When Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra testified on Capitol Hill in late April about the agency’s future plans to promote open banking principles and to deal with the “increasing threat” of Big Tech companies, the question of how to implement these plans remained open.
On Tuesday (May 24), the agency provided some information about how it intends to do that. The answer is a new office. The CFPB announced that it is opening the Office of Competition and Innovation as part of a new approach to help spur innovation in financial services by promoting competition and identifying stumbling blocks for new market entrants.
“The new office will support a broader initiative by the CFPB to analyze obstacles to open markets, better understand how big players are squeezing out smaller players, host incubation events, and, in general, make it easier for people to switch financial providers,” the agency said in a press release.
While the new office may have a supporting role to the CFPB to promote competition and innovation in a broad sense, the agency’s press release emphasized, in fact, only mentioned, open banking and the role of Big Tech companies as the main reasons to create this office.
The new office will focus on “how to create the market conditions where consumers have choices.” The agency explains a bit more how it plans to do that but without providing too many details, just with broad statements. For instance, the CFPB will “give consumers their walking rights to switch providers.” The Bureau wants to give new entrants the opportunity to win customers and it will explore ways to reduce barriers to switching accounts and providers. This measure will be complemented by a future rulemaking by the CFPB under Section 1033 of the Consumer Financial Protection Act that will give consumers access to their own data, the agency said. These two measures will likely be the core of the open banking initiatives by the CFPB.
Another section of the agency’s plan is to “understand how bigger players can gain advantage over smaller players.” While this is not limited to Big Tech firms, the rest of the plan seems to target especially these companies and the agency went a step further saying that “Big Tech companies … are also seeking new ways to join consumer finance markets and may threaten fair competition.”
One question remains: How may this new office assist the CFPB to implement these policies? The answer lies in one of the bullet points revealed by the agency. The new office will be housed in the CFPB’s Research, Markets and Regulation division. This means that the new office will mostly be focused on conducting market research to identify structural problems that may hinder innovation. This research may be useful for the agency to propose rulemaking or to launch other enforcement actions if some problems are identified, but from this announcement it seems like the new office won’t have any additional authority.
Chopra’s testimony in Congress focused on open banking and Big Tech, but there was another important subject he was keen to take on, credit card fees. The press release published yesterday also contained one short reference that may put these companies on alert. When explaining how the new office could conduct research, the agency said “this could include greater explorations of the payment networks market or the credit reporting system, both of which are essential to our financial system but have only a few dominant players.”
Read more: CFPB’s Chopra Tells Senators to Expect More on Big Tech, Repeat Offenders and Open Banking
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