Consumer rights groups in the US have opposed a proposal by the Consumer Financial Protection Bureau to create a regulatory sandbox.
A coalition of 50 public interest groups, which is led by the National Consumer Law Center, have criticised the CFPB’s proposal loosen important consumer protection rules, especially for FinTech companies.
They claim that the CFPB is ‘exceeding its authority’ under the law that created the agency and would set a ‘dangerous precedent’ with its disclosure sandbox policy, its label for granting companies exemptions from disclosure rules.
In a letter to the CFPB that describes the policy as fundamentally ‘unsound’, the group argues that the sandbox would far exceed the CFPB’s statutory authority, enabling it to sidestep limits condoned by Congress and put consumer protection at risk.
“The reckless and unlawful scope of the CFPB’s proposal is breathtaking,” said Lauren Saunders, associate director of the National Consumer Law Center. “The CFPB has no authority to allow ‘trials’ that go on for years and years and that allow entire industries to skip important consumer disclosures, such as the total cost of a loan or the required notice that the loan price was marked up due to information on the consumer’s credit report.
“The CFPB’s proposal would not be confined to consumer testing, which recruits consumers to review and react to sample disclosures as if they were entering into a transaction. Instead, it would allow companies to experiment with or dispense with disclosures in real transactions with real consumers.”
The groups claim that the proposal appears to permit major changes to consumer protections and disclosure requirements without any compliance with the Administrative Procedure Act (APA), including notice and opportunity to comment by impacted consumers and covered persons.
They claim this could result in enabling huge segments of market players governed by the Dodd-Frank Act to avoid disclosure rules and, possibly, other consumer protections guaranteed by the law. In the letter, the group said: “The Bureau should not go forward with this unlawful proposal.”
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