Tomorrow, the House Financial Services Committee’s Subcommittee on Digital Assets, Financial Technology and Inclusion will hold a hearing entitled “Fostering Financial Innovation: How Agencies Can Leverage Technology to Shape the Future of Financial Services.”  The witnesses will be:

  • Valerie A. Szczepanik, Director of the Strategic Hub for Innovation and Financial Technology (FinHub), Securities and Exchange Commission
  • Donna Murphy, Acting Deputy Comptroller for the Office of Financial Technology and Deputy Comptroller for Compliance Risk Policy, Office of the Comptroller of the Currency.  (Ms. Murphy was recently appointed to this position to replace Prashant Bhardwaj, after it was discovered that he had falsified his resume.)
  • Mark Mulholland, Deputy Chief Information Officer for Management, FDIC
  • Ann Epstein, Assistant Director of the Office of Competition and Innovation, Consumer Financial Protection Bureau
  • Charles Vice, Director of Financial Technology and Access, National Credit Union Administration
  • Michael S. Gibson, Director of Division of Supervision and Regulation, Federal Reserve

The Staff Memorandum discusses the Offices that the financial regulatory agencies have established to better foster an innovative environment for regulated institutions and firms and help modernize their internal operations.  (The Memorandum refers to all of the Offices as “Offices of Innovation” even though that is not the formal name of all of the offices.)  The Staff Memorandum describes at a high level the history of each of the Offices with particular focus on the CFPB because of its major change in mission from an office that was formed under a prior Director to foster innovation by, among other things, issuing no-action letters and creating sandboxes, to one whose goal is to root out what Director Chopra considers to be anti-competitive practices. 

With regard to the CFPB, the Staff Memorandum states:

On May 24, 2022, Director Rohit Chopra established the new Office of Competition and Innovation.  This replaced the previous Office of Innovation, with all prior programs and initiatives being absorbed into the new Office of Competition and Innovation.  Under this new banner, the office would pursue a “broader initiative […] to analyze obstacles to open markets, better understand how big players are squeezing out smaller players, host incubation events, and, in general, make it easier for consumers to switch financial providers.”  Subsequently, the CFPB discontinued both the No-Action Letter ( NAL) and Compliance Assistance Sandbox (CAS) policies by letting both policies expire on September 30, 2022.

The Office of Competition and Innovation appears more focused on issuing reports, called “Issue Spotlights,” which focus on specific novel products and services.  Since the NAL and CAS policies expired, the Office has not replaced or implemented any similar policies that reflect those prior initiatives.  In November 2023, Director Chopra commented on the agency’s shift, stating: “while the CFPB continues to look for ways to promote competition and innovation, we have shifted our emphasis to identifying roadblocks to market entry and competition.  We are also increasing our efforts to provide guidance on emerging business models.”

Surprisingly absent from the hearing announcement or the Staff Memorandum is any  discussion of what should be a major focus of the hearing – namely, artificial intelligence.