The CFPB in the Biden Administration — The Newest Federal Competition Enforcer

According to the White House’s accompanying Fact Sheet, the purposes of the Digital Assets EO are to:

• Protect U.S. Consumers, Investors, and Businesses
• Protect U.S. and Global Financial Stability and Mitigate Systemic Risk
• Mitigate the Illicit Finance and National Security Risks Posed by the Illicit Use of Digital Assets
• Promote U.S. Leadership in Technology and Economic Competitiveness to Reinforce U.S. Leadership in the Global Financial System
• Promote Equitable Access to Safe and Affordable Financial Services
• Support Technological Advances and Ensure Responsible Development and Use of Digital Assets
• Explore a U.S. Central Bank Digital Currency

Protecting consumers is listed as the first priority, and the CFPB has (naturally) been tasked with evaluating and examining how digital assets will affect the American consumer. To that end, the CFPB and FTC has each been encouraged to consider the extent to which privacy or consumer protection measures within their respective jurisdictions may be used to protect users of digital assets and whether additional measures may be needed. With regard to the CFPB, such a task is de rigueur given its role as the nation’s consumer financial watchdog.

More interesting is that the CFPB has also been encouraged — as have the FTC and the DOJ — to consider what, if any, effect the growth of digital assets might have on competition policy. Tasking the CFPB with examining competition policy continues the Biden administration’s clear intent to expand the CFPB’s consumer protection remit to include fair competition.

This goal seems to be shared in full by CFPB Director Rohit Chopra. While Director Chopra has launched a variety of initiatives in his first six months at the CFPB (e.g., targeting overdraft and “junk fees”), he has been consistent in signaling that he intends to make fair competition a tentpole of his directorship. Indeed, even before he was confirmed to lead the CFPB, then-nominee Chopra testified before the Senate at his March 2, 2021 nomination hearing that:

Congress has entrusted the Consumer Financial Protection Bureau with carefully monitoring markets to spot risks, ensuring compliance with existing law, educating consumers, and promoting competition.²

According to then-nominee Chopra, the Bureau’s competition mandate is grounded in the Dodd-Frank Wall Street Reform and Consumer Protection Act’s direction that “[t]he Bureau shall seek to implement and, where applicable, enforce Federal consumer financial law consistently for the purpose of ensuring that [...] markets for consumer financial products and services are fair, transparent, and competitive.”³ Given this mandate, then-nominee Chopra testified that the Dodd-Frank Act “requires that the [Bureau] monitor and oversee markets, so that consumers can make choices in a competitive environment”⁴ and that “dominant players should not be able to squelch out competition, and that’s something we need to always be mindful of.” He further stated that he does not want a “financial services system where new market entrants cannot get in, cannot compete, and win the day.”⁵ And while then-nominee Chopra testified that competition is not a “core” CFPB mandate, he made plain that he views fair competition as an important element of consumer protection.⁶

Shortly after Director Chopra’s Senate confirmation hearing — but before he was confirmed —  President Biden issued the Executive Order on Promoting Competition in the American Economy (Competition EO) in which he encouraged the CFPB, “consistent with the pro-competition objectives stated in Section 1021 of the Dodd-Frank Act,” to consider:

• commencing or continuing a rulemaking under Section 1033 of the Dodd-Frank Act to facilitate the portability of consumer financial transaction data so consumers can more easily switch financial institutions and use new, innovative financial products; and
• enforcing the prohibition on unfair, deceptive, or abusive acts or practices in consumer financial products or services pursuant to Section 1031 of the Dodd-Frank Act so as to ensure that actors engaged in unlawful activities do not distort the proper functioning of the competitive process or obtain an unfair advantage over competitors who follow the law.⁷

While Section 1033 rulemaking remains a work in progress, the Competition EO’s direction that the CFPB consider using the Consumer Financial Protection Act — and specifically, the unfair, deceptive, or abusive acts or practices authority — to monitor and potentially enforce fair competition as part of its mission is moving ahead without delay. 

