It’s just an “S”
Being criticized unfairly can be tough to address. For example, in 1988 when I was seeking a “big law” summer position in Chicago, a third-year associate interviewing me at one firm thought he was pretty clever by pointing out a typo at the top of my resume because there was an “S” in the middle of my name that didn’t have a period.[1]I tried to explain to Mr. Smartypants that I didn’t have a middle name-only a middle initial. A period is appropriate when the initial is shorthand for a full name-not when the initial is all there is[2]. He was convinced, however, that I had a typo which illustrated that I didn’t have the kind attention to detail he thought I should have.[3]That interaction still chafes me, because there was no way to shake the impression this guy had about me before even meeting me to hear my story.[4]In fact, pointing out he was wrong only made him dislike me more.
Chopra goes his own way
Anyway, the financial services industry has been dealing with a lot of unfair criticism for a long time.[5]Consider the kind of rhetoric from “big bank” blamers Bernie Sanders and Elizabeth Warren or statements made by former (Acting) CFPB Director Dave Uejio or former CFPB Director Richard Cordray, who seem to believe that the rule of law for financial services firms is ‘guilty until proven innocent’. CFPB Director Rohit Chopra, on the other hand, seems to be charting a very different course from his predecessors. If you think Chopra is simply another Cordray, you are missing the boat. While he’s definitely not an industry advocate[6], and he’s not shy about regulating without APA-backed rulemaking, he’s got a very different agenda from the “old-school” consumer advocates[7]or populist banking industry haters whose agenda dominated the early years of the CFPB. Chopra has also shown that he is willing to go his own way by not playing well in the sandbox with other regulators.
Chopra’s Transunion statement compliment
For example, it didn’t take long for Director Chopra to back up his words about going after market dominant repeat offenders discussed in my last Musings. On April 13, 2022, Chopra announced, with the unique sort of derisive written remarks he is quickly becoming known for,[8]the CFPB’s action against the credit bureau Transunion[9]and its former Senior Executive John Danaher. Notably, Chopra said,
“Put simply, TransUnion’s leadership is either unwilling or incapable of operating its businesses lawfully. I hope that its board of directors will take this action seriously and immediately change its corporate culture when it comes to compliance with consumer protection law. The company’s conduct is a stark contrast to most of the institutions the CFPB examines.”
Praising Chopra (again)?
Wait a minute. Did you hear that? Not the stuff about Transunion’s culture and leadership that I will come back to later. This: “The company’s conduct is a stark contrast to most of the institutions the CFPB examines”. Soak that in for a moment. In singling out Transunion as a bad actor, Chopra also made the point of complimenting the financial services industry generally for being lawful and compliant based on the CFPB’s examinations.[10]
That’s another remarkable and very appreciated admission from the current Director of the CFPB; especially when compared to the kinds of statements about financial service businesses typically made by CFPB’s old guard folks like Richard Cordray and Elizabeth Warren. I find myself again in complete agreement with Director Chopra. Financial services is an industry that rarely gets any credit for doing the right thing despite most participants (particularly those I observe in the home mortgage lending business) being extremely conscious of acting properly, compliantly, and trying to treat consumers fairly. Yet, there are some financial service actors who Chopra is rightly making a point of targeting, and Transunion is right in that bullseye.
Credit bureaus in the crosshairs
I have spilled a lot of ink[11]in these Musings highlighting Wells Fargo as my go-to example of a market abuser.[12]The credit bureaus, however, might be even more emblematic of the types of companies Chopra is targeting for repeatedly abusing consumers with market power. In fact, it would seem that the bureaus need a real bear hug from a Dr. Rick of consumer compliance guidance.
There is something particularly troubling about a credit bureau using its government sanctioned[13]market power (there are only 3 bureaus that have the kind of credit data needed for mortgage lending) to deceive consumers into signing up for unnecessary credit services. Then, when they get caught and agree not to do that, one of them ignores the agreement and uses “dark patterns”[14]in its online consumer funnel to enhance the deceptions.
