Rohit Chopra, American consumer advocate and Commissioner on the Federal Trade Commission talks about consumer uncertainty. Learn more about the conference here.
Transcript:
I AM DELIGHTED TO WILL GIVE YOU
BACK TO THE FORD SCHOOL OF POLICY
AND THE CONFERENCE ON CONSUMER
PROTECTION IN AN AGE OF
UNCERTAINTY.
WELCOME BACK TO THOSE IN THE
ROOM THANK YOU TO THOSE
WATCHING ONLINE.
IT IS A REAL PLEASURE THIS
MORNING TO BE ABLE TO BE IN
CONVERSATION WITH ROHIT
CHOPRA. HE WAS A ASSISTANT
DIRECTOR AT THE MANAGEMENT
BUREAU UNCERTAINTY AGENCIES FOR
STUDENT LOAN.
HE PLAYED AN INSTRUMENTAL ROLE
IN THE AGENDA IN THE STUDENT
LOAN FOR-PROFIT COLLEGE MARKET.
HE ALSO SERVED AS SPECIAL
ADVISOR TO THE SECRETARY OF
EDUCATION TO RETHINK THE
DEPARTMENT'S OVERSIGHT OF
INSTITUTIONS.
AND FOR CONTRACTORS.
I AM DELIGHTED TO WELCOME YOU
BACK TO FORT SCHOOL OF IN
OCTOBER 2017 TO SERVE OF THE
FEDERAL TRADE COMMISSION.
AT UNANIMOUSLY CONFIRMED BY THE
SENATE APRIL 2018.
HE HAS PLACED A STRONG EMPHASIS
ON INCREASING MILITARY REMEDIES
AND CONFRONTING THE CHALLENGES.
AND RATHER THAN A FORMER
KEYNOTE ADDRESS ROHIT HAS
AGREED.
LET ME START BY ASKING AFTER
THE FINANCIAL CRISIS.
APPARENTLY I HAVE A AND BAKING
REGULATORS WHO ARE OUTSPOKEN
ABOUT NOT LETTING WHAT HAPPENED
HAPPEN AGAIN.
THEY DO NOT WANT TO BE
PREEMPTED.
THEY DO NOT WANT TO SIT ON THE
SIDELINES WHILE THINGS GO AWRY.
THAT IS A MAJOR STRENGTH.
OBVIOUSLY WE ARE BOTH A LITTLE
BIASED ON THIS BUT A MAJOR
STRENGTH.
AT LEAST WE HAVE A CFPD AND
THAT IS SOMETHING THAT IS NOT
EVER GOING TO GO AWAY.
AND WE WILL MAKE SURE OF THAT.
BUT THERE ARE MIXED EVIDENCE A
SOME OF OUR OTHER BANKING
REGULATORS ARE DOING.
IF WE LOOK AT THE MACRO PICTURE
OF LOW UNEMPLOYMENT.
LIKE WE ARE SEEING NOW.
WHY ARE WE SEEING THIS TYPE OF
DELINQUENCY?
WHY ARE WE SEEING SUCH ONGOING
PROBLEMS IN STUDENT LENDING?
WHEN WE PEEL BACK ONE LAYER OF
THE ONION THERE ARE A LOT OF
TROUBLES THAT I AM NOT SURE ALL
OF OUR REGULATORS ARE ON THE
GAME ON THAT.
AND THAT WORRIES ME.
THAT WORRIES ME THAT WE ARE NOT
PREPARED AS WELL AS WE COULD BE
FOR THE NEXT RECESSION.
WHICH I DON'T KNOW WHEN WILL
COME BUT WILL COME.
MAYBE I WILL PUT YOU ON THE
REGULATORY QUESTIONS.
YOU NOTED THE RISE OF ACTIONS
BY STATE AG AND STATE
REGULATORS.
AND THE DENUTION OF ENFORCEMENT
OF THE ARE THEY UP TO THE TASK
OF FILLING IN?
WHAT IS THE ROLE OF OCC AND
FTIC AND THE FED.
OTHER BEING AGGRESSIVE ENOUGH?
ARE YOU SEEING THE FEDERAL
LEVELS REACTION AMONG THE
REGULATORS?
Rohit Chopra: THE FTC CANNOT
FIT THE GAP.
WE ARE NOT RESOURCED TO DO SO.
WE DO NOT HAVE NEARLY THE
EXPERTISE IN TERMS OF THE RANGE
OF RESOURCES AND AUTHORITIES AS
THE CFPD.
I'M HAPPY TO TALK ABOUT THIS
MORE.
THERE ARE AREAS WHERE THE FTC
HAS A UNIQUE ROLE TO PLAY BUT
IT SHOULD NOT BE SEEN AS THE
BACKSTOP FOR A WEAKENING
ENFORCEMENT AGENDA OF THE CFPD.
OBVIOUSLY WILL RECEIVE THIS
FEDERAL LEVEL IS OF GREAT
CONCERN TO ME.
BECAUSE IT IS A SIGNAL TO THE
MARKETPLACE THAT YOU CAN GO
CLOSER TO THE LINE.
EVEN CROSS THE LINE AND YOU CAN
MAKE A BUSINESS DECISION TO
CROSS THE LINE.
EVEN IF YOU ARE CAUGHT MAYBE
THERE WILL BE MUCH CONSEQUENCES
AT ALL.
WHAT I WANT TO UNDERSCORE ON
THAT IS THIS IS DEEPLY UNFAIR
TO LAW ABIDING FINANCIAL FIRMS.
SEE A LOT OF FINANCIAL FIRMS
THAT ARE WANTING TO FOLLOW THE
LAW.
AND GUESS WHO WAS MOST HARMED
BY THEIR PEERS AND COMPETITORS
BREAKING THE LAW?
THAT IS FUNDAMENTALLY UNFAIR
THIS IS NOT JUST ABOUT
PROTECTING CONSUMERS.
BUT FOR EVERY LAW ABIDING
BUSINESS THEY SHOULD BE ANGRY
ABOUT WHAT IS WEAKENING
ENFORCEMENT AT LARGE.
ROHIT CHOPRA LET ME IN A
COUPLE AND LET ME START IN THE
AUTO MODE LOAN MARKET..
AS MANY OF OF YOU KNOW THERE E
IS A TUSSLE THE LEGISLATIVE
PROCESS AND THE CONSUMER
PROTECTION BUREAU WAS STRIPPED
OF ITS AUTHORITY BACK IN THE
DEBATE OVER DODD FRANK.
TO WRITE RULES OVER AUTO
DEALERS WITH RESPECT TO LENDING
PRACTICES.
BUT IN A STRANGE TWIST OF FATE
IN THE LEGISLATIVE PROCESS.
DUE TO THE UNDERHANDED
LEGISLATIVE SCHEMES OF ERIC
STONE AND OTHERS.
MAGICALLY THAT SAME AUTHORITY
APPEARED OVER AT THE FTC.
AND I WONDER WHETHER, ROHIT
CHOPRA:YOU COULD COMMENT ON
THIS.
IT IS A FUNNY SITUATION.
THE FTC WHICH GENERALLY DOES IT
HAVE ROLE WRITING AUTHORITY IN
MOST AREAS.
BUT IN THIS ONE AREA THEY HAVE
REALLY CLEAR AUTHORITY.
IT IS THE ONLY THING FOR YOU
HAVE EASY WAYS TO WRITE RULES.
I'M WONDERING IF YOU COULD
COMMENT ON WHY HASN'T THE FTC
FRONT WITH THIS AUTHORITY TO
REGULATE LENDING IN THE AUTO
DOING?
Rohit Chopra: LET ME GIVE
CONTEXT TO ONE THING.
THE FTC CANNOT GET CIVIL
PENALTIES UNLESS THERE IS A
VIOLATION OF AN EXISTING ORDER
OR RULES.
SO, WHAT BUGS ME.
EVEN WHEN WE FIND MISCONDUCT
TODAY.
BECAUSE WE HAVE A RULE ON THE
BOOK WE CANNOT SEEK CIVIL
PENALTIES.
EVEN IF WE WERE TO SIMPLY
RESTATE OUR EXISTING POLICY
COULD TURN THIS ON.IT REALLY
CHANGE THE MARKETS.
IT IS PRETTY DISAPPOINTING IT
HAS BEEN 90 YEARS.
IT HAS BEEN DISAPPOINTING TO
ME.
IT IS SOMETHING I WANT TO PUSH
FOR.
LET ME GET BIG PICTURE ON AUTO.
WE ARE SEEING SOMETHING WEIRD
GOING ON.
SINCE 2010 WE'VE SEEN A
DRAMATIC RUN-UP OF OUTSTANDING
AUTO LOANS.
