Thank you. It is exciting to be here at Money 20/20 and see all of the intense interest around innovation in consumer financial services. The possibilities opened up by powerful technologies and novel approaches are enabling new services and transforming how payments and lending are conducted. So we want to understand how we can influence and channel this wave in positive directions. And I believe our goals are the same: to put consumers first and improve their lives.
As many of you know, the Consumer Financial Protection Bureau is now the one federal agency with the sole mission of protecting consumers in the financial marketplace. We are working to see that all consumers have access to consumer financial products and services in markets that are fair, transparent, and competitive. Unlike the other regulators, we have authority over both banks and nonbank financial companies, which means we can oversee the entire marketplace, regardless of institutional type, to protect consumers.
Among our statutory objectives, we are expressly directed to ensure that these markets “operate transparently and efficiently to facilitate access and innovation.” We are thinking hard about how to fulfill this objective, and we have come to believe that FinTech can help provide people with more value and better service, as well as the fairness and protection that the law requires.
We feel an affinity for those seeking to harness new technologies to better serve customers since we ourselves are a new agency. We are committed to being data-driven, and we have adopted innovative approaches to fulfill our mission. For example, we have handled over one million consumer complaints to date, which we make publicly available and accessible through an API. Users have the ability to search, sort, and filter data based on specific criteria or tags, and can download data in their desired formats. We analyze this data ourselves using natural language processing and other methods. Our new eRegulations tool eases access to the vast body of federal consumer finance regulations and renders them searchable by consumers and industry alike. We are building web-based tools to help people make financial decisions. We have also issued a set of influential principles that reflects our vision for protecting and supporting consumers in the push for faster payment systems.
Many novel products that FinTech companies and financial institutions are developing cut across existing regulatory frameworks. That raises challenging issues for all of us. Certainly we need to make sure that all players in the marketplace comply with existing law, whether they are new innovators or longstanding institutions. Notably, the same technology that empowers consumers to make decisions that serve their interests can also be used to steer them in ways that benefit others at their expense. Yet we recognize that evolving technologies hold great promise. So we will continue to work through these issues and encourage innovation that drives the financial system to deliver even more value to consumers.
You no doubt have noticed that we have taken several enforcement actions now against FinTech providers. These should not be misread or overread. Everyone who provides consumers with financial products and services must adhere to the same standards and will be held to the same expectations. But we are not looking to punish anyone merely for raising novel issues that present unsettled points of law or questions that fall into unforeseen cracks in the regulatory framework. Instead, our enforcement actions to date have addressed basic meat-and-potatoes issues such as companies that promise one thing to their customers and then do something quite different. That is deceptive conduct, and nobody has any privilege to engage in such conduct without putting themselves in legal peril.
To help facilitate access and innovation, the Consumer Bureau launched Project Catalyst four years ago. Back then, this initiative was a novelty for a banking regulator, both here and around the world. We have since had many discussions with our counterparts in Europe and elsewhere, and we share a growing enthusiasm for finding ways to leapfrog forward to products that are more accessible, more affordable, more convenient, and more empowering of consumers. From the start, Project Catalyst has concentrated on encouraging marketplace innovation so that new products can be made safe for consumers. We see new developments in payments, transactions, lending, underwriting, budgeting, money management, and other areas as well. That is a staggering list, even a revolutionary list, of areas ripe for change to benefit consumers.
Let us focus for a moment on access. For many years, millions of American households have been unbanked, consigned to live in the cash economy where the task of managing the ways and means of their lives almost always costs more, takes longer, risks more, and does less to build their financial futures than is true for most consumers. Tens of millions more are credit invisible in that they lack a credit record or have credit reports too thin to generate a credit score. Others have scores that classify them as subprime borrowers. A large number of these underserved consumers are hard-working people, living paycheck to paycheck and waging a constant and careful struggle to make ends meet.
Some of the most exciting consumer-friendly innovations bring new products to those who had been locked out or underserved, whether or not they join the banking system. General-purpose reloadable prepaid cards and new forms of prepaid accounts provide the functionality to address people’s fundamental financial needs. So it is no longer the case that being locked out of the banking system leaves people bereft of any satisfactory options.
