Federal: AFC Letter to OMB Director Vought on CFPB Policy Priorities

The Honorable Russell Vought
Director
725 17th Street, NW
Washington, DC 20503

Dear Director Vought,

On behalf of The American Fintech Council (AFC),  I am writing you to congratulate you on your confirmation as Director of the Office of Management and Budget (OMB) and commend you on your willingness to take on the additional responsibility as Acting Director of the Consumer Financial Protection Bureau (CFPB or the Bureau).

AFC’s mission is to promote an innovative, transparent, inclusive, and customer-centric financial system by fostering safe and responsible innovation in financial technology (Fintech) and encouraging sound public policy. AFC members, made up of fintech companies and innovative banks, are at the forefront of fostering competition in financial services and pioneering ways to better serve underserved consumer segments and geographies. AFC and its members strongly support the development and implementation of regulatory frameworks that encourage the responsible development of innovative financial products and services.

While established with good intentions, the CFPB has been overly politicized and, at times, operated in a manner that exceeded its congressional mandate. The rhetoric and actions of previous CFPB leadership has created an inaccurate narrative of an adversarial dynamic between the financial services industry and the consumers they serve. Further, this narrative has been used to justify paternalistic CFPB actions that, while claiming to be for the benefit of consumers, ultimately stifle responsible innovation. At no other point in the CFPB’s history is it more important to return the Bureau to a pragmatic, balanced approach to regulation. AFC strongly believes that under your leadership, the Bureau can achieve this crucial endeavor.

In your capacity as Acting Director of the CFPB, AFC respectfully requests your consideration of the key policy priorities listed below. AFC encourages you to pursue the swift implementation of several agency endeavors that will ensure the continued success of innovative banks and their fintech partners:

• Engage in Formal Legislative Rulemaking on Earned Wage Access: AFC has long advocated for clarity and a unified regulatory approach to the oversight of Earned Wage Access (EWA) services that ensure long-term stability for the market. EWA services help to reconnect work and reward for the benefit of employees. EWA provides workers with a crucial service by enabling them to access the wages they earned between paychecks and helps to break the arbitrary pay period cycle. Responsible EWA providers, who constitute AFC’s membership offer crucial services for consumers to access their pay prior to payday in a way that makes the most sense for the induvial consumer’s situation. Nationally, our members have already assisted millions of consumers in ensuring that they are able to handle unexpected expenses when they inevitably come up before their next paycheck.

AFC believes that the best path forward to ensuring long-term stability in the EWA market is for the Bureau to pursue formal legislative rulemaking on the issue. Nearly a year ago, AFC made this same request to then-CFPB Director Rohit Chopra.  Unfortunately, the then-Director disregarded our request and instead pursued regulatory activities that sought to further confuse industry participants and ultimately remove the existing Bureau policy with which the industry relied. Pursuit of a formal legislative rulemaking on EWA, which, as prescribed under the Administrative Procedures Act, would provide the public with the ability to adequately convey the myriad views on this subject and ensure that the Bureau duly considers these views. Further, formal legislative rulemaking on EWA would provide the necessary clarity for EWA providers to operate effectively in the market and to resolve the politically motivated and myopic policy decisions made in the final moments of the previous administration.

• Ensuring CFPB’s Existing Regulations Encourage Responsible Innovation: Over the past several years, the CFPB has pursued an active and, at times, politically driven regulatory agenda. While AFC has supported some of these activities, we also recognize that substantial changes are needed to ensure that the existing regulatory framework encourages responsible innovation. Given the broad regulatory remit of the CFPB, amending existing regulations will have far reaching effects on the financial services industry, and in turn, the consumers they serve. Specifically, we want to highlight three policy areas where the Bureau can make positive reforms to its regulations in order to encourage responsible innovation. These reforms are regarding the Bureau’s

o Payday, Vehicle Title, and Certain High-Cost Installment Loans Rule: AFC has been generally supportive of the pragmatic regulation of payday and high-cost installment loans. However, as written, the CFPB’s Payday, Vehicle Title, and Certain High-Cost Installment Loans Rule (Payday Rule) has the unintended consequence of subjecting buy-now-pay-later (BNPL) loans to the provisions of the rule. As you know, the Bureau’s rulemaking in this area was finalized in 2017.  At this time, the BNPL industry in the U.S. was nascent and Bureau officials were not able to adequately assess the impact that this rule would have on the BNPL industry. In the intervening years, BNPL has grown substantially and become a staple for consumers seeking an affordable source of short-term credit. Unfortunately, if the CFPB’s Payday Rule goes into effect unamended, it will severely harm BNPL lenders’ abilities to offer their loans by subjecting them to requirements that are unbefitting of the product. Therefore, to ensure the Payday Rule is not stymieing innovation in the BNPL space, AFC believes that the CFPB should exempt BNPL loans from the existing Payday Rule.

