Consumer Financial Protection Bureau Director Rohit Chopra took note during his Wednesday appearance before the Senate Banking Committee that companies including PayPal and JPMorgan are monetizing customers’ financial data — warning the country is moving toward an age of “financial surveillance.”
The focus of the hearing, at least as titled, was the semi-annual report offered up by the CFPB. But the questioning from senators and the responses from Chopra covered a significant amount of terrain.
In Chopra’s testimony, accessible here, he stated that the agency, since its creation in 2011, has returned $20.7 billion to consumers “and created unquantifiable returns for the over 205 million Americans harmed by the illegal practices that we have stopped.” In addition, the CFPB will be “on track” to save customer $20 billion in “junk” fees annually.
With a nod to credit card pricing, he said that “banks are charging 400 basis points more in interest spread than they did 10 years ago. The difference is $25 billion to American families every year.” Large banks, he said, are charging 800 basis points more than smaller banks and credit unions.
During his own remarks at the hearing, Chairman Sherrod Brown (D-Ohio) said credit card companies are “massive … Wall Street companies. The idea that you missing your payment due date by a day or two is imposing some huge cost on the credit card company is ridiculous.” Asked by Brown whether the card companies have shown math justifying the late fees that are currently charged, Chopra answered, simply, “No.”
Offering his own, contrary views on the fees (and the cap that would late fees to about $8), Ranking Member Tim Scott (R-S.C.), said that “while the rule may save some folks around $20 dollars each time they make a late payment, how much will it cost these same consumers when they no longer qualify for a credit card because they haven’t paid their balances on time? How much will it cost them when their credit score drops as a result of these late payments?” With the recent Supreme Court ruling that the CFPB’s funding is constitutional, Scott said, there’s “increased concerns over a lack of accountability.”
The recent proposals on standards setting, said Chopra, will help “set the stage” for finalizing the rest of the CFPB’s open banking rule-making.
“We believe there are opportunities to advance legislation to accelerate open and decentralized banking in our country,” he said.
The testimony also took particular notice of the use of consumers’ data — contending that “large financial firms like PayPal and JPMorgan Chase are planning to use sensitive data about people’s income and spending to fuel surveillance-based targeting. These plans to monetize sensitive financial transaction data are a reminder that the United States is slowly lurching toward more financial surveillance and even financial censorship.”
As has been widely reported, and as noted here, JPMorgan has launched a retail media network called Chase Media Solutions that will leverage consumer transaction data to help client firms offer personalized advertising within the banking sector.
During the question-and-answer session with lawmakers, Sen. Jack Ree (D-R.I.) said that he was “pleased” that the same rules governing credit card protection will also apply to buy now, pay later (BNPL) loans. Chopra said that “we do have authority to supervise those lenders … in some cases we can work with states that license them … the CFPB cannot be behind the eight ball when it comes to buy now, pay later. If you would like to see more federal authority,” he said to the senators, “we can work with you.”
Sen. Chris Van Hollen (D-Md.) of Maryland signaled in his questioning that there are risks associated with non-bank financial firms, which have more than $20 trillion in assets. In at least some cases, customers have been unable to access their funds with these companies. Chopra said the 2008 financial crisis offered up the lesson that non-bank companies can pose a threat to the larger financial services system and the economy as a whole, and that “we have to look at the whole financial system, not just banks and credit unions.”
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