Associations Oppose CFPB’s Proposed Standard on "Risks to Consumers"

The Consumer Bankers Association and the American Bankers Association ("Associations") urged the CFPB to abandon a proposal to formally define "risks to consumers" in supervisory designation proceedings.

In a request for comment, the CFPB proposed that such conduct be defined as activity posing a high likelihood of significant harm to consumers directly tied to a consumer financial product or service. (See related coverage.) In their joint response, the Associations cautioned, that while the CFPB intends this definition to promote consistency, it would constrain supervisory flexibility and leave gaps in oversight of fast-evolving markets that would allow nonbanks to escape supervision.

The Associations argued:

• The proposal undermines the agency's congressional mandate. The Associations emphasized that Congress created the CFPB to enforce consumer protection laws consistently across banks and nonbanks. They warned that imposing the definition would limit supervisory discretion, which would undermine this statutory mandate.
• Banks are robustly supervised. The Associations argued that banks already face comprehensive oversight from prudential regulators. They said that many nonbanks lack comparable scrutiny, making CFPB supervision the only tool to hold them accountable.
• The CFPB is the only regulator of nonbanks. The Associations explained that the CFPB is the sole federal agency with authority over nonbank financial firms. They cautioned that restricting risk-based supervision would leave large segments of the market entirely unsupervised.
• Flexibility is essential to protect consumers. The Associations emphasized that Congress left "risks to consumers" undefined to give the CFPB flexibility to address emerging threats. They cited Fintech and digital payments as areas where a rigid definition could weaken consumer protection.
• For consistency without codification. The Associations argued that principled, transparent decision-making—not codification—is the best approach. They cautioned that a binding definition could also create unintended consequences across other parts of the Dodd-Frank Act.