o Personal Financial Data Rights Rule: AFC has been generally supportive of the CFPB’s efforts to formalize consumers’ rights to their financial data through its Personal Financial Data Rights rulemaking.  Generally, this rulemaking has the potential to dramatically improve financial data movements and encourage responsible innovation. However, as written, the Personal Financial Data Rights Final Rule poses significant limitations to the secondary use of consumers financial data for the purposes of cross-selling products and engaging in targeted advertising. Many responsible fintech companies and their bank partners leverage the secondary use of consumers financial data responsibly for cross-selling and targeted advertising to improve consumers’ access to innovative products and services. Further, the Final Rule establishes a strict annual reauthorization requirement that is ill-suited for certain innovative financial products and services. Therefore, to ensure the CFPB’s Personal Financial Data Rights regulations encourage responsible innovation, AFC believes that the Bureau should preserve the general regulatory framework established for personal financial data rights, while also reengaging with its rulemaking process in this area to amend the provisions related to secondary use of data for cross-selling and targeted advertising, as well as the provisions regarding annual reauthorization.

o Credit Repair Organization Regulations: AFC has long advocated for pragmatic regulations that ensure companies offer responsible financial products and services to consumers and that unfair and deceptive practices are rooted out of the market. AFC members offering responsible credit work hard to ensure that borrowers are able to repay their loans in full, without issue. Unfortunately, when borrowers fall behind on their repayment, they may seek out credit repair organizations, who promise to remove consumers’ debts without full repayment. In order to accomplish this task, credit repair organizations flood lenders with frivolous and fraudulent claims regarding the consumer’s debt. Due to requirements under the Fair Credit Reporting Act, lenders must respond to each of these claims unless it can determine that the claim is “frivolous or irrelevant”.  Historically, the CFPB has warned consumers about the issues associated with using credit repair organizations, noting that consumers’ credit may actually be harmed by using the services provided by credit repair organizations.  In order to both ensure that both consumers and lenders are not subjected to the unfair and deceptive practices pursued by credit repair organizations, AFC recommends that the Bureau reengage its regulations regarding credit repair organizations and mandate that claims made on behalf of consumers by credit repair organizations be clearly and conspicuously identified for lenders receiving these claims.

Again, I want to congratulate you on your confirmation as OMB Director and willingness to take on the additional responsibility of Acting Director of the CFPB. In your capacity as Acting Director, we look forward to continuing our collaboration to promote and develop policies that encourage responsible innovation and pragmatic regulation of the modern financial services industry.

Sincerely,

‍
Hon.Phil Goldfeder, CEO
AmericanFintech Council

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[1] American Fintech Council’s (AFC) membership spans EWA providers, lenders, banks, payments providers, loan servicers, credit bureaus, and personal financial management companies.
[2] American Fintech Council, “AdvocacyLetter to CFPB in Support of Developing a Pragmatic Regulatory Framework forEWA”, (Feb. 7, 2024), available at https://www.fintechcouncil.org/advocacy/american-fintech-council-letter-to-cfpb-on-developing-a-pragmatic-regulatory-framework-for-ewa.
[3] Consumer Financial Protection Bureau, “Payday,Vehicle Title, and Certain High-Cost Installment Loans”, Fed. Reg. 82, no. 221(Nov. 17, 2017): 54472.
[4] See, American Fintech Council,“Comments Regarding Proposed Required Rulemaking on Personal Financial DataRights CFPB-2023-0052”, (Dec. 29, 2023), available at https://www.fintechcouncil.org/advocacy/comment-letter-responding-to-the-proposed-required-rulemaking-on-personal-financial-data-rights-implementing-section-1033.
[5] 12 CFR Part 1022.43(f).
[6] See, Consumer Financial Protection Bureau, “Consumeradvisory: People have the right to cancel credit repair services”, Sep. 22,2023, available athttps://www.consumerfinance.gov/about-us/newsroom/consumer-advisory-people-have-the-right-to-cancel-credit-repair-services/; and ConsumerFinancial Protection Bureau, “What is the difference between credit counselingand debt
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settlement, debt consolidation, or credit repair?” last revised: May 15,2024, available at https://www.consumerfinance.gov/ask-cfpb/what-is-the-difference-between-credit-counseling-and-debt-settlement-debt-consolidation-or-credit-repair-en-1449/.