Role to protect the time of the gentleman has expired. Thank you. Yield back. Feel free to respond to a writing on the question. The committee, we have votes on the floor, were going to take a recess for not less than five minutes and well come back and finish are questioning. We think our panel for excellent testimony today, so we are in recess for five minutes. [inaudible conversations] [inaudible conversations] comme. The gym before wisconsin is recognized for five minutes. I think the chair. Let me start with you if i can, mr. Johnson. The cfpb can see that it quote lacks sufficient information of substantial number of known Market Participants necessary to estimate their larger participant status, end quote. In other words, they dont know the data can then have the data to and how Many Companies will be swept under the role. It of how much the rule really consult with the full market impacts could be. Cfpb uscirf under cfpb. With this the unusual in your professional opinion . I think would be unusual and certainly present a challenge risk. In some ways this is bureaus response to an executive order and revise guidance or omb regarding the relaxing of standards for costbenefit analysis. I appreciate that. I continue to have concert cfpb isnt doing a proper costbenefit analysis and the fact we dont have data that will be swept in and residual ethic is currently concerning. Let me continue on which if i can mr. Johnson. The law authorizing the cfpb says the bureau shall consult with the federal trade commission to define covered person under larger participant rules that the bureau has said its consulting with or provide an opportunity for consultation with the ftc which could be the ftc did not actually wait in. Can you explain briefly for the record why its important the cfpb to consult with the ftc of white would be a problem if the cfpb actually did not fulfill its regulatory requirements . The doddfrank act creates clear distinctions and boundaries between the ftc and cfpb. And the cfpb inherited certain Consumer Protection authorities but not antitrust authorities from the ftc. So its vital importance the cfpb consult on a regular basis and caucus require them to compel other agencies. I think for the return of establishing their not intruding upon the jurisdiction boundaries the ninth of in the doddfrank act. Appreciate that. Let me jump over to you, mr. Solway. To say that correctly . Yes, sir. Thank you much. Filibustered about how sweeping recoveries under the cfpbs authority would impact the cost of Payment Services to consumers. And so how does insert about the regulatory cost impact the lpr impact of petition and innovation in the payments industry . I think uncertainty always adds cost come even just the initial legal fee is to do with the ambiguity of whether or not a Market Participant is a should be covered. Then your further uncertainty when it becomes hard to budget for those compliant risks. All of those issues take away precious time, capital and attention to only make it harder for folks to innovate. When that is the case consumers can miss out on new and important technology. Thank you. Let me turn to you, mr. Holshouser, if i can. Lets take a broader view of the cfpbs expansion impacts are a kind of workers. At added some high inflation pe can afford thinks any. The bureau has targeted a Competitive Industry with innovators coming from across the globe. I am concerned overbearing and poorly considered regulations from the cfpb will make the u. S. Less competitive and pushing jobs overseas. Can you talk about how the lpr and that the cfpb efforts may discourage innovation and investment here in the United States. Us great question. You got to promise the safeguards within five and for innovation comes , redtapee Innovative Companies that are the envy of the world we have here in the u. S. , innovators and the american spirit and our laws and regulation that allow innovation in two floors. You just look at the eu. Theres been a 40 decrease in investment and started since the gdpr, showing an onerous topdown regulation has a huge constriction effect on innovation and investment. The jobs that are created in this country are mostly created by startups and Small Businesses. They are going to really see the impact and burden much more than larger platforms, and to think its misguided to think this rule only targets what is being seen as big plays. Little ones are the ones that need to help and this is going to constrict their ability to grow and stifle innovation. I share your concerns. I met currently concerning the cfpb is going to continue to stifle innovation did love it here and the United States. Our witnesses. Mr. Chairman, i yield back. Gentleman yields back. Adjustment from california is recognized. I have redone my questions. I will give you another five. The chair recognizes himself. Also with this but i think since about the larger participant rulemaking for sometime and abroad we have the opportunity to explore its impact for the today. First lets begin with refresher what the larger participant rule refers to. The cfpb has four broad categories of supervisory jurisdiction pursuant to doddfrank the number one, Financial Institutions with over 10 billion in assets. Number assets. Number two, mortgage companies, payday lenders and student lenders. Company number three, companies quoteunquote larger participant in the Consumer Financial market, and the before, companies by cfpb as a potential risk to consumers. If unchecked that third category the larger participant category is sufficiently broad as to potential to expand the cfpbs jurisdiction dramatically over