AFC, a standards-based organization, believes in clear and consistent regulatory frameworks for innovative financial providers that are appropriate for the size, activity, and risk posed by the entity providing the service

With some important amendments, this rule may further the development of a robust, consumer-protected market for general-use digital consumer payment applications.

Washington, D.C. (January 9, 2024) – The American Fintech Council (AFC), the fastest growing premier industry association representing responsible fintech companies and innovative banks has submitted its response to the Consumer Financial Protection Bureau (CFPB) on the proposed larger participant rule regarding consumer digital payments. Larger participants in this market would be subject to CFPB supervision and examination authority under the Consumer Financial Protection Act (CFPA).

“Clarity is critical for fintech companies and innovative banks offering safe, transparent and responsible financial services and even more important for the consumers who expect comparable consumer protections regardless of how they access their financial services,” said Phil Goldfeder, Chief Executive Officer of AFC. “We recognize and appreciate the efforts being made by the CFPB to ensure appropriate oversight and welcome the opportunity to provide feedback to ensure the final rule increases consumer protection without limiting competition or market developments that safely serves consumers.”

The CFPB is proposing to supervise larger nonbank companies that offer services like digital wallets and payment apps. Currently, many large technology firms, digital payment apps and wallets continue to grow in popularity but are not subject to CFPB supervisory examinations. As Director Rohit Chopra said in a recent statement, this rule would limit regulatory arbitrage by “ensuring large technology firms and other nonbank payments companies are subjected to appropriate oversight."

The proposed rule would ensure that nonbank financial companies adhere to the same rules as large banks, credit unions, and other financial institutions already supervised by the CFPB. AFC is comprised of responsible industry stakeholders that continue to engage in the public policy process; both when additional regulation is needed and when it is not.

“In principle, AFC agrees with the use of CFPB’s authority to define consumer financial markets in order to bring large nonbank entities under the regulatory perimeter when there is a supervisory gap in the existing regulatory framework,” wrote Ian P. Moloney, SVP, Head of Policy and Regulatory Affairs, in AFC’s recent letter to the CFPB, “However, the Proposed Rulemaking, as written, present concerns related to how the Bureau is defining the entities that constitute a “larger participant” within the general-use digital consumer payment applications market, and the extent that the Proposed Rulemaking applies to certain business models, such as responsible bank-fintech partnerships, that are already subjected to a rigorous supervisory regime.

Read the full letter here.