This note summarizes the federal regulator panels at ETA's annual FinTech Policy Forum, which was hosted by Venable in our Washington, DC office. We provide key takeaways from the discussions with (a) CFPB Director Rohit Chopra and (b) representatives from the Office of the Comptroller of the Currency, the Federal Reserve, and the Consumer Financial Protection Bureau. This note reflects our interpretation of the discussions and is provided for informational purposes only.
Key Takeaways from CFPB Dir. Chopra Discussion:
- Data collection/use concerns remain at the top of the CFPB's mind. Dir. Chopra is personally worried about harvesting of data and how that data can be used by tech companies.
- Dir. Chopra does not want to see the U.S. going down the road of a Chinese-like payments system in which one or a few major players (e.g., Alipay) dominate the markets; having multiple channels is preferred.
- Dir. Chopra is generally supportive of open banking, but does not think that the U.S. has the statutory framework in place to handle it from a regulatory perspective. When it comes to open banking, Dir. Chopra conceded that there is no legal authority for the CFPB to create a UK-style open finance system. In the fall, CFPB will complete rulemaking on customer data that will give customers control of how their data is used. Dir. Chopra worries about the creation of a "data underworld" where companies may try to grab data and use it for unrelated purposes.
- In the P2P payments context, the Bureau does not have a solid answer for whether liability should be shifted to the P2P platform for fraudulent transfers that were authorized, but Dir. Chopra indicated that P2P platforms with more resources at their disposal might be treated differently than those without a large bank or similar entity backing them. The CFPB is thinking about how ubiquitous one-time payments can be made in a way that addresses core issues (i.e., fraud). Chopra indicated that the Bureau might be thinking about the responsibility of the P2P apps working on the rails of a bank or other financial institution.
- The Bureau is trying to understand what it wants to do with BNPL. Dir. Chopra indicated that the Bureau may be using its supervisory authority in the near future to start answering some of its questions. Dir. Chopra indicated that the Bureau is starting to think about BNPL in the same manner in which it thinks about credit cards and that he thinks there should be some parity between the two products. When it comes to BNPL, the CFPB is looking at use of data, and how it might be used to induce more purchases and more borrowing. The "repeatability" of BNPL is the distinguishing feature of BNPL; credit card companies do not have nearly the same ability to influence transactions, according to Chopra
- Stablecoins are an interesting idea, but Dir. Chopra does not think that the U.S. is ready for them yet. In general, however, Dir. Chopra suggested that Washington's obsession with crypto is hindering broader thinking on the entire payments ecosystem.
General Takeaways from Banking Regulator Panel:
- All of the federal banking regulatory agencies are continuing to explore crypto risks and the role crypto plays in financial services.
- The OCC has gained significant knowledge in the crypto space and will continue to study the industry, including by outreach to individual banks where appropriate to do so.
- The OCC will continue to work on Interpretive Letter #1179 process work and will continue clarifying when and how it is permissible for national banks to engage in certain cryptocurrency, distributed ledger, and stablecoin activities.
- The Federal Reserve is focused on crypto assets from a variety of perspectives (i.e., financial stability oversight); recent crypto market moves have shown the Fed that crypto assets are susceptible to a lot of the same risks as are traditional assets. The Fed issued a supervisory letter in August (press release) stating that the institutions the Fed supervises must notify the Fed of that activity before they engage in those activities (mirroring OCC's 1179 process).
- The CFPB is focused on stablecoins/central bank digital currency; CFPB is primarily looking at assets where there is likely to be wide and robust consumer adoption.
- The Bureau is concerned that with faster payments there are fewer "speedbumps," which means a greater risk for fraud. The CFPB is thinking about safety and security in a real-time payments system (area of great focus).
Bank and FinTech Partnerships
- The OCC is focused on these partnerships; they are part of a larger theme in the strategic plan recently issued by the OCC of focusing on the digitalization of products and services; partnerships between banks and non-banks play a primary role in such digitization. The focus of partnerships needs to be on the basic blocking and tackling of compliance, including due diligence of partners, ongoing monitoring, consumer protection, customer service, and existing strategies.
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