Washington, D.C. – TechNet, the national, bipartisan network of innovation economy CEOs and senior executives, released the opening statement by Executive Vice President Carl Holshouser before the U.S. House of Representatives Committee on Financial Services Subcommittee on Digital Assets, Financial Technology, and Innovation. The hearing, “Bureaucratic Overreach or Consumer Protection? Examining the CFPB’s Latest Action to Restrict Competition in Payments,” will take place on Wednesday, March 13, at 9:00 a.m. in 2128 Rayburn House Office Building.

Opening remarks as prepared for delivery:

Chairman Hill, Ranking Member Lynch, and members of the Subcommittee on Digital Assets, Financial Technology, and Innovation, thank you for the opportunity to discuss the Consumer Financial Protection Bureau’s proposed rule on Defining Larger Participants of a Market for General-Use Consumer Payment Applications.

I am Carl Holshouser, Executive Vice President of TechNet, the national, bipartisan network of technology CEOs and senior executives that promotes the growth of the innovation economy at the federal and 50-state level. TechNet’s diverse membership includes dynamic American businesses ranging from startups to the most iconic companies on the planet. We represent over 4.4 million employees and countless customers in the fields of information technology, artificial intelligence, e-commerce, the sharing and gig economies, advanced energy, transportation, cybersecurity, venture capital, and finance.

As you know, technology plays an important role in removing barriers to financial access and empowering Americans of all backgrounds to better manage their financial lives through safe, secure, inclusive, and reliable financial tools, including digital wallets and payment applications. TechNet and our members support efforts by policymakers to adapt and update outdated laws and regulations to meet the growing demand from consumers and businesses for these innovative fintech products.

The current consumer payments ecosystem is highly diversified.  Companies across the ecosystem play a wide array of unique roles, each serving different markets and offering different functionalities. Regulations focused on fintechs must ensure that consumers are protected while continuing to allow for innovation in this dynamic ecosystem to flourish.  Unfortunately, the CFPB’s proposed rule fails to accomplish both of these goals.

Under Dodd-Frank and the Administrative Procedure Act, the Bureau must conduct thorough due diligence before issuing a proposed rule. The CFPB falls well short of satisfying this requirement in this Proposed Rule. Frankly, the CFPB’s lack of empirical analysis underlying its Proposed Rule is stark and troubling. Because the CFPB failed to follow rulemaking requirements required by Congress, the Proposed Rule:

  • Creates an arbitrary market that is not based in data-driven analysis or the realities of the digital payments ecosystem;
  • Fails to identify specific consumer harms that necessitate CFPB supervision; and
  • Fails to adequately address the costs to the diverse array of companies that could be subject to CFPB supervision.

We strongly feel that these deficiencies render the Proposed Rule defective. Before moving forward, it is critical that the CFPB more precisely and narrowly define the consumer payments market in which it seeks to supervise and to conduct the empirical analysis required in the rulemaking process. At a very basic level, the Bureau should complete a cost-benefit analysis that adequately considers companies that may fall within the purview of the Proposed Rule, analyze the costs to the companies rather than using “conservative estimates,” and determine the costs that may be passed on to consumers.

Until the CFPB conducts the analysis required of it by law, TechNet has urged the CFPB to pause the rulemaking process and reconsider the Proposed Rule in its entirety. Otherwise, this rule would introduce tremendous complexity and uncertainty into digital payments markets, to the detriment of consumers and businesses across our economy.

We appreciate the Subcommittee’s attention to this important issue and our views.  I look forward to your questions.


You can read the full written testimony submitted to the committee here.

Earlier this year, TechNet submitted comments to the CFPB on its Proposed Rule defining large participants in digital payment markets. You can read those comments here.