CFPB to Tighten Noose on Nonbank Fintech Firms
The Consumer Financial Protection Bureau (CFPB) published a report on the financial challenges faced by Americans in rural communities and announced its decision to invoke a largely unused legal provision to examine nonbank financial companies that pose risks to consumers.
The report on rural community challenges highlights that many of these communities lack access to physical bank branches and are more likely to seek credit from nonbanks. Since rural Americans are less likely to have a credit history and more likely to use non-bank credit, this results in rural consumers paying more for credit. However, the provision of non-bank credit by non-bank lenders is not very strictly scrutinized by the regulators at present. This brings us to another development, wherein CFPB is seeking to level the regulatory playing field (with respect to non-bank entities) with supervised banks by invoking its dormant authority to examine nonbank financial companies that may pose risks to consumers. CFPB also published the procedural rule that is relevant in this context. The invoked authority being discussed will allow CFPB to supervise entities that may be fast-growing or are in markets outside its existing nonbank supervision program.
Under the Dodd Frank Act, after the 2008 financial crisis, Congress tasked CFPB with supervising certain nonbanks and their service providers, in addition to large depository institutions with over USD 10 billion in assets. Nonbanks do not have a bank, thrift, or credit union charter; many today operate nationally and brand themselves as “fintechs.” Congress had authorized several categories of entities subject to the nonbank supervision program of CFPB; the categories cover all nonbank entities in the mortgage, private student loan, and payday loan industries, regardless of size; entities that are "larger participants” in other nonbank markets for consumer financial products and services; and nonbanks whose activities CFPB has reasonable cause to determine pose risks to consumers. While CFPB did implement the provision through a procedural rule in 2013, the agency has now begun to invoke this authority.
Related Links
- Press Release on Nonbanks
- Associated Procedural Rule (PDF)
- Press Release on Rural Banking Access
- Report on Rural Banking Access (PDF)
Keywords: Americas, US, Banking, Credit Risk, Non-Bank Financial Institutions, Dodd Frank Act, Lending, Consumer Lending, CFPB
Previous Article
BIS Hub Announces TechSprint on CBDCs, Publishes Multiple ReportsRelated Articles
EU Agencies Update LCR Rule and Macro-Prudential Policy Recommendation
The European Commission (EC) published the Delegated Regulation 2022/786 with regard to the liquidity coverage requirements for credit institutions under the Capital Requirements Regulation (CRR).
EBA Publishes Regulatory Standards to Identify Shadow Banking Entities
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying the criteria to identify shadow banking entities for the purposes of reporting large exposures.
EIOPA Examines Physical Climate Risk Exposure, SII Non-Compliance
The European Insurance and Occupational Pensions Authority (EIOPA) published a report assessing insurers' exposure to physical climate change risks
NGFS Report Explores Quantification of Climate Risk Differentials
The Network for Greening the Financial System (NGFS) published two reports to aid central banks and regulators in their oversight of the financial sector and in their central bank operations
EC Publishes Results on Review of Web Accessibility Directive
The European Commission (EC) published the results of a public consultation, held in October 2021, on the review of the Web Accessibility Directive.
MAS Consults on Adjustment Spreads for Conversion of SOR Contracts
The Monetary Authority of Singapore (MAS) and the SC-STS are jointly consulting, until June 10, 2022, on setting adjustment spreads for the conversion of legacy SOR contracts to SORA reference rate.
OSFI Discusses Benchmark Rate Transition, Sets Out Work Priorities
The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.
EBA Proposes Standards to Support Secondary NPL Markets
The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.
EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution
The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).
EBA Issues Standards for Crowdfunding Service Providers Under ECSPR
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.