CFPB invokes old rule to expand authority over fintech and crypto firms

The Consumer Financial Protection Bureau is setting the stage for more involvement in the crypto industry.

On April 25, the CFPB announced that it was invoking a largely unused provision from the Dodd-Frank Act that gave birth to the bureau in the aftermath of the 2007-2008 financial crisis.

The rule gives the CFPB fairly wide authority to supervise “nonbanks” engaged in consumer-facing financial services based on potential risk. The limits of this definition are any nonbanks “whose activities the CFPB has reasonable cause to determine pose risks to consumers. This authority is not specific to any particular consumer financial product or service.”

In its announcement, the CFPB specified its interest in emerging technologies, writing: “Nonbanks do not have a bank, thrift, or credit union charter; many today operate nationally and brand themselves as ‘fintechs.'” 

In its procedural rule, the CFPB emphasized that it already has the authorities it is invoking, meaning that it does not need to wait for the usual timeframes that the Administrative Procedures Act requires: 

“The final rule is not necessary to establish the Bureau’s supervisory authority under 12 U.S.C. 5514(a)(1)(C). Rather, the final rule merely provides transparency and ensures consistency regarding the procedures that the Bureau intends to use in connection with its preexisting supervisory authority under 12 U.S.C.”

As a result, the rule will come into effect in just 30 days. When contacted by The Block, the CFPB did not specify whether it had already begun making supervisory inquiries into firms based on this rule. 

Though the release does not specifically name crypto, the CFPB’s interest in the industry has been on the rise regardless, as has interest in its involvement in crypto. In October, Senator Elizabeth Warren told Bloomberg that the CFPB should crack down on crypto, based on existing statutory authority.

In January, the bureau hired Alexis Goldstein from the antimonopoly Open Markets Institute to lead its digital asset response. Goldstein had spent much of 2021 appearing in Congressional hearings on cryptocurrencies, in which she was consistently critical of the industry. She frequently compared crypto today to Wall Street in the lead up to 2007. 

CFPB director Rohit Chopra also appeared before the Senate Banking Committee today. 

According to CFPB data, the bureau has received over 12,000 complaints related to crypto in the past year. Earlier this year, the CFPB began making inquiries into Venmo’s operations.