UNITED STATES - APRIL 26: Rohit Chopra, director of the Consumer Financial Protection Bureau, testifies during the Senate Banking, Housing and Urban Affairs Committee hearing titled The Consumer Financial Protection Bureaus Semi-Annual Report to Congress, in Dirksen Building on Tuesday, April 26, 2022. (Tom Williams/CQ-Roll Call, Inc via Getty Images)
Photo: Tom Williams/CQ-Roll Call, Inc via Getty Images

Rohit Chopra’s second year at the CFPB could be tougher than his first

Protocol Fintech

Hello, and welcome to Protocol Fintech. This Friday: Rohit Chopra’s first year at the CFPB, Amazon’s expansion of earned wage access, and Jeremy Allaire on staying stable.

Off the chain

Citadel’s Ken Griffin is glad that the speculative bubble that led Americans to bet on meme stocks, NFTs, and crypto has burst. “Money misallocated in speculative assets doesn’t create jobs in the long run,” he said at CNBC’s Delivering Alpha conference this week. Griffin has also plunged $1 billion into real estate located in a hurricane zone.

— Owen Thomas (email | twitter)

A consumer watchdog closely watched

Rohit Chopra arrived as director of the Consumer Financial Protection Bureau one year ago today. True to his reputation as an aggressive watchdog from his time as an FTC commissioner and an earlier stint at the CFPB, he has pursued a busy agenda that’s setting up regulatory battles to come.

Chopra hasn't been afraid to challenge big banks or fintechs. His fight against banking’s so-called "junk fees," for instance, won plaudits from both consumer-focused groups and fintech trade organizations.

  • To little surprise, the agency has been more active under Chopra and the Biden administration compared to the Trump years.
  • Fintech-focused initiatives have included promises for greater scrutiny of algorithmic lending, earned wage access programs, and fraud on peer-to-peer payment networks.
  • Chopra’s CFPB has also stated plans to invoke the agency’s dormant authority to examine certain nonbank financial companies, including fintechs.
  • The agency’s competition-focused office shut down a sandbox program that offered fintechs a regulatory safe harbor to test new financial products.

All eyes in the fintech world are on open banking. The CFPB regulatory docket this fall includes a long-delayed rule-making effort to allow customers to more easily move their data between financial institutions. The effort is part of the Biden administration’s goal to boost competition in markets.

  • "We believe that consumers, not financial institutions, own their data and hope the CFPB will provide clear guidance establishing consumers’ right to control and permission their financial information," said Penny Lee, CEO of the Financial Technology Association.
  • As for other priorities, a recent agency report on “buy now, pay later” lending also indicates further action is likely. “Exactly what shape that takes isn't immediately obvious,” said Jason Mikula, a fintech consultant and author of the Fintech Business Weekly newsletter. "Any action on BNPL is likely to focus on credit underwriting/credit reporting, how companies assess consumers' ability to pay, consumer protections (chargebacks), and adequate and consistent consumer disclosures.”
  • Consumer advocates want to see more protection extended to pay-later loans and other new financial products. They also want the CFPB to ensure that “criminals cannot use P2P services or other means to defraud people and steal their money,” said Lauren Saunders, associate director at the National Consumer Law Center.
  • Something to watch: How the agency balances rule-making and the CFPB’s bully pulpit (something close watchers of the agency say he has leaned on more to this point) with enforcement actions. "I think he is trying to use the carrot and the stick," said Jonah Crane, a partner with Klaros Group.

The agency’s tactics and a growing list of priorities are prompting powerful pushback. The industry and Republican members of Congress are circling.

  • Banking industry groups and the U.S. Chamber of Commerce sued the agency on Wednesday, claiming it violated administrative procedure law by updating its examination guidebook to include oversight of potential discrimination in bank accounts and other financial products not already covered by fair lending laws.
  • The bureau said its mandate to investigate unfair, deceptive, and abusive acts or practices (UDAAP authority, in bureaucratese) gives it oversight of the products. But the lawsuit marks the most significant legal challenge yet from business groups that have been critical of Chopra’s tactics for some time.
  • Sen. Pat Toomey, ranking member on the Banking Committee, has called the agency “lawless,” and congressional scrutiny in the form of document requests and oversight hearings will only increase if Republicans gain control of either the House or Senate this fall.