I THINK WE HAD A BLOCKBUSTER
YEAR OF AUTO LENDING.
IN 2018.
AND SOMETHING THAT IS IMPORTANT
IS TECHNOLOGY IS REALLY
CHANGING THIS.
MANY OF YOU MAY KNOW GPS
TRACKERS, KILL SWITCHES, OTHER
REPO TECH IS MAKING IT EASIER
TO SNATCH A CAR FROM THE
BORROWER DOESN'T PAY.
AND THE NET RESULT IS THERE ARE
LENDERS OUT THERE ABLE TO GIVE
A LOAN EVEN IF THEY KNOW IT
WILL NOT BE REPAID.
THEY KNOW THEY CAN TAKE THAT
CAR BACK.
I HOPE EVERYONE HAS SEEN THE
JOHN OLIVER SEGMENT ABOUT A CAR
THAT WAS SOLD AND REPOSSESSED
SO MANY TIMES.
THAT IS WHEN A LENDER KNOWS IT
DOESN'T EVEN MATTER THAT
BORROWER CRASHES AND BURNS.
AND THE SHOULD BE OF REAL WORRY
FOR US.
BECAUSE AN AUTOMOBILE IS
LITERALLY THE VEHICLE IN WHICH
YOU CAN GET TO EMPLOYMENT.
IN WHICH YOU CAN ACCESS
HEALTHCARE.
IN WHICH YOU CAN PARTICIPATE IN
SOCIETY FOR THE VAST MAJORITY
OF AMERICANS.
IF WE ARE SEEING REPOSSESSIONS.
IF WE ARE SEEING AUTO LOAN
DELINQUENCIES AT RATES WE
SHOULD BE UNHARMED.
AND WE SHOULD NOT SIT AROUND
DOING NOTHING LIKE WE DID WITH
STUDENT DEBT.
IT IS THE SAME STORY OVER AND
OVER.
WE SAW IT IN MORTGAGE WE SAW IT
IN STUDENT LENDING WE ARE
SEEING IT IN AUTO.
AT 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 PLACES THAT DON'T
NECESSARILY HAVE THE POLITICAL
POWER TO DEMAND CERTAIN TYPES
OF CHANGE.
I THINK THAT IF WE DON'T DO
ANYTHING ABOUT IT IF THE CFPD
DOES NOT DO ANYTHING ABOUT IT
WE WILL NEED THE STAMPS DOMINIC
STATES TO WEAR ABOUT.
EVERYTHING I WORRY ABOUT.
THERE IS NOT GOING TO BE A
CRISIS TO THE BANK ON THIS.
AUTO LENDING IS NOT GOING TO
THREATEN THEIR ADEQUACY.
THAT THE ABILITY TO KEEP
REPOSSESSING AND DOING IT
CHEAPLY.
IS NOT GOING TO THREADED THAT.
IT WILL BE HOW TO BETTER
PROTECT CONSUMERS NOT HOW WE
PROTECT THE CAPITAL ADEQUACY OF
FINANCIAL INSTITUTIONS.
I HOPE WE CAN MAKE BIG PROGRESS
ON THIS.
AND AT SOME POINT IS THAT
AUTHORITY BECAUSE AFTER USING
THAT AUTHORITY WE ARE NOT GOING
TO EVER FIX THIS, I THINK.
GIVEN WHAT YOU JUST SAID
SHOULD THERE BE SOME KIND OF
ABILITY TO REPAY RULES IN AUTO?
AND WHAT CAN THE FTC DO IF
ANYTHING ABOUT THE LONG
EXPERIENCE OF DISCRIMINATION
AND AUTO LOANS?
Rohit Chopra: MANY OF YOU
MAY KNOW OF THE FTC ALSO EQUAL
ACCESS BUT WE HAVE NOT BROUGHT
A CASE IN A VERY LONG TIME.
AND THERE IS OBVIOUSLY SOME
EFFORTS AT THE CFPD TO GO AFTER
THAT.
WE HAVE TO DEAL WITH
DISCRIMINATION IN AUTO LENDING.
I PERSONALLY FEEL THERE NEEDS
TO BE MORE DATA ABOUT AUTO
LENDING OUTCOMES.
AND THE MORE DATA WE HAVE THE
BETTER WE CAN BRING THOSE CASES
OF THE BETTER WE CAN COMBAT IT.
WITH RESPECT TO A RULE COULD
LOOK LIKE.
I THINK PUTTING COMMON SENSE
RULES THAT NOT ONLY DOCUMENT
OUR EXISTING ENFORCEMENT RECORD
OF WHAT WE KNOW TO ALREADY BE
UNLAWFUL.
SO WE CAN GET THAT PENALTY
AUTHORITY.
BUT ALSO TO MAKE SURE THAT WE
DON'T HAVE THE TYPE OF ABUSE
THAT ALLOWS THE BUSINESS MODEL
TO PERSIST.
I DON'T KNOW WHAT THAT WOULD
LOOK LIKE.
BUT IT NEEDS TO BE A PEOPLE'S
RAIDERS I THINK IT NEEDS TO BE
ON HER RADAR BEFORE THE ECONOMY
SOURS RATHER THAN TO LEAVE.
LET'S TURNED TO SMALL
BUSINESS MARKETS.
THERE HAS BEEN DRAMATIC CHANGES
IN THE SMALL BUSINESS MARKET IN
THE LAST 10-15 YEARS.
WITH A VERY WIDE VARIETY OF
BANK AND NON-BANK PARTICIPANTS.
THE RISE OF A DIFFERENT KIND OF
BLENDING TECHNIQUE.SOME OF
THOSE HAVE POSITIVELY INCREASED
ACCESS TO CAPITAL FOR SMALL
BUSINESSES.
WHO WERE NOT ABLE TO OBTAIN IT
BEFORE.
BUT THERE IS ALSO BEEN A RISE
OF BUSINESS LENDING ACTIVITIES
THAT ARE REMINISCENT OF THE
KIND OF SUBPRIME MORTGAGE
LENDING THE RESULT IN THE LEAD
UP TO THE CRISIS WITH VERY
COMPLICATED TERMS.
VERY DIFFICULT TO COMPARE TERMS
ACROSS QUOTE OFFERS.
MOST OF YOU KNOW THIS BUT THE
TRUTH IN LENDING ACT FOR SMALL
BUSINESS LENDING.
WHAT DID THE FTC OR OTHER
REGULATORS BE DOING TO CLEAN UP
THIS MARKETPLACE?
AND HELP THE HIGHROAD PLAYERS
AS SHE DESCRIBED BEFORE IN THE
AUTO CONTEXT.
BUT HOW DO WE HELP HIGHROAD
PLAYERS THRIVE?
HOW DO WE PROTECT CONSUMERS?
IN A BIG PICTURE SENSE FROM THE
FTC OR OTHERWISE SHOULD WE BE
DOING?
Rohit Chopra: LET ME MAKE A
FEW POINTS ON THIS.
FIRST, IT IS ALREADY VERY
DIFFICULT TO SMALL BUSINESSES
TO FORM AND COMPETE.
YOU KNOW FOR THE PAST 35 YEARS
WE HAVE SEEN A SECULAR DECLINE
OF NEW BUSINESS FORMATION.AND
I THINK PART OF THAT IS DUE TO
MASSIVE CONSOLIDATION AND
SECTORS ACROSS THE ECONOMY.
IT IS MUCH HARDER FOR A SMALLER
FIRM TO ENTER BECAUSE IT IS
HARD TO COMPETE WITH THE BIG
GUYS.
THERE'S AN ANTI- TRUST QUESTION
WE HAVE TO CONFRONT.
BUT SMALL BUSINESS LENDING IN
THE NON-BANK SECTOR IS THE
EXCLUSIVE JURISDICTION OF THE
FTC.
THE CFPD DOES NOT HAVE
AUTHORITY.
THE CFPD HAS ABILITY TO DO DATA
BUT NOT TO ENFORCE.
A FEW PROBLEMS I SEE.
ONE, I THINK WE'RE SEEING A
MASSIVE INCREASE IN PAYDAY
STYLE SMALL BUSINESS LOANS.
THE WAY OFTEN THIS WORKS JUST
THE SMALL BUSINESS WITH A
RESTAURANT OR RETAILER.
THEY ARE COLLECTING A LOT OF
THE REVENUES THROUGH CREDIT
CARD TRANSACTIONS.
AND YOU HAVE LENDERS WHO
ESSENTIALLY OFFER VERY
SHORT-TERM LOANS THAT ARE
SECURED BY THIS CREDIT CARD
RECEIVABLES.
