As political tides shift, so too does the regulatory outlook for consumer financial services. Among the key documents that could shape the direction of U.S. financial regulation is a January 2021 report by the CFPB Taskforce on Federal Consumer Financial Law. Released during the final days of the first Trump administration and the Trump/Kraninger CFPB, the report offered 100 or so recommendations (in two volumes) aimed at modernizing consumer financial laws and improving the efficiency of regulatory oversight. While its recommendations have yet to gain significant traction, the report remains a potential playbook for policymakers, particularly since it will align more closely with the new administration's deregulatory vision.
Revisiting the Taskforce's Vision
The Taskforce's report was rooted in five guiding principles:
- Enhancing Consumer Protection: Strengthening safeguards to prevent unfair, deceptive, or abusive practices remains central to federal financial oversight
- Improving Access to Information: Consumers need better access to financial education and transparent information to make informed decisions
- Encouraging Competition and Innovation: A vibrant financial services marketplace fosters innovation and drives better outcomes for consumers
- Modernizing Regulations: Acknowledging the dynamic nature of financial services, the Taskforce advocated for more flexible and adaptive regulations
- Expanding Financial Inclusion: Addressing the needs of underserved communities, including the unbanked, underbanked, and those in rural areas, was a priority
One Hundred Recommendations
Several proposals from the report stand out as potential game changers (although these are now four years old):
- Federal Licensing for Non-Banks: The Taskforce suggested granting the CFPB authority to issue federal licenses to non-depository institutions, such as lenders and money transmitters, as a means to reduce regulatory fragmentation
- Level Playing Field for Fintech: Work with other agencies to create a unified regulatory regime for new and innovative technologies providing services similar to banks
- Preemption of State Laws: The report explored the benefits of preempting certain state laws that could impede innovation, particularly in the fintech space
- Promoting Inclusion: Specific initiatives were recommended to address financial barriers for underserved groups, including rural communities and formerly incarcerated individuals
- Streamlining Disclosure Requirements: Proposals included simplifying consumer disclosures to improve understanding and reduce compliance burdens
- Supervisory Exams: Proposals included maximizing the CFPB supervisory impact by redirecting resources from grading a compliance management system to expanding the scope, depth, and frequency of examinations, especially for covered institutions that may not currently be on an examination schedule
A Potential Playbook, Not a Mandate
While the report provides a detailed framework and concepts, it is not prescriptive. Instead, it serves as a set of recommendations (from 2021) designed to inform future policy discussions. Whether these ideas are implemented depends on the political, economic, and regulatory priorities of the administration and Congress.
For example, the Biden/Chopra CFPB had focused heavily on consumer protection, equity, and enforcement, prioritizing issues like junk fees, debt collection practices, and alleged predatory lending. Many of the Taskforce's recommendations, particularly those related to deregulation and federal preemption, would be a significant shift in approach. Some of the changes may require Congressional action.
Stay tuned for whether and how the Trump CFPB could breathe new life into these ideas.
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To read the Taskforce Report Volume I, click here: https://files.consumerfinance.gov/f/documents/cfpb_taskforce-federal-consumer-financial-law_report-volume-1_2022-01_amended.pdf
To read the Taskforce Report Volume II, click here: https://files.consumerfinance.gov/f/documents/cfpb_taskforce-federal-consumer-financial-law_report-volume-2_2022-01_amended.pdf
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