The Consumer Financial Protection Bureau said it will conduct supervisory exams of nonbank fintech companies that pose risks to consumers as Director Rohit Chopra seeks to level the regulatory playing field with supervised banks.
The CFPB said Monday that it is invoking a little-used legal authority to examine nonbank financial companies that pose risks to consumers. Invoking its authority will allow the bureau to supervise entities that may be fast-growing or are in markets outside its existing nonbank supervision program.
The CFPB also is seeking public comment on the
“Given the rapid growth of consumer offerings by nonbanks, the CFPB is now utilizing a dormant authority to hold nonbanks to the same standards that banks are held to,” Chopra said in a press release. “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.”
The CFPB has had the authority to examine nonbanks since 2013, but the agency only now has begun to invoke that authority, the agency said. The bureau described nonbanks as companies that do not have a bank, thrift or credit union charter and typically brand themselves as fintechs.
The Consumer Bankers Association has lobbied the CFPB for years to supervise fintechs and ensure that consumer products similar to those offered by banks are regulated and protected in the same way. Nearly half of all personal loans are originated by fintechs, up from 22% in 2015, the CBA has estimated.
"The banking industry is rapidly evolving. It's well past time for our rules and regulations to follow suit," said Richard Hunt, the CBA's president and chief executive. "As the rise in banking activity outside our nation’s well-regulated and well-supervised banking system accelerates, so too does the risk to consumers who do not receive the same level of protection from nonbanks as they do from traditional banks."
Under the Dodd Frank Act, Congress gave the CFPB authority to supervise nonbanks in the mortgage, private student loan and payday loan industries in addition to large depository institutions with more than $10 billion of assets and their service providers.
The CFPB also issued rules to supervise other nonbanks in specific markets, including consumer reporting, debt collection, student loan servicing, international remittances and auto loan servicing.
There is a third category of nonbanks subject to the CFPB's supervision that includes companies whose activities the bureau has determined pose risks to consumers. The bureau said its authority over nonbanks that pose risks “is not specific to any particular consumer financial product or service.”
Companies that are subject to the CFPB’s supervision based on a risk determination are given notice and an opportunity to respond. Companies also can provide input to the bureau on what information is released to the public.
In order to release information to the public about such entities, the CFPB said it is updating certain aspects of its procedures for risk determinations.
