The CFPB had previously finalised a rule to bring large nonbank companies offering digital funds transfer and payment wallet apps under its supervision. Credit: T. Schneider/ Shutterstock.

TechNet, a bipartisan network of innovation economy CEOs and senior executives, has initiated legal action against the Consumer Financial Protection Bureau (CFPB), opposing its new rule to supervise fintech companies.  

The lawsuit, filed in the US Federal District Court for the District of Columbia, is supported by a trade association NetChoice, and challenges the CFPB’s authority over non-bank financial technology innovators. 

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The trade groups argue that Congress did not empower the CFPB to supervise large non-banks offering consumer financial services, including those behind products like Apple Wallet, Google Pay, and Venmo, reported Reuters. 

According to the complaint filed in Washington, D.C., federal court, “The bureau failed to show what consumer risks the rule was even meant to alleviate in its haste to dream up a problem in search of a solution.” 

They contend that the CFPB has not demonstrated any consumer risks or regulatory oversight gaps that would justify the rule, which applies to companies processing at least 50 million transactions annually. 

Both TechNet and NetChoice are represented by Mayer Brown in their legal proceedings against the CFPB. 

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NetChoice Litigation director Chris Marchese said: “The CFPB’s unlawful power grab undermines the rule of law, further bloats the administrative state and puts American consumers and innovation at risk.”  

TechNet EVP Carl Holshouser said: “Instead of fostering a regulatory environment that supports responsible innovation, the CFPB is undermining the very principles that make the U.S. a global leader in financial technology. By granting itself broad authority over a company’s operations, even those entirely unrelated to digital payments, the CFPB goes far beyond its mandate.” 

The CFPB, which has not yet commented on the lawsuit, had previously finalised a rule to bring large nonbank companies offering digital funds transfer and payment wallet apps under its supervision.  

Announced in November, the CFPB stated that the rule aims to offer consumers the same protections against fraud, privacy violations, and account closures that they receive from banks. 

CFPB director Rohit Chopra said at the time that digital payments “have gone from novelty to necessity and our oversight must reflect this reality.” 

Last month, Google filed a separate lawsuit against the CFPB, challenging the agency’s decision to oversee Google Payment Corp.