time. I fear we are seeing that with this rule today. One example of how this will expand cfpbs which hasnt gotten much discussion as it relates to merchants. Cfpb is explicitly barred from supervising merchants pursuant to doddfrank when they are selling nonfinancial goods. This is a common sense guardrail. Cfpb is a financial regulator. They dont have Supervisory Authority over nonfinancial merchants in the country, and they shouldnt. However, i go this proposal takes the boundary and pushes it away. One piece of visual claims if at any time the merchant uses Consumer Payment information for something other than completing the transaction including for benign purposes like research, they go from selling a nonfinancial good to a Financial One and are therefore within the scope of the rule. Lets step back and think about that for just a moment. When a completely nonfinancial merchant conducts research on their payments of data, even for good reason like conducting research to stop future fraud, they could be subject to cfpb supervision or for example, if a consumer buys a recliner chair at an Online Furniture store, whether not the transaction is considered a financial transaction by the cfpb would depend upon exactly how have merchant treats the information associated with it. According to this interpretation the fact we are talked about a merchant selling a of First Venture is relevant. Cfpb still have jurisdiction anyway. To delay for the cfpb this could extend the Supervisory Authority to merchants selling any and all kinds of goods. This interpretation allows them to go from a financial regulator to regular to the could of authority over anything sold online. Another way the rulemaking expand cfpbs authority is not just overuse dollar transactions but Digital Asset transactions. Again, this would be a broad expansion of their power. Mr. Johnson, in your testimony you connected the cfpbs jurisdictional wrap over Digital Asset transactions to major questions doctrine from the landmark West Virginia versus case. Do you believe the cfpb has clear congressional authorization for its claimed authority over Digital Assets . And please explain why or why not. I dont believe it has of that authority because congress didnt give it that the authority and didnt give it that authority expressly in title x of the doddfrank act. Its a relief to do you say that because the members of the smith at the work of delicate authority to regulators over Digital Asset for your pet will be rather discouraging if the cfpb could simply claim authority over the space with the stroke of the pin and very little legal basis. I would like to close today but bring up one more issue with the proposed rule. It completely failed to assess its potential impact on Small Businesses pursuant to the regulatory flexibility act. The rules certified there will not have Significant Impact on small entities but does so with no serious analysis. This is despite the fact Small Businesses and Sole Proprietor for some of the most common uses of thirdparty Payment Technology that could be clearly covered under the rule. Mr. Holshouser, to mention the lack of analysis regarding the rules potential Small Business impact in your testimony. Would you provide additional thoughts on this topic. Was id be happy to. I think small and mediumsize businesses have noted whether not theyre covered under this proposal is that in itself is the problem. Were very investment of 17, at first but it think it estimates could be well in hundreds. If youre a Small Business and making decisions between spending money on compliance cost to do with this new propose regime versus innovating new products and then selling them, which is the lifeblood of creating a new business, you are going to see real headwind in your ability to maintain and grow. And i think if you limit and define the scope of this proposed rule in and more targeted basis, you will certainly give more certainty businesses were really confused but whether they would be caught into this and what that means for their ability and need for raising money to grow. Thank you very much for your testimony. I never make it as a general from north carolina. Thanks to our church and a Ranking Member under witnesses for being here. I represent north carolinas 13th district, and i have said this before, the work of the cfpb is incredibly important. The mission of protecting consumer support by professor george americans regardless of political party. Cfpb recently released their larger participant rule for digital Consumer Payment apps in november or kindest and the goal of this rulemaking as millions are now using Digital Payment apps. However, im concerned this rule is overly broad and lacks clarity. Mr. Holshouser, as my colleagues have making the cfpb indicated that 17 companies would be covered by this role. However, they refuse to say which companies. Is that Standard Practice . What purpose is served by keeping the list of companies who would be impacted by this rule secret . This is not instead of practice and have no idea what this serves. Certainty is what businesses need in order to operate their businesses and know how to plan. And this lack of specificity is a real concern. Mr. Holshouser, again to you, given ten certainty this role, companies we discussed offering Payment Services to consumers and how will this impact competition and innovation. Absolutely unthinkable decrease the players in the market and reduce new entrants. It will cause those that are in it might be caught up in this role to retract from this market which will lessen the number of products and, therefore, hurt competition. Mr. Ken, next