Latest news with #RohitChopra
Yahoo
5 days ago
- Business
- Yahoo
CFPB, consumer groups clash over BNPL
This story was originally published on Payments Dive. To receive daily news and insights, subscribe to our free daily Payments Dive newsletter. Consumer Financial Protection Bureau researchers last week released a study concluding buy now, pay later services are not harmful to consumers, after the federal agency last month jettisoned a rule regulating BNPL. The June 7 study, conducted by two economists in the CFPB's research office, reviewed data from the six largest BNPL companies over several years and found few negative impacts on consumers who use the payment method. That was at odds with findings from a separate CFPB study, published in January, that concluded consumers who used BNPL options were piling on debt. The clash of findings comes as the agency under President Donald Trump turns away from the prior administration's efforts to regulate BNPL. On May 12, the bureau spiked an interpretive rule that would have regulated BNPL purchases like credit card transactions. The rule was first proposed under director Rohit Chopra, who was fired by Trump in February. Buy now, pay later industry providers and supporters say the agency's June study proves that BNPL does not harm consumers, while consumer advocates counter that there is nothing in the research that contradicts their view that buy now, pay later should be tightly regulated. Consumer advocates who reviewed both studies said that neither supports the notion that buy now, pay later products make credit more accessible to consumers with poor credit history or no credit score, an argument often put forth by BNPL companies. The buy now, pay later industry's signature product is a payment split into four installments which are repaid over six weeks, with no interest charges. Some BNPL providers, however, have started offering longer-term loans, some of which accrue interest. The study issued this month found that shoppers who use BNPL to buy goods and services generally don't load up on other types of debt and are overwhelmingly likely to repay BNPL providers in full. 'We do not detect analogous increases in non-BNPL debt balances,' for first-time buy now, pay later users, the abstract for the study said. 'The results do not support a conclusion of negative impacts of first-time BNPL use on the ability of borrowers to repay non-BNPL loan obligations nor on several measures of financial distress.' The research underscores what buy now, pay later companies have long asserted about their products, David Sykes, chief commercial officer for the Swedish BNPL company Klarna, said in an emailed statement. 'BNPL is a smarter, more transparent alternative to high-interest credit cards,' he said. The earlier January study found that 63% of buy now, pay later users took out multiple types of loans, and 33% took out loans from multiple BNPL companies at a time. While the January report raised concerns about what is described as loan-stacking, the June report showed 'the overall debt picture is not negatively impacted,' said Ian P. Moloney, head of policy and regulatory affairs for the American Fintech Council. Consumers are 'maintaining the level of debt that's appropriate for them,' he said. Supporters of the industry were also quick to note that the more recent study found that buy now, pay later users repay their loans 98% of the time. Credit cards, by contrast, have a default rate of around 10%, the study said. The findings are in line with figures released by BNPL companies, said Miranda Margowsky, head of communications for the Financial Technology Association. 'This research confirms our own member company data showing that consumers are using BNPL responsibly and repaying in full and on time,' she said. The latest study did, however, note that most buy now, pay later users must sign up for automatic payments, and 'could be left without sufficient funds to repay non-BNPL debt obligations.' The more recent study also seems to indicate that U.S. consumers who use buy now, pay later services do so infrequently, said Adam Rust, director of financial services for the Consumer Federation of America. 'This says that people dip their toe in BNPL, use it sporadically, and continue to rely on other forms of credit,' he said, noting that the study mirrors his own thoughts on the issue. 'It points to BNPL as something that people use once, and don't really rely on.' Moloney argued that the BNPL industry's signature product is suited to more consumers than some other types of financing because it does not have late fees or accrue interest. The studies don't necessarily contradict one another because they use different data sets, Rust said. The January study reviewed 145 million BNPL applications made between 2017 and 2022. The study released last week reviewed a 16% random sample of loan applications from the six largest buy now, pay later providers between 2019 and 2022. Also, the latest study focused more on first-time users. A CFPB spokesperson did not respond to a request for additional comment about the findings of either study. Lauren Saunders, associate director for the National Consumer Law Center, contended the latest CFPB study didn't counter earlier research that raised concerns over BNPL use. "The June study does not refute the negative impacts of buy now, pay later credit found by other studies and surveys," Saunders said. She referred to a May report from the research firm Bankrate that found roughly half of BNPL users had experienced some type of setback, be it a missed payment or a problem with refund. Also, a survey by the loan marketplace LendingTree released in April said 41% of U.S. consumers who use buy now, pay later services had made a late payment within the last year. Research on buy now, pay later must continue because the number of consumers and merchants who use and offer the service is still comparatively low, stressed Chuck Bell, programs director for Consumer Reports. The Bankrate survey results showed 30% of U.S. adults said they had used BNPL at least once. 'The researchers are careful to point out that the average amounts of BNPL debt assumed by borrowers [in the June study] are very low, and may increase over time as BNPL becomes more widely adopted by merchants and consumers in multiple sectors of the economy,' he said. Recommended Reading Apple launches Affirm BNPL option Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Bloomberg
