Upstart Has Ended a Key Agreement With the CFPB -- Should Investors Be Worried?
Artificial-intelligence-driven lender Upstart Holdings (NASDAQ: UPST) and the Consumer Financial Protection Bureau (CFPB) recently agreed to remove Upstart from the consumer watchdog's list of accepted "no-action letters (NAL)." The designation essentially grants certain financial technology companies immunity from being charged by the CFPB for violating the Fair Lending Act. The idea is to encourage tech companies to do responsible innovation in the financial services space without fear of enforcement from regulators. Let's take a look at why Upstart and the CFPB are parting ways and whether or not investors should be worried.
In April, Upstart told the CFPB that it planned to add new variables to its loan underwriting algorithms. The CFPB said it would need time to analyze and consider the changes. As a result, Upstart requested termination of the NAL so it could make the changes in a more expedient manner, a request that the CFPB granted.
Nat Hoopes, head of public policy and regulatory affairs at Upstart, said in a recent blog post that Upstart's "request was motivated by a need to keep our risk models accurate and up-to-date during a period of significant economic change." Hoopes also said Upstart chose to make this move because the CFPB is expected to "de-emphasize regulatory arrangements with individual companies, including the no-action letter (NAL) program."
Source Fool.com
