On November 14, 2012, the CFPB launched Project Catalyst, which the CFPB characterized as “an initiative designed to encourage consumer-friendly innovation and entrepreneurship in markets for consumer financial products and services.” Through Project Catalyst, the CFPB is calling on innovators and entrepreneurs to help the CFPB by: (i) assisting the CFPB in “improving” financial regulation to “better foster consumer-friendly innovation;” and (ii) developing/launching new consumer-friendly financial products or services. The Bureau claims to have initiated Project Catalyst in an effort to fulfill its Dodd-Frank mandate to increase transparency and innovation in financial products and services. The CFPB, however, may have other motives in establishing this program.
Make no mistake: As a medium for data collection, Project Catalyst will not only enhance the Bureau’s ability to collect data for the formulation and “evolution” of regulations for future financial products and services, it will offer the same utility for enforcement purposes. As part of the “inaugural phase” of Project Catalyst, three financial services companies—BillGuard, Plastyc, and Simple—“agreed to share anonymized data about consumer behaviors and trends with the CFPB.” The CFPB says that it intends to “use that data gathered to better inform policy decisions” and to “be prepared” as financial products “evolve.” However, it appears that at least some of the information collected, particularly as to consumer complaints, will contain names of financial services companies subject to complaints for purposes of determining whether such companies are engaged in potential unfair credit card sales and billing practices. The Bureau claims it will use this data simply to “inform policy decision,” but there is no limitation on the CFPB using the newly minted information in Bureau investigations or enforcement actions. Other unanswered questions include whether the agreements with these service providers will be made public and similarly what the service providers are to receive in exchange for their cooperation with the CFPB.
Because this announcement creates more questions than answers, check back with the CFPB-Lawblog for updates, as we’ll continue to monitor this developing issue.