Four Things You Absolutely Must Know about the CFPB's Big Announcement This Week

The CFPB's announcement from earlier this week is a doozy.

The Bureau insisted (surprise!) that it has had regulatory authority over nonbank financial companies all along. It also reasserted its interest in investigating any company - nonbank or otherwise - that poses a risk to consumers, but did so without explaining how it defines "risk to consumers." Oh, and by the way, it also plans to make exam findings very, very public.

In short, compliance risk just went up for everyone.

Here are the four things you absolutely need to know about the CFPB's announcement and what it means for your company.

1. Which sources of information will factor into the CFPB's new consumer risk standard? All of them.

The CFPB tells us that it will determine if a company poses a risk to consumers by looking at many, many different kinds of sources, including CFPB complaints, judicial opinions, administrative decisions, whistleblower complaints, state partners, federal partners, or news reports. You'll need to watch out for bad press. You can assume, also, that the agency will include online reviews.

The agency does not define "risky conduct," but that standard may certainly include unfair, deceptive, or abusive acts or practices or other acts or practices that potentially violate federal consumer financial law.

2. Didn't deserve that bad press? Doesn't matter.

The agency announcement makes no mention of the merit of complaints, just the volume. In other words, it doesn't seem to matter what consumers say you did or if you earned that criticism or not. If you are getting a lot of criticism, the CFPB will be paying attention.

What this means: Perception is reality.

If your company or its clients are not thinking of collections and financial services as customer service, you may want to revisit your strategy.

3. Everything will be public. Everything.

If a supervisory examiner finds an issue, it will no longer be a private matter to be corrected. Instead, the proverbial dirty laundry will be aired publicly for consumers, investors, and other business partners to see. In the CFPB’s view, the public interest in transparency outweighs the need for confidentiality in the supervisory process. Further, the CFPB states that publicly released supervisory decisions and orders will be precedent for future proceedings.

The CFPB won’t be easily swayed regarding whether it has the authority to take these actions.

4. Nonbanks: the CFPB is coming for you now, too.

Fintechs, telcom, healthcare providers, BNPL (Buy Now, Pay Later), and others should be on high alert. Though this announcement specifically references fintechs, the announcement covers any entity that interfaces with consumers and impacts consumers’ financial status. If any company dealing with consumers in a financial capacity thinks they are immune from CFPB scrutiny, they should think again.

What does this all mean?

Any entity which has already been – or may now be – subject to CFPB supervisory examinations should ensure that their compliance department is not window dressing. Compliance personnel are not revenue generators, BUT as the CFPB’s most recent publication makes clear, the stakes are high and compliance needs to do its job really well.

The best defense is a strong compliance group and compliance management system to prevent findings before they occur.

What's more, compliance professionals have to understand what customer service means and how that standard can and should inform their work. Compliance professionals who get it will help reduce lawsuit risk and help to stem the flow of bad reviews and publicity. Those who don't will only exacerbate the problem.

What you can do about it

This is. . . a lot to process.

Regulatory risk has just gone up across the industry and compliance professionals should be asking themselves some key questions. Are you sure you are finding all your company's gaps? Should you consider a risk and gap assessment? Do you have the expertise or planning documents to conduct an effective one? Are you clear on recent changes to the CFPB exam manual? Do you have a network of peers or experts you can go to with questions about your CMS, your policies, or your blind spots?

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