The committee members ask the CFPB to rescind a rule allowing the bureau to use its supervisory authority to examine nonbank financial companies, among other actions.
12/22/2022 9:10 A.M.
2.5 minute read
Republican members of the House Financial Services Committee (HFSC) have called on Consumer Financial Protection Bureau Director Rohit Chopra to rescind actions related to nonbank entities that exceed the bureau’s statutory authority.
In a letter (PDF) to Chopra in advance of a hearing on the bureau’s semiannual report to Congress Dec. 14, the members, led by HFSC Chairman-Elect Patrick McHenry, R-N.C., raised concerns about the bureau’s actions ranging from nonbank supervision to changes in the bureau’s Office of Competition and Innovation.
“The result of the CFPB’s actions will be fewer financial products and services available in the marketplace—an outcome in direct conflict with fostering increased competition and innovation. We call on you to rescind these actions immediately,” the letter states.
Among the actions for the bureau to rescind is a rule allowing the CFPB to use its supervisory authority to examine nonbank financial companies.
The CFPB announced in April that “it is invoking a largely unused legal provision to examine nonbank financial companies that pose risks to consumers,” ACA International previously reported. “The CFPB believes that utilizing this dormant authority will help protect consumers and level the playing field between banks and nonbanks.”
The CFPB will also make final decisions and orders in these proceedings public. The rule was finalized in November.
ACA submitted comments on the procedural rule with concerns about the rulemaking process as well as whether supervisory proceedings should be public.
Comments from the banking industry showed support for oversight of nonbank companies, but also concern about publicizing findings and risk-based assessments about a company before having inspected it firsthand.
Republican members on the HFSC said in the letter to Chopra that, “given your penchant for public shaming of individual entities, we are concerned this will be abused as just another tool to shame market participants without due process. In addition, despite requests from numerous commenters, the CFPB declined to clarify or further define ‘risks to consumers’ for purposes of employing its nonbank supervision responsibility under the Dodd-Frank Act. While the CFPB claims the final rule is intended to level the playing field to hold nonbank entities accountable, it appears that this is yet another effort to entrench the status quo by attacking companies that provide innovative products and services.”
The committee members also question the bureau’s approach to public statements about research on buy now, pay later (BNPL) products.
“While the actual content of the report underscored the benefits of BNPL to consumers, the accompanying CFPB press release and public statements failed to comport with the report findings, instead casting BNPL in a skeptical light,” the letter states.
In addition to revisiting changes to the bureau’s Office of Competition and Innovation that reduce the bureau’s ability to engage and understand innovative products and services, the committee members also seek answers to several questions on the bureau’s goals in reviewing business practices of peer-to-peer platforms, including Amazon, Apple, Facebook, Google, PayPal and Square, by Dec. 30.
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