In the wake of the 2008 financial crisis, the U.S. Congress passed the Dodd-Frank Act, empowering enforcement agencies to aggressively investigate the practices of financial institutions in the name of protecting consumers from unfair or risky practices.
The world is a very different place now than when Dodd-Frank was first passed. But that does not appear to be an obstacle to the Consumer Financial Protection Bureau (CFPB), which announced that it will be using the law to supervise fintechs and “nonbanks” at its discretion.
“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,” said CFPB Director Rohit Chopra in a statement.
Needless to say, there is a great deal of worry about exactly how the government agency will determine what makes a financial institution worthy of such intense oversight. It is presumed that the CFPB will base such judgments on complaints by whistleblowers or government partner entities. Perhaps anticipating the worry over the lack of clarity on this issue, the CFPB announced a procedural rule to increase the transparency of this process going forward.