Authority Over Nonbank Companies on CFPB’s Radar in Comment Request

The bureau is accepting comments by May 31 on its supervisory authority over nonbank companies, including private student loan servicers, and a procedural rule on releasing examinations to the public.

05/09/2022 1:20 P.M.

3 minute read

Comments are open on a largely unused rule of the Consumer Financial Protection Bureau to “examine nonbank financial companies that pose risks to consumers,” according to a news release from the bureau.

“The CFPB believes that utilizing this dormant authority will help protect consumers and level the playing field between banks and nonbanks,” according to the news release.

Comments on a procedural rule to make the process more transparent are open through May 31.

“Given the rapid growth of consumer offerings by nonbanks, the CFPB is now utilizing a dormant authority to hold nonbanks to the same standards that banks are held to,” said CFPB Director Rohit Chopra in the news release. “This authority gives us critical agility to move as quickly as the market, allowing us to conduct examinations of financial companies posing risks to consumers and stop harm before it spreads.”

The Basics

The law that created the CFPB, the Dodd-Frank Act, gives it authority to use enforcement actions to stop companies from conduct that poses risk to consumers, including litigation.

The law also gives the CFPB authority to conduct supervisory examinations to review the books and records of regulated entities.

When this happens, CFPB examiners typically provide a report to entities with problems that need to be addressed, and responsible institutions typically take prompt corrective action.

New Nonbank Supervision

After the 2008 financial crisis and recession, Congress turned to the CFPB for supervision of certain nonbanks, in addition to large depository institutions with more than $10 billion in assets, and their service providers.

This included all nonbank entities in the mortgage, private student loan and payday loan industries, regardless of size.

“The CFPB conducted rulemakings to define thresholds for entities subject to supervision in the markets of consumer reporting, debt collection, student loan servicing, international remittances, and auto loan servicing,” it reports.

A third category includes the nonbank companies whose activities the CFPB has reason to determine will pose risks to consumers, and the CFPB is now using its supervisory authority to examine those companies.

The bureau reports using this authority will allow for supervision over fast-growing companies or those in markets outside of the current nonbank supervision program.

It will determine whether to examine these companies based on reports of consumer risks from:

  • Complaints collected by the CFPB.
  • Judicial opinions and administrative decisions.
  • Whistleblower complaints, state partners, federal partners, or news reports.

Transparency

The CFPB also issued a procedural rule to increase the transparency of the risk-determination process.

Unlike other provisions of law regarding nonbank supervision, entities subject to supervision based on risk are given notice and an opportunity to respond.

In order to provide greater guidance to the marketplace on how the CFPB will conduct this process, the CFPB is updating an aspect of its procedures for risk determinations to authorize the release of certain information from any final reports of the examination.

The company involved will have an opportunity to provide input to the CFPB on what information is released to the public.

Share Your Comments

Submit comments using Docket No. CFPB-2022-0024 through:

  • The Federal eRulemaking Portal. Follow the instructions for submitting comments here.
  • Email: [email protected]. Include Docket No. CFPB-2022-0024 in the subject line of the message.
  • Mail/Hand Delivery/Courier: Comment Intake—Supervisory Authority Over Certain Nonbank Covered Persons Based on Risk Determination; Public Release of Decisions and Orders, Consumer Financial Protection Bureau, 1700 G Street NW, Washington, D.C. 20552.

ACA International is reviewing the request to submit comments to the bureau on the accounts receivable management industry’s behalf. If this is an item you want to discuss further with ACA’s advocacy team, please email [email protected] 

If you have executive leadership updates or other member news to share with ACA, contact our communications department at [email protected]. View our publications page for more information and our news submission guidelines here.

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