IT IS JUST LIKE A PAYDAY LOAN
IN SOME WAYS.
THE TERMS AND CONDITIONS YOU
SEE.MANY OF YOU HAVE HEARD
THE INCLUDE TERMS LIKE
CONFESSIONS OF JUDGMENT.
THINGS THAT WERE BANNED BY THE
FTC CREDIT PRACTICES RULES 30
YEARS AGO BUT DO NOT COVER
SMALL BUSINESS LOANS.
I THINK THERE ARE NOW AROUND
$15 BILLION OF ORIGINATION IN
THESE PAYDAY SMILE SMALL
BUSINESS LOANS.
THIS OBVIOUSLY IS GOING TO
TARGET SOME OF OUR MOST
VULNERABLE:YOU KNOW,
INDIVIDUALS.
I ALSO THINK IT IS NOT JUST A
TYPICAL SMALL BUSINESS.
IT MIGHT BE WORKERS, OTHER
WORKERS MIGHT BE INDEPENDENT
CONTRACTORS OR HAVING THEIR
PRIMARY INCOME NOT TIED TO
TRADITIONAL EMPLOYMENT.
WE AT THE FTC WILL BE HOLDING A
FORUM ON THIS.
BUT I HOPE IT LEAVES THE
GROUNDWORK FOR MORE DATA AND
MORE ENFORCEMENT.
AND AS APPROPRIATE I THINK THEY
WILL NEED TO BE GREATER
AWARENESS ABOUT HOW THESE TYPES
OF LENDING MODELS ARE INFECTING
VARIOUS PARTS OF OUR FINANCIAL
ECONOMY.
AGAIN, I HATE TO SAY IT.
WE HAVE SEEN THIS BEFORE.
LET'S NOT PRETEND TO BE
SURPRISED BY HIM.
IT HAS THE SAME INTERFACE WITH
CAPITAL MARKETS.
THE SAME INTERFACE WITH THESE
LOANS ARE BUNDLED AND SOLD AND
TRANSACTED UPON.
IT IS NOT A BUNCH OF SMALL
LITTLE PLAYERS.
THERE IS CONNECTIVITY TO WALL
STREET.
AND IF WE DON'T CALL IT OUT FOR
WHAT IT IS IT IS JUST GOING TO
GET WORSE.
AND I DON'T WANT US TO KEEP
REPEATING, YOU KNOW.
FRANKLY WHAT WE MISSED AND WHAT
WE FEEL THAT BEFORE.
THE CONFESSIONS OF JUDGMENT
APPROACH SEEMS PARTICULARLY
EGREGIOUS.
THIS IS WHERE BUSINESSES GIVE
UP THE RIGHTS TO CONTEST
WHETHER OR NOT THEY ARE IN
DEFAULT ON THEIR LOAN.
IN ADVANCE IN THE CONTRACT.
IT IS BECOMING INCREASINGLY
DEPLOYED.
I AM WONDERING IF YOU THINK
THERE ARE STRATEGIES WITHIN THE
EXISTING LEGAL SYSTEM BUT
WITHIN THE EXISTING SET OF
RULES TO ATTACK THAT?
Rohit Chopra: OF COURSE
THERE ARE.
THESE WERE BANNED IN CONSUMER
CREDIT CONTRACTS FOR THE MOST
PART TO THE CREDIT PRACTICES
RULES THAT I BELIEVE WERE
FINALIZED IN THE 1980S. THERE
IS EXISTING AUTHORITY TO DO IT.
WHETHER THERE IS THE COURAGE
AND THE WILL AND THE TENACITY
TO GET IT DONE?
THAT IS WHAT WE HAVE TO PUSH
FOR.
AND I THINK THAT MEANS A LOT
FOR PEOPLE PUSHING OUR AGENCIES
AND DON'T JUST ASSUME WE WILL
DO NOTHING.
BUT WE HAVE TO HEAR FROM PEOPLE
ABOUT WHERE THE PROBLEMS ARE IN
THE MARKET OR IT WILL NOT GET
SOLVED.
I THINK THIS RAISES A LARGER
QUESTION ABOUT JUNK CONTRACT
CLAUSES.
AND ONE OF THE THINGS I THINK
WE NEED TO START THINKING ABOUT
IS WE OFTEN ATTACK THESE
CLAUSES ONE BY ONE.
BUT WE NEED TO START THINKING
BIGGER PICTURE ABOUT WHAT ARE
THE TYPE OF CONTRACT TERMS THAT
ARE FUNDAMENTALLY UNFAIR?
AND HOW DO WE USE THE EXISTING
AUTHORITY UNDER FEDERAL AND
STATE LAW TO GO AFTER THAT?
BECAUSE WHEN A SELLER 'S LENDER
IS SO MUCH MARKET POWER OR SO
MUCH ABILITY TO OBSCURE TERMS.
THIS CAN LEAD TO CONTRACTS THAT
ARE CORRUPTED.
BY THESE CONTRACT TERMS.
THERE HAVE BEEN BIG FIGHTS OVER
THE YEARS OF FORCED
ARBITRATION.BIG FIGHTS ABOUT
OTHER TERMS BUT I THINK WE NEED
TO LOOK AT A COMPREHENSIVE VIEW
ABOUT HOW CONTRACTS.
WHERE THERE IS A BIG GUY ON ONE
SIDE AND A LITTLE GUY ON THE
OTHER.
HOW DO WE CHANGE THAT GAME?
WE CANNOT BE ON A TREADMILL OF
GOING AFTER THESE CONTRACT
TERMS ONE BY ONE.
NEW ONES WILL POP UP AND WE
WILL STILL BE STAYING BEHIND.
WE NEED TO GET MORE SCHOLARSHIP
ON HOW TO REFORM THESE
CONTRACTS.
WE HAVE TO THINK OF IT IN A
BIGGER PICTURE OF LAW
ENFORCEMENT REGULATORY
APPROACH.
BECAUSE WHEN POWERFUL FIRMS ARE
ABLE TO COVER THE USE
CONTRACTS.
THE USE THEIR MARKET POWER TO
ESSENTIALLY BULLY OUT FAIR
COMPETITION.
AND THAT IS NOT WHAT A FREE AND
FAIR MARKET IS SUPPOSED TO LOOK
LIKE.
I HAVE ALWAYS BEEN STRUCK
THE BEHAVIORAL ECONOMICS
LITERATURE HAS MADE HUGE
PROGRESS ON THE CONSUMER SIDE.
WE NOW UNDERSTAND A LOT MORE
ABOUT HUMAN DECISION-MAKING.
THE WAY IN WHICH HUMAN BEINGS
ARE FALLIBLE AND HOW THE MARKET
CAN TAKE ADVANTAGE OF THAT
FALLIBILITY.
WE SEEM NOT TO HAVE MADE MUCH
PROGRESS CHANGE THAT FOR
BUSINESS OWNERS.
MOST SMALL BUSINESS OWNERS TO
STATE THE OBVIOUS, PEOPLE.
AND MOST PEOPLE HAVE BIASES.
WITH THE INFALLIBILITY, WHETHER
SERVING AS A BUSINESS OR
CONSUMER.
AND MOST WILL BUSINESSES ARE
NOT ABLE TO HIRE LAWYERS UNDER
THE EXPERTISE THEY NEED.
THERE HAS BEEN SOME OF THE
STATE LEVEL.
CALIFORNIA HAS A TRUTH IN
LENDING ACT NOW FOR SMALL
BUSINESSES.
I AND WONDERING IF YOU THINK
THAT IS THE ROAD FORWARD AS WE
ARE TRYING TO MAKE PROGRESS AT
THE FEDERAL LEVEL.
SHOULD STATES BE FOLLOWING
CALIFORNIA'S LEAD OR OTHER
THINGS STATE COULD BE DOING TO
BE HELPFUL IN THIS CASE?
Rohit Chopra: I FAVOR
DISCLOSURE BUT I DON'T WANT
ANYONE THINKING THAT DISCLOSURE
FUNDAMENTALLY FIXES THIS.
I THINK OTHER STATES ARE
LOOKING AT SIMILAR THINGS.
BUT YOU MENTIONED SMALL
BUSINESSES, PEOPLE WHO RUN
SMALL BUSINESSES ARE PEOPLE
THEY ARE ALSO CONSUMERS.
WE ARE SEEING THE SAME THING
WITH WORKERS.SO, EMPLOYEES
HAVING SOME OF THESE CLAUSES
THAT ARE FUNDAMENTALLY LEAD TO
PROBLEMS.
WE HAVE DONE SOME CASES RELATED
TO UBER DRIVERS.
WITH RESPECT TO FINANCING AND
PROMISES BEING MADE TO THAT
ABOUT HOW MUCH THEY EARN.
