A former attorney for the Consumer Financial Protection Bureau has joined Goldman Sachs as the head of compliance for its new online consumer lending business.
Mitch Hochberg was a senior counsel at the CFPB from mid-2011 to mid-2013, working on new mortgage regulations tied to the implementation of the Dodd-Frank financial reform laws. He left the regulator to join Fenway Summer, a consumer finance investment and advisory firm founded that year by former CFPB deputy director Raj Date. He joined Goldman last month, according to LinkedIn; a Goldman Sachs spokesperson declined to comment.
Web-based financial services companies have taken off in recent years, with billions poured into the sector by venture capitalists. The industry exists in a regulatory niche, as the companies make loans to consumers but are not treated as banks by authorities. Startup lenders like SoFi, Lending Club and Prosper have originated billions of dollars of loans over the past few years, and regulators are still working on their approach to the fast-growing market.
Last summer the Treasury Department put out a request for information on the industry; the CFPB's interest in online lenders has so far been focused on internet companies offering so-called payday loans. Goldman’s online business will be run through its chartered bank, GS Bank.
Hochberg is one of many new hires made in the past few months as Goldman Sachs builds up its online lending program. In May, the bank hired Harit Talwar from Discover to run the new business. It has since hired employees from companies like Lending Club, the publicly traded online lender, American Express, and Citi. A source familiar with the matter told BuzzFeed News that Goldman has hired dozens of people to work on the lending business.
In a memo last year announcing the hiring of Talwar, Goldman's chief executive Lloyd Blankfein and president Gary Cohn said that they had "identified digitally led banking services to consumers and small businesses as an area of opportunity" for the company. Goldman Sachs analysts said in a separate report that $4.6 billion worth of bank profits were at risk of being lost to online lenders, and that digital upstarts could capture up to 15% of the $843 billion worth of outstanding consumer loans.
For nearly its entire existence, the CFPB has been criticized by conservative groups and the financial industry, saying the regulator is stifling the growth of financial services and introducing rules that make it harder for people to get loans. Last year, the American Action Network, a conservative non-profit, ran an ad depicting the agency as an officious, Soviet-style bureaucracy dedicated to denying loan applications.
When Date and other CFPB employees left the Bureau to found Fenway Summer — which says it invests in business that "drive consumer-friendly innovation in financial services" — several Republican House members wrote a letter raising questions about the move. The letter expressed concerns that the CFPB under Date's leadership had written new rules on consumer finance, and Date and others now planned to work on lending businesses that could operate around the regulations written by the CFPB.
Just last week, the CFPB rolled out a process intended to reduce regulatory uncertainty for newer financial services products and companies.