CFPB Prioritizing Enforcement Over Education

On August 4, Consumer Financial Protection Bureau (CFPB or Bureau) Director Rohit Chopra spoke at the Philadelphia Federal Reserve Bank’s Sixth Annual Fintech Conference, arguing that enforcement actions rather than financial literacy efforts were necessary to prevent consumer abuse.

Chopra said that while there is value in educating consumers to spot risks and find trustworthy advice, financial products are inherently challenging to understand. “Disclosures are not going to be what’s fixing it,” Chopra said. “What is often going to fix it is to eradicate unlawful actors who really prey on people.”

Chopra was even more pointed in his July 14 prepared remarks for the Financial Literacy and Education Commission where he claimed that “financial education can be harmful.”

Chopra’s statements reflects a marked change from Chopra’s predecessor’s, former Director Kathleen Kraninger, approach to consumer protection. Kraninger listed education as the “first tool” in the CFPB’s toolbox in preventing consumer harm. In a 2019 speech at the Bipartisan Policy Center, Kraninger stated that the Bureau could not and should not try to “be everywhere, with everyone, at every transaction” and so would look to empower consumers to help themselves and make good financial choices.

Chopra, meanwhile, cast doubt on the effectiveness of that approach on August 4. “The experiment has not had much success,” Chopra said. “One, I think in some cases financial education has made people worse off because they become overconfident.”

The CFPB’s increased emphasis on enforcement led to an uptick in fair lending enforcement in 2021, and that trend has continued with increased enforcement in areas, such as loan servicing, credit reporting, student loans and small business lending.

Troutman Pepper will continue to monitor important developments involving the CFPB and enforcement actions and will provide further updates as they become available.