BUT WE HAVE TO TAKE A HARD LOOK
AT ALL OF THESE CONTRACTS.
AND HOPE THAT IS SOMETHING THAT
IS NOT JUST GOING TO BE SOLD BY
DISCLOSURE.
THAT CERTAIN TYPES OF TERMS.
THOSE CONFESSIONS OF JUDGMENTS.
WILL NOT LEAD TO A COMPETITIVE
MARKET IF SOMEONE HAS TO
STIPULATE THAT THEY ARE GUILTY
OF THE BEGINNING OF THE
TRANSACTION.
THAT IS GREAT.
IT IS ILLUSTRATIVE OF THE WAY
IN WHICH THE LINE OF BEING A
PERSON AND BEING A BUSINESS IS
FUZZY.
Rohit Chopra: GLORY.
LET'S SWITCH GEARS AND TALK
ABOUT CREDIT BUREAUS.
HIS CERTIFIED REGULAR CONSUMER,
IN A POSITIVE WAY.
AND PEOPLE HAVE PROBLEMS
CORRECTING ERRORS.
AND WE HAVE THE AUTHORITY FOR
THE CONSUMER FINANCIAL
PROTECTION BUREAU TO SUPERVISE.
THE FTC HAS AUTHORITY HERE AS
WELL.
WHAT COULD BE DONE TO REALLY
CHANGE THE BEHAVIOR OF THE
CREDIT BUREAUS?
Rohit Chopra: AND ONE OF THE
THINGS THAT HAS BEEN
UNDERREPORTED HAS BEEN HOW
POSITIVE THE ROLE OF CFPD
SUPERVISION HAS BEEN.
THAT HAS CHANGED THE CREDIT
BUREAUS ARE THINKING ABOUT
THINGS.
BUT AT THE SAME TIME THERE IS
STILL SERIOUS PROBLEMS AND IT
IS NOT JUST ACCURACY.
OBVIOUSLY, THE FTC HAS PUBLICLY
ANNOUNCED IT IS INVESTIGATING
THE MASSIVE DATA BREACH AT
CARFAX.
AT THE IMPLICATIONS.
DATA SECURITY IS OBVIOUSLY A
MAIN FOCUS OF THE FTC, THE CFPD
HAS A MASS OF EARLY STRONG TEAM
OF PEOPLE.
WHO HAVE EXPERTISE IN CREDIT
REPORTING.
THERE IS A BIGGER QUESTION WE
WANT TO START THINKING ABOUT.
I ALWAYS SAY THIS AND OTHER SAY
IT, TOO.
THEY ARE NOT, IT IS THE
PRODUCT.
IT IS THERE DATA BEING SOLD AND
TRANSACTED.
AND THIS IS INCREASINGLY WHAT
IS HAPPENING TO OUR DATA
ECONOMY.
WHAT WE SEE ONLINE IS MASSIVE
DATA COLLECTION THAT IS THROUGH
ONLINE BEHAVIOR ADVERTISING.
HAVE DATA BROKERS.
IN THE STUDY OF DATA BROKERS.
THE DATA BROKERS, BIG
TECHNOLOGY FIRMS.
THEY ARE MERGING IN THEIR
BUSINESS MODEL.
THEY ARE SELLING US TO OTHERS.
IF YOU ASK HARD QUESTIONS
ABOUT.
THEN THERE COULD BE COMPETITIVE
PRESSURES TO LEAD TO BETTER
PRACTICES.
AT THE WAY THE CREDIT BUREAU IS
STRUCTURED THAT WILL EVER GET
THAT.
OUR TRADITIONAL SPEAKING HAS
BEEN LOOKS REGULATED.
THINK ABOUT BIGGER STRUCTURAL
SOLUTIONS IN OTHER OECD
COUNTRIES THERE ARE DIFFERENT
MODELS.
SHOULD THERE BE MORE CREDIT
BUREAUS?
THAT, I DON'T KNOW.
IF THERE IS A RACE TO THE
BOTTOM THERE ARE MORE FOR FAIR
TREATMENT OF CONSUMERS.
THAT WE HAVE TO THINK ABOUT.
THERE'S A LOT OF LINGERING
ISSUES ABOUT THE
APPROPRIATENESS AND USES OF
CREDIT REPORTING DATA.
OBVIOUSLY, THE USE OF
EMPLOYMENT.
THESE ALL RAISE TOUGH ISSUES.
I AM NOT SURE IF OUR CURRENT
REGIME OF ENCOURAGING PEOPLE TO
CHECK THE REPORTS IS REALLY
WORKING IF YOU CAN'T EASILY
DISPUTE AND CORRECT.
I AM REALLY SKEPTICAL.
I DON'T THINK WE SHOULD BE A
LOT OF MEDICAL DEBT ON CREDIT
REPORTS.
THERE IS SO MUCH GARBAGE
MEDICAL DEBT PUT ON PEOPLE'S
CREDIT REPORTS.
THE REALITY IS MOST CONSUMERS
ARE JUST IN THIS PING-PONG
MATCH.
THAT THEY ARE WATCHING BETWEEN
THE PROVIDER AND THEIR
INSURANCE COMPANY.
THEN ONE DAY THEY ARE CALLED
AND SAID YOU OF THIS BILL.
AND FOR MOST PEOPLE, THEY ARE
NOT CONSUMER ADVOCATES.FOR
THOSE OF US WHO HAVE A LOT OF
PATIENT EXPERIENCE.YOU FEEL
SOME SORT OF EMBARRASSMENT FOR
IF YOU ARE ON SOME LIST IS YOU
ARE NOT TAKING.
THEY END UP WRITING THAT CHECK.
EVEN WHEN THEY DON'T OPEN.
THEY ARE BEING JERKED AROUND BY
BOTH THE INSURANCE COMPANY AND
IN SOME CASES THE CREDIT
BUREAU.
THE CFPD STUDY ON MEDICAL DEBT
AND CREDIT SCORES I THINK
DEFINITELY HELPED.
BECAUSE IT IS NOT BEING
REPORTED IMMEDIATELY.
IT IS NOT NECESSARILY IMPACTING
THEIR SCORE.
BUT EVEN IF IT DOES GET
REPORTED I AM NOT SURE THE
VALUE IT GIVES THE MAY BE
COERCING SOMEONE TO PICK UP.
I AM NOT PLEASED WITH THE STATE
OF CREDIT REPORTING STILL.
BUT I DON'T WANT TO DISMISS THE
MASSIVE LEAPS FORWARD THE CFPD
HAS LED.
THERE IS MORE WORK TO DO.
I HOPE THE CREDIT BUREAUS KNOW
WE ARE STILL TAKING A HARD LOOK
AT THEIR BUSINESS PRACTICES.
AND LET ME JUST SAY ONE MORE
TIME.
WE ARE SEEING THEY ARE
INCREASINGLY LOOKING MORE LIKE
DATA BROKERS AND MASS DATA
AGGREGATORS.
IT IS MORE THAN JUST FAIR
CREDIT REPORTING.
LET'S DIVE IN FOR JUST A FEW
MINUTES ON STUDENT LOANS.
WE WILL HAVE A WHOLE DISCUSSION
ON STUDENT LOANS.
IN A PANEL DISCUSSION.GIVEN
YOUR OF THE DEPARTMENT OF
EDUCATION AND CFPD AND WILLY
PUSHED BOTH ENTITIES QUITE
HARD.
ON THE PROBLEMS OF THE
FOR-PROFIT MORE BROADLY.
WHAT PROGRESS HAS BEEN MADE?
WE SEE THE PITFALLS?
IN TWO MINUTES OR LESS.
TAKE YOUR TIME.
Rohit Chopra: WE STILL HAVE
ONCE EVERY 30 SECONDS SOMEBODY
DEFAULTED ON FEDERAL STUDENT
LOANS.
IT IS THOUSAND THE DAY.
WE'RE NOT SEEING DELINQUENCY OR
DEFAULT RATES SLOW DOWN EVEN AS
THE ECONOMY GETS BETTER.
WE STILL HAVE A HUGE AMOUNT OF
BORROWERS WERE BURDENED WITH
THIS DEBT.
AND ARE REALLY NOT ABLE TO GET
THE VALUE OUT OF THAT.
I REJECT THE SINGULAR FOCUS ON
GETTING TO COMPLETE COLLEGE.
BUT WE REALLY NEED TO THINK
ABOUT THAT 1.3 TRILLION THAT IS
OUT THERE.
I THINK THE SCANDALS OF OPEN
PEOPLE'S EYES OTHER THIS IS A
FUNDAMENTALLY CORRUPT SYSTEM
FROM BEGINNING TO END.
