Plenty of people do their banking without a bank. They use prepaid debit cards. They send money using services like Western Union. They sign up for services promising to get them out of debt.
Now a government watchdog agency wants to patrol these companies too, making sure that people who bank without banks get similar protections as people who use traditional financial institutions. In an announcement last week, the Consumer Financial Protection Bureau said it may eventually regulate the largest companies in a host of industries.
“Historically, banks, thrifts, and credit unions have been subject to examinations by federal regulators, but other types of companies providing consumer financial services generally have not,” according to the bureau’s press release. “Today, there are thousands of such companies that are not banks, and these nonbanks’ products form a significant portion of the consumer financial marketplace.”
Specifically, the bureau is thinking about targeting companies that offer common consumer products like prepaid debit cards, money transmitters like Western Union, and debt relief services. It also may regulate companies that most consumers rarely see, but which play important roles in how much credit people can get, including credit bureaus and debt collectors.
Many consumer advocates welcomed the news.
“These are all areas where consumers have had lots of problems,” says Gerri Detweiler, Credit.com’s consumer credit expert. “It’s good news for consumers. And it’s about time.”
Before it can start enforcing the law, the bureau must first decide which companies it applies to. While the Dodd-Frank financial reform act applies to companies of all sizes, it requires the bureau to identify “larger participants” (i.e. the biggest ones) in each industry, and begin its investigations into alleged misconduct with these larger companies.
“This will ultimately create fair competition, better product offerings, and more transparent markets for consumers,” Elizabeth Warren, special advisor to President Obama on creating the bureau, said in a prepared statement. “Consumers deserve the peace of mind that financial companies — both banks and nonbanks — are following the rules.”
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Image: Casey Fleser, via Flickr