The Consumer Financial Protection Bureau taskforce on federal consumer financial law released a report last week with recommendations on how to improve consumer protection in the financial marketplace.
The report is based on five interrelated principles that serve as the foundation for proposed systematic changes to the current legal and regulatory framework: consumer protection, information and education, competition and innovation, regulatory modernization and flexibility, and inclusion and access.
Chartered in January 2020, the taskforce engaged with external stakeholders, including consumer advocates, the CFPB’s combined advisory boards, state and federal regulators, and industry. The report discusses what the taskforce learned during its examination and outreach to stakeholders and offers recommendations for the future of consumer financial protection to Congress, the CFPB, and state and federal regulators.
Among 102 different recommendations, one of the more controversial suggestions was that Congress create a federal charter for nonbank fintech companies and possibly transfer creation and regulation of such a charter to the CFPB. The Office of the Comptroller of the Currency created such a charter in 2018, but it is mired in lawsuits — including from the Conference of State Bank Supervisors — and no company has used it yet. Currently, fintechs must comply with laws and regulations of each state in which they operate.
Other recommendations include addressing financial inclusion of the under- and unbanked, ex-convicts, immigrants and those who live in rural areas. Regulators should identify areas of potential cooperation and ways to create a “unified regulatory regime” to ease fintechs’ compliance burden. An independent review of the CFPB’s regulatory cost-benefit analyses should be established, the taskforce said, and use of nonfinancial alternative data in assessing creditworthiness should not be restricted without careful consideration. A full list of recommendations can be found in parts one and two of the taskforce’s report.
“I want to thank Taskforce Chair Todd Zywicki and members Dr. Howard Beales, Dr. Thomas Durkin, Jean Noonan, and William MacLeod for applying their considerable expertise and experience in consumer protection to prepare an insightful report that will be incredibly valuable to policymakers,” said Consumer Financial Protection Bureau Director Kathy Kraninger. “The bureau is already committed to many of the recommended ideas presented in the report. The taskforce recommendations help define and illuminate our current path.”