AND WHETHER WE NEED TO BE
THINKING MORE BROADLY ABOUT
CANCELLATION.NOT JUST FOR
THOSE WHO WERE VICTIMIZED BUT
THOSE SET UP TO FAIL FROM THE
BEGINNING.
I THINK YOU WILL START SEEING
OVER THE NEXT YEAR MUCH BIGGER
DISCUSSION ON STUDENT DEBT
CANCELLATION.
WERE WE DO IT WAS GOOD UP FROM
THE BEGINNING.
THERE HAS TO BE A DISCUSSION
ABOUT RETHINKING THE STUDENT
LOAN ORIGINATION SYSTEM.
IF WE ARE GOING TO ALLOW THIS
TO CONTINUE WILL ONLY HAVE MORE
NEGATIVE REPERCUSSIONS FOR OUR
ECONOMY.
AND I TELL YOU I THINK A LOT OF
PEOPLE WHO GRADUATED OR CAME OF
AGE AROUND THE TIME OF THE
FINANCIAL CRISIS.
THEY WERE IN COLLEGE.
SO MANY OF US HAVE MET STUDENTS
WHO TOLD US.
YOU KNOW, MY PARENTS WERE LAID
OFF OR WE LOST OUR HOMES.
AND NOW IT IS ALL ON ME TO PAY
FOR THIS.
AND SOPHOMORE YEAR OF COLLEGE
WHAT ARE YOU GOING TO DO?
YOU WILL BORROW PICK AND HOPE
IT ALL WORKS OUT.
BUT THE STRUCTURE OF OUR
ECONOMY DOESN'T WORK THIS WAY.
AND LOOK AT SCHOOLS LIKE
MICHIGAN.
EVEN HERE A STATE SCHOOL SOME
PEOPLE HAVE TO BORROW BIG TO GO
TO LAW SCHOOL.
TO GO TO GRADUATE SCHOOL.
AND IT SKEWS ANOTHER LOOK AT
THE CAREER PATH.
AND THAT HAS REAL
REPERCUSSIONS.LET'S TURN
TO SERVICE MEMBERS, MILITARY
MEMBERS.
YOU KNOW, THE FINANCIAL CRISIS,
ONE OF THE ISSUES IS THE WAY IN
WHICH SERVICE MEMBERS HAVE BEEN
ABUSED.
ON AND AROUND MILITARY BASES OR
DURING OVERSEAS DEPLOYMENT.
THE CFPD WAS GIVEN IMPORTANT
AUTHORITIES IN THIS AREA.
HOW MUCH ARE SERVICEMEMBER
STILL AT RISK?
RAISING PROBLEMS IN THE MARKET
YOU THINK WE SHOULD BE FOCUSED
ON?
Rohit Chopra: YOU OBVIOUSLY
SEE A VERY DIFFERENT SET OF
DEMOGRAPHICS ON THE FORCE
NEEDED 10 YEARS AGO.
IT IS NOT AS MUCH OF THE
WARTIME FORCE THAT IT WAS BUT
YOU STILL SEE MANY YOUNG, OFTEN
FROM LOWER INCOME BACKGROUNDS.
ESPECIALLY MEN BEING OFF ON
THEIR OWN AND HEAVILY TARGETED.
BY A WHOLE SUITE OF
UNSCRUPULOUS ACTORS.
I THINK THE RESULTS HAVE BEEN
VERY POSITIVE.
ARE SEEING BIG IMPROVEMENTS
THERE.YOU KNOW, YOU MENTIONED
AUTO EARLIER.
WE HAVE BIG PROBLEMS IN THE
AUTO MARKET WITH RESPECT TO
SERVICE MEMBERS.
I THINK THAT HAS TO BE A BIG
FOCUS FOR THE FTC AND THE
STATES.THE SERVICEMEMBERS
CIVIL RELIEF ACT.
WE SHOULD ALL TAKE SERIOUS
PAUSE.
THE ILLEGAL FORECLOSURES GOT A
LOT OF ATTENTION.
BUT YOU KNOW THEY SANTAN DER
SOMEBODY AT BASIC TRAINING
HAVING THEIR CAR TAKEN FROM THE
ILLEGALLY IS JUST EGREGIOUS.
I WORRY WE HAVE NOT CALIBRATED
CORRECTLY DIRECTIVE OF
CONSEQUENCES FOR THAT BEHAVIOR.
AND WE NEED TO START THINKING
ABOUT WHAT TYPES OF GOVERNMENTS
LICENSES, FAVORS ARE WE GIVING
THESE FIRMS.
THAT EGREGIOUSLY BREAK THE LAW.
AS A MONETARY SIGN ENOUGH?
AND HOW MANY TIMES DO YOU HAVE
TO BREAK THE LAW?
BEFORE WE START THINKING ABOUT
WHAT WE DO WITH YOUR LICENSE?
WHAT DO WE DO WITH SOME OF THE
GOVERNMENT BENEFITS YOU GET?
AND I THINK THAT IS A ONE OF
THE ONLY WAYS WE WILL DETER
SOME OF THESE BAD ACTORS.
WE HAVE A LOT OF GREAT WORK AT
THE FTC WITH RESPECT TO LEAD
GENERATION.
TARGETING MILITARY SERVICE
MEMBERS AND VETERANS.
I THINK FOCUSING HARD ON THESE
LEAD GENERATORS WILL PAY
DIVIDENDS.
LET ME ASK YOU A QUESTION
ABOUT SOMETHING NOT IN THE FTC
JURISDICTION.
BUT I AM SURE YOU HAD A CHANCE
TO TALK ABOUT.
A PRIME EXAMPLE OF THE KIND OF
ABUSES THAT CAN HAPPEN IN THE
RETAIL BANKING MARKET.
HOW DO YOU THINK FEDERAL
REGULATORS HAVE DEALT WITH
WELLS FARGO THUS FAR?
HAS IT BEEN ENOUGH?
WHAT FURTHER STEPS MIGHT BE
USEFUL?
Rohit Chopra: ONE OF MY
EARLIEST PRIORITIES WAS
SHARPENING OUR FOCUS ON REPEAT
OFFENDERS.
AND VIOLATORS OF CONSENT
DECREES AND OTHER ORDERS.
YOU HAVE YOU HAVE A GOOD
EXAMPLE OF A FIRM THAT HAS
SERIOUS MANAGERIAL DEFICIENCIES
AND OBVIOUSLY THE CFPD AND CITY
ATTORNEY OF LA.
THE FAKE ACCOUNT SCANDAL THAT
WAS UNCOVERED.IT HAS
LITERALLY BEEN OVER AND OVER
AGAIN MORE AND MORE PROBLEMS WE
HAVE BEEN HEARING.
AND I THINK THE BIG LESSON THAT
ALL OF US HAVE TO TAKE FROM
THIS IS, ARE WE FUNDAMENTALLY
MISS CALIBRATING MONETARY
PENALTIES?ARE MONETARY
PENALTIES THOSE PENALTIES THAT
BIG FOR A GOOD REGULATORS PRESS
RELEASE?
IS IT ACTUALLY JUST A JOKE
SOMETIMES?
OBVIOUSLY, I THINK WE HAVE SOME
AGENCIES THAT USE THEIR
AUTHORITIES AND SEEK AN AMOUNT
THAT IS HIGHLY JUSTIFIABLE IN
THE COURTS.
BUT I LOOK AT SOMEONE LIKE
WELLS FARGO AND I HAVE
WONDERED.
WITH ALL THESE FAKE ACCOUNTS
SHOULD WE BE TRUSTING THEM WITH
FTI SEE INSURANCE WAY WE ARE
DOING.
AS I AM NOT SAYING.IT RAISES
TOO BIG TO FAIL ISSUES.
BUT THE ACT IS QUITE CLEAR THAT
FOR THIS REPEATED UNSAFE AND
UNSOUND BUSINESS PRACTICES.
THIS IS NOT SOMETHING THE
PUBLIC SHOULD NECESSARILY BE
PROTECTING.
I THINK, THINKING MORE ABOUT
THE OTHER LEVERS WE HAVE.
I THINK THE FED ACTION TO LEAD
TO REAL GOVERNANCE CHANGES.
THIS STRUCTURAL REMEDY SET
FUNDAMENTALLY RESHAPED
EXECUTIVE COMPENSATION,
GOVERNANCE, AND ACCESS TO
GOVERNMENT BENEFITS.
HAS TO BE PART OF THAT POOL.
THAT IS NOT SOMETHING I'VE
STUDIED SO CLOSELY.
