President Joe Biden has advocated a whole-of-government approach to issues such as antitrust and climate change, arguing that involving all government agencies can be more decisive. While such a strategy for Big Tech has not been explicitly decreed, a new Consumer Financial Protection Bureau rule suggests one may be on the horizon.
The CFPB’s proposal aims to subject nonbank companies operating consumer payment platforms to the same supervisory examination processes as banks. In a statement, CFPB Director Rohit Chopra hopes the rule will help “crack down on one avenue for regulatory arbitrage by ensuring large technology firms and other nonbank payments companies are subjected to appropriate oversight.”
The new regulation would only cover the largest firms — those whose platforms have more than 5 million transactions per year. The CFPB did not release a list of businesses it had identified as meeting this criterion, but the agency estimated that 17 services surpassed this threshold. Companies likely covered include Apple
The rulemaking process will stretch well into 2024, with the agency accepting public comments until early January. Once this period has closed, the CFPB will consider possible revisions and have to publish its final rule. Chopra will likely aim to have this done before August 2024 to ensure the regulation is completed outside of the period in which a government under unified Republican control could overturn it with a Congressional Review Act resolution.
Unsurprisingly, the rule has its fair share of detractors, including Republicans and tech industry groups. There have been some hints of possible legal challenges to the rule, but nothing will be filed until the rule is completed. House Financial Services Committee Chair Patrick McHenry (R-N.C.) raised one interesting angle of attack: the rule will benefit existing players in the space and hurt future competition, he argued in a statement.
More surprising is the way the rule has been praised by both progressives, like Senator Elizabeth Warren (D-Mass.), and the traditional banking industry — two groups that often clash. Those groups have different reasons for backing Chopra’s effort, but the result is the same. It is unclear how much this may bolster the chances for the rule to survive any legal challenges, but it gives the CFPB at least two powerful allies.
A whole-of-government approach is even possible in trying to regulate Big Tech firms because of these companies’ growing omnipresence. The CFPB’s role will be to monitor their push toward financial services. However, as these companies continue extending their reach into other industries and potentially toward becoming a “super app,” they will increasingly come under the jurisdiction of other regulators. Instead of having “traditional” Big Tech regulators, the agencies will be responsible for different parts of these businesses.
What may hamper this effort is Congress’ persistent gridlock in passing new legislation to regulate Big Tech. There have been several attempts in recent years on various issues, such as data privacy and market competition, but all have failed. Under Biden, executive agencies have stepped in to fill the void. Still, the lack of new authority can mean these rules are more legally vulnerable, particularly with the conservative leanings of the Supreme Court.
While this trend would likely continue under a second term for Biden, even if a Republican president were elected in 2024, Big Tech would still face significant scrutiny. Look no further than the November 8 Republican presidential debate for the lack of love for Big Tech on the right. The GOP’s frustrations with the industry are different from the Democrats, with more of a focus on alleged censorship of conservative voices — but are present, nonetheless. The era of wanting to befriend Big Tech appears to be over, and instead, the industry has become a popular legislative target. However, the odds for Congress to pass meaningful reform remain slim.