question to you. To justify the role that cfpb only perform a costbenefit analysis of peertopeer products, however the road cover products like express checkout that have nothing to do with the future. Costbenefit analysis is a right for the cfpb to propose such an allencompassing when you dont have adequate data to justify it . I agree the proposed rule conflates very separate and distinct payment products and functionalities. It doesnt explain why it does so. And not explaining why conflates them, theres a costbenefit or any sort of empirical analysis to support that kind of overly broad definition. Mr. Kim, i came to you. How is this larger participant role compared to previous larger participant rules . Well, with prior ones we were not asking these questions like with service, and when who the big players were i dont think people debated by much concern about whether the threshold would capture the large ones versus the small ones. I think todays hearing highlights how theres a lot of uncertainty about the scope of the rule and its potential impact. Mr. Kim, again to you. Can you walk us through what a a typical supervisor examination by the cfpb would look like for firms identified as larger participants and describe what powers the cfpb has over an entity once it has been designated as a larger participant . Well, they sin examiners santa. Its at a minimum several that easily 20 to 30 who are logiTech Companies, i would imagine the cfpb would bring it socalled a game and bring as many as it can. It would be probably a combination of hosting an onsite but also hybrid or virtual. And these exams last month. So were talking about wave after wave of information requests and followup requests, and then Companies Often field of those questions for over a year and then maybe you might get an exam report a year or two later. So its significant. People have to kind of dropped their day jobs to respond to information requests. Thank you, and i yield back. Gentleman yields back. Gentleman from florida is like a. Thank you, chairman. [laughing] , this a been a very hearing. I say often in this room that the first thing i ever watched as a as a citizen of this country was the Financial Services hearings when doddfrank was being created. I was in the finance world, not a member and to be blunt and no disrespect to the staff on capitol hill, not a staffer of writing memos about the financial world i was actually doing it. A lot of the things in doddfrank concerned me. Most overall overarching was the cfpb and the concern was the cfpb will be this overarching agency with no real oversight that which is roam the fruited plains trying to figure out what they can meddle in. Obviously we are doing that today. Mr. Holshouser, we get very technical in Financial Services for the people watching at home, what actually our Digital Payment systems . What are the actual pieces of technology were talking about that will apply to the American Consumer . Thats an incredibly complex and diverse question with a lot of different aspects to it just give me an example. But you are running Financial Transactions through large digital pipe a bunch of data sent back and forth between merchants and banks with other regular entities and payment ecosystem also involved in that. Would cryptoware be part of that. Was subject to interpretation but yes. On a consumer i go on my phone i download a digital wallet. I put crypto stablecoins potentially even cash in this wont work with that ill be subject to the cfpbs role . Under the proposed rule, yes. Okay. Mr. Odinet, professor odinet, question for you. Even in this infancy when doddfrank was being created, did the members i will see Democrat Members because they are going to voted for, did actually think it would make it possible that the cfpb would regulate consumer transactions between consumers . So i wasnt involved in that process. Like you i was much younger. But what again is congress intended for the cfpb to have jurisdiction over nonbank, not depository institutions involved in the provision of Consumer Financial products and services. I dont want to overdo in representative but im short on time. You know why they did that . Because of the lending market because i was a lender at the time. In the lending market, home mortgages specifically where you could jump itself want to buy this house, you have no credit report, no Income Verification and a nonbank issues you a mortgage to go buy a house that you cant afford, isnt that correct . So i think the subprime mortgage crisis was at the forefront of congress at the time but that doesnt mean that the bureaus authority is limited to the Mortgage Market to contact the text of the act of forgot that into multiple different types of Consumer Financial products. Professor odinet i would like to opine on the part thats when doddfrank is trashed and what are the worst piece of legislation ever contemplated by this body. But let me move on. Do you think the digital wallets poses a systemic threat to the United States of america . By justin is the bureau is not making this will make on the basis of systemic threat but of the threat of consumer harm and offering of is there consumer in americans being able to actually use the resources to buy goods and services from a business, a merchant from another individual . Under the limited facts of the questions, no. Okay. Is it plausible that an american citizen needs a license or needs authority or approval from the cfpb under to transact business income . No, but the business that facilitated do. You said in your statement that and i want to say quote, businesses could discriminate based