June 12 (Reuters) - The head of the top U.S. watchdog

agency for consumer finance on Wednesday called on lawmakers to

adopt greater protections against the collection and use of

consumers' data from payment processing and so-called

buy-now-pay-later services.

Rohit Chopra, director of the U.S. Consumer Financial

Protection Bureau, delivered his first testimony on Capitol Hill

since a Supreme Court decision last month upholding the

constitutionality of the agency's funding structure.

In prepared remarks, Chopra cited recent media reports

according to which companies such as JPMorgan Chase & Co ( JPM )

and PayPal ( PYPL ) planned to allow the use of customer

payments data for targeted advertising and said it was "critical

that Congress must act too."

"These plans to monetize sensitive financial transaction

data are a reminder that the United States is slowly lurching

toward more financial surveillance and even financial

censorship," he said.

PayPal ( PYPL ) did not immediately respond to a request for comment

but Trish Wexler, a representative for JPMorgan Chase ( JPM ), told

Reuters Chopra was mistaken and that Chase in fact allowed

customers to opt in to receive coupons for online shopping.

"No transaction or other personal information is ever shared

in developing these discount offers," she said.

Chopra likewise told the committee he was concerned that

companies offering buy-now-pay-later services could leave

consumers with little choice but to allow similar uses of their

data.

The CFPB last month issued an interpretive rule treating

such companies as credit card providers and requiring them to

investigate disputed charges and issue refunds.

Chopra also rejected assertions from Senator John Kennedy, a

Republican from Louisiana, that his agency was illegally drawing

funding from the Federal Reserve because the central bank has

recently been operating at a loss.

Such arguments have circulated among agency critics since

last month's Supreme Court decision, which rejected

industry-backed arguments that the Constitution did not allow

the CFPB to receive funding outside the congressional

appropriations process.

"How are you entitled to any money right now? The Federal

Reserve doesn't have any earnings," said Kennedy.

"I can tell you we've looked at this issue. We do believe

wholeheartedly everyone is complying with the statute," said

Chopra.