On January 5, 2021, the Consumer Financial Protection Bureau (CFPB) Taskforce on Federal Consumer Financial Law (Taskforce) issued a final report (Report) with recommendations on how to improve consumer protection in the financial marketplace. In proposing changes to the existing legal and regulatory framework, the Report is centered around five key principles: (1) consumer protection; (2) information and education; (3) competition and innovation; (4) regulatory modernization and flexibility; and (5) inclusion and access.
Chartered by the CFPB in January 2020, the Taskforce was charged with examining ways to harmonize and modernize the federal consumer financial laws. The five-member Taskforce was comprised of academics, financial services attorneys, and former regulators. It spent a year examining the existing legal and regulatory environment and consulting with external stakeholders including consumer advocates, state and federal regulators, and the industry, before issuing the Report.
The Report is over 900 pages long, consisting of two volumes. Volume I of the Report provides an extensive historical and economic overview of consumer finance and current consumer protection regulation. Volume I also discusses issues surrounding innovation, financial inclusion, and privacy.
Volume II of the Report contains over 100 recommendations to the CFPB, Congress, and state and federal regulators to strengthen consumer protection. Key recommendations include:
- Authorizing the CFPB to issue licenses to non-depository institutions that provide lending, money transmission, and payments services;
- Expanding access to the payment system to unbanked and underbanked consumers, and ensuring consistent treatment by applying the same rules to similar financial products;
- Identifying competitive barriers and making appropriate recommendations to policymakers and regulators for expanding access to the payments systems to non-bank providers;
- Researching and developing policies tailored to the unique challenges of formerly incarcerated people;
- Researching and developing policies to address problems of financial inclusion in rural communities;
- Facilitating creditor access to immigrants’ credit information prior to their arrival in the United States in order to use that information in credit decisions;
- Researching consumer reporting issues that arise in connection with a consumer’s bankruptcy;
- 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;
- Identifying opportunities to coordinate regulatory efforts, including eliminating overlapping examination subject areas and reconciling inconsistent examination standards;
- Increasing dialogue with state regulators to bridge knowledge gaps and streamline regulation;
- Creating a unified regulatory regime for new and innovative technologies providing services similar to bank services;
- Evaluating any positive or negative effect on inclusion as part of the CFPB’s cost-benefit analyses as appropriate;
- Exercising caution (a recommendation to the CFPB, Congress, and other federal and state regulators) in restricting the use of nonfinancial alternative data;
- Clarifying the obligations of credit reporting agencies and furnishers with respect to disputes under the Fair Credit Reporting Act; and
- Periodically assessing the accuracy and completeness of consumer credit reports.
The potential impact of the Taskforce’s recommendations may depend, at least in part, on how they are viewed and/or adopted by CFPB leadership and other stakeholders following the upcoming Presidential administration change.