The Consumer Financial Protection Bureau recently proposed a rule that sounds technical but could have serious implications for regular families. They want to change how they decide when to investigate financial companies, making it much harder to step in before people get seriously hurt.
Right now, if there’s good reason to think a financial company might be harming consumers, the government can investigate. The new rule would likely require waiting for proof that lots of people are already getting significantly harmed. It’s like changing the rule from stopping a speeding car to waiting until it crashes into someone.
Here is the exact language:
The proposed rule would explain that, for purposes of section 1024(a)(1)(C) of the CFPA, “conduct that poses risks to consumers with regard to the offering or provision of consumer financial products or services” consists of conduct that: (a) presents a high likelihood of significant harm to consumers; and (b) is directly connected to the offering or provision of a consumer financial product or service as defined in section 1002 of the CFPA.
This change comes at the wrong time. More people are using services like Buy Now Pay Later apps, cryptocurrency lending, and digital payment systems. Instead of watching these new companies more closely, the government wants to watch them less.
Who Gets Hurt Most
When financial oversight weakens, certain communities always pay the heaviest price. Unbanked families, especially in communities of color, often rely on payday lenders and check cashers because they can’t access regular banking services. Without strong government oversight, these companies can charge hidden fees, discriminate against certain neighborhoods, and sell personal information to scammers.
The new rule would let financial companies get away with practices that seem small but add up to massive harm. A company might charge thousands of customers a few dollars in hidden fees each month. Under the old rules, regulators could investigate when they spotted this pattern. Under the new rules, they’d likely have to wait until the company had stolen millions of dollars before taking action.
Small businesses would also suffer. More entrepreneurs are borrowing from online lenders who could escape oversight under these weaker rules. Data brokers who sell personal financial information to enable discrimination would likely avoid supervision entirely.
The Bigger Problem
Even when individual companies aren’t causing massive harm by themselves, widespread bad practices across many companies can create the same market failures that led to the 2008 financial crisis. The proposed rule focuses only on individual bad actors while ignoring these bigger systemic risks.
The rule would also discourage people from filing complaints about unfair practices. If consumers think regulators won’t take action unless harm reaches some high threshold, they might not bother reporting problems at all. This means regulators would lose their early warning system for spotting emerging threats.
What We’re Asking For
NCRC submitted a detailed comment asking the CFPB to scrap this rule completely and instead use their “dormant authority” rule published in 2022, which allows the agency the agility they need to identify and address evolving consumer threats in the marketplace. We represent over 700 community organizations that work directly with families who depend on strong financial oversight. We know firsthand how important it is to catch problems early, before they spread.
Chime in Before September 25
The government needs to hear from real people, not just financial industry lobbyists. You can submit your own comment online explaining why strong financial oversight matters to you and your family. You can also get help with your letter. Follow this link to a tool that will ask you for some information and will help you write a letter. You should then review it, edit it and copy/paste it into the Federal Register and let the CFPB know why this matters to you.
Read our full response and get more details here
Strong financial rules protect families and prevent economic crises.
This proposed rule moves in the wrong direction.
