United States: CFPB Makes FinTech Headlines

The Consumer Financial Protection Bureau (the "CFPB" or "Bureau") made headlines in FinTech on October 24, 2016. First, the Bureau released its first-ever Project Catalyst report on promoting consumer-friendly innovation (the "Report"). The Report summarizes the work conducted by Project Catalyst to date and sets forth in broad strokes some of the financial innovations that the CFPB is encouraging. While the Report does not represent new policy, it provides a helpful glimpse into the key developments in financial services that the Bureau is encouraging or monitoring.

On the same day, Director Richard Cordray addressed Money 20/20 in Las Vegas, Nevada, covering a range of FinTech issues that affect consumers. Key points from the Director's remarks are identified below.

The CFPB launched Project Catalyst in November 2012 as a means of achieving Congress' statutory directive to the agency to "operate transparently and efficiently to facilitate access and innovation." The Report highlights Project Catalyst's work to date and describes a number of innovative market developments that have the potential to benefit consumers. The Report also highlights Catalyst's efforts to engage with industry stakeholders and government agencies through Project outreach and conversations, including through its "office hours" program. The Report notes the "Trial Disclosure Waiver Policy" and "No-Action Letter Policy" as two initiatives developed by the CFPB to help facilitate innovation, but does not provide empirical data about the effectiveness of these policies. The Report, however, does highlight a number of collaborative research and testing projects that the Bureau has conducted with various companies, such as testing methods of promoting consumer saving among prepaid card users. The CFPB said that it welcomes additional testing of innovations that have the potential to serve consumers' financial needs, either with or without CFPB collaboration.

Aside from reporting on Project Catalyst's work, the Report also highlights market innovations that the CFPB believes have the potential to benefit consumers. The CFPB expressed a commitment to using its policies and programs to help facilitate innovation in the following areas:

  • Cash flow management, including tools and services that allow a consumer to "smooth" his or her income, access accrued wages earlier than his or her regular payday, or deduct a portion of his or her wages and set it aside for future recurring payments.
  • Improved credit assessment, including potential opportunities for creditors to use non-traditional underwriting data or machine learning to help create an effective credit scoring model for consumers who are "credit invisible," while being mindful of potential risks associated with new underwriting methods.
  • Consumer financial data access, including tools that allow consumers to permit personal financial management tools to access data. In his Money 20/20 remarks, Director Cordray strongly endorsed open financial data, stating that the Bureau is "gravely concerned" that financial institutions are limiting or shutting off access to financial data, rather than "exploring ways to make sure that such access...is safe and secure." The Director continued: "Let me state the matter as clearly as I can here: We believe consumers should be able to access this information and give their permission for third-party companies to access this information as well."
  • Student lending and refinancing, noting that some FinTech companies have reported that incumbent servicers may create obstacles for new entrants to enter the student loan refinancing market, such as precluding such a lender from obtaining an accurate payoff balance from the originator.
  • Mortgage servicing platforms, specifically, servicer efforts to replace legacy systems with modern technology platforms that improve loan servicing through features such as automated reconciliations and user-friendly interfaces.
  • Credit reporting accuracy and transparency, acknowledging that industry participants ranging from incumbent banks to FinTech startups are offering consumers more information about their credit scores and credit reports on a more regular basis than has been the case historically. The Bureau also recognized that new tools and services are being used to help consumers understand how their actions may affect their credit standing and help prompt consumers to make beneficial changes in their behaviors.
  • Peer-to-peer payments, noting that many companies are working to develop services that allow consumers to make peer-to-peer transfers more quickly and at lower cost.
  • Savings, noting that some companies are creating tools to help consumers automate their choices to save money and help advise consumers as to how much they can afford to save.

Throughout the Report, the CFPB makes clear that the agency does not believe that FinTech companies receive special regulatory treatment as compared to industry incumbents. The Report states that it is "especially important for banks and non-banks to be held accountable to the same compliance standards and oversight, which is known as the level playing field that the Bureau is working to achieve."

In his Money 20/20 remarks, Director Cordray reiterated this "equal treatment" point: "Everyone who provides consumers with financial products and services must adhere to the same standards and will be held to the same expectations. [The Bureau is] not looking to punish anyone merely for raising novel issues that present unsettled points of law or questions that fall into unforeseen cracks in the regulatory framework."

Director Cordray's remarks also are noteworthy because of the position he articulated for the Bureau related to safe and secure—but open—access to consumers' financial data. Noting that some financial institutions have declined to permit third-party personal financial planning providers to access data concerning the accounts of consumers, the Director suggested that the burden of mitigating information security risks should rest with the financial institution. This approach stands in stark contrast to the approach prudential regulators have taken with respect to information security, under which financial institutions are directed to verify and validate third parties' risk management and risk mitigation in connection with consumer information sharing and information security.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Calvin Funk
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions