For those of you not located in the United States, you may not be familiar with the Consumer Financial Protection Bureau (CFPB). This has become a controversial agency that was created as a result of the financial crisis as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. As its name implies its mission is, “….ensuring that consumers get the information they need to make the financial decisions they believe are best for themselves and their families.”
This mission of giving all consumers access to fair, transparent, competitive and innovative markets rests on three pillars: educate, enforce and study.
In line with the educate and study functions, CFPB Director Rich Cordray and Deputy Director Raj Date, journeyed to the heart of Silicon Valley to unveil an important initiative, Project Catalyst. If you are an entrepreneur in the financial services market, this one is for you.
A catalyst for community action
Project Catalystis designed to encourage consumer-friendly innovation and entrepreneurship in markets for consumer financial products and services. As Cordray said, “We want to collaborate with innovators seeking to advance consumer-friendly innovation…These collaborations help us better understand what works and does not work to improve life for consumers in the marketplace.”
The bureau has already conducted early outreach to the innovation community, and is establishing a website dedicated to boosting access and communication between the Bureau and that community.
As the announcement of Project Catalyst highlights, the bureau will work to:
- Establish firm lines of communication with innovators: The bureau wants to be accessible to all those who may be affected by the bureau’s regulations, including those on the front lines of innovation. Direct communication will allow the bureau to better understand the current situations in the market.
- Understand new and emerging products in the market: Current regulations were written to address existing products. As products evolve, regulations may need to evolve as well and the Bureau wants to be prepared.
- Engage with innovators: The bureau wants to engage with innovators who have new ideas that beget consumer-friendly innovation. These collaborations help the bureau better understand what works and does not work for consumers.
The CFPB also is looking tolearn more about what innovators are discovering about consumer wants, needs, and practices to guide their decision-making. As part of the launch of Project Catalyst, it has gotten three companies to agree to share anonymized data about consumer behaviors and trends with the CFPB. They are:
- BillGuard: BillGuard is a company that alerts consumers to questionable charges on their debit and credit cards and helps them resolve billing disputes quickly. BillGuard will share their billing dispute data with the Bureau, which will allow the Bureau to observe trends in consumer complaints and complaint resolution.
- Plastyc: Plastyc is designed to be an alternative to traditional banking. Plastyc’s data sharing will focus on the value consumers place on easily depositing and obtaining immediate access to their funds.
- Simple: Simple is designed to be an alternative to traditional banking. This collaboration will explore how consumers can gain insight into their spending habits and help the bureau understand what tools can encourage saving.
The CFB was careful to note that all of the data being shared, “will not contain personally identifiable information and appropriate precautions will be taken to ensure that individual consumers cannot be identified through the data.”
It was noted at the top that this agency has been a source of contention since its creation, and even became a source of controversy during the recent presidential election because of the belief by some that the CFPB is a poster-child for over-regulation.
With elections now over, it is actually encouraging to see the CFPB did not wait long to engage the business community in efforts to help the agency do its job better. Public-private partnerships are becoming common vehicles in a variety of critical sectors in the U.S. especially in the areas of transportation and infrastructure planning and funding.
Indeed, the first phase of Project Catalyst of doing the studying part early makes sense. There is an old saying that you cannot know what you cannot measure. In order for the CFPB to properly fulfill its mandate, it needs what we in the tech world call, “big data”/”business intelligence.” It needs actionable insights.
Starting by looking at conflict resolution, ease of access to funds and the drivers that are behind saving behavior while a wide net, nicely touches on the highly emotional transactional considerations of all of us. And, going to Silicon Valley rather than staging a press event in Washington, D.C., demonstrates a level of business sensitivity that tends to be unusual. It will be interesting to see how many takers the CFPB can attract to Project Catalyst.
If nothing else you have to admire CFPB’s willingness to be innovative about engaging a community that can and should be an important voice in how the future of consumer financial protection unfolds.
Edited by Jamie Epstein