Proposals would undermine competition in the financial services industry and fail to protect consumers.
WASHINGTON, D.C. – The Financial Technology Association (FTA) today submitted responses to the Consumer Financial Protection Bureau’s requests for comment on its proposed non-bank registries, questioning not only the Bureau’s legal authority to advance the registries but also arguing that the proposals are arbitrary, undermine the Biden Administration’s directive to promote competition in the economy, and fail to achieve their stated purpose of protecting consumers.
“Fintech innovation helps people better manage their financial lives with personalized and easy-to-use services, whether it’s balancing monthly expenses, saving for retirement, or starting a small business,” said Penny Lee, President and Chief Executive Officer of the Financial Technology Association. “Regulation ought to be a tool that keeps our financial systems safe and makes it possible for people to access responsible financial services, but the Bureau’s proposals would leave people with fewer financial options and stifle innovation.”
In its comment letters, FTA urged the Bureau to withdraw the proposed rules and expressed its commitment to working constructively on alternative ways to enhance consumer protection. FTA outlined several concerns with the Bureau’s proposed registries, including:
- The Bureau lacks the statutory authority to advance the proposed rules. The Consumer Protection Act of 2010 gave the Bureau authority to engage in market monitoring from time to time, not to develop multiple, ongoing, and permanent databases. The proposals to create new, perpetual registration regimes and accompanying databases requiring ongoing submissions from certain entities exceeds the statutory and common-sense market monitoring authority Congress provided to the Bureau.
- The Bureau’s proposals are arbitrary and ineffective in identifying potential consumer risks. The Bureau alleges that evidence of past state and federal orders and the use of common and legal contractual provisions indicate a higher risk of current harm to consumers but fails to substantiate these claims. The Bureau’s premise that past violations or resulting orders dating back as far as ten years are evidence of current risk of harm is more likely to mislead or confuse consumers regarding the current state of the reporting company. The Bureau further indicates that common and legal contractual terms and conditions pose a risk of consumer harm even though such terms are not precluded by statute, regulation, or judicial decision. The Bureau has other options to identify potential risk of harm to consumers that are more effective, including its consumer complaint database, a real-time source of information to prioritize supervision, examination, and enforcement activity.
- Regarding the terms and conditions registry, the proposal violates market monitoring confidentiality requirements. The Bureau’s market monitoring authority allows it to make public marketing monitoring information through aggregated reports to avoid divulging specific firm information and disclosing proprietary and confidential information. The proposal, however, violates the explicit requirement to create an aggregated report and, instead, envisions a new database that would include specific information about the reporting entity.
To read FTA’s complete response to the Bureau’s proposed rule to establish a public registry of terms and conditions and proposed registry to capture past state and federal orders issued by entities other than the Bureau, click here and here, respectively. FTA represents responsible, regulated, and transparent financial technology companies that comply with all applicable consumer protection laws at the state and federal levels. To learn more about how financial technology companies are regulated, read FTA’s white paper, Fintech Regulated, Explained.
The Financial Technology Association (FTA) is a Washington, DC-based trade association representing industry leaders shaping the future of finance. We champion the power of technology-centered financial services and advocate for the modernization of financial regulation to support inclusion and responsible innovation.