The CFPB on Sept. 25, 2025, issued a final rule to rescind amendments it previously adopted to the Procedures for Supervisory Designation Proceedings, "with the exception of some limited process adjustments."
The Consumer Financial Protection Act of 2010 (CFPA) grants the CFPB supervisory authority over nonbank covered persons that the Bureau "has reasonable cause to determine, by order, after notice to the covered person and a reasonable opportunity for such covered person to respond ... is engaging, or has engaged, in conduct that poses risks to consumers with regard to the offering or provision of consumer financial products or services." In 2013, the CFPB established procedures "to govern these supervisory designation proceedings" and provided that "information regarding the proceedings," including the Director of the CFPB's (the Director) final determination, must be "treated as confidential supervisory information and not publicly disclosed."
The process of determining whether the nonbank covered person should be subject to supervision under the 2013 Rule was extensive and included 1) a "notice of reasonable cause" sent by the CFPB to the respondent, 2) "a supplemental oral response from the respondent before the Associate Director of the Division of Supervision, Enforcement, and Fair Lending," (the Associate Director), 3) a "formulated a recommended determination" sent from the Associate Director to the Director and (4) the Director's final determination. In the alternative, rather than submit to the contested process, the respondent had the option to voluntarily consent to supervision.
The CFPB issued a series of rules in April 2022, November 2022 and April 2024 (the 2022-2024 Rules), which amended the 2013 Rule. The 2022-2024 Rules "enabled the Director to publicly release the Director's final decisions and orders designating respondents for supervision" and additionally "removed the role of the Associate Director ... from the process, citing an internal reorganization that abolished that position" and rather "specified that the Director would preside over the proceeding without receiving a recommended determination."
On May 14, 2025, the agency published a notice of proposed rulemaking that sought comments on rescinding the 2022-2024 Rules, as Holland & Knight previously reported. After receiving eight comments to the notice of proposed rulemaking, the CFPB concluded that the 2022-2024 Rules should be rescinded, aside from "some limited process adjustments that were contained in the 2024 rule."
The 2022-2024 Rules "provided for public release of final decisions and orders by the Director and made other changes to the CFPB's procedures for designating nonbank covered persons for supervision." In the May 2025 notice of proposed rulemaking, the CFPB was particularly concerned that entities exercising the right to contest supervisory designation would be subject to a public decision and order "asserting that the entity 'is engaging, or has engaged, in conduct that poses risks to customers.'" As such decisions could have far reaching consequences on a business' public reputation, the CFPB noted that the 2022-2024 Rules could improperly persuade entities to consent to designation "even when they have good arguments that designation is unwarranted." Based on its concerns, the CFPB sought comments on "the impact of public release on supervised entities and the supervisory process."
Among those in favor of rescinding the 2022-2024 Rules were "a trade association representing the U.S. business community, a trade association of financial technology firms, and a trade association whose members include installment lenders." Each "of these trade associations cited unfair reputational harm from public release" as a basis for rescinding the 2022-2024 Rules, and two trade associations "identified a risk to competition, because firms that contest designation may be competitively disadvantaged by a public order compared to firms that consent to designation and so are not the focus of a public order." The two trade associations, noting competitive disadvantages as a basis for rescission, also highlighted their position that "public release is inconsistent with supervisory confidentiality and harms the supervisory relationship between the Bureau and the entity."
"Two trade associations representing the banking industry" also opposed the "public release of decisions and orders," but rather than eliminating all public disclosures, they proposed the "public release of the names of designated nonbank entities" as an alternative approach. Though these associations emphasized that "supervisory confidentiality is important because it encourages candid communication between an entity's management, an entity's board of directors, and the supervising agency," they balanced the need for confidentiality against the need for some transparency and found that "by instead publishing a list of designated nonbank entities, the Bureau would provide transparency to the public and to other market participants about which nonbanks are subject to Bureau supervision, without causing the harms from publishing decisions and orders."
Though the trade associations were consistent in their support for rescinding the 2022-2024 Rules, "[t]wo consumer advocacy organizations, an individual commenter, and an anonymous commenter favored public release and opposed the proposed rescission." These comments highlighted the concern that "without transparency, the public cannot meaningfully evaluate whether the Bureau is fulfilling its mandate, and it would also deny consumers access to information about conduct by entities that could be important to their financial well-being." One organization proposed that if the CFPB is going to adjust the present system, the agency should instead consider alternative approaches such as "offering clearer guidance on the threshold for public disclosure; allowing limited redactions to protect sensitive information in specific circumstances; or providing additional due process protections for entities facing public orders."
After analyzing the comments submitted, the CFPB ultimately elected to restore the 2013 Rule's original "treatment of decisions and orders in supervisory designation proceedings as confidential supervisory information." Because "the financial services industry is highly focused on reputational concerns," the CFPB noted the potential danger to "public interest ... if the Bureau designated entities that ought not be designated but accede to designation out of fear of reputational harm." Though the CFPB acknowledged the merits of transparency and disclosure, "because the large majority of respondents have historically voluntarily consented, the ability of the public to use decisions and orders from the minority of contested cases to understand the Bureau's supervision program is limited." Accordingly, to balance the cost of reputational harm against the more limited impact on transparency, the CFPB elected to reinstate the 2013 Rule.
Though the CFPB reinstated the 2013 Rule, it will retain limited procedural provisions of the 2024 Amendment that "simplify and clarify the process, and contribute to a more fair and effective process." These provisions include:
- "a provision authorizing the initiating official to file a written reply to the respondent's written response, which helps provide the respondent with fair notice of points the initiating official might subsequently raise orally during the 'supplemental oral response'
- an option for the recommending official to direct that the supplemental oral response be conducted by video, as a third alternative alongside telephonic and in-person options under the 2013 [R]ule
- provisions that codify the possibility of additional supplemental briefing from the parties, which can help ensure that the recommending official and Director have full information and that respondents have a fair opportunity to respond to new issues
- simplification of the provisions governing the mechanics of voluntary consent agreements, which led to some confusion under the 2013 [R]ule
- a nomenclature update to the definition of 'initiating official,' in order to reflect a 2024 reorganization that replaced the two former 'Assistant Directors for Supervision' with the 'Supervision Director.'"
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