Since being confirmed on September 30, 2021, Director Chopra and the CFPB have made multiple forays into the competition space. On October 14, 2021, shortly after Director Chopra’s confirmation, the CFPB and the FTC issued a joint statement commenting on an amicus brief filed by the CFPB, FTC, and the North Carolina Department of Justice. Director Chopra and FTC Chair Lina Khan emphasized the CFPB’s and FTC’s concern over companies seeking to undermine fair competition and warned the market that their respective agencies “will be closely scrutinizing tech companies’ efforts to use Section 230 to sidestep applicable laws and will seek to ensure that this legal shield is not being used or abused to gain an undue competitive advantage over law-abiding businesses.”⁸ Beyond its substance, the joint statement is significant for what it signals about the FTC’s view of the CFPB joining the competition space. Indeed, while government regulators are traditionally protective of their jurisdictions, in this instance, the FTC seems to be accepting – if not welcoming – the CFPB as a new competition regulator.

Less than a week later, on October 19, 2021, the CFPB highlighted competition issues again when it announced the first enforcement action resolved under Director Chopra. The defendant, JPay, held a single-source government contract for prepaid cards used to disburse consumers’ funds following their release from prison. Director Chopra issued a statement characterizing the action as one in which the defendant “violated several federal consumer financial laws designed to protect government benefits, ensure consumer choice, and prohibit abuses of dominance.”⁹ By charging a number of fees on its prepaid cards, Director Chopra asserted, JPay abused the market power created by the single-source contract.¹⁰

Two days later, on October 21, 2021, Director Chopra launched the first major initiative of his directorship when the CFPB issued orders requesting information from six major American technology companies relating to the payments services that they offer to American consumers (the Payments Orders). In announcing the Payments Orders, Director Chopra commented that the inquiry is “one of many efforts within the Federal Reserve System to plan for the future of real-time payments and to ensure a fair and competitive payments system in our country.”¹¹ While acknowledging that “families and businesses benefit from faster, cheaper, and more secure payment systems,” the CFPB contended that these developments “present new risks to consumers and to a fair, transparent, and competitive marketplace.”¹²

The following week, on October 28, 2021, Director Chopra was back before Congress and again testified about the CFPB’s role in promoting competition. Director Chopra told the House Committee on Financial Services that:

The CFPB intends to use its tools to promote an equitable and inclusive recovery. Given existing economic conditions and these tools, I expect to have several areas of focus.

First, we must find ways to create more competition in these markets. For example, I am concerned that many Americans could be paying lower rates on their mortgages and credit cards and earning higher rates on their savings. We plan to listen carefully to local financial institutions and nascent competitors on the obstacles they face when seeking to challenge dominant incumbents, including in Big Tech.¹³

Thereafter, in early January 2022, the CFPB released a report detailing what it contended were the “consumer complaint response deficiencies of the big three credit bureaus.”¹⁴ While the report itself did not overtly focus on competition issues, Director Chopra issued an accompanying statement implying that lack of competition was at the heart of the alleged failings, saying: “America’s credit reporting oligopoly has little incentive to treat consumers fairly when their credit reports have errors. [...] Today’s report is further evidence of the serious harms stemming from their faulty financial surveillance business model.”¹⁵

Later in January 2022, the Bureau published a blog post raising concerns about the level of competition in the credit card market, committing the Bureau to “focus on ensuring a more fair, transparent, and competitive credit card market” and to “uncover[ing] unfair, anticompetitive practices.”¹⁶ In the blog post, the CFPB observed that “[w]hen an industry has a small number of major players, it can be common to see parallel, anticompetitive shifts in business practices.”¹⁷ As an example, the CFPB cited the practice of “major players in the credit card industry […] withholding information that they previously reported to the credit bureaus about borrower repayment patterns.”¹⁸ Doing so, the Bureau argued, “helped them obscure the repayment behavior of their customers, making it more difficult for other issuers to offer competitive pricing to customers.”¹⁹ Director Chopra followed the issuance of the blog post by commenting that “[t]he market is dominated by a handful of banks and credit card giants.”²⁰

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And this is just likely the beginning of the CFPB’s entry into the competition space. Director Chopra has signaled that he will use each of the CFPB’s tools — enforcement, supervision, regulation, and communication — in pursuing a fair competition agenda that he believes is in the best interest of the American consumer. This is new ground for the CFPB. Financial service providers, including those offering cryptocurrency and digital asset services, would be well served to understand what this new emphasis may mean for them. To that end, Sidley has unrivaled experience in advising clients on all facets of consumer financial products and services – including in the competition space – and can help you determine the best way to deal proactively and productively with the CFPB. We invite you to reach out to us.

