The news: The Consumer Financial Protection Bureau (CFPB) has signaled that it plans to exercise greater oversight of fintechs under a dormant legal provision that lets it examine nonbank financial companies which “pose risks to consumers,” per a press release.
More on this: The CFPB said it will hold fintechs to the same standards as banks.
Neobank backlash: Regulators are clamping down on fintechs and challenger banks:
Why now? As inflation hits multi-decade highs, regulators seeking to protect consumers from its aftershocks have turned their attention to the unequal oversight of highly regulated banks and lightly regulated fintechs. In a recent ComplyAdvantage report, compliance officers listed cybercrime, ransomware, and money laundering as the financial crime trends to be most concerned about in 2022.
What’s next? Challenger banks in the US and UK need to invest more in compliance and avoid breaking things as they move fast and try to maintain their growth. The rules for neobanks likely will resemble the rules for incumbents, leveling the playing field between the two. Firms that fail to toe the line on compliance will face severe fines and sanctions as well as the risk of considerable reputational damage.