CFPB Focuses on Innovation; Creates New Office and Hints at Future Rulemaking

On May 24, 2022, the Consumer Financial Protection Bureau announced that it is opening a new office called the Office of Competition and Innovation in order to spur innovation in financial services through competition. This new office will replace the Office of Innovation which primarily processed company and product-specific applications for No-Action Letters and Sandboxes.

The CFPB believes that the creation of this new Office will help it fulfill its statutory mandate to promote fair transparent and competitive markets. Its goal is to create market conditions where consumers have choices, the best products win, and large incumbents cannot stifle competition. In order to achieve this objective, the Office of Competition and Innovation will do the following:

• Explore ways to reduce barriers to switching accounts and providers, to give consumers the ability to switch providers easily.

• Look at market structure problems that create obstacles to innovation, for example taking a look at payment networks and credit reporting systems which have only a few dominant players.

• Understand how bigger players gain an advantage over smaller players by stymying players that may have products more favorable to consumers. 

• Identify commonplace practical problems which may prohibit innovators from getting their products to market, like access to capital and talent. 

• Host events where entrepreneurs, small business owners, and technology professionals will be able to collaborate, explore obstacles, and share frustrations with government regulators 

Within the announcement, the CFPB also noted there will be a future rulemaking aimed at giving consumers access to their own data. 

See the complete announcement here. 

insideARM Perspective:

It's interesting that the CFPB professes to be interested in innovation geared at promoting fair and competitive markets, while simultaneously ensuring debt collectors are stuck in 1977, the year the Fair Debt Collection Practices Act (FDCPA) became the law of the land.

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Words are great; initiatives and announcements look good on paper, but what is the CFPB doing about current barriers to using 21st-century technologies? Where debt collectors are concerned, it appears the answer is nothing. The CFPB will do nothing. 

Take, for example, the fallout from the Hunstein decision. It has been thirteen very long months since the 11th Circuit Court of Appeals issued its catastrophic opinion which basically outlawed the use of letter vendors simply because in 1977 those that enacted the FDCPA could not envision this future technology. In order to avoid copycat suits, which cost both time and money, debt collectors have been forced to forgo using modern letter production technology (and the consumer protections that come with it). Though the CFPB has acknowledged and accepted the usage of letter vendors in the past, and even referenced usage of letter vendors within Regulation F, they have chosen to remain silent on the issue, ensuring debt collectors are stuck in 1977. 

As another example, while Reg F does create some safe harbors for debt collectors to contact consumers through the channels in which they would like to be contacted (primarily email and cell phone), the number of hoops created by Reg F still essentially requires debt collectors to get on the phone with consumers to gain permission to use modern channels of communication. When a debt collector gets a consumer on the phone (a rarity!) in order to follow the 1977 FDCPA, the steps a debt collector must take to verify the person's identity mirror the same methods used by 2022 scammers to steal identities. The net result is a "who's on first" scenario, where debt collectors can't communicate effectively with consumers and consumers are not able to learn about their options to resolve past due accounts. 

Within the May 24th announcement, Director Chopra said this: “Competition is one of the best forms of motivation. It can help companies innovate and make their products better, and their customers happier. We will be looking at ways to clear obstacles and pave the path to help people have more options and more easily make choices that are best for their needs.” [emphasis added]

Well, Director Chopra, debt collectors (and the consumers they service) would very much like to use technology created after 1977. We are eager for you to clear these obstacles and waiting for the CFPB's actions to match these words.