shape how much money we make or the fees we pay, or whatever it is, but it needs to shape how we are treated in our society because the amount of… I think the best way to phrase it is, corporate fuckery that goes on in our country today is so egregious, and I think it really contributes to why everybody is so pissed off. You can’t go around a corner without somebody trying to fleece you with some hidden fee or whatever it is.
Goldy:
And to be clear, the less money you make and the less money you have, the more they take advantage of you.
Nick Hanauer:
That’s right.
Goldy:
Because they can. And I can tell you from personal experience, Nick, that I’ve been working with you, oh my God, Nick, it’s almost 10 years now, but in the decade prior, I was a blogger who relied on donations and advertising. I worked for an alt-weekly that paid crap. I didn’t make a lot of money, and I was living month to month, and I had thousands of dollars of credit card debt when I first started working for you. And a 13-year-old car and a hundred-year-old house that everything needed repairs. And it was really a struggle. And it was so frustrating how the financial industry was not there to help me. It was there to exploit me. In the years after the financial collapse, I was so lucky that I never tapped the equity in my home because, had I gotten one of those adjustable-rate mortgages, I would’ve lost my house.
But then afterwards, when interest rates were low before I went to work for you, it was so frustrating. I had this higher interest rate, and I couldn’t refinance. I couldn’t refinance because I didn’t make enough money to cut two points off my interest rate. I had to pay my old, higher interest rate, which I was making every month. It was never there to help me out. And I’m pretty savvy. So I was pretty good in choosing low-interest credit cards and rolling my balances across that. But it was a lot of work. I certainly didn’t have it as bad as most other people did. It is so frustrating that everything you do in life, it feels like somebody’s trying to take advantage of you. Like the pre-Obamacare days, buying insurance on the individual market. It was a nightmare the way I was taking advantage. And I think about that again. I talked about the lack of transparency in a cable bill.
Well, as you know, I had some surgery recently. I had my gallbladder out. It wasn’t a big deal. But when you look at those bills, thank you, Nick, for buying us good health insurance because it’s amazing. First of all, nobody ever says you don’t get a choice. Well, you can have the good surgery, which is going to cost you $12,000, or we could do it on the cheap for $7,000. You’re not shopping around that way. And then you get these bills, and there’s this price. This is $11,000 is what they bill you. And the insurance company pays them $3,000, and you have a $300 copay on that. Where’s the other $8,000? Well, if you didn’t have insurance, you’re paying that list price. It’s all a fiction, and it’s all done in a way that makes it impossible to shop around and to know what you’re getting. And yeah, people give up.
I think Rohit mentioned that that’s what they’re trying to do, is to get you to-
Nick Hanauer:
Give up.
Goldy:
… give up and pay the bill. And I have to admit, I’ve done that in the past. I’ve given up and paid bills because it just wasn’t worth fighting them.
Nick Hanauer:
Right. So listeners, when you hear about this agency, I hope after hearing more specifically what they’re up to, you’ll be more sympathetic to their efforts because it is, wow, what a job. What a job.
Goldy:
And a lot of work there to do because, oh man, if not for the Consumer Financial Protection Bureau and a lot of what they’re doing, it’s the financial industry. It’s just nothing but rent-seeking, Nick. They’re just trying to make money off their money, and they’re not looking serving you. That’s wrong. They are looking at serving you, Nick.
Nick Hanauer:
Yeah, it’s true.
Goldy:
They’re just not looking at serving everybody else.
Speaker 3:
Pitchfork Economics is produced by Civic Ventures. If you like the show, make sure to subscribe, rate, and review us wherever you get your podcasts. Find us on Twitter and Facebook @CivicAction and Nick Hanauer. Follow our writing on Medium, @CivicSkunkWorks, and peek behind the podcast scenes on Instagram, @pitchforkeconomics. As always, from our team at Civic Ventures, thanks for listening. See you next week.