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Lawmakers Oppose CFPB’s Proposed Rule on Supervising Nonbank Financial Firms

Three members of Congress have urged the Consumer Financial Protection Bureau (CFPB) to reopen and extend the public comment period on its proposed rule that would allow it to supervise large nonbank companies that offer services like digital wallets and payment apps.

They also urged the CFPB to reconsider finalizing the rule as it is current proposed, “given its insufficient justification, unclear guidance regarding third-party service providers, unknown effects on the digital asset ecosystem, and an inadequate comment period,” they said in a Tuesday (Jan. 30) press release.

The lawmakers urging the CFPB to do so include Rep. Patrick McHenry, chairman of the House Financial Service Committee; Rep. French Hill, chairman of the Digital Assets, Financial Technology and Inclusion Subcommittee; and Rep. Mike Flood, according to the release.

In a Tuesday letter to CFPB Director Rohit Chopra, the lawmakers said that the proposed rule does not justify the need to expand the agency’s regulatory scope into the payments industry; puts third-party service providers in “regulatory limbo” because it does not specify whether they are covered by the rule; and creates more regulatory uncertainty around digital assets payments because its impact on that sector is unclear.

The lawmakers also said in the letter that the comment period on the proposed rule should be reopened for another 60 days due to its “wide sweeping implications and existing ambiguities.”

“This would ensure that the Bureau receives substantive input from a wide array of stakeholders before moving forward with this rule,” the letter said.

The CFPB announced this proposed rule in November, saying that it aims to bring nonbank financial companies that offer services like digital wallets and payment apps, particularly those handling more than 5 million transactions per year, under the same regulatory scrutiny as large banks, credit unions and other financial institutions already supervised by the CFPB.

“Payment systems are critical infrastructure for our economy,” Chopra said in a statement when the proposed rule was announced. “These activities used to be conducted almost exclusively by supervised banks. Today’s rule would crack down on one avenue for regulatory arbitrage by ensuring large technology firms and other nonbank payments companies are subjected to appropriate oversight.”