Regulators across the government need to respond to the expanding reach of the largest technology companies, Consumer Financial Protection Bureau Director Rohit Chopra said Thursday.
“Every single government agency is being impacted by how big tech companies are infiltrating sectors of the economy,” Chopra, testifying before the Senate Banking Committee, said in perhaps his strongest comments about the technology sector since taking the helm of the CFPB on Oct. 12.
One day after he testified in the House, Chopra addressed a whole host of topics and took some hostile questioning from Republican senators. He brought up consumer issues regarding student loan servicers, military service members and an upcoming rule on small-business data collection.
But Chopra, who days after being sworn in had demanded details from tech giants about their payment offerings, saved his fiercest testimony for Silicon Valley.
“In recent years, big tech companies have sought to gain greater control over the flow of money in our economy,” he said.
Bloomberg News
Last week, the CFPB ordered Amazon, Apple, Alphabet’s Google, Facebook, PayPal and Square to turn over information on their payment system practices. Chopra said the order seeks information on how tech giants harvest, track and monetize data about consumers’ spending habits.
Sen. Sen. Jon Ossoff, D-Ga., asked how the CFPB planned to protect consumers’ data privacy.
“We’ve seen new entrants in financial technology providing services that have typically been the domain of more traditional financial services companies, offering those companies a significant opportunity to collect data about their users, about their patterns and habits of consumption, about their location,” Ossoff said. “Can you please comment on these developments and what jurisdiction your agency or partner agencies may have to protect data privacy as more and more customers are using these novel financial products?”
Chopra reiterated that he thinks tech companies need oversight on par with banks.
“To the extent that big tech companies are using the treasure troves of data, there needs to be some parity with local banks and other financial institutions that are following the law,” he said.
Early on in the nearly two-hour hearing, Sen. Patrick Toomey, R-Pa., the ranking Republican on the Banking Committee, questioned why Chopra had not responded to letters that inquire about whether CFPB employees had been fired from the agency for their political affiliation. Chopra responded that he was a nominee at the time and had observed all protocols.
But Toomey was not satisfied with that answer.
“Is it your view that you just decide which questions from oversight committees of Congress you’re going to answer and which ones you’re not?” Toomey said. “Can Republicans generally expect that we’ll get answers to questions in the future or will you decide?”
Toomey’s comments prompted a sharp rebuke from Sen. Jon Tester, D-Mont., who said no one in the GOP criticized the Trump administration’s efforts to politicize independent agencies.
“I watched a president go after the head of the [Federal Reserve], trying to politicize the Fed. I don’t know that I heard one person stand up and say that’s inappropriate on the Republican side of the aisle,” Tester said. “Because quite frankly everything the last administration did was about politics all the time. The [former] president politicized everything that came down the pike.”
Beyond the focus on tech giants, Chopra said the CFPB’s top priorities will be to find ways to spur competition, focus enforcement on repeat offenders and restore so-called “relationship banking.”
The focus on relationship banking drew praise from Sens. Jerry Moran, R-Kan., and Steve Daines, R-Mont., who asked if Chopra would narrow the CFPB’s small-business data collection rule.
“This ever-increasing regulatory burden that our relationship bankers are facing means that we have fewer relationship bankers,” Daines said. “What assurances can you provide that that final rule will be efficiently narrowed to limit the compliance burden on our smallest community banks and credit unions?”
Chopra did not back away from the rule’s parameters and vowed to meet with the senators to further explain why the data collection is necessary.
“We need to get a picture of what’s happening with small-business lending in America,” he said. “Our country was disadvantaged, particularly when constructing the [Paycheck Protection Program], to not have this robust data set.”
Sen. Thom Tillis, R-N.C., said the rulemaking would force lenders to guess the ethnicity and race based on the appearance of potential borrowers.
“You’re forcing people to make assumptions about ethnicity and race,” Tillis said. “It doesn’t seem like to me to be a good way to get accurate information. And if the goal is end discrimination, this doesn’t seem like a very good way to do it.”
In response to a question from Sen. Catherine Cortez Masto, D-Nev., Chopra also said he would look into how small-business loans are originated to franchisees.
“Franchisees in this country have been beat up for too long and we need to make sure they have ingredients for success,” he said.
Several senators asked if the CFPB is monitoring two large federal student loan servicers — Pennsylvania Higher Education Assistance Agency and Navient — that have announced plans to exit the market by year-end.
“The last time there was a student loan servicing transfer on this scale, it both caused and revealed millions of errors that continue to haunt student loan borrowers, particularly those trying to access promised relief through the Public Service Loan Forgiveness” program, said Sen. Bob Menendez, D-N.J.
Menendez and others specifically asked about PHEAA, a state agency that manages the Public Service Loan Forgiveness program for the Education Department. Under that program, borrowers that make 120 on-time monthly payments for 10 years on their student loans can have the remaining balance canceled.
“I am worried about big transfers,” Chopra said. “Major servicing transfers can really be problematic when records have errors or when systems are not appropriately tested. The last thing we need is for hundreds of thousands or millions of borrowers to have incorrect bills.”
The CFPB oversees all large student loan servicers and is working with the Education Department and other regulators to engage in oversight, Chopra said.
The CFPB’s current student loan ombudsman, Robert G. Cameron, was hired under the Trump administration. He had been deputy chief counsel and vice president of enterprise compliance at PHEAA.
Tester and Chris Van Hollen, D-Md., also raised concerns about the government reneging on promises to forgive a portion of the debts of student loan borrowers.
“I think it’s critically important that we keep our commitment to those folks,” Tester said, referring to borrowers in public service that have sought forgiveness of their loans. “I made it clear to the previous [CFPB] director and to former President Trump’s Department of Education that the administration of this program was unacceptable.”
Former Department of Education Secretary Betsy DeVos had instructed student loan servicing contractors in late 2017 not to give any data or documents to other government agencies seeking information to support investigations or oversight of student loan servicers.
“I am very nervous that it’s gonna be a challenge … to transfer these loans to another servicer,” Van Hollen said.
Credit: Source link
