Wall Street’s Most Hated Regulator Faces an Existential Threat

Rohit Chopra became one of the most powerful financial regulators by pairing bark with bite. As director of the Consumer Financial Protection Bureau, he has attacked — often with a hammer — the perpetrators of what he considers injustices against everyday Americans.

When the bureau slapped Wells Fargo last year with $3.7 billion in fines and damages for transgressions, including wrongfully seizing some borrowers’ homes, Mr. Chopra accused the bank of a “rinse-repeat cycle of violating the law.” When it sued MoneyGram that same year over delays in transmitting customers’ funds, Mr. Chopra said he wanted to go beyond fines and impose a punishment that would cut deeply enough to “halt repeated lawbreaking.” And in litigation against TransUnion, again in 2022, about deceptive sales tactics, Mr. Chopra took the rare step of targeting not just the credit reporting agency but also one of its senior executives.

That aggressive approach has made Mr. Chopra a hero to consumer advocates and a scourge to the banks and other lenders his agency oversees.

“Wall Street may always attack the C.F.P.B., but their opposition has reached, shall we say, frenzied levels with Rohit Chopra at the helm,” said Senator Sherrod Brown, the Ohio Democrat who leads the Senate Banking Committee.

Now, the future of the agency that Mr. Chopra has wielded as a cudgel to alter the financial industry’s behavior is under threat — and with it some of Mr. Chopra’s biggest wins.

On Tuesday, the Supreme Court will hear arguments in a case that could upend the bureau and the market it regulates. The U.S. Court of Appeals for the Fifth Circuit ruled last year that the agency’s funding structure, which uses direct transfers from the Federal Reserve, is unconstitutional. It concluded that all actions taken by the bureau in its 12-year existence should be “rewound.”

If the Supreme Court agrees that the bureau’s funding is improper, it could, at minimum, force the agency to rely on congressional appropriations. Or the court could follow the Fifth Circuit’s suggestion and obliterate everything the agency has done to date.

Mr. Chopra — who, at 41, is one of Washington’s youngest regulatory chiefs — claimed to be sanguine about the assault on his agency’s power. “I think this is what one should expect when you’re doing your job,” he said.

His detractors are scathing. In an opinion essay, Rob Nichols, the chief executive of the American Bankers Association, criticized the agency’s “politicized enforcement binge” and called it “a regulator gone rogue.”The U.S. Chamber of Commerce, a pro-business lobbying group, started a six-figure online ad campaign to denounce Mr. Chopra’s “radical agenda and reckless actions.”

In a speech last year at the Exchequer Club, a Washington-based group focused on economics and finance, Richard Hunt, a former chief executive of the Consumer Bankers Association, said he suspected that Mr. Chopra “hates banks.”

“He has a predisposed opinion of banks, and that’s just not healthy,” Mr. Hunt said.

Mr. Chopra maintained that he held no such biases. “I like to be pretty direct,” he said. “The C.F.P.B. does not group firms into good and bad. We look at law-abiding versus non-law-abiding, and seek a market that is what the law says — fair, transparent, competitive.”

He is uniquely motivated to move fast, both personally and professionally. A continuing battle with cancer is a daily reminder to him of two things: the stakes of his work and the urgency of seeing it through.

Mr. Chopra was born in New Jersey and raised, by first-generation immigrants from India, in a suburb just over the border from Philadelphia. His mother, a doctor, teaches geriatric medicine, and his father worked various engineering and construction jobs.

He graduated from Harvard before attending the Wharton School at the University of Pennsylvania. In 2009, as he was finishing his M.B.A. degree, he studied the housing crisis as it unfolded and was captivated by the professors who accurately predicted the dynamics of the crash. That experience shattered, for him, any belief that the country’s regulatory norms were worth upholding.

“The fact that there were so many warning signs that went unheeded — it’s still, I can’t, I still can’t fully comprehend that,” Mr. Chopra said. “There’s just no question that the way in which financial firms have long been overseen was a failure.”

The consumer bureau was created through the Dodd-Frank Act, the 2010 law enacted in response to the 2007 financial crisis that prompted the Great Recession. When Elizabeth Warren — who had just succeeded in her quest to convince Congress that Washington needed a new financial regulator — began recruiting for the fledgling consumer bureau, Mr. Chopra sent in his résumé.

Ms. Warren eagerly hired him in 2010. They had crossed paths before at Harvard; Mr. Chopra was one of the rare undergraduates to register on the star law professor’s radar.

“The president of Harvard pointed him out to me,” Ms. Warren recalled. “We were talking about students who early on know the kind of battles they want to fight. She told me about Rohit, and I met him and I was just knocked down.”

Colleagues from those early days — including some who later became close allies — remember Mr. Chopra as intense and, at times, off-puttingly brash.

“I thought he was a careerist, fast-talking, hard-charging person who I wouldn’t like,” said Deepak Gupta, an appellate lawyer who spent a year at the bureau. “I quickly realized that first impression was totally wrong — he cares deeply about this work.”

