WASHINGTON — Fifty consumer groups are calling on the Consumer Financial Protection Bureau to withdraw a plan allowing fintech firms to test financial disclosures on consumers.
The groups argue the CFPB’s "disclosure sandbox" proposal, which would provide certain legal safe harbors to participating companies, exceeds the CFPB’s statutory authority and would put consumers at greater risk.
“The proposed policy is far outside the consumer bureau’s authority and would allow entire industries to ignore consumer protection requirements for an unlimited time period with no showing of consumer benefit and no public input,” the groups, including the Center for Responsible Lending and the National Consumer Law Center, wrote in a comment letter to the agency.
Under the proposal, released last month, participating companies could test financial disclosures on consumers on a two-year basis. The CFPB also said it would approve or deny applications within 60 days of submission, in an attempt to encourage more companies to apply. Past efforts by the agency to encourage financial innovation in a sandbox-like model had few takers.
But the consumer groups argue that the trial period has “no end in sight” because the proposal allows a company to extend the two-year testing period for another two years or more.
“A ‘trial’ could easily last a decade or longer,” the groups said.
The consumer groups also argue that the CFPB’s authority only allows it to give a legal safe harbor to a company in the trial program “to improve upon a model form” but not go beyond that.
The legal waivers have also been changed in the proposal to consider several factors including industry cost savings, delivery mechanism and consumer understanding. However, consumer groups say the legal waivers should instead focus on making sure the consumer fully understands the trial disclosure.
“Although applicants would have to identify risks to consumers, the bureau is not required to evaluate those risks independently, to ensure that the disclosures enable ‘consumers to understand the costs, benefits, and risks,’ ” the letter said. “Or to determine that improvements to consumers justify any potential risk.”
The groups filed the letter Wednesday, when the comment period closed on the CFPB’s proposal.