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¹ Executive Order Ensuring Responsible Development of Digital Assets (March 9, 2022), available at https://www.whitehouse.gov/briefing-room/presidential-actions/2022/03/09/executive-order-onensuring-responsible-development-of-digital-assets/.

² Written Statement from Commissioner Rohit Chopra to the U.S. Senate Comm. on Banking, Housing, and Urban Affairs (Mar. 2, 2021), available at https://www.banking.senate.gov/imo/media/doc/Chopra%20Testimony%203-2-21.pdf.

³ 12 U.S.C. § 5511(a).

⁴ Response of Director Designate Rohit Chopra to Questions from the U.S. Senate Comm. On Banking, Housing, and Urban Affairs (Mar. 8, 2021), available at https://www.banking.senate.gov/imo/media/doc/Chopra%20Resp%20to%20QFRs%203-2-211.pdf.

⁵ Nomination Hearing of Commissioner Rohit Chopra, at 02:31:41 (Mar. 2, 2021), available at https://www.banking.senate.gov/hearings/02/22/2021/nomination-hearing.

⁶ Id.

⁷ Executive Order on Promoting Competition in the American Economy, E.O. 14036 (Jul. 9, 2021), available at https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/.

⁸ Statement of CFPB Director Rohit Chopra and FTC Chair Lina M. Khan on Amicus Brief filed in Henderson v. The Source for Public Data, L.P. (Oct. 14, 2021), available at https://www.ftc.gov/system/files/documents/public_statements/1597534/joint_statement_on_henderson_amicus.pdf.

⁹ Statement of Director Rohit Chopra on the JPay Enforcement Action, CONSUMER FIN. PROT. BUREAU (Oct. 19, 2021), available at https://www.consumerfinance.gov/about-us/newsroom/statement-of-cfpb-director-rohit-chopra-on-the-jpay-enforcement-action/.

¹⁰ Id.

¹¹ Statement of Director Rohit Chopra Regarding the CFPB’s Inquiry into Big Tech Payment Platforms, CONSUMER FIN. PROT. BUREAU (Oct. 21, 2021), available at https://www.consumerfinance.gov/about-us/newsroom/statement-regarding-the-cfpbs-inquiry-into-big-tech-payment-platforms/.

¹² Press Release, CONSUMER FIN. PROT. BUREAU, CFPB Orders Tech Giants to Turn Over Information on their Payment System Plans (Oct. 21, 2021), available at https://www.consumerfinance.gov/about-us/newsroom/cfpb-orders-tech-giants-to-turn-over-information-on-their-payment-system-plans/.

¹³ Opening Statement of Director Rohit Chopra before the House Committee on Financial Services (Oct. 28, 2021), available at https://www.consumerfinance.gov/about-us/newsroom/opening-statement-director-rohit-chopra-before-house-committee-financial-services/. 

¹⁴ Press Release, CONSUMER FIN. PROT. BUREAU, CFPB Releases Report Detailing Consumer Complaint Response Deficiencies of the Big Three Credit Bureaus (Jan. 5, 2022), available at https://www.consumerfinance.gov/about-us/newsroom/cfpb-releases-report-detailing-consumer-complaint-response-deficiencies-of-the-big-three-credit-bureaus/.

¹⁵ Id.

¹⁶ Blog Post, CONSUMER FIN. PROT. BUREAU, Americans pay $120 billion in credit card interest and fees each year (Jan. 19, 2022), available at https://www.consumerfinance.gov/about-us/blog/americans-pay-120-billion-in-credit-card-interest-and-fees-each-year/.

¹⁷ Id.

¹⁸ Id.

¹⁹ Id.

²⁰ Rohit Chopra (@chopracfpb), Twitter (Jan. 19, 2022, 3:31 PM), https://twitter.com/chopracfpb/status/1483900048975011848?t=h14HJ6NPXOgklJ45t0ETSA&s=01.