04-06-2025
- Business
- Bloomberg
Stocks Gain on US Jobs Surprise as Treasuries Fall
Bloomberg Television brings you the latest news and analysis leading up to the final minutes and seconds before and after the closing bell on Wall Street. Today's guests are Winnie Cisar, Creditsights, Danielle Moran, Bloomberg News, Rohit Chopra, Federal Trade Commission, Anthony Chukumba, Loop Capital, Omair Sharif, Inflation Insights, Alix Steel, Bloomberg News, Tony Roth, Wilmington Trust, Sally Bakewell, Bloomberg News, Jessica Inskip, Mary Ross Gilbert, Bloomberg Intelligence, Sophia Webster, Luxury Shoe Designer, Lorraine Hutchinson, Bank Of America, Brett Rose, United National Consumer Suppliers. (Source: Bloomberg)
Yahoo
03-06-2025
- Business
- Yahoo
CFPB seeks to end open banking case
This story was originally published on Payments Dive. To receive daily news and insights, subscribe to our free daily Payments Dive newsletter. The Consumer Financial Protection Bureau followed through Friday on a plan to let its open banking rule die. The federal agency filed a motion for summary judgment in U.S. District Court for Eastern Kentucky in a case brought by bank groups last year challenging the rule. In its Friday filing, the CFPB conceded the rule was unlawful. The rule 'unlawfully seeks to regulate open banking by mandating the sharing of data with 'authorized third parties,'' the CFPB's 27-page filing asserted. The rule also unlawfully prohibits financial institutions providing the data from instituting fees for sharing the data and unlawfully sets deadlines for compliance without a consensus on how standards will be developed, the filing said. The CFPB's position is an about-face by the Trump administration on the open banking rule crafted by the agency's former director, Rohit Chopra, during the Biden administration. The agency had put the rule in place last October to give consumers more control over sharing their financial data, such as bank account information, with other financial service providers. The move toward open banking was an attempt to let consumers opt to send their financial data to other financial institutions or any one of a number of young fintechs offering new digital financial services. Open banking has already gained traction in Europe and advocates have pushed for it in the U.S. for years, leaning on Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Bank Policy Institute, which represents most of the big U.S. banks, and the Kentucky Bankers Association brought the lawsuit against the CFPB last October, along with Kentucky-based Forcht Bank, immediately after the rule was finalized the same month. A week before the agency's latest filing last month, the bureau's chief legal officer, Mark Paoletta, signaled the CFPB's plans in a court filing. 'After reviewing the Rule and considering the issues that this case presents, Bureau leadership has determined that the Rule is unlawful and should be set aside,' the agency wrote in a May 23 filing. The federal agency's filing echoed arguments made by plaintiffs in a longer, 50-page filing Friday also seeking summary judgment and outlining arguments against the rule. That court filing argued that the agency exceeded its authority in establishing the rule; that the framework for the mandated data-sharing was 'arbitrary and capricious'; and that the rule was unlawful for a number of reasons, including that banks wouldn't be allowed to charge fees for application programming interfaces they would provide to facilitate the data-sharing. The Financial Technology Association, which supports the rule, was last month granted leeway by U.S. District Judge Danny C. Reeves to intervene in the case and defend the CFPB open banking rule. The trade group, which represents companies that would benefit from the third-party data-sharing, said in a statement Friday that it will continue to fight to protect the rule. 'Americans must have a right to securely control and share their financial data to access the apps and services of their choice,' FTA CEO Penny Lee said in the statement. 'FTA will continue to defend this right and work to uphold Americans' financial freedoms. The FTA's members include digital payments pioneer PayPal, neobank Chime and financial technology provider Block. The association contended in its statement that big banks are trying to limit competition and short-change consumers' control of their data. It also noted that the rule was initially put forward during the first Trump administration with 'broad bipartisan support.' The Financial Data and Technology Association's North America arm also protested the bureau's court arguments against the rule. That association, which represents the fintech Plaid, processing giant Fiserv and other fintechs, said in a Friday statement that it 'strongly' rejects the CFPB claim that Dodd-Frank doesn't allow for the sharing of consumers' data with third-parties. Recommended Reading CFPB to yank 'unlawful' open banking rule Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
03-06-2025
- Business
- Yahoo
'Repeal and replace is not a plan': Michael Steele on GOP's empty promises for health care
Rohit Chopra, the former head of the Consumer Financial Protection Bureau, joins The Weeknight to discuss the potential impact of the Republican budget bill on the U.S. health care system.
