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Financial Services Committee Republicans Call on CFPB Director Chopra to Rescind Anti-Consumer Actions on Nonbank Financial Firms

Washington, December 14, 2022 -

Ahead of today’s hearing, all Republicans on the House Financial Services Committee—led by Chairman-elect Patrick McHenry (NC-10)—sent a letter to Consumer Financial Protection Bureau (CFPB) Rohit Chopra. Republicans are raising concerns with Director Chopra’s recent actions related to nonbank financial firms that exceed the CFPB’s statutory authority and harm the very consumers the agency was established to protect.

Read the full letter to Director Chopra here.

Read key excerpts from the letter to Director Chopra below:

“Dear Director Chopra:

“We write to express our concern with recent actions taken by the Consumer Financial Protection Bureau (CFPB). In particular, the CFPB’s recent actions with respect to nonbank entities exceed its statutory authority and harm the very consumers the CFPB was established to protect. The result of CFPB’s actions will be fewer financial products and services available in the marketplace – an outcome in direct conflict with fostering increased competition and innovation. We call on you to rescind these actions immediately.

Nonbank Supervision

“Eight months ago, the CFPB announced that it would exercise its authority under the Dodd-Frank Act to supervise “nonbanks whose activities the CFPB has reasonable cause to determine pose risks to consumers.”  In conjunction with that announcement, the CFPB explained that it would amend its procedural rules to create a process for the Director to authorize the release of information regarding such nonbanks. Despite serious concerns raised about disclosure of sensitive confidential supervisory information, the CFPB finalized the procedural rule last month. The CFPB claims it will protect specific categories of sensitive information; however, given your penchant for public shaming of individual entities, we are concerned this will be abused as just another tool to shame market participants without due process.

“In addition, despite requests from numerous commenters, the CFPB declined to clarify or further define “risks to consumers” for purposes of employing its nonbank supervision responsibility under the Dodd-Frank Act. While the CFPB claims the final rule is intended to level the playing field to hold nonbank entities accountable, it appears that this is yet another effort to entrench the status quo by attacking companies that provide innovative products and services.

Buy Now, Pay Later

“Last year, the CFPB published a blog post on Buy Now, Pay Later (BNPL). The post emphasized the importance of individuals understanding the potential benefits and risks that come with BNPL products before making a purchase. In December 2021, the CFPB requested information to gain additional insight into the practices of several BNPL firms, including Affirm, Afterpay, Klarna, PayPal and Zip. In January, the CFPB requested comments from the public on their experiences with BNPL firms. The CFPB recently released a report showing that consumers are increasingly using BNPL products and new firms continue to enter the market, offering different types of BNPL products. While the actual content of the report underscored the benefits of BNPL to consumers, the accompanying CFPB press release and public statements failed to comport with the report findings, instead casting BNPL in a skeptical light.

“This approach is similar to the CFPB’s tactics used with respect to overdraft fee programs: the CFPB decides it does not like a particular industry and seeks to destroy it. This effort is no different, and its threats to the BNPL market raise significant concerns. Neither the CFPB nor any government entity should be dictating how consumers spend their money. New products should not be punished and unjustly stereotyped for failing to fit into a certain regulatory bucket. BNPL products provide consumers with financial flexibility and the ability to budget accordingly. Allowing room for innovation helps consumers have choice and accountability over their own financial decisions.

Office of Competition and Innovation

“In May, the CFPB made structural changes and announced the replacement of its Office of Innovation with the new Office of Competition and Innovation.  At the same time, the importance of this new Office was downgraded to the CFPB’s Division of Research, Markets and Regulation. This marks a significant shift away from previous Directors who used the Office to encourage companies to innovate in a safe and sound manner without fear of public retribution. This move will not remove barriers to entry nor enhance competition in the marketplace. Rather it has the very real and likely potential to harm consumers and communities. Finally, replacing the fintech sandbox program that processed applications for no-action letters is a step in the wrong direction and will reduce the CFPB staff’s ability to engage and understand innovative products and services.

Peer-to-Peer (P2P) payments

“In October 2021, the CFPB ordered six large technology and peer-to-peer (P2P) platforms, including Amazon, Apple, Facebook, Google, PayPal and Square, to provide information about their business practices. This October, the CFPB reopened the public comment period. As you noted, the CFPB is looking at the framework of the Electronic Fund Transfer Act (EFTA) to combat fraudulent activity in P2P payment systems. Let us be clear, Congress writes the laws. To that end, Congress was clear with respect to its intent and its goals of deterring and punishing fraudsters and bad actors. The CFPB should not reinterpret Congress’ meaning and upend P2P payment systems and their benefits to consumers, small businesses, and our payment systems. …”


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