- Source: law360.com
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On May 31, 2022, the Consumer Financial Protection Bureau closed out a comment period regarding an initiative that could bring more fintech firms and other nonbanks under the agency’s supervisory umbrella under authority that the CFPB has not often used. This initiative may open up nonbank firms, including online lenders, payment platforms, and “buy now, pay later” providers to targeted examinations from the Bureau.
If the CFPB concludes that a company’s conduct “poses risks to consumers,” it can bring them under supervision for at least two years. While the Bureau does not have specific standards for what conduct “poses risks to consumers”, it has said it may base its designations on allegations drawn from sources as varied as consumer complaints to whistleblowers to news reports.
During the comment period, the CFPB received pushback from trade groups representing a variety of nonbanks. However, the idea of performing these targeted examinations were generally welcomed by banking trade groups, including the American Bankers Association, and the Consumer Bankers Association.
One area where both sets of trade groups agreed was that they were reluctant to have the CFPB publicly disclose which firms would be subject to examination. The supervisory process for supervised institutions has historically been confidential, and any change to that could lead to a turn from precedence.
The ABA and CBA urged the agency to refrain from publishing its designation decisions and instead consider releasing only the names of nonbanks flagged for exams, then sharing any key findings through one of its periodic and anonymized supervision reports. There is no indication that the CFPB plans to delay the onset of these targeted examinations.