CFPB establishes new unit to promote fairness in financial services industry

The Consumer Financial Protection Bureau (CFPB) is setting up a new office to help it carry out its mandate of promoting fair, transparent, and competitive financial services markets.

The Office of Competition and Innovation, as the new unit is called in the CFPB announcement, will be tasked with helping to spur innovation in the financial services industry in the United States. It will do this by simultaneously promoting competition and identifying obstacles faced by new market entrants to address them.

The new unit replaces the Office of Innovation, which was focused on an application-based process to confer special regulatory treatment on individual companies. The CFPB says this approach to the market has been highly ineffective and raised new challenges, hence the need for the pivot.

“After a review of these programs, the agency concludes that the initiatives proved to be ineffective and that some firms participating in these programs made public statements indicating that the Bureau had conferred benefits upon them that the Bureau expressly did not,” the CFPB press release said.

The rules the new unit will make will apply to “all companies in the market.” The release further noted that the CFPB is open to suggestions from companies, startups, and members of the public in the rulemaking process.

The CFPB could be looking at digital currency firms

The CFPB does not explicitly mention digital currencies and has not been involved with the market. However, the move, along with other recent CFPB activities, may be setting the stage for the body to play a more prominent role in the digital currency market.

Last month, the CFPB released a notice that it was invoking the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The long-dormant legal provision gives the body authority to regulate “non-bank” companies that pose a risk to consumers.

“Nonbanks do not have a bank, thrift, or credit union charter; many today operate nationally and brand themselves as ‘fintechs,'” it said.

Significantly, the move followed a call from U.S. Senator Elizabeth Warren for the body to crack down on digital currency abuses. Warren told Bloomberg that digital currency infiltration of the market cuts across the CFPB’s jurisdictions also.

Meanwhile, other consumer protection-focused market regulators, including the SEC and the CFTC, have also been zeroing in on the digital currency market.

The case is similar outside the U.S. as well. The U.K.’s Financial Conduct Authority (FCA) recently warned consumers about the risks of investing in digital currencies.

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