US consumer watchdog must now define 'risk to consumers' before it acts

The US Consumer Financial Protection Bureau is proposing a new rule that forces it to define "risks to consumers" before it can supervise nonbank companies. This means the agency must now clearly state what specific harms it is trying to prevent, rather than acting on a broader interpretation of risk.

For years, the Consumer Financial Protection Bureau has had broad power to supervise nonbank financial companies if it decided they posed a risk to consumers. This new rule means the agency can no longer just say a company is risky. It must now publish a specific definition of what counts as a risk, and then prove the company meets that definition. This makes it harder for the agency to act quickly against new types of financial products or services.