The most powerful companies in finance and tech are engaging in a high-stakes lobbying clash that has major implications for industry, consumers and President Joe Biden’s regulatory legacy. Instigating the cross-industry warfare is CFPB Director Rohit Chopra. He’s pushing to ratchet up oversight of tech giants, including Apple and Alphabet, that have come to dominate the services that Americans use to pay for goods and services. It’s the latest battleground in one of Washington’s oldest policy quandaries: Where should the government draw the line between banking and commerce? In a 2024 twist, it’s also forcing policymakers to consider fundamental questions of what money is, thanks to the rise of cryptocurrency. MM today is your quick guide for the battle lines being drawn as the CFPB rolls out a plan that could upend how Washington polices finance and tech for years to come. Big tech to the CFPB: Stop — The largest U.S. tech firms, largely through their trade groups, are urging the bureau to halt and re-do its proposal. They argue the agency is overreaching, failing to demonstrate what risks need to be addressed and not abiding by rulemaking requirements. It’s language that makes any reasonable reader sense there’s a potential legal challenge brewing. “Digital payment apps and nonbank entities differ from banking institutions in their function, characteristics, and capabilities,” the Computer & Communications Industry Association, which represents Apple, Google and Amazon, told the bureau in a letter. “Hence, they should not be subject to the same supervisory authority as banks and credit unions.” Banks back Chopra but it’s messy (blame crypto) — Groups speaking for banks large and small say they generally support the CFPB’s efforts to ratchet up supervision of big payment apps. They’ve been fighting for years to ensure that banking’s big tech competitors aren’t getting away with lighter regulatory requirements than traditional lenders. Banks are supposed to face some of the most strenuous government oversight of any business. “A failure to examine fintechs does not only contribute to an uneven playing field between fintechs and supervised entities, but more importantly results in a continuous and growing potential for consumer harm,” the Consumer Bankers Association told the CFPB. In a twist, banks are divided over another fintech concern: the CFPB’s pitch to include crypto in the scope of the rule. The Independent Community Bankers of America, which exclusively represents the smallest lenders, backs the CFPB approach. It says “entities that enable consumers to move virtual assets should be regulated in the same way as those that deal with fiat currency.” Consumer groups, including Americans for Financial Reform and the Consumer Federation of America, are also urging the CFPB to cover crypto. Other lenders want the bureau to hold back. The CBA and the American Bankers Association say the matter shouldn’t be “shoehorned” into the rule and deserves a separate rulemaking with other agencies. The Bank Policy Institute and the Clearing House Association, which represent large banks, said the CFPB should limit the scope to fiat currency and legal tender to provide certainty and avoid unintended consequences. (They do want the CFPB to extend the rule to cover buy now, pay later services.) Congress and the states — A bipartisan group of lawmakers is questioning the proposal and pressing the agency to take more time. Twenty House Republicans, including Financial Services Chair Patrick McHenry, are warning about the prospect of roping in crypto and merchants. Seven Financial Services Democrats led by Reps. Jim Himes and Josh Gottheimer say the agency needs to be more specific about each product market it plans to cover and spell out the potential risks. But Chopra has the backing of 19 attorneys general, including those of New York, California and the District of Columbia. Their support matters as some in the tech industry argue that existing state supervision is sufficient. “The proposed rule closes regulatory loopholes that put vulnerable populations’ financial security at risk, while simultaneously strengthening the enforcement of state consumer protection laws,” they said in a joint letter. It’s Wednesday — A quick plug: Check out our sister newsletter Global Playbook for in-depth coverage of next week’s World Economic Forum. Your MM host will be there, too. Want to chat in Davos? Send a note to zwarmbrodt@politico.com.
| 
