WASHINGTON, D.C. – The Financial Technology Association (FTA) today submitted a comment letter urging the Consumer Financial Protection Bureau (CFPB) to pause and reconsider its proposed rule defining larger participants in the digital consumer payments space, calling the rule overly broad and arguing that the Bureau has failed to appropriately define the market or identify specific risks to consumers that existing regulation does not already mitigate.
“Rather than properly analyzing and defining specific markets, the CFPB’s proposed rule conflates diverse uses and products into a one-size-fits-all approach for the digital payments ecosystem,” said Penny Lee, President and CEO of the Financial Technology Association. “The CFPB should pause its rulemaking, recognize that existing laws govern digital payments markets, and reconsider this overly broad approach that could stifle innovation and limit competition and consumer choice.”
FTA’s letter raises several concerns with the proposed rule, including:
Overly Broad Market Definition: No “general-use digital consumer payments” market exists. The consumer payments ecosystem is highly diversified, with companies offering peer-to-peer digital payments differing significantly from companies processing payments for merchants, for example. Defining a “market” is fundamental to determining who a larger participant is within that market. Therefore, FTA argues that “the CFPB should narrowly define the particular consumer payments market that it seeks to supervise through rigorous, data-driven analysis to identify the area that is inadequately supervised and poses the greatest risk to consumers.”
Failure to Identify Consumer Risks: The proposal fails to identify the specific consumer harms it seeks to address. Instead, it states that “as a result of supervisory activity, the CFPB and an entity might uncover compliance deficiencies indicating harm or risks of harm to consumers.” While FTA understands that consumer protection regulations must evolve with new technology, the CFPB should identify and assess the consumer harms it perceives in the precise market before it proposes a larger participant rule.
Inadequate Cost Benefit Analysis: The Dodd-Frank Act requires that the CFPB conduct a cost-benefit analysis of a rule before issuing it, assessing “the potential benefits and costs to consumers and covered persons, including the potential reduction of access by consumers to consumer financial products or services resulting from such rule.” Yet, the proposed rule performs a superficial market analysis and “fails to assess the potential costs to consumers resulting from increased prices and the stifling of future innovation.” Therefore, FTA urges the Bureau to “consider a cost-benefit analysis that adequately considers companies that may fall within the purview of the Proposed Rule, analyze the related costs to the companies rather than using conservative estimates, and determine the costs that may be passed on to consumers.”
To read FTA’s full comment letter, click here.
ABOUT US
The Financial Technology Association (FTA) is a Washington, DC-based trade association representing industry leaders shaping the future of finance. We champion the power of technology-centered financial services and advocate for the modernization of financial regulation to support inclusion and responsible innovation.
FTA Urges CFPB to Pause and Reconsider Overly Broad Digital Payments Rule
WASHINGTON, D.C. – The Financial Technology Association (FTA) today submitted a comment letter urging the Consumer Financial Protection Bureau (CFPB) to pause and reconsider its proposed rule defining larger participants in the digital consumer payments space, calling the rule overly broad and arguing that the Bureau has failed to appropriately define the market or identify specific risks to consumers that existing regulation does not already mitigate.
“Rather than properly analyzing and defining specific markets, the CFPB’s proposed rule conflates diverse uses and products into a one-size-fits-all approach for the digital payments ecosystem,” said Penny Lee, President and CEO of the Financial Technology Association. “The CFPB should pause its rulemaking, recognize that existing laws govern digital payments markets, and reconsider this overly broad approach that could stifle innovation and limit competition and consumer choice.”
FTA’s letter raises several concerns with the proposed rule, including:
Overly Broad Market Definition: No “general-use digital consumer payments” market exists. The consumer payments ecosystem is highly diversified, with companies offering peer-to-peer digital payments differing significantly from companies processing payments for merchants, for example. Defining a “market” is fundamental to determining who a larger participant is within that market. Therefore, FTA argues that “the CFPB should narrowly define the particular consumer payments market that it seeks to supervise through rigorous, data-driven analysis to identify the area that is inadequately supervised and poses the greatest risk to consumers.”
Failure to Identify Consumer Risks: The proposal fails to identify the specific consumer harms it seeks to address. Instead, it states that “as a result of supervisory activity, the CFPB and an entity might uncover compliance deficiencies indicating harm or risks of harm to consumers.” While FTA understands that consumer protection regulations must evolve with new technology, the CFPB should identify and assess the consumer harms it perceives in the precise market before it proposes a larger participant rule.
Inadequate Cost Benefit Analysis: The Dodd-Frank Act requires that the CFPB conduct a cost-benefit analysis of a rule before issuing it, assessing “the potential benefits and costs to consumers and covered persons, including the potential reduction of access by consumers to consumer financial products or services resulting from such rule.” Yet, the proposed rule performs a superficial market analysis and “fails to assess the potential costs to consumers resulting from increased prices and the stifling of future innovation.” Therefore, FTA urges the Bureau to “consider a cost-benefit analysis that adequately considers companies that may fall within the purview of the Proposed Rule, analyze the related costs to the companies rather than using conservative estimates, and determine the costs that may be passed on to consumers.”
To read FTA’s full comment letter, click here.
ABOUT US
The Financial Technology Association (FTA) is a Washington, DC-based trade association representing industry leaders shaping the future of finance. We champion the power of technology-centered financial services and advocate for the modernization of financial regulation to support inclusion and responsible innovation.