Senator raises concerns over X Money-Visa deal

Senator Richard Blumenthal, D-Conn., is raising questions about a deal struck between Visa and X, the social media platform previously known as Twitter. Sen. Blumenthal's questions primarily center on X's owner, Elon Musk, and the role he has played in gutting the Consumer Financial Protection Bureau in his capacity as head of the Department of Government Efficiency (DOGE).

But he also raised questions about X's inability to stem the proliferation of bots, scams and hate speech on the site.

Blumenthal, who is the ranking member of the U.S. Senate Permanent Subcommittee on Investigations, raised his concerns in a letter to Ryan McInerney, Visa's CEO.

Blumenthal wrote that his is concerned that X would be unable to "protect consumers from fraud and scams as it ventures into the financial sector. As the largest payment processor in the world, Visa has a legal responsibility to ensure its network is free of financial crime such as scams and fraud, money laundering, terrorist financing, and more," he wrote.

The Senator also pointed to the fact that Musk, in his role at DOGE, an unofficial agency of the Trump Administration, has "taken deliberate steps to target the CFPB to diminish its ability to perform critical oversight of the financial services sector, including digital platforms like X Money."

Reporting by CNBC, for example, suggests staffing of CFPB under its new acting director, Russell Vought, could be scaled back from 1,700 to just five. "That would kneecap the agency's ability to carry out its supervision and enforcement duties," CNBP noted. The staffing cuts are currently on hold while a federal judge considers a lawsuit brought by a CFPB union seeking a preliminary injunction.

Blumenthal isn't the first lawmaker to raise concerns about X Money. Senator Elizabeth Warren, D-Mass., told a group which last month was protesting the shuttering of the CFPB, that the move was an attempt by Musk to avoid oversight of X Money.

A CFPB rule that took effect in early January would have given it oversight authority for nonbanks offering P2P digital payment apps. Large financial institutions offering such apps are already regulated by the consumer watchdog agency. The rule, however, was scuttled by a resolution approved by Congress last week.

Blumenthal has many concerns

"DOGE's actions to diminish the enforcement reach of CFPB could boost Visa's new business interests with X Money," Blumenthal wrote. "Equally troubling is the possibility that DOGE and Mr. Musk could use their access to CFPB's systems to gain a competitive advantage for Mr. Musk's business interests, in particular X Money."

Blumenthal raised other concerns as well. For example, he pointed to "signs of 'increased active bot-like accounts'" that have been found to be on the X platform.

"The most pronounced indicators for bots were found around a large upswing in posts promoting cryptocurrency, which may increase risks of financial scams," he wrote in the letter to McInerney. Blumenthal pointed to an October 2023 Federal Trade Commission report that more money was lost to frauds originating on social media than any other method of contact.

Who will regulate nonbanks?

The CNBC report was headlined "Here's why banks don't want the CFPB to disappear." This despite the fact that banks have been harsh critics of the consumer watchdog agency.

In its reporting, CNBC pointed out that "if the Trump Administration succeeds in reducing the CFPB to a shell of its former self, banks would find themselves competing directly with nonbank financial players, from big tech and fintech firms to mortgage, auto and payday lenders that enjoy far less federal scrutiny than Federal Deposit Insurance Corporation-backed institutions.

CNBC quoted David Silberman, a veteran banking attorney who lectures at Yale Law School, explaining that CFPB is the only federal agency supervising non-bank depository institutions.

"Payment apps like PayPal, Stripe, Cash App, those sorts of things, they would get close to a free ride at the federal level." Silberman said. "If you're the big banks, you certainly don't want a world in which the nonbanks have much greater degrees of freedom and much less regulatory oversight than the banks do.?"

Zelle lawsuit thrown out

In a related development, the CFPB withdrew a lawsuit it had pending against Zelle, the peer-to-peer payment platform operated by Early Warning Services. The lawsuit was dismissed without prejudice, which means it can't be revived in the future

The Zelle lawsuit is one of about half a dozen that were brought by the CFPB during the Biden Administration and since scuttled by the Trump Administration.

In a statement, the White House noted that the CFPB "the brainchild of Sen. Elizabeth Warren – has long functioned as another woke, weaponized arm of the bureaucracy that leverages its power against certain industries and individuals disfavored by so-called 'elites.'"

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