Consumer Financial Protection Bureau Bolsters Competition Enforcement Efforts

Implications for Consumer Financial Service Providers

The CFPB’s decision to create this new competition-focused office is yet another reminder — combined with the fact that CFPB Director Rohit Chopra is a former antitrust enforcer — that companies should keep competition issues front of mind when dealing with the CFPB. Larger companies, especially big tech companies introducing new fintech products, should be prepared to field inquiries from the CFPB on competition issues more commonly addressed by antitrust enforcers such as the Federal Trade Commission (“FTC”) (where Chopra was a Commissioner immediately before his current post), the Department of Justice Antitrust Division (“DOJ”), and state attorneys general. Inquiries may include a request to explain the company’s market positions for the financial service at issue and other products connected to that service, a company’s business practices that may affect competition for the relevant product or service, and whether barriers exist to entry in the market more generally, among other competition questions. The CFPB has the authority to initiate investigations, issue subpoenas and civil investigative demands, and conduct hearings on these issues.

Ironically, the CFPB seems to recognize that fintech is a very competitive space. In its announcement, the CFPB acknowledged that digital technology is transforming the markets for payments, deposits, and lending, and that “[b]ig banks, fintech, big tech, incumbents, and small start-ups are all jockeying to be in front.” One way to square this recognition with CFPB creating this new office is that the agency wishes not so much to create choices as to ensure that the current state of disruption and competition continues. According to the CFPB, the Office of Competition and Innovation “will focus on how to create market conditions where consumers have choices, the best products win, and large incumbents cannot stifle competition by exploiting their network effects or market power.”

Immediate Action Items for the CFPB’s Office of Competition and Innovation

The CFPB stated that the Office of Competition and Innovation will take the following actions:

• Explore ways to reduce “the barriers to switching accounts and providers”
• Research “market-structure problems that create obstacles to innovation”
• Research how big companies (specifically calling out big tech) “may threaten fair competition,” including by introducing fintech products to their existing large customer bases and, in the process, “stymie[ing] outside players who may have more favorable products”
• Identify ways to address “commonplace obstacles” like access to capital, talent, and data
• Host events to explore “barriers to entry,” including open houses and hackathons where “[e]ntrepreneurs, small business owners, and technology professionals will be able to collaborate, explore obstacles, and share frustrations with government regulators,” the results of which the CFPB will share publicly.

The CFPB’s Blending of Consumer Protection and Antitrust Part of Larger Trend

The larger context here is that the CFPB is facing external and internal pressures to consider competition issues. President Biden’s Executive Order from July 2021 encourages the CFPB to use its rulemaking and enforcement authority to ensure the proper functioning of the competitive process in the financial services industry, including by adopting a data portability rule, which the Office of Competition and Innovation intends to take on. Internally, Director Chopra is also pushing the CFPB to consider competition issues. In a recent enforcement action, Director Chopra stated that the Consumer Financial Protection Act’s (“CFP Act”) prohibition on unfair, deceptive, or abusive acts or practices, typically a consumer protection harm, may, in some cases, extend to “the misuse of a dominant position in the offering of consumer financial services,” typically an antitrust harm. The blending together of consumer protection and antitrust laws is part of a larger trend. Lina Khan, Chair of the FTC (and a Chopra ally), established as a priority for the FTC under her leadership to consider consumer protection issues in competition-related enforcement actions. Given the risk of overlapping or inconsistent enforcement between the CFPB and federal antitrust agencies, the CFPB has agreed to coordinate certain activities with the FTC and DOJ.

As a result of these developments, financial services providers should prepare themselves for more frequent and pointed competition-related inquiries from the CFPB, and, accordingly, an increased risk that such inquiries could lead to enforcement actions under the CFP Act.