Bureau reform needed
The bureaus’ entire business model of holding consumer payment data is suspect absent necessity for their services. 50+ years ago there was a real need to centralize consumer payment data for technological reasons to enable consumers to easily obtain credit. So, today, the bureaus hold your personal financial data (whether you want them to or not) and then they get to sell your data to others (including back to you[15]). Meanwhile, over the years, the bureaus have been a magnet for consumer and regulatory claims for things like not maintaining accurate records and deceiving consumers into buying credit products. Moreover, since they hold pretty much everyone’s data in the country, when they get hacked by China or the Russians (or whoever) it is a national security issue in addition to an identity fraud treasure trove.
One writer in Rob Chrisman’s April 16 daily summed it up quite well,
“Perhaps it is time to reconsider the whole purpose behind the credit bureaus. With blockchain technology, smart phones, and data interfaces among financial institutions, what is preventing control of personal credit data being in the hands of the consumer instead of these private companies? That is, do we even need to give private companies a license to hold consumer credit data and the right to charge to sell that data…,?”
Those are very good questions for Mr. Chopra as well as Congress and the other financial regulators to consider. In the meantime, the credit bureaus (and any other market dominant financial service firm) might want to make sure they treating consumers a lot better than Transunion apparently did to stay out of Director Chopra’s crosshairs.
[1] My family has a tradition with just having the middle initial “S”. My father has just an S, my brother has just an S and my kids have the same. Also, my favorite superhero growing up was Superman, but there is no cause and effect there.
[2] I recently helped my son Danny prepare his resume and we debated whether to use the period or not, so he won’t have the same experience. He rejected the period idea and said, “bring it” to his future Smartypant typo finders. Danny is graduating from Wisconsin next month with a double major in computer science and political science and is looking to move to Washington DC to find a career in foreign relations. Please contact me if you have job or DC housing ideas and/or would like a copy of his outstanding resume without typos.
[3] In fact, it shows the just the opposite. That said, sometimes I use the period to avoid hearing anything about typos from all the Mr. Smartypants’ out there.
[4] My favorite story about my middle initial “S” came when my wife and I adopted our first child. The Oklahoma state court judge who presided over the adoption asked, “[W]hat’s the child’s middle name?” I replied, “it’s just an “S”, your honor, same letter as my father, brother and I have.” Her unamused response was, “Do you have any idea what it will be like for this child to grow up without a middle name?” To which I answered (probably less respectfully than one should with someone wearing judge’s robes about to sign off on your child’s adoption), “Uh, yes, I might have some idea…”
[5]There is fair criticism of the industry as well. See e.g., https://mortgagemusings.com/f/edition-12-professionalism-and-the-mortgage-business
[6] I understand that he has only met with industry groups twice since he started at CFPB.
[7] I’m very curious as to how the traditional consumer advocates and class action bar assess Chopra’s performance.
[8] Readers of my Musings are “in the know”.
[9] I assume Transunion has no relation to the post-Soviet breakaway area of Moldova known as Transnistria we are all learning about. TBH, I just learned about Moldova too.
[10] In fact, Chopra seems to view small financial service providers in particular with a certain amount of sympathy. Here, in another written statement, he offers to help small banks “collectively bargain” with the large core service providers to combat contracts of adhesion which limit service availability for small bank consumers. That’s something new for sure.
[11] I never tire of metaphors.
[12]See e.g., Musings here and here
[13] The bureaus would not exist but for being enabled by federal government action. Initially, FCRA enabled the bureaus to obtain consumer’s payment history from “furnishers” such as your mortgage lender or credit card provider. Later, the government sponsored enterprise mortgage lenders (Fannie, Freddie and FHA/VA) all required credit scores which are only available with use of the big 3’s databases.
[14]Chopra’s statement detailed Transunion’s “dark pattern” deception, “TransUnion deployed a range of dark patterns to lure consumers into enrolling in its subscription credit monitoring product. TransUnion used colorful buttons that gave consumers the impression that they were obtaining a credit score, when in fact they were enrolling in a monthly subscription for credit monitoring. To access a credit score or credit report, consumers were asked for their credit card information, ostensibly for identity verification purposes. TransUnion did not making [sic] it clear to consumers that they were actually signing up and paying for credit monitoring.
The only indication in the enrollment process that consumers were making some sort of purchase was through a fine print, low contrast disclosure, located off to the side of the enrollment form. The disclosure is inside an image that can take up to thirty seconds longer to load than the rest of the material in the form. This dark pattern triggered thousands of complaints.”
[15] It bothers me that you have to pay for your own credit report data if you are getting a loan and can’t use the “free” report available online.