On July 18, 2018, Acting Director Mick Mulvaney of the Consumer Financial Protection Bureau ("CFPB") announced that Paul Watkins will head the CFPB's new Office of Innovation. According to the press release, the office, which Mulvaney created to focus on consumer-friendly innovation, "will focus on creating policies to facilitate innovation, engaging with entrepreneurs and regulators, and reviewing outdated or unnecessary regulations." Watkins previously managed the first state fintech regulatory sandbox in the United States out of the the Arizona Office of the Attorney General, which we have previously reported on here. He is expected to take charge of a sandbox initiative that the CFPB is working on in coordination with the Commodity Futures Trading Commission ("CFTC"). A sandbox program aims to provide relief from various regulatory requirements and regulatory guidance to start-ups, while providing insight into fintech startups and technology innovation to regulators.
The CFPB announced the creation of the Office of Innovation in early May as part of a broader restructuring of the CFPB. The new office reports directly to Mulvaney. Its predecessor, Project Catalyst – which was folded into the Office of Innovation – had long been touted as a resource for companies to develop consumer-friendly innovation in the marketplace with an implicit blessing from the CFPB. But the mission of Project Catalyst was often at odds with the aggressive enforcement activity that was a hallmark of the agency under the previous director.
Mulvaney, on the other hand, has clearly signaled that the industry can expect far less regulatory burden from the CFPB in the future, particularly supervisory and enforcement activity. And he has made numerous public statements that innovation is a Bureau priority. Against this backdrop, companies may feel heartened to seek support from this new Office of Innovation and ultimately work with the CFPB to develop innovative technology and novel consumer products.
The United Kingdom's Financial Conduct Authority ("FCA") launched a fintech startup sandbox in 2016, and earlier this year announced plans for a global testing bed for new financial technology apps. This path appears to support success for businesses and countries alike, as the UK recently announced that fintech investment in the first half of 2018 was higher in the UK than in the US and China (£12.3 billion), while investment worldwide has reached a record level, according to a recent KPMG report. The CFTC and CFPB will be hoping for similar success from their sandbox programs.
This article is presented for informational purposes only and is not intended to constitute legal advice.
