This article has recently been corrected. Originally, the article headline claimed that Rohit Chopra was appointed to the FTC; in actuality, Rohit Chopra was nominated for an appointment to the FTC.
On October 19th, the White House announced its intention to nominate Rohit Chopra, a leading private student loan watchdog, to an open Democratic slot at the Federal Trade Commission. The FTC is a bipartisan government agency charged with promoting competition and protecting consumers. The White House also announced its nomination of Joseph Simmons, a competition-law expert, to head the FTC.
Chopra is considered a strong advocate for borrowers who take out private student loans. He is a considered a close ally of Senator Elizabeth Warren (D-Mass), who London bookies currently give 12-to-1 odds of capturing the White House in 2020.
Rohit Chopra works at the Consumer Federation of America as a Senior Fellow. His focus is on economic issues facing young people, with an emphasis on the private student loan industry. Previously, he served as an Assistant Director at the Consumer Financial Protection Bureau, the agency that is the brainchild of Senator Warren. He also served as the Treasury’s first Student Loan Ombudsman, a position newly created under the Dodd-Frank Act, and as Special Advisor to the Secretary of the Department of Education.
While at the CFPB, Chopra was credited with several important initiatives regarding the private student loan industry, including:
- Supported the CFPB’s law enforcement actions resulting in relief for student loan borrowers worth hundreds of millions of dollars
- Authored widely-cited research on student loans
- Created a cutting-edge student loan complaint system
In a CFPB article released in June of 2015, Chopra announced the finding that 90 percent of private student loan borrowers were rejected when they applied for co-signer release. This industry practice means that co-signers who can’t obtain release are subject to damage to their credit and higher interest rates. It can also hurt the borrower if the co-signer should die or go bankrupt, since this can trigger an auto-default on the private student loan, even if the loan is in good standing. In 2011, more than 90 percent of student loans were co-signed.
The main takeaways from Chopra’s 2015 report were:
- Rejection: Consumers who applied for co-signer release on private student loans were rejected 90 percent of the time. This occurred despite widespread advertising to the contrary.
- Obfuscation: Lenders obfuscated the criteria for obtaining a co-signer release, leaving co-signers confused about their rights and why they were denied.
- Auto-default: Most private student loan contracts contain auto-default clauses that put borrowers in default when co-signers go bankrupt or die. This is despite some promises from the industry to abolish auto-default.
- Repackaged: Even without auto-defaults, many private student loans are sold to other lenders and then securitized. The new loan owner might decide to enable auto-defaults.
- Disqualified: Some contracts permanently forbid co-signer release if the borrower receives forbearance or prepays part of the loan.
- Poison clauses: The CFPB found many poison clauses in the fine print of private student loans. For example, “universal default” clauses can trigger a default of the student loan if the borrower or co-signer is not in good standing on an unrelated loan.
Rohit Chopra has also been a frequent expert witness in front of Congress. He has been profiled in publications such as Money, Kiplinger’s and the Wall Street Journal. He has received multiple awards for his contributions and public service related to consumer finance. He earned an MBA from Wharton School at the University of Pennsylvania and a BA from Harvard.
Chopra’s term on the FTC would expire on Sept. 25, 2019. In 2015, Senator Warren advocated his nomination to be the superintendent of the New York Department of Financial Services, but ultimately the job went to another person.
Author: Andrew Rombach
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