CFPB should bolster oversight of nonbank financial services

May 31, 2022

CUNA appreciates the Consumer Financial Protection Bureau (CFPB) bolstering its oversight of nonbanks in consumer financial services, it said in comments filed Tuesday. The CFPB issued a procedural rule amending the procedures the CFPB uses to establish supervisory authority over a nonbank based on risk determination.

“In particular, credit unions are concerned about the growing influence of unsupervised entities offering financial products to consumers designed to be glossy, heavily marketed, tech-savvy alternatives to traditional banking services,” the letter reads. “These business models of nonbank providers often rely on avoiding accountability and prudent regulation. We agree that there is a benefit to consumers in the Bureau supervising these entities and subjecting them to the same standards as traditional financial institutions.”

While credit unions welcome innovation in consumer finance, CUNA notes fintechs and other nonbank actors have “outpaced prudent regulatory oversight,” ultimately resulting in consumer harm.

“The absence of effective regulatory oversight creates an uneven playing field that materially disadvantages traditional service providers,” it reads. “Credit unions and other well-established providers are heavily regulated for safety and soundness and compliance with consumer protection laws and regulations. This is often not the case for many nonbanks.

CUNA also recommends the CFPB:

  • Continue to stay focused on nonbank providers as their business model and substantial growth could result in irreparable harm to consumers.
  • Establish a procedural mechanism for publicly releasing information related to nonbank risk-determinations.
  • Focus its supervisory resources on influential fintechs and other entities not currently subject to the authority of a federal banking regulator, such as CUSOs.