With the new year comes new Consumer Financial Protection Bureau (“CFPB”) Task Force recommendations regarding modernizing the consumer financial market. The CFPB Task Force wasted no time in publishing a two-volume, 800-page report on January 5, 2021. The report contains roughly 100 recommendations on ways Congress, the CFPB, State and Federal regulators can modernize and improve the consumer financial regulatory and legal environment. Not surprisingly, many of the Task Force’s recommendations focus on the growing number of non-bank and fin-tech companies.{1}
First, the Task Force recommends that Congress either (i) “authorize the [CFPB] to issue licenses to non-depository institutions that provide lending, money transmission, and payments services,” with licenses “provid[ing] that these institutions are governed by the regulations of their home states, even when providing services to consumers located in other states,” or (ii) “clarify that the [Office of the Comptroller of Currency (the “OCC”)] . . . has the authority to issue charters to non-depositories engaged in lending, money transmissions, or payment services.” Without going into huge amount of detail, the Task Force next recommends that competitive barriers to expanding access to non-bank payment system providers should be addressed and commented upon by policymakers. The Task Force further suggests that fin-tech companies with multistate operations should be subject to a single set of laws to promote consistency, which could reduce unnecessary regulatory costs while at the same time promoting competition. The Task Force also recommends that the CFPB weigh costs and benefits before deciding to preempt State law.
The Task Force calls for heightened regulatory coordination between the CFPB and other Federal and State regulators. In addition, the Task Force opines upon the following:
the use of alternative data; suggested changes to the [CFPB’s] internal organization; competition in the consumer financial marketplace, including with respect to the cost of credit, the effect and burden of state licensure requirements, and settlement servicing prices; consumer credit reporting, including clarifying the obligations of credit reporting agencies and furnishers with respect to dispute investigations; consumer empowerment and education; equal access to credit and financial inclusion; disclosure requirements; electronic signatures and document requirements; disparate impact; privacy; small dollar credit; and enforcement and supervision.
Accordingly, it appears State and Federal regulators will be viewing non-traditional creditors with additional scrutiny in coming years, a deviation from the past. In addition, given the recent victory of President-elect Joe Biden, it is likely that the CFPB and related Task Force will take an Obama-era approach of regulation by enforcement (meaning the U.S.A. can likely expect increased CFPB-related litigation moving forward over the next several years).
