Thursday, December 1 2022

Hello and welcome to Protocol Fintech. This Friday: Rohit Chopra’s first year at CFPB, Amazon’s expansion of earned wage access, and Jeremy Allaire on stability.

out of the chain

Citadel’s Ken Griffin is glad the speculative bubble that led Americans to bet on meme stocks, NFTs and cryptos has burst. “Money misallocated into speculative assets doesn’t create long-term jobs,” he told CNBC’s Delivering Alpha conference this week. Griffin also dived $1 billion in real estate located in a hurricane zone.

—Owen Thomas (E-mail | Twitter)

A closely watched consumer policeman

Rohit Chopra arrived as director of the Consumer Financial Protection Bureau a year ago today. True to his reputation as an aggressive watchdog since his stint as FTC commissioner and an earlier stint at the CFPB, he has pursued a busy schedule that prepares for the regulatory battles ahead.

Chopra hasn’t been afraid to challenge big banks or fintechs. His fight against the so-called “junk fee“, for example, has won praise from consumer-focused groups and fintech business organizations.

  • Unsurprisingly, the agency has been more active under Chopra and the Biden administration compared to the The Trump years.
  • Fintech-focused initiatives have included promises of greater scrutiny of algorithmic lending, earned wage access programs and peer-to-peer payment network fraud.
  • Chopra’s CFPB has also announced its intention to invoke the dormant authority to examine some non-banking financial companies, including fintechs.
  • The agency’s competition-focused office ended a sandbox program that gave fintechs a regulatory safe harbor to test new financial products.

All eyes in the fintech world are on open banking. The CFPB regulatory register this fall includes a long-delayed regulatory effort to make it easier for customers to move their data between financial institutions. The effort is part of the Biden Administration objective of stimulating market competition.

  • “We believe that consumers, not financial institutions, own their data and hope that the CFPB will provide clear guidelines establishing consumers’ right to control and authorize their financial information,” said Penny Lee, CEO of the Financial Technology Association.
  • As for other priorities, a recent agency report on “buy now, pay later” loans also indicates that further action is likely. “The exact form this takes isn’t immediately obvious,” said Jason Mikula, fintech consultant and author of Fintech Business Weekly newsletter. “Any action on BNPL is likely to focus on credit underwriting/credit reporting, how companies assess consumers’ ability to pay, consumer protection (chargebacks), and adequate and consistent consumer information. .”
  • Consumer advocates want to see greater protection extended to deferred repayment loans and other new financial products. They also want the CFPB to ensure that “criminals cannot use P2P services or other means to defraud people and steal their money,” said Lauren Saunders, associate director at the National Consumer Law Center.
  • Something to watch: How the agency balances rulemaking and the CFPB bullying pulpit (something close agency watchers say on which it has relied more so far) with enforcement measures. “I think he’s trying to use the carrot and the stick,” said Klaros Group partner Jonah Crane.

The agency’s tactics and a growing list of priorities provoke a powerful backlash. Industry and Republican members of Congress are circling.

  • Banking industry groups and the United States Chamber of Commerce sued the agency Wednesday, claiming to have violated the Administrative Procedure Act by updating its review guide to include monitoring for potential discrimination in bank accounts and other financial products not yet covered by fair lending laws.
  • The bureau said its mandate to investigate unfair, deceptive, and abusive acts or practices (UDAAP authority, in bureaucratic terms) allows it to monitor products. But the lawsuit marks the biggest legal challenge ever by corporate groups that have been criticism of Chopra’s tactics for some time.
  • Senior Banking Committee member Sen. Pat Toomey has called the agency “anarchic” and congressional scrutiny in the form of document demands and oversight hearings will only increase if Republicans take control of the House or Senate this fall.

The agency seems to be preparing for this possibility. American banker reported that the CFPB launched a dedicated office this summer to respond to requests from Congress. Crane, a former Treasury official, said that document requests can consume a lot of administrative resources: “It’s a big exercise, but it seems that he is preparing to manage it without distracting himself from his daily work.” But there’s no doubt that Chopra’s second year on the job will be tougher than the first.

—Ryan Defenbaugh (E-mail | Twitter)

A MESSAGE FROM CIRCLE, THE USDC ISSUER

Fintech has made it easier to manage and move your money, but for merchants, financial institutions and other businesses, traditional banking infrastructure can still hold them back.

look how a stablecoin infrastructure like USDC offers a fast and profitable alternative available today.

on the money

On protocol: Binance CEO Changpeng “CZ” Zhao explains why he’s pushing back on attempts to tie his company to Beijing, and Circle CEO Jeremy Allaire delves into his own dispute with Binance over USDC.

Rare sighting: A fintech IPO on the horizon. Initiated reports that expense management firm TripActions has confidentially filed an initial public offering.

Also on Protocol: The CFPB sued MoneyLion for alleged breach of the loans. SilverLion said in a press release that he “would vigorously defend himself against these false allegations to set the record straight”.

Better.com continues to lay people off – and morale is only getting worse. The mortgage lender who gained notoriety for a mass Zoom shooting is now laying off “smaller groups very systematically”, TechCrunch Reports.

A new bill from Senator Pat Toomey could give crypto retirement accounts a boost. The legislation aims to reduce risk for litigation when including crypto and other non-traditional assets in 401(k) plans.

Insurtech investors still believe in it. Despite some major struggles companies that have gone public, such as Metromile, investors still believe in the potential of tech startups to tackle massive insurance markets.

The right time for Anytime Pay?

Amazon announcement yesterday saw wage increases and the rollout of new benefit programs for warehouse workers. But one of these products may pose heightened risks to the company’s most vulnerable workers: the widespread deployment of Amazon’s Pay Anytime Program.

The program, first announced in October 2020, allows employees to access a portion of their checks before a regular pay date. These products are generally referred to as “access to earned wages” and are positioned as a less expensive and therefore less predatory alternative to payday loans. Amazon uses Wisely, a product offered by payroll company ADP, for the service.

Employees load their salary in advance onto a Visa debit card and can then use that card wherever Visa cards are accepted or withdraw cash at select ATMs. When Amazon first rolled out the program to some workers, they could get up to 50% of their salary in advance. Now more workers have access to the program and can withdraw 70% of their salary in advance by transferring funds to their Visa Wisely Pay card.

Read the full story on Protocol.com.

— Veronica Irwin (E-mail | Twitter)

Table

The collapse of the UST, once third largest stablecoin, sent already plummeting crypto prices plummeting in May. But the crypto market crash, which cost crypto holders $2 trillion, does not appear to have diminished the appetite for dollar-linked stablecoins. The three stablecoins that now dominate the market have seen their circulation diverge over the past three months: BUSD, issued by Binance, the largest crypto exchange, has seen its total market value increase by 20% since July . Tether’s USDT, the largest stablecoin, gained around 3%. And the USDC of Circle, the second largest stablecoin, slipped around 12%.

A MESSAGE FROM CIRCLE, THE USDC ISSUER

USDC offers cost-effective payments that can be settled in seconds, near-instantaneous transactions that can help take the vendor payment process from days to minutes, and digital dollars with global reach that allow merchants to expand their business to new markets.

Find out how companies are taking advantage of these opportunities at Circle’s USDC Hub for Business.

Thanks for reading – see you Monday!

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