ETA FinTech Policy Forum | Venable LLP

This memo summarizes the federal regulatory panels at ETA’s annual FinTech Policy Forum, hosted by Venable in our Washington, DC office. We provide key takeaways from discussions with (a) CFPB Director Rohit Chopra and (b) representatives from the Office of the Comptroller of the Currency, the Federal Reserve, and the Consumer Financial Protection Bureau. This note reflects our interpretation of the discussions and is provided for information purposes only.

Key takeaways from CFPB Dir. Chopra discussion:

1. Concerns about data collection/use remain at the top of the CFPB’s mind. Dir. Chopra is personally concerned about the collection of data and how that data can be used by technology companies.
2. Dir. Chopra doesn’t want to see the US going down the road to a Chinese-style payment system where one or a few big players (eg Alipay) dominate the markets; having multiple channels is preferred.
3. Dir. Chopra generally supports open banking, but does not believe the US has the statutory framework in place to deal with it from a regulatory perspective. When it comes to open banking, Dir. Chopra conceded that there is no legal authority for the CFPB to create a British-style open financial system. In the fall, the CFPB will finalize regulations on customer data that will give customers control over how their data is used. Dir. Chopra worries about the creation of a “data underworld” where companies can try to grab data and use it for unrelated purposes.
4. In the context of P2P payments, the Bureau does not have a solid answer as to whether responsibility should be shifted to the P2P platform for fraudulent transfers that were authorized, but Dir. Chopra indicated that P2P platforms with more resources at their disposal may be treated differently than those without a large bank or similar entity backing them. The CFPB is thinking about how ubiquitous one-time payments can be done in a way that addresses core issues (ie, fraud). Chopra indicated that the Bureau might be thinking about the liability of the P2P apps that work on the rails of a bank or other financial institution.
5. The Bureau is trying to understand what it wants to do with BNPL. Dir. Chopra indicated that the Bureau may use its oversight authority in the near future to begin answering some of the questions. Dir. Chopra indicated that the Bureau is beginning to think of BNPL the same way it thinks of credit cards, and that he believes there should be some parity between the two products. In the case of BNPL, the CFPB is looking at the use of data, and how it can be used to induce more purchases and more loans. The “repeatability” of BNPL is the hallmark of BNPL; Credit card companies don’t have nearly the same ability to influence transactions, according to Chopra
6. Stablecoins are an interesting idea, but Dir. Chopra doesn’t think the US is ready for them yet. In general, however, Dir. Chopra suggested that Washington’s obsession with crypto is hindering broader thinking about the entire payments ecosystem.

General tips from the banking supervisory panel:

Cryptocurrency

1. All of the federal banking regulatory agencies continue to explore crypto risk and the role crypto plays in financial services.
2. The OCC has gained significant knowledge in the crypto space and will continue to study the industry, including by reaching out to individual banks where appropriate.
3. The OCC will continue to work on interpretive letter #1179 process work and will continue to clarify when and how domestic banks are permitted to engage in certain cryptocurrency, distributed ledger, and stablecoin activities.
4. The Federal Reserve is focused on cryptoassets from a number of perspectives (ie monitoring financial stability); Recent movements in the crypto market have shown the Fed that crypto assets are exposed to many of the same risks as traditional assets. The Fed issued a supervisory letter in August ( press release ) stating that the institutions the Fed supervises must notify the Fed of that activity before engaging in those activities (reflecting the OCC’s 1179 process).
5. CFPB is focused on stablecoins/central bank digital currency; The CFPB looks primarily at assets where there is likely to be broad and robust consumer adoption.

Faster payments

1. The Bureau is concerned that with faster payments there are fewer “speed bumps”, which means a greater risk of fraud. The CFPB is thinking about safety and security in a real-time payment system (area of ​​major focus).

Banking and FinTech Partnerships

1. OCC is focused on these partnerships; they are part of a larger theme in the strategic plan recently released by the OCC to focus on digitization of products and services; partnerships between banks and non-banks play a primary role in such digitization. The focus of partnerships must be on basic blocking and compliance tackling, including partner due diligence, continuous monitoring, consumer protection, customer service and existing strategies.

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