Those seeking to innovate in the financial services sector might view the CFPB as more of an obstacle than a partner. But bureau Director Richard Cordray sees the consumer protection watchdog as very much a friend of fintech. During a keynote session capping the opening day of Money20/20 in Las Vegas, Cordray said the CFPB and regulated fintech providers can learn a lot from each other.
Cordray struck an amenable tone in his address on Sunday evening, saying that emerging fintech has the potential to help improve the lives of consumers—especially the underbanked. “We’re in a promising time where [fintech providers] are aggressively rethinking old methods and understanding that it’s possible to knock down some of the barriers to the financial system,” Cordray said. Among the specific fintech categories Cordray singled out for praise were payments, lending, credit reporting and underwriting. “But we’re seeing potential across the spectrum,” he added.
Cordray also said he was sympathetic to many of the regulatory challenges imposed upon startups and other providers looking to develop fintech products, such as the patchwork of regulators—often with inconsistent or conflicting rules—with which fintech providers must comply. “We have, unfortunately, a somewhat fragmented regulatory system, and that can be hard for innovators to work through,” Corday noted. The various regulators have a responsibility to work together to ensure regulations are cohesive and the path to compliance across agencies is clear, he said. Meanwhile, the CFPB has taken steps to help alleviate some regulatory uncertainty, Cordray noted, including a policy enacted earlier this year of enabling firms to apply for no-action letters—assurances from the CFPB that it doesn’t intend to an enforcement or supervisory action about a specific product or service. But compliance experts suggest approaching no-action letters with caution, and companies may have reasons to avoid requesting one, including opening itself up to increased scrutiny.
Cordray also stressed the importance of communication between regulated fintech providers and the bureau. An open dialogue is important not just for regulated parties to understand the CFPB’s regulatory expectations—but also for the agency to learn more about the needs and wants of the companies it oversees. “Part of our job is to listen carefully to those who are doing the innovating and trying to understand what obstacles they’re running into,” Cordray observed. “We want them to be able to do better things for customers … but if we’re in the way, then we should have discussions about it and see what we can do to eliminate that.”
As to specific recommendations to fintech providers, Cordray urged companies to leverage the data they have access to—such as direct consumer complaints—to find patterns and identify areas in which their intentions about a product or service aren’t translating into the actual experience for the user. Ultimately, Cordray said, it comes down to keeping the focus on serving consumers’ needs, and the rest will follow—and not just compliance. “You build a business for the long term based on customer satisfaction, and making people want to come back to you and spread the word,” he noted. “Put the consumer first … and the sky’s the limit.”
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