US Treasury outlines fintech consumer protection recommendations
The US Department of the Treasury, in collaboration with the White House Competition Council, has released a report outlining recommendations to reduce the risks fintechs pose to consumer protection and market integrity.
The report details how new non-bank firms, in particular fintechs, are adding “significantly” to the number of firms competing in core consumer finance markets.
To shore up consumer protection, the report recommends that oversight for these newer firms should be “enhanced” with regards to consumer financial activities, such as risks related to data privacy and regulatory arbitrage.
The report recommends that regulators should provide a clear and consistently applied supervisory framework for bank-fintech relationships and that bank-fintech relationships must operate in compliance with the laws, regulations, and risk management standards applicable to the relevant insured-depository institution.
Regulators should also “robustly” supervise bank-fintech lending relationships for compliance with consumer protection laws and support innovations in consumer credit underwriting designed to increase credit visibility, reduce bias, and prudently expand credit to underserved consumers.
US Secretary of the Treasury Janet Yellen says that while fintechs’ moves into core consumer finance markets has increased competition and innovation, “it has not come without additional risks to consumer protection and market integrity”.
Yellen adds: “This report lays out actions that would maintain fair, transparent, and competitive markets while encouraging responsible innovation that benefits consumers.”
The report is a result of President Joe Biden’s July 2021 Executive Order, “Promoting Competition in the American Economy”, part of a series of reports assessing competition in various aspects of the economy.