The Consumer Financial Protection Bureau’s investigation into the business practices of big tech companies in the payments sector does not go far enough, according to the Independent Community Bankers of America (ICBA), one of the banking industry’s leading trade associations.
The ICBA, whose members are responsible for most small businesses and agricultural loans in the U.S., called on the CFPB to expand the scope of the federal inquiry initiated in October by Director Rohit Chopra to include data aggregators.
“Data aggregators play a large role in the procurement and usage of consumer financial data,” the ICBA wrote in its Dec. 6 letter to the CFPB in response to a solicitation for comment on the agency’s investigation into the tech companies. “Data aggregators serve as middlemen between millions of consumers and thousands of financial technology companies, collecting data on consumers who wish to use websites or applications that have agreements with the data aggregators.”
Such non-bank entities are entering the same markets as banks even though they aren’t subject to the same stringent regulations in areas like protecting consumers' confidential information, according to ICBA.
“The positions espoused in our letter related to data and security are longstanding and apply to any data aggregator that holds consumer financial data," a spokesperson for ICBA said.
In opening the CFPB inquiry, Chopra said: "Little is publicly known about how Big Tech companies will exploit their payments platforms,” in an Oct. 21 statement. He could have asked the companies to provide the information voluntarily, but chose not to do so.
Other non-bank entities such as the payments company Square, online lender SoFi Technologies and retailer Walmart filed applications in recent years to be so-called industrial loan companies.
“With social media companies and other big tech/big data companies beginning to offer financial products and services, a small number of companies could hold tremendous market power,” ICBA said. “The integration of these technology and banking firms would pose conflicts of interest and privacy concerns to our banking system. What will happen when big tech extends their reach into our financial lives?”
Chopra sent 50 detailed questions to big tech companies Google, Apple, Facebook, Amazon, Square and PayPal about their "products, plans, and practices." The agency also plans to study the payments businesses of Chinese tech companies, including WeChat Pay and Alipay.
Responses from the companies were due to the CFPB on Dec. 15. Earlier this month, the CFPB extended the deadline for the public to submit comments regarding the inquiry to Dec. 21.
Earlier this month, the American Bankers Association (ABA) and the Consumer Bankers Association (CBA) called on the CFPB, as part of the inquiry, to “ensure consumer protections are applied consistently to all companies offering payments products and financial services, including big tech."
The payment tech company probe initiated by the federal agency earlier this month is separate from a new inquiry into the practices of buy now-pay later companies launched by the CFPB last week.