Fintech Legal Report – October 2021 | Perkins Coie
Weekly Fintech Focus
- Rohit Chopra is sworn in as CFPB director.
- Consumer advocates demand that the CFPB change or revoke its opinion on wage access programs and its innovation sandbox programs.
Chopra was sworn in as CFPB director
On October 12, 2021, Rohit Chopra was sworn in as director of the CFPB. Acting Director David Uejio will be stepping down but will remain at CFPB pending his likely confirmation for a Fair Housing role at HUD as Deputy Secretary for Fair Housing and Equal Opportunity. Mr. Chopra joins the CFPB leaving a vacant position in his former position with the FTC. President Alvaro Bedoya’s nomination to replace Mr. Chopra at the FTC is still pending, and until confirmed, the FTC will be split 2-2 between Republican and Democratic commissioners.
Upon his arrival at CFPB, Mr. Chopra named many people in key agency positions.
In his remarks to staffMr. Chopra highlighted certain themes of CFPB’s mission, including (1) ensuring that financial markets meet the needs of all families, workers and communities; (2) use agency tools to promote competition and shift market power to consumers and law-abiding businesses; (3) strive for a market where families are treated fairly and can ask for help in times of hardship; and (4) anticipate emerging risks to anticipate a crisis.
Consumer advocates ask CFPB for notice of change on earned wage access programs and cut sandbox programs
Over the past year, regulators have actively participated in Earned Wage Access (EWA) programs. Typically, an EWA provider allows employees to claim a portion of the salary they have accrued before their standard payday or the date the funds are released to the employee. The EWA provider then collects the funds through a payroll deduction or debit to the employee’s payday bank account. In december 2020, the CFPB issued an advisory opinion on EWA programs, which established the criteria according to which EWA transactions would not be “credited” for the purposes of Regulation Z. In February 2021, the California Department of Financial Protection and Innovation has entered into memoranda of understanding with a number of EWA companies to monitor these companies as they provide their services to consumers in the state.
Today, nearly 100 consumer groups, including the National Consumer Law Center and the Center for Responsible Lending, are request that the CFPB modify or rescind its 2020 advisory opinion because it is based on “flawed reasoning” which could “facilitate widespread escapes from credit laws beyond [EWA] programs. ”In short, consumer groups urge the CFPB to regulate all paid EWA products as credit. Specifically, consumer groups argue that virtually all available EWA programs provide a one-third cash advance to the consumer before the payday of the consumer which must be repaid later on the paycheck, which should be considered a loan.
Beyond changes to the EWA guidelines, consumer groups are also calling for the CFPB to eliminate or significantly change current CFPB innovation programs such as the Compliance Assistance Sandbox. They argue that these programs provide a secret process by which industry can seek exemptions from incorrect interpretations of consumer protection laws without proper visibility by consumers, competitors or the general public.