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Big Tech Poses Harm to Payment Rivals, CFPB’s Chopra Says (1)

Oct. 27, 2021, 3:57 PMUpdated: Oct. 27, 2021, 5:42 PM

The Consumer Financial Protection Bureau wants to make sure that tech companies like Apple Inc., Amazon Inc., Facebook Inc., and Google don’t “squelch” smaller competitors from operating their own payment systems, the bureau’s new director told Congress.

The CFPB’s recent letters to the four tech giants along with PayPal Holdings Inc. and Square Inc. are meant to ensure that financial innovation in the payments space doesn’t harm consumers or limit their product options, CFPB Director Rohit Chopra told the House Financial Services Committee Wednesday.

“I am worried that the Big Tech companies are coming for financial services,” he said.

Chopra’s appearance on the Hill was his first since his Sept. 30 confirmation. In addition to addressing big tech’s payment platforms, he fielded questions about his overall approach to the enforcement of consumer finance laws.

The bureau wants to know how companies like Apple and Google integrate Apple Pay and Google Pay into their operating systems. It’s also probing the practices at peer-to-peer payments platforms like PayPal’s Venmo app and Square’s CashApp.

“What I want to make sure is that those payments systems still adhere to consumer protection,” Chopra said. “That they don’t really undermine a fast, fair and transparent system. And that they’re not squelching innovators or kicking people off with no understanding as to why.”

The six companies have until December to reply to more than 50 detailed questions about how they how they collect, use, and sell consumers’ financial data.

Chopra said he’s concerned that some of the companies that received letters “may start competing businesses and therefore may want to foreclose potential competitors.”

“That’s bad for consumers,” he said. “That’s bad for businesses.”

Chopra is also worried about the potential for big payments platforms to process stablecoins—cryptocurrencies pegged to stable commodities or currencies like the dollar. Stablecoins are largely used for speculative trading, but they could reach a global scale quickly if adopted for other uses, he said.

“That’s part of the reason why I issued those orders to the big tech companies,” he told the committee.

Enforcement Focus

Chopra faced questions about how he will use the bureau’s vast Dodd-Frank enforcement authority against Unfair, Deceptive, or Abusive Acts or Practices (UDAAP). Committee Republicans raised concerns that the agency will return to “regulation by enforcement” policies in which industry expectations are laid in enforcement orders rather than the rulemaking process.

Chopra said he will try to make sure all financial market participants clearly understand the laws and regulations the CFPB enforces before enforcement actions are brought. At the same time, the CFPB should file more lawsuits so courts can help develop consumer finance law, he said.

Chopra pointed to his past experience as a commissioner at the Federal Trade Commission to outline his enforcement views.

“One of the things that drives me a little crazy is when federal agencies don’t focus their efforts on nationwide or systemic or severe harm,” he said.

The CFPB under the Trump administration largely targeted violations at smaller firms that yielded smaller penalties or none at all.

The CFPB should “focus most of our resources on the largest firms that are engaged in nationwide harm that are really totally beyond the pale,” Chopra told lawmakers.

(Story updated with additional reporting on Chopra's enforcement priorities.)

To contact the reporter on this story: Evan Weinberger in New York at eweinberger@bloomberglaw.com

To contact the editor responsible for this story: Michael Ferullo at mferullo@bloomberglaw.com; Laura D. Francis at lfrancis@bloomberglaw.com

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