New technologies can also open up new credit opportunities and more efficient ways to manage money and control spending. We see mobile technology and innovations in distribution making cost-effective financial services available in both urban and rural environments where traditional brick-and-mortar outlets may be uneconomical. Computer-enabled data mining can lead to better understanding of the financial patterns of the underserved – their inflows and outflows and how they find ways to manage the gaps. This approach could open up opportunities to fashion brighter futures that benefit not only them, but the rest of us as well, thereby strengthening the economy as a whole.
But even beyond improved access, creative new tools can help working families better manage their finances. New product designs are empowering households to better anticipate and weather the inevitable income and expense shocks they face in an uncertain economy. Along with innovations that are starting to emerge from traditional account providers, we are now clear in our minds that many of these beneficial products will be FinTech products.
What we call our Project Catalyst encompasses approaches that are frankly experimental. Like you, we are seeking to innovate around our mission. We know we do not have all the answers, so we are determined to try things and learn from our growing body of experience. We are seeking insights from research pilots with both start-up firms and larger companies, as we did with a recent project exploring a savings vehicle on a prepaid product with American Express. Other research projects are currently in the works.
Among the products that interest us are tools that help people better manage their finances and automatic or motivational savings tools that help them build rainy day funds for emergencies. We are also interested in services that help consumers smooth volatile incomes, avoid overdrafts, or reduce reliance on expensive short-term credit. Through our “Office Hours” program, we engage with hundreds of companies, both large and small, on the front lines of innovation. It helps us learn while spreading awareness of the CFPB and our philosophy on encouraging financial innovation. We are releasing our first report on Project Catalyst to highlight some of the insights we gained so far.
Another way we seek to facilitate consumer-friendly innovation is through our “no-action letter” policy. We recognize that companies may be uncertain about how existing regulations apply to novel products that do not fit neatly within the regulatory structure. Under our “no-action letter” policy, if CFPB staff is persuaded that a particular product holds promise for consumers and is structured in a way to mitigate risks to consumers, but is held back by regulatory uncertainty, the staff can issue a no-action letter to the company stating that we have no intent to initiate supervisory or enforcement action based on those particular innovations for a defined period.
For example, we have met with a number of innovators that seek to expand access to credit by looking to alternative forms of data and newer methods -- such as machine learning -- of analyzing this data to assess creditworthiness. They say they want to do this in compliance with the consumer financial laws, including the fair lending laws, but are unsure how to do so. Through Project Catalyst’s program, Bureau staff can consider issuing a no-action letter to foster access and innovation. We welcome a dialogue with anyone who is facing this sort of challenge in expanding access to credit.
Another way Project Catalyst can help innovators better serve consumers is through our “trial disclosure waiver” policy. Throughout the financial marketplace, disclosures must be provided when a consumer shops for or purchases a product, and often on a periodic basis over the life of an account. These required disclosures are designed to help consumers understand the terms of the product. But in today’s world of fast-changing technology, there may be opportunities to deliver disclosures more effectively than by traditional static forms. Congress authorized the CFPB to provide greater latitude for companies to test alternatives to standard disclosures over time. Again, we welcome dialogue with anyone interested in doing so.
Many exciting products we see through the lens of Project Catalyst depend on consumers permitting companies to access their financial data from financial providers with whom the consumer does business. We recognize that such access can raise various issues, but we are gravely concerned by reports that some financial institutions are looking for ways to limit, or even shut off, access to financial data rather than exploring ways to make sure that such access, once granted, is safe and secure.
Let me state the matter as clearly as I can here: We believe consumers should be able to access this information and give their permission for third-party companies to access this information as well. In the Dodd-Frank Act, Congress likewise stated that, subject to regulations issued by the Bureau, consumers should be able to access information maintained by a financial provider about the consumer’s use of their products. Congress also specified that the information “shall be made available in an electronic form usable by consumers.” We look forward to productive engagement with all stakeholders on this topic to find solutions that put consumer interests first.
The Consumer Bureau is still a new agency with our sights set firmly on the future. We are not content to sit passively by as mere spectators watching these technologies develop. Instead, we intend to move forward alongside the industry, keeping an eye out to protect consumers even as we encourage innovative providers to put consumers first and find ways to make their lives better. Likewise, most FinTech companies understand that your long-term interests depend on providing great value and service to consumers. In these ways, our deepest interests are closely aligned. It is within our reach here to change the world and make it vastly better for consumers. Let’s do that together. Thank you.
The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.