The CFPB is Attempting to Limit Innovation and Consumer Choice

Across the U.S., thousands of banks, credit unions and tech companies are vying for business and consumer confidence. American consumers will benefit from a highly competitive market when it comes to choosing banking services that meet their needs, and have the right to make informed decisions about how much they should pay for a checking account function, such as overdraft protection or benefits that may offer a specific credit card.

Against this background, it is all the more surprising that earlier this year the Bureau of Financial Protection (CFPB) seemed surprised to find that financial service providers charge for the products they provide to consumers. A recent information request (RFI) and a number of accompanying messages to the CFPB blog suggest that consumers of financial products are unconscious victims of fees charged to their service providers.

The RFI, published in the Federal Register, is officially called “Request for Information on Fees Charged by Providers of Consumer Financial Products and Services,” but the agency’s press release and related blog posts suggest it is more than neutral information gathering. Rather, they use threatening phrases like “operating income streams” to suggest that all companies are using consumers or breaking the law in some way. This is not the case.

With regard to consumer protection, existing laws and regulations provide consumers with timely and accurate disclosure of information, including the schedule of fees. The Law on Lending, for example, requires disclosure of the terms and value of credit products, while the Law on Truth in Savings requires certain uniform information on commissions and interest when banks open a deposit account for a customer.

The financial services market is highly competitive

There is little evidence that consumers lack the benefits of strong competition in the financial services market. According to the CFPB report on federal consumer financial law in January 2021, the consumer credit market “has new entrants, innovative products, aggregate growth, reinstatement of current executives and the downturn or departure of companies that could not keep up with others. These are the hallmarks of competitive markets. ”

Another surprise from the CFPB is the description of some fees as “quasi-mandatory”. This seems to indicate that the Bureau is not satisfied any fees are charged. This type of thinking demonstrates a complete misunderstanding of the financial services market and business more broadly, ignoring overheads, including, but not limited to, service development, marketing (which can be extremely expensive in a competitive market) and infrastructure, including customer service. making products work.

If the CFPB wants to help consumers, it must specifically identify its problems. The proliferation, which accuses law-abiding companies of wrongdoing, distracts from illegal activities that need to be combated. The business community is committed to protecting consumers – we can’t help but detect bad entities if the CFPB manages to say it is an illegal activity.

The CFPB should give consumers the opportunity to make informed choices rather than choose for them. This alleged RFI is simply an attempt to force banks and financial institutions to limit consumer choice and will only stifle innovation and competition in the financial services sector. The final question that the CFPB ignores is which services will disappear if suppliers are unable to cover costs and will the consumer be better off?

About the authors

Bill Hals

Bill Hals

Vice President of the Center for Capital Market Competitiveness

Bill Hals is vice president of the U.S. Chamber of Commerce’s Center for Competitiveness in Capital Markets.

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