Fintechs, telcom, healthcare providers, BNPL (Buy Now, Pay Later), and others should now be on high alert. The Consumer Financial Protection Bureau (CFPB) now insists that it has had regulatory authority over nonbank companies all along, which means that companies who previously believed they were not subject to the oversight of the CFPB should start preparing now. If the CFPB considers any of your recovery or collections efforts to be a “risk to consumers,” it will investigate.

On April 25, 2022, the CFPB announced that it plans to use its supervisory authority to examine any nonbank financial company that poses a risk to consumers. According to CFPB Director Rohit Chopra:

“Given the rapid growth of consumer offerings by nonbanks, the CFPB is now utilizing a dormant authority to hold nonbanks to the same standards that banks are held to. This authority gives us critical agility to move as quickly as the market, allowing us to conduct examinations of financial companies posing risks to consumers and stop harm before it spreads.”

Here’s what you need to know about the announcement and the CFPB’s intentions.

The Definition of Risk is not Clear

The announcement didn’t explicitly define what The CFPB considers “risky conduct,” but it may include unfair, deceptive, or abusive acts or practices.

The CFPB will look to use multiple sources to determine which entities it can reasonably determine “pose a risk” to consumers, including publicly available resources like bad press; it should be assumed this also includes online reviews. Also: the CFPB does not mention the merits of the complaints, only the volume.

(Potentially) Airing Dirty Laundry

In addition to announcing that the CFPB has purview over nonbank entities, the April 25, 2022 release detailed that the CFPB will now publicly release supervisory decisions and orders.

In the past, if an examination yielded findings, those would be private matters that the examinee could correct. Now, the CFPB will make those findings public for consumers, investors, and other business partners to see.

The examinee will have an opportunity to essentially convince the director of the CFPB why their findings should not be made public, but ultimately, the CFPB Director has discretion. In fact, the CFPB explicitly declined to codify a standard regarding the criteria that must be met for publication.

How Can You Prepare?

  • If you’re not already taking a customer-first approach, it’s time to start. Eliminating potential customer complaints is a good way to keep yourself off the CFPB’s radar. You can start by reducing friction in authentication, one of the most difficult parts of customer contact. 
  • Meet customers where they want to be met by providing them with multiple ways to reach your organization, and be responsive. Creating (and controlling) your social media presence will be key to avoiding scrutiny. 
  • Get familiar with the CFPB examination procedures and prepare your compliance department. You can start by viewing the first part of the six part Research Assistant webinar series A Complete Guide to Risk and Gap Assessments.  

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The iA Institute Consumer Relations Consortium and Innovation Council member companies are experts in navigating CFPB exams by integrating robust compliance with strategy and technology. Learn more about these peer groups and how member companies work together to envision the future, and then map how to get there here.