On Monday (March 6), CFPB Director Richard Cordray presented at the LendIt USA Conference, providing attendees with an overview of where the bureau stands on FinTech innovation.
In his keynote speech, Cordray shared how the CFPB is working to help facilitate FinTech innovation in a way that is beneficial for both providers and consumers. Three broad areas of special interest to the bureau were discussed – encouraging consumer-friendly innovations, the issue of consumer control over their personal financial data and the benefits and risks of using unconventional sources of data to underwrite loans and provide access to credit to more consumers.
Cordray also noted the two principles that the federal agency aims to uphold in accordance with those areas: to ensure there is a level playing field for all providers of consumer financial services and products and to urge those providers to build in consumer protections and compliance from the start.
“Consumer protections and compliance should not be mere add-ons or afterthoughts; they must be essential elements of the business model, from beginning to end,” Cordray said. “We all have a vested interest in fostering a marketplace where consumers can understand and access the kinds of responsible products they can rely on throughout their financial lives. And the information consumers need to make decisions about their economic opportunities must be accessible, accurate and reliable.”
Cordray discussed the CFPB’s major initiative, Project Catalyst, which promotes engagement between the agency and financial innovators in order to help improve the financial services market.
The program includes initiating industry research pilot programs, creating policies that promote consumer-friendly innovation and listening to startups, nonprofits, banks and other financial companies.
“We are learning about what does and does not work for consumers and the potential challenges facing entrepreneurs and investors,” Cordray said.
He noted that the agency is also analyzing how consumers and third parties are utilizing and accessing data in the financial marketplace, while also learning more about how consumers are exercising control over their own financial data.
“We will take action as needed to make sure that consumers can safely access and share information about their financial lives, that providers and aggregators act in accordance with their instructions and that financial institutions have their legitimate interests appropriately protected,” he added.
Lastly, Cordray shared an update on the CFPB’s latest actions to encourage new credit opportunities for more consumers through the usage of new types of data. While there are both benefits and risks to the increasing use of this alternative data, he explained that the agency is working to evaluate if using various forms of nontraditional data can help underserved consumers build their credit histories and gain more access to credit.