BUT I THINK THE EXPERIENCE WE
ARE HAVING AT WELLS FARGO IS
SIGNALING TO SO MANY OF THE
AGENCIES.
THAT THE PUBLIC IS GOING TO
BECOME MORE SKEPTICAL JUST
ABOUT THE BILLION DOLLAR
NUMBERS.
THEY ARE NOT GOING TO SEE THESE
SORT OF CHANGES UNTIL WE THINK
ABOUT STRUCTURAL REMEDIES.
AND AGAIN, I THINK TO
FUNDAMENTAL INCENTIVES.
THE STRUCTURE OF THOSE BUSINESS
MODELS.
AND WELLS FARGO LIKE MANY.
IT IS A THINK WITH THE FEDERAL
CHARTER VEGAS FEDERAL DEPOSIT
INSURANCE.
AND BENEFITS GREATLY FROM
THOSE.
WE SHOULD ASK QUESTIONS AGAIN.
ARE WE GIVING THOSE BENEFITS TO
REALLY?
WHEN WE HAVE REPEATED PROBLEMS
THAT NEED TO GET SOLVED?
QUICK FOR ME ASK ONE LAST
QUESTION AND THEN I WILL OPEN
IT UP TO ALL OF YOU FOR
QUESTIONS.
AND WHAT TO COME BACK TO YOUR
COMMENT ON THE ECONOMY AND TECH
COMPANIES IN GENERAL.
AND TALK ABOUT THE COMPETITION
POLICY SIDE OF THE HOUSE AT THE
FTC.
THERE HAS BEEN ALL KINDS OF
STORIES COMING OUT ABOUT
ANTICOMPETITIVE BEHAVIOR.
IN ONE PARTICULAR PROBLEM THAT
HAS RISEN TO THE TOP IS A
NONCOMPETE AGREEMENT FOR
WORKERS IN THE TECH ECONOMY.
I AM WONDERING WHAT EFFECT YOU
THINK HAVING INNOTECH.
IS IT FAIR?
ARE THERE THINGS THE FTC OR
OTHERS CAN AND SHOULD DO ABOUT
IT?Rohit Chopra:
NONCOMPETE AGREEMENTS THERE HAS
BEEN MORE AND MORE DATA AND
RESEARCH.
INCLUDING BY ALAN KRUEGER ABOUT
HOW NONCOMPETE MAY BE
DISTORTING A COMPETITIVE LABOR
MARKET.
THAT MAY ACTUALLY BE
SUPPRESSING WAGES ESPECIALLY
FOR MANY OF OUR LOWEST INCOME
WORKERS.
THE ILLINOIS ATTORNEY GENERAL,
THE WASHINGTON ATTORNEY
GENERAL.
THAT ON SOME ENFORCEMENT WORK
AND HAVE DECLARED THE USE OF
SOME OF THESE CLASSES.
AS A VIOLATION OF THEIR MANY
FTC.
THEIR UNFAIR BUSINESS
PRACTICES.I RAISED IN AN
ARTICLE IN SEPTEMBER AS TO
WHETHER THE FTC SHOULD CONSIDER
USING ITS UNFAIR METHOD OF
COMPETITION WE ARE USING TO
DEVELOP THE LAW.
AND OFFER MORE CLARITY AS TO
WHEN THE USE OF THESE
NONCOMPETE CLAUSES COULD BE OF
VIOLATION OF FEDERAL LAW.
IT IS SOMETHING THEY ARE
PROLIFERATING.
AND IF WE DON'T DO ANYTHING
ABOUT IT WE ARE NOT GOING TO
SEE A COMPETITIVE LABOR MARKET.
WITH RESPECT TO CHECK.
ONE THING THAT I THINK IS
IMPORTANT FOR YOUR CENTER AND
FOR STUDENTS WHO ARE THINKING
ABOUT FINANCE, LAW AND
POLICIES.
THE LINE BETWEEN FINANCIAL
SERVICES AND TECH IS ALSO
FLOORING IN LOT.
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 IS GOOD.
SOME OF IT RAISES FOR QUESTION
ON HOW THAT DATA WILL BE USED
OR MISUSED.
EVERYONE WHO IS INTERESTED IN A
FAIR FINANCIAL MARKET HAS GOT
TO BE THINKING ABOUT OUR
SURVEILLANCE ECONOMY.
FOR EVERYONE WHO CARES ABOUT A
COMPETITIVE FINANCIAL SERVICE
MARKET.
THEY ALSO HAVE TO WAKE UP AND
ASK HER QUESTION.
ARE WE DOING ENOUGH WITH
RESPECT TO ANTITRUST LAWS WITH
FINANCIAL SERVICES FIRMS?
THE FEDERAL RESERVE OF THE
DEPARTMENT OF JUSTICE, YOU
KNOW.
TAKE THE LEAD ON MAKING
MERGERS.
THERE ARE ALL SORTS OF
FINANCIAL SERVICES MERGERS THAT
REALLY NEED A LOT MORE
SCRUTINY.
AND I THINK WE ARE NOW SEEING
BIG BANK MERGERS AGAIN.
AFTER THE JUDGE FRANK BILL WE
ARE NOW SEEING LARGER BANKS
SEEKING TO MERGE.
I THINK THAT WILL CONTINUE.
AND I THINK WE NEED TO
DETERMINE WHETHER WE ARE USING
ALL THE TOOLS WE HAVE TO MAKE
SURE THOSE MARKETS ARE
COMPETITIVE.
A COMMUNITY BANKS AND OTHERS
ARE ABLE TO COMPETE.
THAT IS GREAT.
LET ME OPEN IT UP TO ALL OF
YOU.
YES.
THANK YOU, THANK YOU SO
MUCH.
CAN YOU WAIT FOR THE MAN TO
ARRIVE.
WE HAVE FOLKS WATCHING ONLINE.
IS THIS ON?
IT WAS ON.
GOOD, THANK YOU SO MUCH.
I JUST WANTED TO RUN BY YOU A
COUPLE OF TOPICS.
I WOULD BE CURIOUS ON YOUR TAKE
OF THE EFFECTIVENESS OF THE
COAP HAS BEEN A DIFFICULT
STATUTE TO ENFORCE AND NOW WE
HAVE THE CONCERN THE IMPACT
SERIES IS IN DANGER BUT THAT IS
ONE QUESTION.
AND IF THE CFPP IS A
REGULATORY, WHAT WOULD BE THE
INTERACTION OF THAT CFTP WITH
THE FTC JURISDICTION?
Rohit Chopra: THAT IS A GOOD
QUESTION.
I THINK, FRANKLY, ALL OF OUR
ANTIDISCRIMINATION LAWS, THEY
REALLY NEED.
THEY WERE NOT DESIGNED FOR THIS
MASS DATA SURVEILLANCE ECONOMY.
IF WE LOOK AT WHAT IS HAPPENING
IT IS NOT JUST IN THE
UNDERWRITING OF CREDIT.
WHAT ADDS:NOT FOR HOUSING,
EMPLOYMENT, PRODUCTS.
IT IS NOT LIKE YOU ARE OPENING
THE NEWSPAPER.
THOSE ADS ARE NOW CUSTOMIZED TO
YOU.
AND WITH ARTIFICIAL
INTELLIGENCE AND MACHINE
LEARNING AND ALGORITHMS.
IT IS FUNDAMENTALLY A DIFFERENT
WORLD FOR IT IS NOT NECESSARILY
A HUMAN INTENTIONALLY
DISCRIMINATING.
BUT THE ALGORITHM ITSELF MAY BE
DISCRIMINATORY.
BUT WE HAVE NO WAY TO CHECK FOR
THAT.
BECAUSE MAY BE RELYING ON
ARTIFICIAL INTELLIGENCE AND
EVOLVING ON ITS OWN.
YOU KNOW THE FRAMEWORK I
OBVIOUSLY WANT US TO USE IT TO
EVERY BIT WE CAN.
AND OBVIOUSLY THAT MEANS USING
DISPARATE IMPACT THEORY.
BUT I AM NOT SURE THAT LOST
THINGS UP WELL WITH THE DATA
ECONOMY TODAY.
AND I HOPE WHEN THE NEXT
FINANCIAL REFORM COMES OR WHEN
WE START TALKING FOR REAL ABOUT
ACCOUNTABILITY IN TECH AND BIG
DATA THAT BECOME THE
CENTERPIECE OF IT.
NOT JUST IN CREDIT BUT ECONOMIC
OPPORTUNITIES.
WITH RESPECT TO THE SANDBOX.
THAT IS A REAL OPEN QUESTION.
YOU KNOW THE CFPD CERTAINLY HAS
SPECIAL AUTHORITIES WITH
RESPECT TO ECOA BUT I THINK
THAT IS TO BE DETERMINED.
