Recent Analysis of Consumer Financial Protection Bureau Data Shows Exponential Increase in FinTech and Crypto Complaints to CFPB | Knowledge

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Data intelligence firm Morning Consult recently analyzed consumer complaints filed with the Consumer Financial Protection Bureau (CFPB). The analysis showed that FinTech and crypto-related complaints filed by consumers with the CFPB “exploded” in early 2021 compared to the same period in 2020.

Our clients should be aware that the sharp increase in consumer complaints in the area of ​​FinTech and crypto is well known within CFPB and that FinTech enforcement is a key priority for the Enforcement Office. of the CFPB. The Office of Enforcement is already active in the financial technology field and is looking for new topics of investigation. Jurisdictional boundaries are being drawn between financial regulators, and the CFPB seeks to signal that it will be the primary financial regulator of consumer financial products and services in the fintech and crypto spaces and will pursue enforcement aggressive where warranted.

Among financial regulators, the CFPB has jurisdiction over the widest range of fintech products and services, most of which fit perfectly into one or more of the strategic markets in which the CFPB Office of Enforcement classifies investigations and disputes. The most relevant strategic law enforcement markets for the purposes of consumer fintech and crypto products and services are payments, deposits, fair loans, auto finance, credit cards, mortgage arrangements / services, small loans and student financing.

Taking a closer look at some key strategic markets, ‘payments’ is a broad category, spanning payment service providers, peer-to-peer payments, digital wallets, and the infrastructure that enables consumers to make payments or make payments. have payments made on their behalf. “Deposits” are also large and cover all neobanks, most of which have expanded beyond traditional checking and savings functions to offer products such as credit cards, mortgage origination and financing. , car financing and student loans, all covered by other CFPBs. strategic law enforcement markets. The “fair loan” is the broadest strategic market since it applies to every product or service in the fintech space. As an example of how the CFPB views fair trade loans, the CFPB wants to ensure that any artificial intelligence or machine learning used by fintechs does not discriminate but fully comply with the Equal Rights Act. credit odds and fair loan laws. CFPB’s application resources are dedicated to all of these strategic markets as well as many others in the fintech space.

And while the Morning Consult article identifies some tech and crypto companies by name, that identification shouldn’t reassure those that have escaped mention. The CFPB takes a look at all the fintech players, products and services and focuses on many of the most popular new products, including Earned Wage Access and Buy Now Pay Later. Moreover, if Morning Consult’s analysis looks at current trends, there is no reason to believe that this “explosion” in consumer complaints is transitory. On the contrary, that number will undoubtedly increase as mainstream consumers increasingly embrace fintech products and cryptocurrencies. The growth in complaints will directly lead to more CFPB investigations for the simple reason that consumer complaints are one of the main sources used by the Enforcement Office in deciding whether or not to pursue investigations.

While the CFPB is likely to be the most aggressive financial regulator of consumer fintech products and services, other regulators are also focused on the regulation and enforcement of financial and crypto technologies. We are seeing a marked increase in coordination between financial regulators in investigations of fintech, blockchain and digital asset companies. The Securities and Exchange Commission, the Commodities Futures Trading Commission, the US Department of Justice, the Financial Crimes Enforcement Network, and state financial regulators conduct investigations both independently and in partnership with each other.

Sidley has extensive experience in fintech and crypto and representing clients before the CFPB and other federal and state financial regulators. We are able to help our clients cope with upcoming changes and challenges in financial and crypto technology regulation and enforcement. Sidley’s Enforcement attorneys, many of whom have led the most active financial regulators in FinTech and crypto, work in perfect harmony with our leading multidisciplinary FinTech and Blockchain group, helping clients develop programs and compliance strategies to address issues raised by regulators during investigations and enforcement actions.

With regard to the CFPB, we count among our partners Thomas Ward, who is the only recent CFPB application manager to practice in private practice, the only CFPB application manager to have served as an employee career under both the Republican and Democratic administrations, and the only one who served as the Assistant Deputy Attorney General in the United States Department of Justice, leading the affairs of the consumer protection branch, which is a partner CFPB key to criminal referrals arising from consumer affairs and financial investigations. During his tenure at CFPB, Tom commissioned a global effort to centralize the investigation, litigation and negotiation processes and best practices of the Enforcement Office; critical reflection on each of the more than 20 enumerated laws that the CFPB applies and the Consumer Financial Protection Act; reflecting on the broad authority over unjust, deceptive or abusive acts and practices of the Consumer Financial Protection Act; and how the Enforcement Office considers and calculates remedies, penalties, remedies and injunctions. The result was a centralized and comprehensive roadmap of enforcement practice that did not exist under previous directors or enforcement agencies. Tom also oversaw the setting of CFPB implementation priorities under the Republican and Democratic administrations, which will guide the CFPB for years to come, and led the first reformulation of the CFPB’s responsible business conduct bulletin, which enables companies mitigate or avoid application problems. absolutely.

In the fintech and crypto space, Lilya Tessler is a partner and leader of Sidley’s FinTech and Blockchain group, which was recently recognized as one of the country’s best practices in the Chambers Fintech 2021 guide and named the FinTech Practice Group of the year by Law360 in 2020 She focuses her practice on representing digital asset trading platforms, blockchain technology companies, US and non-US brokers, financial services companies and cryptocurrency funds . Lilya is ranked in the Chambers Fintech 2021 Guide in the USA Legal: Blockchain & Cryptocurrencies category and was named Rising Star of Fintech by Law360 (2019). Lilya advises technology companies on public and private securities offerings, including blockchain token distributions. She also advises financial institutions and digital asset exchanges on day-to-day securities matters, private placement agent requirements, custody rule requirements, cross-border regulatory matters, business registration requirements. Monetary Services and Financial Sector Regulatory Authority (FINRA); and Securities and Foreign Exchange Commission Regulatory Investigations. She advises several US and non-US financial technology companies, including robotics advisers and high-frequency trading firms, in evaluating the registration requirements of brokers and investment advisers. Lilya is the founder and co-chair of the Digital Asset Regulatory and Legal Alliance, an industry task force made up of general counsel and compliance officers from leading blockchain and digital asset companies. Lilya is a Certified Public Accountant and FINRA Dispute Resolution Arbitrator and previously held FINRA Series 7 and 24 licenses.

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