The bureau, for the first time, used a procedural rule on its supervisory authority to issue an order against a company based on its potential risk to consumers.
02/29/2024 10:30 A.M.
1.5 minute read
The Consumer Financial Protection Bureau has issued its first supervisory authority order (PDF) for a company under a procedural rule to examine nonbank financial companies that could pose risks to consumers.
The order for installment lender World Acceptance was issued after the CFPB determined the company “has met the legal requirements for supervision,” according to a news release.
It outlines concerns about the company’s credit reporting, collections and insurance practices; however, the CFPB notes the order does not constitute a finding that the company has engaged in wrongdoing.
“The CFPB is making this order public to provide transparency about how it assesses risks using consumer complaints and other factors,” according to the news release.
How Did We Get Here?
The CFPB finalized the changes to its nonbank supervision rule in November 2022, ACA International previously reported.
Based on stakeholders’ comments before the final rule was issued, the bureau clarified the standards that will decide what information is appropriate for public release.
ACA submitted comments (PDF) on the procedural rule with concerns about the rulemaking process as well as whether supervisory proceedings should be public.
Comments from the banking industry showed support for oversight of nonbank companies, but also concern about publicizing findings and risk-based assessments about a company before having inspected it firsthand, ACA previously reported.
How Does This Impact You?
According to an article on the supervision order from ACA member company Hudson Cook LLP, the CFPB’s order further explains the bureau’s “interpretation of the ‘reasonable cause’ standard, the meaning of ‘risk’ under the statute, and the use of unverified consumer complaints on the CFPB’s portal.”
The order also states that the CFPB can use information on consumer complaints in the consumer complaint database for making a risk-based supervision decision, meaning companies should review their compliance management systems and handling of consumer complaints, according to the article.
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