Tech groups sue CFPB over payments rule

A pair of tech trade groups is suing the Consumer Financial Protection Bureau and its director, Rohit Chopra, over a rule that grants the agency supervisory authority over big technology companies' payment operations.

The groups – NetChoice and TechNet – represent some of the biggest tech companies on the planet, including Facebook parent Meta Platforms Inc., Apple Inc., Amazon, PayPal and Google. Additionally, Mastercard and Visa are listed as members of TechNet.

The tech groups take issue with a rule that was finalized by the CFPB in late November 2024 that puts big tech companies offering digital payment apps on an equal regulatory footing with financial institutions that already are subject to CFPB oversight. The consumer watchdog agency estimated that the most widely used apps covered by the rule collectively process over 13 billion consumer payment transactions a year.

On an individual company basis the CFPB said it would have oversight authority on any company that processes at least 50 million transactions a year.

NetChoice and TechNet, in a lawsuit filed last week in U.S. District Court for the District of Columbia, argued the CFPB in adopting the rule overstepped the authority it was granted when created by the Dodd-Frank Act.

"This blatant overreach is less about protecting consumers and more about overzealous bureaucrats consolidating government control over one of the most innovative sectors of the economy," NetChoice complained in press release.

This was one of a series of lawsuits challenging CFPB rulemaking in the waning days of the Biden Administration. Trade groups including the American Bankers Association, America's Credit Unions, and the Mississippi Bankers Association sued the agency in U.S. District Court for the Southern District of Mississippi in December in an attempt to block a CFPB rule capping bank overdraft fees at $5.

A rule barring medical debt from consumer credit reports, adopted by CFPB in early January, meanwhile, was met with legal challenges by credit reporting agencies and debt collectors in U.S. District Courts in Texas.

President Trump and the Republican-controlled Congress have promised to roll back regulations implemented during the Biden Administration, and those adopted by the CFPB are expected to be high on the to-do list. During the first Trump Administration, CFPB rulemaking was practically moribund.

Overstepping authority

The NetChoice-TechNet lawsuit argued that the agency acted "arbitrarily and capriciously" without any proof that consumers were being harmed, or that there were any consumer protection risks that CFPB supervision could or would remedy, much less any that were not already being addressed by state-level supervision.

"The CFPB's power grab undermines the rule of law, further bloats the administrative state and puts American consumers and innovation at risk," said Chris Marchese, NetChoice director of litigation. "The CFPB's actions create unnecessary roadblocks for businesses striving to meet consumer needs and set the stage for increased prices and reduced options. ... America's success in the digital payments space has been driven by innovation and competition – not heavy-handed, unlawful government interference."

"Instead of fostering a regulatory environment that supports responsible innovations, the CFPB is undermining the very principles that make the U.S. a global leader in financial technology," stated Carl Holshouser, executive vice president of TechNet. Holshouser added that the rule is inconsistent with the Bureau's statutory mandate and sets a "dangerous precedent that federal agencies can operate beyond the limits established by Congress."

For example, Holshouser said, a company offering digital payments could under the rule find itself subjected to wide-ranging scrutiny over things that have nothing to do with consumer payments or the CFPB's mission, such as tax payments.

"This isn't regulation; it's overreach and risks creating a chilling effect on innovation that drives economic growth and benefits millions of consumers," Holshouser asserted.

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