CFPB To Launch Registry Of Nonbank Enforcement Actions

In a move that's sure to make nonbank financial institutions even more uncomfortable, the Consumer Financial Protection Bureau (CFPB) has decided to shine a brighter light on those that have been alleged...
United States Finance and Banking
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In a move that's sure to make nonbank financial institutions even more uncomfortable, the Consumer Financial Protection Bureau (CFPB) has decided to shine a brighter light on those that have been alleged to violate consumer financial law. Effective September 16, 2024, the CFPB's Nonbank Registration of Orders Rule (creating 12 C.F.R. Part 1092) will require certain nonbank covered persons to report final public orders related to violations of consumer financial laws.

This registry, an online treasure trove of info, will be available for all to see—regulators, consumers, and the general public alike. Financial institutions will need to determine if they fall under the rule, and which implementation dates (discussed below) may be relevant to their specific circumstances. It will be important for nonbank financial institutions, including service providers and affiliates, to analyze whether they are covered by the rule and, if so, to incorporate its requirements into the institution's compliance program.

Registry Requirements

  • Certain nonbank covered persons must report final public orders related to violations of consumer financial laws to the CFPB within 90 days of the covered order's effective date, and 90 days after the covered order's amendment, modification, termination, abrogation, or cessation of covered-order status, or after changes to other registration information.
  • The rule excludes insured depository institutions, insured credit unions, related persons, states, certain other entities, and natural persons from these requirements.
  • Affected entities must provide basic identifying information about themselves and the orders, including copies of the orders, and periodically update this information to ensure accuracy.
  • Nonbanks that are subject to an order published on the Nationwide Multistate Licensing System's Consumer Access website (except for orders issued or obtained at least in part by the Bureau) may elect to comply with a one-time registration option in lieu of complying with the rule's notification and written-statement requirements with respect to that order.
  • The CFPB intends to publish the submitted information on its website and potentially other forms (not identified).

Types of Covered Orders

  • The registry will include "covered orders" that are final, written, public orders related to violations of federal consumer financial laws, such as the Consumer Financial Protection Act (CFPA) prohibition on unfair, deceptive, or abusive acts or practices, the Truth in Lending Act, the Electronic Fund Transfer Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, and Section 5 of the Federal Trade Commission Act, and identified state UDAP laws, among others.
  • Covered orders identify a covered nonbank by name as a party subject to the order.
  • Orders may include those issued by the CFPB, other federal agencies, state agencies, and courts.
  • Nonbank covered persons must report any final public order that imposes obligations based on violations of these laws.
  • Orders subject to the final rule include "consent orders" (i.e., orders issued with the consent of the covered nonbank subject to the order).
  • Covered orders includes orders with an effective date on or after January 1, 2017.

Expiration and Challenges

  • Ongoing registration requirements apply to a covered order until it is deemed to expire under the rule (e.g., terminated by an agency or court, its own terms on a date expressly provided for in the order, or 10 years after its effective date if not otherwise expressly stated as longer or terminated earlier) or all relevant provisions are fully terminated.

Supervised Nonbanks

  • Supervised nonbanks must annually (on or before March 31 of each year) identify an executive responsible for compliance with the orders listed in the registry and submit a written statement regarding compliance, signed by the executive.
  • The rule requires the designated executive of the covered nonbank to complete certain tasks, including (1) describing the steps the executive has taken to review and oversee the covered nonbank's activities subject to the order during the preceding calendar year, and (2) attesting whether, to the executive's knowledge, during the preceding calendar year the covered nonbank identified any violations or noncompliance with any applicable obligations imposed in the order's public provisions.

Implementation and Submission Period Timing Requirements

  • Different implementation dates are specified for larger participants, other supervised nonbanks, and other nonbanks not subject to CFPB supervision. Detailed dates and examples are provided in the CFPB's executive summary (linked below) and generally are:
    • Larger Participants and Supervised Covered Nonbanks:
      • Registration Submission Period: October 16, 2024 through January 14, 2025
      • Registration Deadline: January 14, 2025
    • Other CFPB-Supervised Covered Nonbanks:
      • Registration Submission Period: January 14, 2025 through April 14, 2025
      • Registration Deadline: April 14, 2025
    • Other Covered Nonbanks:
      • Registration Submission Period: April 14, 2025 through July 14, 2025
      • Registration Deadline: July 14, 2025
  • Filing instructions and guidance will be provided by the CFPB to assist entities in complying with the new requirements. Generally, information required for registration will include covered nonbank identity information, administrative information, and covered order information (including a complete copy of the covered order).

Violation of the final rule would be an independent violation of federal consumer financial law subject to enforcement as provided in the CFPA, and applicable remedies under law, including potential civil money penalties.

The CFPB claims the registry will enhance supervision, consumer protection, and regulatory efficiency. Section 1022(b) of the CFPA authorizes the CFPB to prescribe rules necessary to carry out the purposes of federal consumer financial laws. CFPA Sections 1022(c)(1)-(4) and (7) allow the CFPB to collect information from covered persons for market monitoring and require registration. CFPA Section 1024(b) provides the CFPB with supervisory authority over certain nonbank covered persons and mandates periodic reports and examinations to assess compliance and detect risks. In 2022 the CFPB created a "Repeat Offender Unit" to focus on entities that violate agency or court orders.

The CFPB's Executive Summary of the Nonbank Registration of Orders Rule is available here.

The Nonbank Registration of Orders Rule is available here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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