Financial Services Outsourcing: New Roles and Risks under a Consumer Financial Protection Agency

The financial services industry is facing major regulatory changes following the global sub-prime credit crisis and ensuing recovery plans.  These changes will have a major impact on outsourcers that deal with consumer financial information or in back-office support for financial investment transactions that are deemed unfair, deceptive or abusive.  The adoption of a new Consumer Financial Protection Agency Act would have a significant negative impact on the risks and costs of outsourcing of IT and business process functions by companies that deal with consumers.  It would invite a new view of risk allocation between enterprise customers and independent contractors as outsourcers, increasing the costs of doing business by putting the service provider into a new role of whistleblower.  It remains to be seen whether the analysis of public policy in this arena will spill over into other industries and other types of outsourcing.
Draft Consumer Financial Protection Agency Act

As of mid-May 2010, the U.S. Congress was considering possible enactment of financial regulatory reform.   Among the proposals is the draft “Consumer Financial Protection Agency Act,” as inserted into another draft law, H.R. 4173, “Wall Street Reform and Consumer Protection Act of 2009,” referred to Senate committee after being enacted by the House.  This consumer protection bill was originally H.R. 3126, 111th Cong., 1s Sess.; H. Rept. No. 111-367 (Dec. 9, 2009) (“Draft CFPAA”).  As the dissenting Republicans observed i...