May 24, 2022

CFPB: New Effort Launched to Promote Competition and Innovation in Consumer Finance

New Office Will Identify Obstacles for New Market Entrants

The Consumer Financial Protection Bureau (CFPB) is opening a new office, the Office of Competition and Innovation, as part of a new approach to help spur innovation in financial services by promoting competition and identifying stumbling blocks for new market entrants. The office will replace the Office of Innovation that focused on an application-based process to confer special regulatory treatment on individual companies. The new office will support a broader initiative by the CFPB to analyze obstacles to open markets, better understand how big players are squeezing out smaller players, host incubation events, and, in general, make it easier for people to switch financial providers.

“Competition is one of the best forms of motivation. It can help companies innovate and make their products better, and their customers happier,” said CFPB Director Rohit Chopra. “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.”

The CFPB has a statutory mandate to promote fair, transparent, and competitive markets. Families, honest businesses, and the entire economy benefit when consumer finance markets are fiercely competitive, rather than dominated by a handful of firms. Digital technology is transforming the markets, including how payments, deposits, and lending are provided and who provides them. Big banks, fintech, big tech, incumbents, and small start-ups are all jockeying to be in front. The Office of Competition and Innovation will focus on how to create market conditions where consumers have choices, the best products win, and large incumbents cannot stifle competition by exploiting their network effects or market power.

The new office will support the CFPB’s general effort at increasing competition for the benefit of all consumers. Specifically, the CFPB will:

The Office of Competition and Innovation replaces the Office of Innovation, which opened in 2018, and Project Catalyst, launched in 2014. The Office of Innovation’s primary purpose was to process applications for No Action Letters and Sandboxes that applied to an individual company’s specific product offering. 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 is also encouraging companies, start-ups, as well as members of the public to file rulemaking petitions to ask for greater clarity on particular rules. This will help level the playing field and foster competition by ensuring any actions the CFPB takes will apply to all companies in the market.

This post was originally published here.