CFPB Director Rohit Chopra recently gave opening remarks at the joint meeting of the Community Bank and Credit Union Advisory Councils. In them, he expressed a desire to re-direct the CFPB’s attention to the needs of financial institutions used by local businesses and to make relationship banking a key priority for the CFPB.
Director Chopra took the opportunity to highlight his concerns about the potential imbalance of power between core services providers that small banks and credit unions rely on to keep up with the digitization of consumer financial services. He discussed how small financial institutions are worried about the rising costs of and limited flexibilities offered by core services providers, particularly because the core services provider market has become heavily consolidated – noting that four major companies serve 78% of all U.S. banks. His conclusion is that this consolidation affects service and cost, harming local financial institutions’ abilities to keep up with bigger competitors, and has a negative downstream effect on relationship banking and consumers.
Looking ahead, Director Chopra stated that he has asked CFPB staff to work with core services providers, including to answer questions related to banks’ collective bargaining on core services’ contracts. In addition, he states that the CFPB will work with other agencies to examine third-party service providers and to potentially refer complaints to other law enforcement agencies. He finalized his remarks by asserting that these efforts will create a more competitive market that will help every institution, regardless of size, participate in the ever-evolving technological landscape.
Without debating the merits of Director Chopra’s comments, we find ourselves asking whether the concerns about competition he raises are more properly in the purview of the FTC than that of the CFPB.