The Rule Grossly Exceeds CFPB’s Authority, Sets Dangerous Precedent, Threatens Innovation and Consumers

Washington, D.C. – TechNet, the national, bipartisan network of innovation economy CEOs and senior executives, today announced that it has filed suit in United States Federal District Court for the District of Columbia against the Consumer Financial Protection Bureau (CFPB), challenging its attempt to grant itself new authority over non-bank financial technology (fintech) innovators. TechNet is joined in the lawsuit by NetChoice.

“Instead of fostering a regulatory environment that supports responsible innovation, the CFPB is undermining the very principles that make the U.S. a global leader in financial technology. By granting itself broad authority over a company’s operations, even those entirely unrelated to digital payments, the CFPB goes far beyond its mandate. For example, under this rule, a company offering digital payment services could find itself subjected to wide-ranging scrutiny over its tax payments or completely unrelated product lines—areas that have nothing to do with consumer payment applications or the CFPB’s mission. This isn’t regulation; it’s overreach and risks creating a chilling effect on innovation that drives economic growth and benefits millions of consumers,” said Carl Holshouser, Executive Vice President of TechNet, who previously testified on the rule before the U.S. House of Representatives Committee on Financial Services, Subcommittee on Digital Assets, Financial Technology, and Innovation. His opening statement can be found here, and his full testimony can be found here.

“This action is inconsistent with the Bureau’s statutory mandate and sets a dangerous precedent that federal agencies can operate beyond the limits established by Congress. TechNet remains committed to standing up for innovators and ensuring that regulatory actions are lawful, targeted, and truly in the interest of consumers. Through this lawsuit, we are fighting to preserve a competitive and fair marketplace that encourages innovation and protects consumers without undue interference,” Holshouser continued.

Chris Marchese, Director of the NetChoice Litigation Center, said: “The CFPB’s unlawful power grab undermines the rule of law, further bloats the administrative state, and puts American consumers and innovation at risk. NetChoice is proud to join TechNet to stop this overreach from the Biden administration. This rule threatens to stifle technological progress and harm the very consumers it claims to protect.”

Case Overview

In December the Consumer Financial Protection Bureau (CFPB) published a final rule purporting to define larger participants of a market for “general-use digital consumer payment applications.” In seeking to expand its regulatory reach far beyond anything contemplated by the law, the CFPB claims broad authority to supervise each large company involved in consumer payment applications, including business units and practices that have nothing to do with those products.

Despite opposition from dozens of stakeholders, nonprofits, companies, and industry associations, the CFPB goes far beyond its authorized supervisory authority, placing an enormous and unnecessary burden on an arbitrarily defined set of companies. The final rule would divert resources, inhibit innovation, and harm consumers.

TechNet and NetChoice are represented in this matter by the law firm of Mayer Brown LLP.

Read the complaint here.

Background

TechNet previously submitted comments on the rule when the CFPB initially proposed it. Those comments can be found here. TechNet’s statement following the issuance of the rule can be found here.

Carl Holshouser, TechNet’s Executive Vice President, previously testified on the rule before the U.S. House of Representatives Committee on Financial Services, Subcommittee on Digital Assets, Financial Technology, and Innovation. His opening statement can be found here, and his full testimony can be found here.

About TechNet’s Innovation Legal Center

TechNet’s Innovation Legal Center (ILC) is the voice of the innovation economy in the federal and state courts and the broader legal community. The ILC works to advance pro-innovation laws and regulations through effective legal advocacy, including by representing TechNet in lawsuits challenging unlawful regulatory actions at all levels, by filing amicus curiae briefs in key litigation, by intervening to defend important pro-innovation laws against legal challenges, and by leveraging our legal expertise and analysis for the benefit of judges, lawmakers, and regulators. The ILC retains some of the nation’s top litigators and advocates, ensuring effective representation for the interests of American innovators. The ILC also works with advocates, researchers, and academics to improve understanding of legal issues that are important to fostering a climate of innovation and strengthening America’s competitiveness.

Carl Holshouser, TechNet’s Executive Vice President, leads the Center, with Drew Hudson, TechNet’s General Counsel, serving as litigation director. Ebbie Yazdani, TechNet’s Counsel and Federal Policy Director, provides policy and legal expertise.

About TechNet

TechNet is the national, bipartisan network of technology CEOs and senior executives that promotes the growth of the innovation economy by advocating a targeted policy agenda 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 and represents over 4.5 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.  TechNet has offices in Austin, Boston, Chicago, Denver, Harrisburg, Olympia, Sacramento, Silicon Valley, Tallahassee, and Washington, D.C.