McCarthy Hatch, a leading tech-enabled financial services consulting firm, today unveiled FSAi, an innovative technology designed to help financial institutions proactively identify potential consumer harm before it escalates and minimize regulatory penalties. FSAi empowers financial institutions to reduce risk in real time, allowing them to proactively address potential issues before they intensify. This enables them to take swift corrective actions, ensuring their customers feel valued and protected in an increasingly complex regulatory environment.
FSAi is a proprietary risk engine that continuously monitors regulatory changes and analyzes their impact on consumers. The platform allows consumer finance companies to anticipate risks, avoid compliance pitfalls, and take immediate action to mitigate potential consumer harm. By leveraging FSAi, consumer finance companies can enhance their risk management strategies, reduce regulatory exposure, and create a better financial ecosystem.
As of September 2024, the Consumer Financial Protection Bureau (CFPB), a U.S. agency responsible for consumer financial protection, has ordered consumer relief exceeding $19 billion, making an estimated 195 million consumers eligible for relief, and has imposed civil money penalties totaling $4.8 billion.
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McCarthy Hatch is led by a team of financial industry veterans, including James McCarthy, a founding member of the CFPB, and Asaf Buchner, a former Forrester analyst who has held senior positions at EY, KPMG, Charles Schwab, and UBS. Their extensive knowledge and leadership underpin the innovative solutions offered by FSAi.
“As the regulatory landscape becomes more complex, FSAi stands out as a strategic solution, allowing consumer finance companies to not only stay compliant but to address issues before they turn into larger risks proactively,” said Asaf Buchner, CEO of McCarthy Hatch. “We’ve made the integration of FSAi seamless and efficient, providing consumer finance companies with the tools they need to access precise, actionable insights from day one.”
How FSAi Works: Setting a New Standard in Risk Prediction
McCarthy Hatch’s FSAi represents a new standard in real-time risk management. Built on the same approach used by modern regulators to assess market risks, FSAi employs advanced algorithms and data analytics to deliver precise, actionable insights drawn from consumer sentiment. These insights help consumer financial companies mitigate risks, allocate compliance resources more efficiently, and anticipate regulatory challenges. The platform integrates seamlessly with existing systems, enhancing compliance and risk management strategies by delivering unparalleled accuracy and efficiency.
Trusted by Major Financial Institutions
FSAi monitors the sentiment data of more than 150 million banking customers, giving financial institutions invaluable insights to enhance their compliance efforts and reduce the risk of consumer harm. This extensive monitoring capability enables consumer finance companies to stay ahead of regulatory challenges, proactively manage risks, and maintain customer trust — while ensuring privacy and data protection remain top priorities.
Looking Ahead: Predicting Future Regulatory Risks
FSAi’s predictive analytics offer institutions early warnings about potential areas of regulatory focus. By analyzing consumer sentiment data and regulatory trends, FSAi identifies emerging areas of scrutiny, allowing financial institutions to allocate resources better and avoid enforcement actions before they happen. This predictive capability gives financial institutions a critical advantage in staying compliant and ahead of evolving regulatory landscapes.
Key Findings from the New Report: The Auto Finance Industry Faces Renewed Scrutiny for Failing to Address Ongoing Consumer Concerns
A new report powered by FSAi1 highlights regulatory focus areas in auto finance and identifies companies at high risk of causing significant consumer harm:
In 2023, the auto finance industry received significant warnings from regulators concerning rising consumer complaints and harmful practices. The enforcement action against Credit Acceptance Corporation (CAC) underscored predatory lending and deceptive practices. The FSA analysis for 2024 reveals that the issues identified in the 2023 enforcement action remain prevalent and, in some cases, have intensified.
- Auto Finance Companies are showing a significantly higher concentration of financial harm indicators compared to other auto loan providers, such as banks, credit unions, and captives. Specifically:
- Auto finance companies exhibit eight times more indications of consumer harm at origination compared to traditional lenders.
- During servicing, these companies display over 11 times more indications of consumer harm per $1 of outstanding loans compared to other loan providers.
- Credit Acceptance Corporation, Westlake Services, and DriveTime/BridgeCrest consistently show the highest concentrations of potential consumer harm, with major issues like insufficient rate disclosures, predatory APRs, and repossession mismanagement.
- While non-bank finance companies like CAC dominate the negative spotlight, traditional lenders like banks, credit unions, and captives are not immune from regulatory scrutiny. The FSAi analysis suggests that these institutions must enhance transparency and improve compliance measures to avoid similar issues.
For further details and to explore the full scope of risks, download the report here: Download Report.
Learn How FSAi Can Transform Your Compliance Strategy
Financial institutions interested in enhancing their compliance and risk management strategies are encouraged to schedule a demo of FSAi. Discover how real-time data and proactive decision-making can elevate your institution’s consumer protection efforts. Visit McCarthy-Hatch.com for more information or to schedule a demo or consultation.
1 Methodology
FSAi is an advanced AI-driven platform designed to continuously monitor and analyze consumer sentiment, complaints, and regulatory updates across the entire consumer financial marketplace. Using machine learning algorithms and natural language processing, FSAi processes vast amounts of data from sectors such as auto finance, mortgages, credit cards, and personal loans, allowing it to identify emerging regulatory risks in near real time. While FSAi takes a comprehensive approach, scanning all segments of the market, recent data from its models have flagged Auto Finance as a critical area of concern. By analyzing sentiment shifts and complaint volumes using modeling and metrics, FSAi detected an apparent deviation in Auto Finance, indicating a higher likelihood of regulatory enforcement action in this segment. This focused insight, derived from a broad marketplace analysis, underscores the platform’s technical capability to rapidly narrow regulatory risks, enabling financial institutions to manage compliance in an increasingly complex environment proactively.