AND I GET THE ATTRACTION TO THE
SANDBOXES BUT IT IS IMPORTANT
THAT IT IS NOT BECOME THE SIDE
DOOR TO DEREGULATING THE WHOLE
THING.
AND THAT IS SOMETHING WE NEED
TO PAY CLOSE ATTENTION TO.
BECAUSE THERE'S A LOT OF
OPPORTUNITY FOR ABUSE IT.
AND THAT MEANS THAT ANYBODY
BENEFITING FROM IT IS REALLY
GOING TO BE HELD ACCOUNTABLE
FOR PRODUCING A LOT OF DATA.
PRODUCING AND ADHERING TO THE
HIGHEST STANDARDS.
YOU KNOW, I HAVE WORKED IN
ONLINE LENDING.
AND INNOVATIVE FINANCIAL
TECHNOLOGIES.
BUT I AM NOT SO SURE.
I SEE BOTH SIDES BUT I AM
SKEPTICAL AS TO WHETHER THAT
WILL LEAD TO THE BENEFITS THAT
THEY THINK IT WILL.
Man: I HAVE A QUESTION.
I JUST LOOKED UP A STATISTICS
THERE IS RAMPANT ALCOHOL ABUSE.
PEOPLE MAKE BAD CHOICES, BAD
DECISIONS, BAD BEHAVIOR.
HOW DO YOU IN MAKING POLICY
ACCOUNT FOR PEOPLE JUST DOING
BAD STUFF.
UNTIL THEN THEY SHOULDN'T DO
BUT THEY DO IT ANYWAY AND THEN
YOU HAVE TO POLICY THAT
PROTECTS THEM?
Rohit Chopra: I THINK WE
HAVE TO START WITH THE IDEA WE
CAN'T LET PEOPLE BE LIED TO.
WHEN IT COMES TO TOBACCO USE
WITH A HISTORY OF PEOPLE BEING
LIED TO.
WITH OPIOID ABUSE WE ARE NOW
LEARNING MORE AND MORE.
CONCEALED AND EVEN LIGHT.
SO I START THERE.
BUT YOUR QUESTION ABOUT HOW TO
NUDGE PEOPLE TO BETTER
DECISIONS THERE IS A LOT OF
LITERATURE ON THAT.
BUT I STILL THINK WE HAVE TO
MAKE SURE THE REAL CONSEQUENCES
WHEN PEOPLE ARE BEING LIED TO.
AND ONE OF THE THINGS I HAVE
NOT BEEN THRILLED ABOUT THE
AMOUNT OF SETTLEMENTS THEY
ENTER THAT OUR LETTER ZERO
DOLLARS.
THESE NEW CONSEQUENCE
SETTLEMENTS.
THE FREE PASS.
I UNDERSTAND AND FULLY
RECOGNIZE SOME OF THAT MAY BE
RELATED TO LIMITED AUTHORITIES.
BUT SOME OF IT IS BACKWARDS IN
TERMS OF HOW WE ARE TRYING TO
HOLD ACCOUNTABLE THOSE WHO DO
FLY.
I DON'T KNOW IF THAT IS
RESPONSIVE BUT THAT IS OUR
FIRST PRIORITY.
THERE ARE LOTS OF OTHER TOOLS
OUTSIDE OF LAW ENFORCEMENT TO
TRY TO HELP PEOPLE MAKE BETTER
DECISIONS.
I WOULD LIKE TO TAKE THAT A
STEP FURTHER.
WE TALK ABOUT JUSTICE IN OUR
COUNTRY AND WE TALK ABOUT
HUMANS.
WE COVER THIS POINT OF VIEW HOW
FAR CAN WE PUNISH SOMEONE UNTIL
IT IS UNACCEPTABLE TO SOCIETY?
WHEN IT IS A BUSINESS WHAT IS
THE LEAST AMOUNT WE CAN DO TO
GET THE CHANGE WE WANT?
WE COME FROM THESE TWO
DIFFERENT POINTS OF VIEW.
EVEN IF HUMAN BEINGS.
IF YOU ARE TALKING OR ANYONE IS
TALKING ABOUT FINANCIAL
JUSTICE.
WE TALK IN A METERED LANGUAGE.
HOW DO WE CHANGE THAT PARADIGM
OR WE CAN BE DRACONIAN WE CAN
PLAY A HAMMER DOWN ONE OF THE
HURDLES WE RUN INTO.
SO WE DON'T RUN INTO FOR
HUMANS.
WITH NO PROBLEM SENDING HUMANS
TO JEFF ARE EXTREMELY LARGE
AMOUNTS OF TIME IN OUR COUNTRY.
BUT WE CAN'T GO AFTER BEINGS,
WE CAN'T DEAL WITH THESE
COMPANIES?
Rohit Chopra: IN SOME WAYS
THE OBVIOUS POLITICAL POWER OF
OUR MOST INFLUENTIAL AND
WEALTHIEST CITIZENS AND FIRMS
THAT ARE ABLE TO DISTORT THE
JUSTICE SYSTEM IN THEIR FAVOR.
I DON'T KNOW HOW TO SOLVE THAT
ONE?
BUT YOU ARE RIGHT.
I THINK IT GOES TO WHAT I SAID
ABOUT THOSE REGULATOR PRESS
RELEASES.
$1 BILLION IS A TREMENDOUS
AMOUNT OF MONEY.
BUT IS IT A TREMENDOUS AMOUNT
OF MONEY FOR SOME OF THE
LARGEST FIRMS ON THE PLANET?
AND IS PICKING THAT FIND
SOMETIMES A GAMBLE THAT IS
WORTH TAKING?
AGAIN, WHAT I GO BACK TO ITS WE
NEED TO KEEP THINKING ABOUT IS
A MONETARY REMEDY GOING TO
SOLVE IT?
AND IN SOME WAYS, ESPECIALLY
FOR THOSE WHO REPEATEDLY BREAK
THE LAW.
DO YOU NEED TO GO TO COURT AND
DO YOU NEED AUTHORITY TO
FUNDAMENTALLY FIX THE
STRUCTURAL INCENTIVE AT LEAST
UP TO DO THAT.
I THINK THAT GOES TO EXECUTIVE
COMPENSATION.
IN TOWARD GOVERNMENTS.AND IT
GOES TOWARD ESPECIALLY
INDIVIDUAL LIABILITY.
AND WE RECENTLY HAD A
CHILDREN'S PRIVACY CASE.
COMMISSIONER SLAUGHTER AND I
SPOKE OUT ABOUT THE NEED FOR IN
THESE CASES VERY SERIOUS
MISCONDUCT.THIS IS A CASE
INVOLVING ESSENTIALLY THE
DISCLOSURE OF SAID DATA ABOUT
YOUNG CHILDREN.
THAT WAS AVAILABLE TO PEOPLE.
AND THE COMPANY DECIDED TO LET
IT GO ON.
IT IS DEFINED TO THE COMPANY OR
DO WE NEED TO SHARPEN OUR FOCUS
ON THE ROLE OF INDIVIDUALS?
AN INDIVIDUAL ACCOUNTABILITY
UNTIL WE START DOING THAT.
THAT IS NOT GOING TO REALLY
CHANGE THE STRUCTURAL
INCENTIVES.
A COUPLE.
I WAS ON A BOARD OF DIRECTORS
IN THE UK.
AND THE ONLY THING I LEARNED ON
BEEN ON THE BOARD OF DIRECTORS
WAS THE COMPANY'S, ARE FTC,
TELLS YOU YOU ARE PRETTY
PERMISSIVE AS TO WHAT YOU CAN
DO EXCEPT FOR IF YOUR COMPANY
BECOMES INSOLVENT.
THE DIRECTORS ARE PERSONALLY
LIABLE.
AND WE HAVE TAKEN AWAY THE
PERSONAL LIABILITY OF MANAGERS
AND DIRECTORS THROUGH INSURANCE
AND OTHER THINGS.
YOU TALK ABOUT WELLS FARGO.
THE CEO PAID 1 BILLION IN FINES
LAST YEAR AND GOT A FIVE
PERCENT RAISE.
IS MAKING $8.5 MILLION.
WHEN DO WE GET TO THE POINT
WHEN CORPORATIONS DO BAD
THINGS.
THE OTHER ALTERNATIVE IS WHAT I
HEARD A LOT DURING THE
FINANCIAL CRISIS.
WHY DIDN'T WE LOCK ANYBODY UP?
DO WE HAVE THE ABILITY TO DO
CRIMINAL PROSECUTIONS FOR
CRIMES.
