The U.S. Department of the Treasury recently released a report titled “Assessing Impacts of New Entrant Non-bank Firms on Competition in Consumer Finance Markets,” a product of the Biden administration’s effort to assess competition in different aspects of the economy. The report focuses primarily on FinTechs and other new entrant non-bank firms, including the consequences of their participation with insured depository institutions in core consumer finance markets (e.g., credit, deposits, and payments) and recommendations to enhance oversight of non-bank financial institutions.

While the report recognizes the benefits of innovation, competition, and contribution from FinTech and other non-bank firms, it warns of additional risks to consumer protection and market integrity and recommends certain steps to maintain responsible competition and consumer safety, specifically by recommending that regulators:

• take various steps to support innovations in consumer credit underwriting designed to increase credit visibility, reduce bias, and expand credit to underserved consumers;
• provide a clear and consistently applied supervisory framework for bank-FinTech relationships to address competition, consumer protection, and safety concerns;
• increase consistency in supervisory practices related to small-dollar lending programs; and
• take steps to promote a more unified approach to oversight of consumer-authorized data sharing.

In addition, the report also supports regulators’ ongoing efforts in related matters, including: (i) the federal banking regulators’ and the DOJ’s review of bank merger policies; (ii) the CFPB’s inquiries into Big Tech payment platforms and BNPL providers; and (iii) the CFPB’s rulemaking efforts to address consumer financial data access through implementation of Section 1033 of the Dodd-Frank Act.

Putting it into Practice: This report reinforces the Department of the Treasury’s intent to increase the robustness of regulatory oversight and simultaneously encourage diversification in consumer finance markets alongside adequate consumer protection and appropriate supervisory practices. FinTechs and other non-bank companies should be aware of the potential of increased oversight on their bank-FinTech relationships, and diligently address any new laws and/or regulations that could affect their businesses.

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