CFPB invokes “largely unused” Dodd-Frank law to scrutinise fintechs
The US Consumer Financial Protection Bureau (CFPB) has said it is invoking a largely unused legal provision to increase scrutiny of nonbank financial institutions.
CFPB director Rohit Chopra
Utilising this “dormant authority” within the regulator’s nonbank supervision programme, CFPB director Rohit Chopra says, will allow it to level the playing field between banks and nonbanks and protect consumers.
“This authority gives us critical agility to move as quickly as the market, allowing us to conduct examinations of financial companies posing risks to consumers and stop harm before it spreads,” Chopra says.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, Congress tasked the CFPB with supervising nonbanks, large depository institutions with more than $10 billion in assets, and their service providers.
These regulations give the CFPB the authority to review records of regulated nonbanks which do not have a bank, thrift, or credit union charter. “Many today operate nationally and brand themselves as ‘fintechs’,” the regulator says.
Congress mapped out three types of entities that would be subject to the CFPB’s nonbank supervision programme.
Firstly, nonbank entities in the mortgage, private student loan, and payday loan industries, regardless of size.
The second category includes “larger participants” providing consumer financial products and services, operating in consumer reporting, debt collection, student loan servicing, international remittances, and auto loan servicing markets.
The third category, initially implemented through a procedural rule in 2013 but which the CFPB has now begun to invoke, covers nonbanks of any type whose activities pose risks to consumers.
The CFPB says invoking this final category will allow it to be more agile and supervise entities that are fast-growing or those in markets outside the existing nonbank supervision programme.
The regulator recently brought legal action against remittance paytech MoneyGram, alleging that the company failed to deliver funds promptly to recipients abroad, “leaving families high and dry”, a claim MoneyGram has dismissed as “meritless”.