WHETHER THEY BE AT THE CFPD OR
FTC?Rohit Chopra: I AM NOT
A CRIMINAL PROSECUTOR.
BUT IF WE LOOK WHAT HAPPENED AT
THE SAVINGS AND LOAN SCANDAL.
A LOT OF PEOPLE WENT TO PRISON.
AND THAT DIDN'T HAPPEN THIS
LAST TIME.
AND THAT IS ALSO SOMETHING THAT
WILL THE POLICY TOOL KIT.
THERE ARE CERTAIN THINGS THAT
ARE SUBJECT TO CRIMINAL
PENALTIES.AS A CIVIL AGENCY
EVEN CIVIL LAW ENFORCEMENT THAT
TARGETS INDIVIDUALS DOES
SOMETHING.
THAT IS AN IMPORTANT PIECE OF
REALLY WHAT WE SHOULD BE DOING.
I TELL YOU THE FTC WE NAME
INDIVIDUALS A LOT.
FOR SMALL SCAMMERS.
BUT I AM NOT SO SURE WE SHOULD
ASSUME THAT A LARGE FIRM
SHOULDN'T NECESSARILY BE THE
SAME LEVEL OF SCRUTINY.
I DON'T KNOW THE ANSWER TO YOUR
QUESTION.
MY GET TELLS ME WE DID NOT IS A
CRIMINAL AS VIGOROUSLY AS WE
SHOULD BE.
I WILL MAKE ANOTHER POINT.
IF WE LOOK AT FARANOS, EVEN
CORINTHIAN AND ITT.THOSE MAY
BE KNOWN TO MANY OF YOU.
THEY ARE LARGE PUBLICLY TRADED
FIRMS THAT THE CFPD SINCE THEY
ARE NOW DEFUNCT.
THE LEADERSHIP OF THOSE FUNDS
ENGAGED IN BILLIONS OF DOLLARS.
WITH HARM TO SO MANY STUDENTS.
THE ONLY PERSONAL
ACCOUNTABILITY THEY FACE IS AN
$80,000 FINE.
WHAT KILLS ME IS YOU CAN DO --
YOU CAN TAKE ADVANTAGE AND LIE
AND CHEAT CONSUMERS.
HOW DARE YOU LIE TO AN
INVESTOR.
IF YOU'D LIKE TO AN INVESTOR
YOU WILL BE PERSONALLY HELD
ACCOUNTABLE FOR THAT OFFENSE.
I THINK WE SOMETIMES NEED TO
THINK ABOUT WHETHER MASSIVE
FRAUD AGAINST CONSUMERS.
DO WE HAVE THAT CALIBRATION
RIGHT?
Woman: WHAT WILL IT TAKE TO
REGULATE GOOGLE.
I WAS LISTENING TO THE HEARINGS
ON C-SPAN AND I WAS STRUCK BY
THE FACT THAT YOU WILL NOT GET
DECENT LEGISLATION.IT SEEMED
LIKE MANY OF THE MEMBERS OF
CONGRESS NEED A TUTORIAL ON THE
FIELDS TO BE ASKING THE RIGHT
QUESTIONS EVEN.
JUST TO GIVE YOU A SENSE.
SIX OF THE 10 LARGEST
CORPORATIONS BY MARKET
CAPITALIZATION ARE EITHER
AMERICAN OR CHINESE FIRMS.
THIS IS A DRAMATIC CHANGE.
MANY PEOPLE HERE MIGHT THINK
ABOUT THE VALUATION OF LARGE
FINANCIAL INSTITUTION.
THESE FIRMS EQUIPS THEM BY FAR.
I GUESS MY REACTION TO YOU IS I
DON'T THINK YOU NEED TO BE A
TECHNOLOGIST OR COMPUTER
SCIENTIST TO KNOW HOW TO PUT
INTO PLACE REGULATIONS FOR SOME
OF THESE FIRMS.
IT HAS TO BE ROOTED IN OUR
VALUES IS WHAT WE THINK IS FAIR
IN TERMS OF WHAT PROFESSOR
McCOY ASKED ABOUT
DISCRIMINATION.
WHEN IT COMES ABOUT PRIVACY AND
THE USE OF DATA.
OBVIOUSLY WE WANT TO BE DRIVEN
BY EVIDENCE.BUT ON BOTH SIDES
OF THE AISLE PEOPLE ARE
UNCOMFORTABLE.
NOT JUST IN THEIR HEADS BUT
THEIR HEARTS ABOUT SOME OF THE
PRACTICES THAT THEY SEE
ESPECIALLY WITH MASS DATA
AGGREGATION ONLINE.AND HELP
BLOCK THE MARKET ENTRANTS.
AND THEY MONETIZE CONSUMERS.
THAT LEADS TO REAL THREATS TO
JOURNALISM INDUSTRY.
TO OUR NATIONAL SECURITY.
THAT DATA SECURITY ON THE DATA
SECURITY.
MANY OF OUR LARGEST DATA
BREACHES.
THESE ARE ASSETS THAT ARE BEING
TARGETED BY FOREIGN STATE
ACTORS.
THEY KNOW THIS RICH SET OF
ACTORS COLLECTED TO US HAS REAL
VALUE.
AND OF COURSE WE WANT
LEGISLATORS TO BE SMART.
I DON'T WANT ANYONE THINKING
YOU HAVE TO BE A COMPUTER
SCIENTIST OR TECHNOLOGIST TO
ENGAGE IN THIS DEBATE.
ALTHOUGH SHOULD BE ABLE TO
ENGAGE IN THIS DEBATE NO MATTER
HOW HARD WE PARTICIPATE IN THE
ECONOMY.
WE HAVE TIME FOR ONE
QUESTION.
A SHY GROUP THIS MORNING.
I WANTED TO ASK ABOUT THESE
SORTS OF SERVICES THAT CAN HELP
CONSUMERS MANAGE THEIR CREDIT
BETTER.
CREDIT, IS A BIG EXAMPLE I CAN
THINK ABOUT.
ARE THESE HELPING CONSUMERS
UNDERSTAND?
I AM A USER AND THERE ARE SOME
THINGS I HAVE LEARNED.
OR ARE THEY DOING MORE HARM
THAN GOOD BY COLLECTING A LOT
OF THAT INFORMATION SUCH AS
THEY OFFER FREE FILING.
BUT THEN SAY THEY WILL USE THAT
INFORMATION TO MARKET FINANCIAL
SERVICES TO YOU?
WHAT ARE YOUR THOUGHTS ON
THINGS LIKE THAT?
Rohit Chopra: I THINK IN THE
NEXT FEW YEARS WE WILL HAVE TO
SWITCH OUR DEFINITION OF THE
WORD FREE.
FREE, A LOT OF THINGS ARE
OFFERED FOR FREE.
BUT THEY ARE ACTUALLY A REAL
EXCHANGE AND I WOULDN'T EVEN
CALL IT A FAIR EXCHANGE.
I WOULD SOMETIMES CALLING IT
OFFERING SOMETHING FOR FREE BUT
PICKPOCKETING SOMEONE AND
SELLING WHAT YOU TOOK FROM
THEM.
BECAUSE IT IS NOT CLEAR AT ALL
TO CONSUMERS WHAT IS BEING
TAKEN FROM THEM.
THE ABILITY TO FOR THIS TO GET
MORE COMPLICATED.
WE MAKE THE TRANSITION TO 5G.
COMMUNICATIONS IN WAYS WE SEE
ONLY FOR FIX.
AND THAT WILL LEAD TO A HUGE
BLOSSOMING OF AN INTERNET OF
THINGS.
MORE WEARABLE DEVICES AND
CONNECTED CARS.OF THE AMOUNT
OF INFORMATION THAT WILL BE
AVAILABLE ON US.
AUTOMOTIVE COMPANIES CAN
COLLECT.
THAT RETAILERS CAN COLLECT.
IT WILL LEAD TO MORE
PERSONALIZED PRICES WHICH
RAISES A WHOLE OTHER SET OF
ISSUES AND CONSUMER PROTECTION
ISSUES.
I AM VERY WORRIED THAT WE ARE
NOT UP TO SPEED AS STATE AND
FEDERAL REGULATORS ON THE
IMPLICATIONS ON THIS FOR
OURSELVES AND OUR SOCIETY.
I DON'T KNOW WHAT THE ANSWER IS
SPECIFICALLY TO THE SPECIFIC
FIRMS.
BUT IF WE DON'T CHANGE OUR
THINKING ON THE WORD THINKING
AND THINK IT WILL LEAD TO
DELAYED ACTION.
THAT IS A LITTLE OVERDUE.
THANK YOU.
PLEASE CHOOSE ME AND THANK NG
ROHIT CHOPRA.