The consumer bureau initially focused on creating new guardrails for the mortgage industry that had just imploded. Mr. Chopra gravitated to a different area: student loans. It was a market few in Washington paid any attention to, even as borrowers’ debt burdens skyrocketed.

The Dodd-Frank Act required the consumer bureau to appoint an ombudsman to address borrowers’ complaints about their educational loans. Mr. Chopra was the obvious choice for the job, said Wally Adeyemo, who was the consumer bureau’s first chief of staff and now serves as the deputy Treasury secretary.

He was “right out of central casting — he was both a very smart young person who cared deeply about these issues, and he could articulate why not only protecting individual students made sense, but why this made sense for the economy,” Mr. Adeyemo said.

Once he landed the gig, Mr. Chopra executed a signature move: He ignored the position’s statutory bounds and refashioned the role into a far broader one. The law that Congress wrote directed the bureau’s ombudsman to police private education loans — a roughly 10 percent sliver of a market dominated by federal loans. Mr. Chopra instead focused on those government-supported loans, and he quickly became a thorn in the side of the Education Department, which he liked to describe as “a K-12 policy shop with a trillion-dollar bank strapped on.”

Mr. Chopra cajoled and publicly shamed the department into intensifying its enforcement against powerful groups that had long taken advantage of lax federal oversight.

A crackdown he helped set in motion toppled Corinthian Colleges and ITT Technical Institute, two giants in the for-profit education field that faced accusations of illegal recruiting tactics. A series of scathing oversight reports about student loan servicers’ failings — paired with a still-active lawsuit that the consumer bureau filed against Navient, then one of the largest federal servicers — led to legislative changes and stricter oversight that have checked some of the worst abuses.

Industry leaders were incensed about being pursued by an overseer with fangs. Shortly before ITT collapsed, its chief executive sent an email to his corporate lawyers describing Mr. Chopra as an “economic terrorist” who should be “sent to Guantánamo Bay for about a decade of R&R; which should include an aggressive regimen of ‘water sports’!”

“Part of me wishes Rohit could run pretty much every federal agency,” said David Halperin, a Washington lawyer and longtime advocate of higher-education funding reforms. “Wherever he’s gone, he has not hesitated to find the full extent of the powers available to him, and to actually use them, which is rare.”

Mr. Chopra left the consumer bureau in 2015 for a brief stint at the Education Department, then joined Hillary Clinton’s transition team, anticipating a role in her administration. But Donald J. Trump’s election as president scuttled those plans — and within days, Mr. Chopra’s personal life also fractured.

At a doctor’s visit, his physician found what she guessed was a cyst. Swamped in the planning for Mrs. Clinton’s presidency, Mr. Chopra scheduled an ultrasound for the day after Election Day, figuring he would then race off to work. Instead, he found himself in an unexpected career wilderness, unemployed for the first time in his adult life and diagnosed with advanced thyroid cancer.

“People can really get hit with a ton of bricks at the same time,” he said. Major surgery and radiation followed. Mr. Chopra rarely speaks of his health struggles, but they remain a part of his life.

“You still work through it,” he said. “I mean, I’m not in remission. But you just soldier on. I’ll be OK.”

Late last year, the New Orleans-based U.S. Court of Appeals for the Fifth Circuit issued a ruling that sizzled through Washington like a lightning bolt.

Trade groups representing payday lenders had challenged a bureau rule that would have curbed some of their activities, such as repeatedly trying to withdraw money from borrowers’ empty bank accounts. They threw a laundry list of objections into their briefs, including an argument that the consumer bureau’s funding structure was unconstitutional. A three-judge panel from the Fifth Circuit agreed, and decided that the payday rule was therefore invalid and should be overturned.

In attacking a weak rule affecting a large but narrow industry, the payday lenders had found a court willing to jackhammer the foundation of every regulation and enforcement action the bureau had ever imposed. Many legal scholars were stunned. The decision is “playing with matches,” said Dalié Jiménez, a law professor at the University of California, Irvine.

Since the Fifth Circuit ruling, more than a dozen companies, including MoneyGram, have sought to have lawsuits or penalties against them thrown out. The Supreme Court will hear arguments this week on the consumer bureau’s appeal of the Fifth Circuit ruling.

The bureau has survived other existential legal threats. Most notably, a 2020 Supreme Court ruling gave the president the power to fire the agency’s director without cause, but it upheld the agency’s actions and operations. (The decision cleared the way for Mr. Chopra’s appointment. Without it, Mr. Trump’s chosen chief, Kathleen Kraninger, could have remained in the role until her five-year term expired at the end of this year.)

But even Mr. Chopra’s backers worry that his incendiary tactics could backfire. Lawmakers have several options for clipping the agency’s wings — including switching its funding stream to appropriations, which would let Republicans gut the bureau’s funding when they control Congress.

“The political pendulum does not stop swinging,” Representative Patrick McHenry, the North Carolina Republican who leads the House Financial Services Committee, warned Mr. Chopra at an oversight hearing. “I know you’ll wish you tried harder to play by the rules.”

Mr. Chopra insists that he always follows the rules. His view is that he’s simply more expansive than others in determining what those rules are.

Emily Flitter contributed reporting.