06/01/2023 | Press release | Distributed by Public on 06/01/2023 14:13
The Consumer Financial Protection Bureau (CFPB) today issued a report highlighting the potential harm fintech payment providers operating outside of the well-regulated and supervised banking system could cause consumers. The CFPB also issued a consumer advisory urging consumers to move funds stored on apps such as Venmo, PayPal, and CashApp, which may not be protected by insurance in the event of another financial disruption similar to those caused by the collapse of Silicon Valley Bank and Signature Bank, to their insured accounts.
What They're Saying: In the report, CFPB Director Rohit Chopra reiterated concerns long-held by the Consumer Bankers Association (CBA) that the growing fintech and nonbank market could result in consumer harm without proper safeguards, warning:
"Popular digital payment apps are increasingly used as substitutes for a traditional bank or credit union account but lack the same protections to ensure that funds are safe. As tech companies expand into banking and payments, the CFPB is sharpening its focus on those that sidestep the safeguards that local banks and credit unions have long adhered to."
Similarly, last month, FDIC Chair Martin Gruenberg highlighted the agency's work on expanding access to banks and helping consumers recognize the risks of non-FDIC insured financial service providers. Specifically, Gruenberg said it is critical to regulate these platforms so consumers clearly understand which institutions are banks as well as when their money is FDIC insured.
What They Found: The CFPB's report highlighted several findings, including:
Why It Matters: The financial services ecosystem continues to rapidly evolve, highlighted by the growth of large fintechs and other non-bank providers that now offer many of the same products and services as traditional banks. Unlike well-regulated financial institutions, non-banks do not have the same stringent federal oversight standards as banks, potentially putting the safety of consumers' funds at risk.
What CBA Is Proposing: Since the CFPB was founded more than a decade ago, a growing share of banking activity has occurred outside of the purview of leading regulators, putting consumers and the resiliency of the financial system at risk. CBA long has advocated for policymakers to craft policies that foster a level playing field that reflects this market evolution and ensures every American family receives the protections they deserve, regardless of where they go to meet their financial needs. These efforts by CBA include:
Go Deeper: A poll released by CBA in December 2022 found Americans believe Congress and the CFPB need to do more to ensure large fintech are subject to increased oversight by federal regulators. The poll, conducted among US adults, also found that when it comes to protecting their money, consumers overwhelmingly trust banks over these other financial services providers.