The Consumer Financial Protection Bureau’s new aim to consider industry competition in its oversight should get payments players’ attention, according to a former top enforcement attorney at the agency.
Former CFPB Enforcement Director Thomas Ward, who is now a partner at the law firm Sidley Austin, told a room full of payments professionals at the American Banker Payments Forum in Phoenix Tuesday that CFPB Director Rohit Chopra was flexing new regulatory muscles with his decision to tap the agency’s markets authority in requesting information from big tech giants last October. “The bureau is really pursuing a competition agenda in a way that it has never done before,” Ward said.
The agency last October demanded information from Google, Facebook, Amazon, Apple, PayPal and Square parent Block about their plans for consumer payments. Ward said it was the agency’s “highest-profile payments action” since Chopra took the agency’s top job, which happened the same month that the paytech inquiry began.
Ward sees the CFPB's approach on the tech inquiry as a sign of things to come. While payments had been a “sleepy space in the bureau,” Ward said, a “news flash” for the day was: “Payments is no longer sleepy.”
Even Chopra’s predecessor, Richard Cordray, who was an aggressive regulator, didn’t pursue competition cases while he led the bureau, Ward said. Cordray was the first director of the bureau and was in the role from 2012 to 2017.
The CFPB’s tack with respect to using its competition enforcement authority has likely changed with the Biden administration’s new focus on rooting out anti-competitive behavior in corporate America. In a July order last year, the president even cited the CFPB’s “pro-competition objectives” in urging the agency to consider “enforcing the prohibition on unfair, deceptive, or abusive acts or practices in consumer financial products or services.”
Chopra has taken on that new mandate with gusto, said Ward, who is one of only two former CFPB enforcement directors. “He does view competition and consumer protection as intertwined and therefore to do his job, the CFPB has to be a competition regulator,” Ward said.
As illustrative of the agency’s zeroing in on the competitive angle, Ward cited questions Chopra raised in his statement the day the bureau announced the orders to the tech companies, including “Will small businesses feel coerced into participating in the payment platform out of fear of being suppressed or hidden in search or product listings?” and “Will the payment platforms be truly neutral, or will they use their scale to extract rents from market participants?”
The information gathering from the companies is a way for the bureau to become more attuned to what role it may need to play in the payments space, Ward suggested. The bureau is doing this "because there's a significant consumer payments market developing outside of supervisory oversight, and in order to fulfill its duty to the American consumer, it needs to get up to speed on it, and the markets mechanism is one way to do that,” Ward said.
Ultimately, Ward expects the agency to produce a report saying whether it has validated its concerns about the tech companies' participation in the payments industry. That’s a “big priority” for the administration, but it’s not clear when that report will arrive, he said.