On Friday, the Ford School of Public Policy hosted keynote speaker Rohit Chopra, a commissioner on the Federal Trade Commission, to discuss the vulnerability consumers face when seeking a loan, as part of the Consumer Protection in an Age of Uncertainty conference. Chopra was one speaker among a number of other panelists, including the previous day’s keynote speaker Richard Cordray, former founding director of the Consumer Financial Protection Bureau.
Chopra was an assistant director at the CFPB, where he served as the organization’s first student loan ombudsman — helping to establish federal guidelines that dictate policy and management of student loans and for-profit colleges. He was confirmed as an FTC commissioner with unanimous support from the Senate in April 2018.
The talk was structured as a conversation between Chopra and Public Policy Dean Michael Barr, who facilitated the discussion.
“We’re now 10 years after the financial crisis,” Barr said. “How are regulators doing? How are you feeling about the relative state of safety and fairness in the financial system?”
Chopra responded with regard for state level and investment regulation tactics.
“One major strength that I see in the right direction is we have some very energetic state attorney’s general and banking regulators who are outspoken about not letting what happened happen again,” Chopra said. “They do not want to be pre-emptive, (and) they do not want to sit on the sidelines while things go awry.”
Chopra later criticized how the CFPB, in his view, has a new agenda of lessening regulatory efforts on businesses. Barr pressed him to discuss the effects of this lack of regulation, and Chopra discussed how it indicates to businesses that they can disobey laws without consequence.
“What we see at the federal level is of great concern to me because it is a signal to the marketplace that you can go closer to the line, and even cross the line, and you can even make a business decision to cross the line, and even if you are caught, maybe there won’t be much consequences at all,” Chopra said.Chopra added these laws seem unfair to financial firms that do obey the laws.“This is deeply unfair to law-abiding financial firms,” Chopra added. “You see a lot of financial firms who are actually wanting to follow the law, and guess who is most harmed by their peers and competitors breaking the law? … For every law-abiding business, they should be angry about weakening reinforcement.”
One example of these business tactics Chopra pointed out was in the auto loan market. He explained how auto lending has been dramatically increasing since 2010, and with new technology to assist repossession of vehicles, such as GPS trackers and kill switches, it is easier for lenders to repossess a car if the person borrowing misses a payment. Chopra said lenders can give a loan knowing the borrower won’t be able to repay.
Chopra explained the consequences of these auto lending delinquencies.
“This should be a real worry for us, because an automobile is literally the vehicle in which you get to employment, in which you can access healthcare, in which you can actually participate in society for the vast majority of America,” Chopra said. “Add on top of that, subprime auto is disproportionately affecting people of color, it is disproportionately affecting the zip codes that are lower income, and those are the places that don’t necessarily have the political power to demand certain types of change.”
Barr asked Chopra to describe his view on student loans and the for-profit college market. According to Chopra, a student defaults on a federal loan every 30 seconds. He described what he observed among students who went to college during or before the financial crisis of 2008.
“So many of us have met students who told us ‘My parents were laid off, or we lost our home, and now it’s all on me to pay for this,’” Chopra said. “Sophomore year of college, what are you going to do? You’re going to borrow big, and hope it all works out, but the structure of our economy doesn’t work this way.”
Chopra raised concerns about the expanding role data collection plays in financial firms.
“The line between financial services and (technology) is also blurring a lot,” Chopra said. “The way in which big data is being used for alternative underwriting, the way in which technology firms are increasingly entering the financial services space … some of it raises some real questions about how that data is going to be used or misused. Everyone who’s interested in a fair financial market has got to be thinking about our surveillance and data economy too.”
In response to an audience member question about data usage, Chopra suggested that current federal anti-discriminatory laws aren’t designed for the mass data and surveillance economy. He described how ads for housing, employment and products can customize themselves to their user, and while a human may not be discriminating against a user, data algorithms themselves can be discriminatory.
Rackham student Hayden Jackson attended several parts of the conference because he studies monetary policy and financial regulation. Jackson felt the conference was relevant to his academic interests and helped further his practical knowledge of consumer protection.
“I have learned about the nuts-and-bolts of regulation, which will definitely shape my understanding of the politics side of it … and additionally, how these firms are going to use the regulation, or abuse it to accomplish their business goals, which is really important and I think a lot of political scientists don’t do this, to understand how these things are exactly being put into practice in real life,” Jackson said.