CFPB Proposes Nonbank Registry of Financial Law Violations; Potential for "Scarlet Letter"

3 min

The CFPB unveiled a far-reaching proposal to require certain nonbank financial firms to register with the CFPB on December 13, 2022, which is meant to enhance market monitoring and risk-based supervision efforts. The deadline for submitting comments is 60 days after publication in the Federal Register.

The registry is the CFPB's latest effort targeting nonbank providers of financial products and services "to track and mitigate the risks posed by repeat offenders, while also being able to monitor all lawbreakers subject to agency and court orders," in an online and public registry.

The CFPB's proposed rule would:

  • Apply to Covered Nonbanks and Final Orders: Pursuant to Sections 1022(b) and 1022(c) of the Consumer Financial Protection Act of 2010 (CFPA), the CFPB is proposing to require certain nonbank covered person entities (with exclusions for insured depository institutions, insured credit unions, related persons, states, certain other entities, and natural persons) that are under certain final public orders obtained or issued by a federal, state, or local agency in connection with the offering or provision of a consumer financial product or service to report the existence of such orders to a registry. In addition, the registry would include all final public orders and judgments (including consent and stipulated orders and judgments) obtained or issued by the CFPB or any government agency (federal, state, or local) for violation of certain consumer protection laws.
  • Executive Attestation: Pursuant to CFPA Section 1024(b)(7), the CFPB is also proposing to require certain supervised nonbanks to submit annual written statements regarding compliance with each underlying order, signed by an attesting executive who has knowledge of the entity's relevant systems and procedures for achieving compliance and control over the entity's compliance efforts.

Nonbank registrants would have to register in the Bureau system starting after both the effective date of the final rule and the launch of a registration system created by the CFPB. According to the CFPB, there is currently a greater need to collect and publish the information described in the proposal from nonbanks under its jurisdiction than insured banks and credit unions that would be excluded from the proposed registry. According to the CFPB, "comprehensive, readily accessible information is lacking about the identity of orders issued against nonbanks subject either to the CFPB's market monitoring authority or to its supervisory authority across the various markets for consumer financial products and services."

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