The recently created U.S. Consumer Financial Protection Bureau (CFPB) is emerging as yet another source of added regulatory costs for financial firms, says Fitch Ratings in a new report.
The rating agency notes that the CFPB is taking a more active role in regulation, and, as a result, it expects that firms will likely face higher costs from CFPB enforcement actions, and compliance efforts.
Earlier this month, the CFPB brought an action against Capital One that led to a fine of $210 million. And, Fitch notes that firms such as American Express and Discover Financial Services have “increased litigation reserves in recent quarters in response to notifications about joint enforcement actions from regulators, including the CFPB, related to the assessment of late fees and/or marketing practices of fee-based products.”
Fitch says that it sees the enforcement of legislation concerning credit cards “as an opening for the CFPB to expand its regulatory reach” in enforcing the provisions of those laws. And, it notes that the bureau has also indicated its interest in forcing card issuers to improve their disclosure.
“A year after its creation, the CFPB now appears willing and able to levy penalties against firms that the agency believes are not operating in accordance with consumer protection laws and regulations. We expect this to push compliance and marketing costs higher for all companies subject to CFPB oversight, even if they are able to avoid penalties,” it concludes.