Yahoo
28-05-2025
- Business
- Yahoo
DOJ, CFPB seek to end Trustmark redlining consent order early
This story was originally published on Banking Dive. To receive daily news and insights, subscribe to our free daily Banking Dive newsletter. The Justice Department and the Consumer Financial Protection Bureau filed a motion last week to terminate a consent order against Trustmark Bank over allegations the Jackson, Mississippi-based lender engaged in redlining between 2014 and 2018. The 2021 consent order marked the launch of a concerted effort by the DOJ, CFPB and Office of the Comptroller of the Currency during the Biden administration to root out racial discrimination in mortgage lending. Throughout three years, the agencies agreed to 15 settlements that brought $150 million in relief, the DOJ said last October. Trustmark has paid a $5 million penalty in connection with the order and disbursed $3.85 million into a loan subsidy program meant to increase the bank's lending presence in majority-Black and majority-Hispanic neighborhoods in the Memphis, Tennessee, area, and took steps to implement improved fair lending procedures, the DOJ and CFPB argued last week. Trustmark's consent order was to remain in effect for five years. Terminating the order now would free the bank 17 months early. The DOJ and CFPB seek to have it dismissed with prejudice, too, so future iterations of the agencies can't file claims later on the same allegations. 'Trustmark has demonstrated a commitment to remediation, and … [the bank] is substantially in compliance with the other monetary and injunctive terms of the Consent Order,' the agencies wrote in paperwork filed in the U.S. District Court for the Western District of Tennessee. The bank likewise referenced its 'commitment to remediation' and 'substantial compliance' with the consent order in a filing Wednesday with the Securities and Exchange Commission disclosing the matter. The CFPB alleged in 2021 that Trustmark failed to adequately market, offer or originate home loans to consumers in majority-Black and Hispanic neighborhoods in and around Memphis. Specifically, just four of the bank's 25 Memphis-area branches were in majority-nonwhite neighborhoods at the time, and none of the four had an assigned mortgage loan officer, the bureau said at the time. Further, Trustmark did not establish internal committees to oversee fair lending until August 2018, after the OCC launched an exam of the bank's fair-lending practices. 'The federal government will be working to rid the market of racist business practices, including those by discriminatory algorithms,' the CFPB's then-director, Rohit Chopra, said, noting the launch of the anti-redlining effort. Despite being used as a benchmark, the Trustmark settlement was hardly the first of the Biden era. The DOJ had reached an $8.5 million settlement with Cadence Bank just two months earlier over allegations the lender engaged in redlining in Houston from 2013 to 2017. But the Trustmark order signaled a lock-step among regulators. Observers might argue Trump administration regulators are aligning in a similar lock-step now, with different priorities. The CFPB, for example, dismissed 18 lawsuits and three civil investigative demands against various firms between February and early May, American Banker reported. So last week's Trustmark motion is in character. The DOJ and CFPB noted in their motion that 'modifications' to the 2021 consent order 'may be made upon approval of the Court, by motion by any Party, and that the Parties will work cooperatively to propose modifications if there are changes in material factual circumstances.' Trustmark's $5 million penalty was far from the highest from the cooperative anti-redlining effort. That distinction belongs to Royal Bank of Canada subsidiary City National Bank, which was ordered to pay $31 million in 2023. Recommended Reading Shared zeal for CRA reform leads OCC chief, entrepreneur to rare rapport
