Consumer law reform group touches on state regulation

(Jan. 8, 2021) Considering the benefits and costs of preempting state law where conflicts can impede the provision of valuable products and services (such as the regulation of FinTech companies engaged in money transmission) is among the 100 total recommendations from a CFPB taskforce on federal consumer financial law released this week.

The report was issued by the bureau’s Taskforce on Federal Consumer Financial Law after about a year of deliberations. Formed in January 2020, the group was charged with developing recommendations for ways to improve and strengthen consumer financial laws and regulations.

Other recommendations for strengthening consumer laws which touched on states included: Continue to increase dialogue with state regulators to bridge knowledge gaps and streamline regulation, and; authorize CFPB to issue licenses to non-depository institutions that provide lending, money transmission, and payments services.

Additional, general recommendations highlighted by the group included:

  • Identify competitive barriers and make appropriate recommendations to policymakers and regulators for expanding access to the payments systems by non-bank providers.
  • Identify opportunities to coordinate regulatory efforts. “For example, the Bureau and prudential regulators should eliminate overlapping examination subject areas and reconcile inconsistent examination standards that unnecessarily expend multiple resources and can cause confusion,” the report stated.
  • Facilitate creditor access to immigrants’ credit information prior to their arrival in the United States in order to use that information in credit decisions.
  • Work with other agencies to create a unified regulatory regime for new and innovative technologies providing services similar to banks.
  • Exercise caution (which it said was a “recommendation for the CFPB, Congress, and other federal and state regulators”) in restricting the use of nonfinancial alternative data, “which can be very useful indicators of creditworthiness.”

Consumer Financial Protection Bureau’s Taskforce on Federal Consumer Financial Law Releases Its Report