The Treasury Department is pushing federal bank regulators to complete guidance tied to how banks oversee risk associated with fintech relationships.
The agency warned in a new 128-page report that fintechs are creating new risks to consumer protection and market integrity in areas such as data privacy and regulatory arbitrage. The report called for enhanced oversight of fintech’s consumer finance activities.
The lack of regulation for fintechs, compared to what exists for banks and credit unions, “raises various public policy considerations.”
“Where new entrant nonbank firms are rebundling core banking services outside the bank regulatory perimeter, there may be risks similar to those posed, for example, by the intermingling of commerce and banking,” the report said. “Some new entrant nonbank firms or their offerings may pose new or greater risks of reliability or fraud issues.”
The report was created in response to a July 2021 executive order.
The agency recommended that regulators:
- Provide “a clear and consistently applied supervisory framework” for bank-fintech relationships where both parties “must operate in compliance with the laws, regulations, and risk management standards” applied to the depository institution.
- “Robustly supervise” bank-fintech lending relationships for compliance with consumer protection laws and their impact on consumers’ financial well-being.
- Support innovations in consumer credit underwriting designed to “increase credit visibility, reduce bias and prudently expand credit to underserved consumers.”