The agency seems to be gearing up for that possibility. American Banker reported that the CFPB launched an office this summer dedicated to responding to congressional requests. Crane, a former Treasury official, said document requests can eat up a lot of administrative resources: “It is a big exercise, but it seems he is preparing to handle it without distracting from his day job.” But there’s little question that Chopra’s second year in the job will be more challenging than his first.

— Ryan Deffenbaugh (email | twitter)

A MESSAGE FROM CIRCLE, THE ISSUER OF USDC

Fintech has made it easier to manage and move your money, but for merchants, financial institutions and other businesses, traditional banking infrastructure can still hold them back.

See how a Stablecoin infrastructure like USDC offers a fast, cost-effective alternative available today.

On the money

On Protocol: Binance CEO Changpeng "CZ" Zhao explains why he’s pushing back on attempts to link his company to Beijing, and Circle CEO Jeremy Allaire digs into his own dispute with Binance over USDC.

Rare sighting: a fintech IPO on the horizon. Insider reports that spend-management firm TripActions has confidentially filed for an initial public offering.

Also on Protocol: The CFPB has sued MoneyLion over alleged lending violations. MoneyLion said in a statement that it would "vigorously defend against these false allegations to set the record straight."

Better.com is still laying people off — and morale is only getting worse. The mortgage lender that gained notoriety for a mass Zoom firing is now laying off "smaller groups very systematically," TechCrunch reports.

A new bill from Sen. Pat Toomey could give crypto retirement accounts a boost. The legislation aims to lessen the risks for litigation when including crypto and other nontraditional assets in 401(k) plans.

Insurtech investors still believe. Despite some major struggles from companies that went public, such as Metromile, investors still believe in the potential for tech startups to tackle the massive markets in insurance.

The right time for Anytime Pay?

Amazon announced pay raises and the rollout of new benefit programs to warehouse employees yesterday. But one of those products may pose increased risks to the company’s most vulnerable workers: the expanded rollout of Amazon’s Anytime Pay Program.

The program, first announced in October 2020, allows employees to access a portion of their checks in advance of a regular pay date. Such products are typically referred to as “earned wage access” and position themselves as a lower-fee and thus less predatory alternative to payday loans. Amazon is using Wisely, a product offered by payroll company ADP, for the service.

Employees load their wages in advance onto a Visa debit card and are then able to use that card wherever Visa cards are accepted, or withdraw cash at some ATMs. When Amazon first rolled out the program to some workers, those workers could obtain up to 50% of their paycheck in advance. Now, more workers have access to the program, and can cash out on 70% of their paycheck in advance by transferring funds to their Wisely Pay Visa card.

Read the full story on Protocol.com.

— Veronica Irwin (email | twitter)

The chart

The collapse of UST, once the third-largest stablecoin, caused already tumbling crypto prices to dive ever lower in May. But the crypto market wipeout, which cost crypto holders $2 trillion, doesn’t seem to have diminished the appetite for dollar-linked stablecoins. The three stablecoins that now dominate the market have seen their circulation diverge over the past three months: BUSD, issued by Binance, crypto’s biggest marketplace, has seen its total market value rise 20% since July. Tether’s USDT, the biggest stablecoin, has gained about 3%. And Circle’s USDC, the second-biggest stablecoin, has slipped about 12%.

A MESSAGE FROM CIRCLE, THE ISSUER OF USDC

USDC offers cost-effective payments that can settle in seconds, near-instant transactions that can help take the process of paying suppliers from days to minutes, and digital dollars with global reach that enable merchants to expand their business to new markets.

Learn how businesses are taking advantage of these opportunities at Circle’s USDC Hub for Businesses.

Thanks for reading — see you Monday!

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