CFPB doubling down on fintechs

The Consumer Financial Protection Bureau said it would carry out supervisory exams of nonbank fintech companies that pose a risk to consumers. The CFPB has had the authority to look into nonbanks since 2013, but it’s only decided to invoke that authority now.

Why should we care?
The CFPB’s expanded scope suggests that, as nonbanks have taken up a larger chunk of the financial market, regulators and traditional banks have come to an agreement that nonbanks should be subject to the same scrutiny as their more established counterparts. “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,” said CFPB Director Rohit Chopra. “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.” For years, the Consumer Bankers Association has lobbied the CFPB to exercise its supervisory authority in the fintech space; the CBA cited the personal loan space as a particularly sensitive market lacking CFPB oversight, given that fintechs offer almost half of all personal loans, as compared to 22% in 2015. We may see more frequent audits of fintechs in the coming months, with CFPB contact a rite of passage as fintechs grow into larger institutions.