U.S. financial institutions may be held accountable for the actions of the companies they contract with for services such as telemarketing or product development, the new U.S. Consumer Financial Protection Bureau said on Friday.
The CFPB, which was created by the Dodd-Frank financial reform law and is almost a year old, released a bulletin warning financial companies that they must thoroughly vet and monitor contractors, and can be held accountable for contractors' legal violations.
"Consumers are at a real disadvantage because they do not get to choose the service providers they deal with -- the financial institution does," CFPB Director Richard Cordray said in a statement.
The CFPB was created to closely police all financial companies, not just traditional banks, to make sure that they're treating consumers fairly.
The CFPB has ratcheted up its activity in recent months, putting the debt collection and payday lender industries on watch. Those industries previously did not have a strong federal regulator.
It has also begun on-site supervision of financial companies and is starting to file friend-of-the-court briefs in cases around the nation that involve disputes over consumer lending laws.
The CFPB's bulletin on Friday laid out what financial companies should do to ensure that their business arrangements with contractors do not pose unwarranted risks to consumers.
The steps include due diligence to verify the contractor is aware of relevant laws, reviewing the service provider's internal controls and training materials, and quickly addressing any problems that come up during the monitoring process. (Reporting By Karey Wutkowski; Editing by Steve Orlofsky)
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