Under the Trump administration, the federal agency that’s supposed to protect consumers from Wall Street and financial predators has thought of yet another way to strip consumers of their protections. The Consumer Financial Protection Bureau or CFPB announced Tuesday that, working with seven state regulators, it launched the American Consumer Financial Innovation Network or ACFIN, a network that it said would "enhance coordination among federal and state regulators to facilitate financial innovation."
The CFPB invited all state regulators to join ACFIN, and the attorneys general of Alabama, Arizona, Georgia, Indiana, South Carolina, Tennessee, and Utah took the offer.
Consumer advocates criticized the CFPB action because it gives banks, fintech companies, and other corporations no-action letters and approvals that will protect companies from enforcement and determine potentially new risky financial products and services to be in compliance with the law.
“The new ‘compliance assurance sandbox’ could be a dangerous Sahara desert parched of consumer protection if the CFPB approves risky products that evade the law and endanger consumers,” said Lauren Saunders, associate director of the National Consumer Law Center. “We strongly disagree with the CFPB’s claim that a single Bureau employee can ‘approve’ an evasive means of skirting the law and thereby give companies a safe harbor that stops consumers and states from enforcing consumer protection laws.”
“The CFPB’s mission is to protect consumers, but the bureau’s no-action letter policy and compliance assurance sandbox does the opposite,” said Linda Jun, senior policy counsel at Americans for Financial Reform. “By approving products and services without seeking public input or getting information along the way about how the product is helping or hurting consumers, the CFPB’s innovation policies provide companies with cover instead of accountability for unanticipated harms or dangers that their innovative products may cause.”
“Innovation isn’t advanced by handing out individual grants of immunity from law enforcement, and certainly not by companies lobbying Bureau staff for deregulation-by-letter,” said Will Corbett, litigation director at the Center for Responsible Lending. “Instead, the Bureau should focus equally on consumer risk and benefits and should develop policy in a transparent manner.”
In addition to the new policies, the CFPB Tuesday also issued its first no-action letter under Director Kathy Kraninger, creating a mechanism to allow mortgage lenders to pay for housing counseling at agencies that refer business to them. “While there may be valid reasons to facilitate funding for housing counseling, changes in anti-kickback rules should be made after public notice and comment to prevent evasions, not through a secretive, one-sided no-action letter process,” said Odette Williamson, staff attorney at the National Consumer Law Center.
“With Americans shouldering record debt, we don’t need our own finance cops to help Wall Street devise ways to add more weight,” said Bart Naylor, financial policy advocate at Public Citizen.
“Every sandbox approval and no-action letter that the CFPB issues will draw close scrutiny, and the CFPB risks a legal challenge if it approves efforts to evade the law or products or practices that put the public at risk,” Saunders said.
In addition to “approvals,” the CFPB originally proposed to issue orders granting exemptions from statutes or regulations. While exemptions weren’t included in the new policies, the CFPB announced that it intends to propose a legislative rule for the issuance of orders granting exemptions from regulatory requirements and other categories of exemptions.
“The CFPB should abandon any plans to issue orders allowing companies to ignore consumer protection laws,” Saunders said.