Today, we finalized changes to our nonbank supervision procedural rule. The changes will provide transparency to the public about how we are using an important supervisory tool to keep pace with fast-moving consumer finance markets.
Based on public comments, in this final version of the procedures, we are clarifying the standard we will apply to decide what information is appropriate for public release. We are also extending the amount of time that is available to the nonbank entity to provide us with input about what information we should release.
Agility in Nonbank Supervision
The Consumer Financial Protection Act (CFPA) enables the CFPB to supervise a nonbank covered entity that we have reasonable cause to determine is engaging, or has engaged, in conduct that poses risks to consumers with regard to consumer financial products or services.
This statutory authority gives the CFPB’s supervision program the ability to move as quickly as the marketplace. For instance, fast-growing companies in nontraditional areas of the consumer finance market may be engaged in novel activities that warrant supervisory attention. There can also be supervisory gaps in more traditional areas of the market that ought to be filled. Through the supervisory process, CFPB examiners can work with the company in question to fully understand and manage its risks.
When we make a determination that supervision is warranted, our focus is on identifying risks to consumers, preferably before they manifest in violations of law or consumer harm.
Being Transparent with the Public
In April 2022, we amended our procedures for making supervisory risk designations so that we can publicly release the Director’s decision that supervision of a company is warranted. Under the amended procedures, the nonbank entity has an opportunity to provide us input as to whether the decision should be withheld or redacted.
It is important for us to be transparent about how we are exercising this important authority. Public release of these decisions will also allow nonbank entities themselves to cite past decisions when making arguments to the CFPB about whether they should be designated or not.
The amended procedures only relate to the initial decision to extend supervision to a nonbank entity, and they do not affect the confidentiality of any ensuing supervisory examination or any other aspect of the supervisory process.
- Codifies a standard to govern information that will not be included in the public release of a designation decision: We will not publish information that would fall within two Freedom of Information Act (FOIA) exemptions, which protect confidential commercial information and personal privacy. We can also withhold information when there is other good cause to do so—for instance, in order to avoid revealing specific violations of law or specific compliance management deficiencies. Overall, this approach will provide assurance to the company involved that we will protect specific categories of sensitive information, while not stopping companies from raising concerns about the release of other information.
- Extends the time for respondents to provide input related to our public release determinations from 7 to 10 business days: The company has the option of expressing its views about whether an order should be publicly released, and we are now extending the deadline to do so.
The CFPB has taken a number of steps to increase transparency and to ensure that our processes to implement federal consumer financial protection law are responsible and effective. We have released a series of Consumer Financial Protection Circulars and advisory opinions that make our positions on our statutory authorities clear to covered entities, the public, and other consumer protection enforcers. We have also improved transparency by launching a new way for the public to petition for regulatory changes and meaningfully engage with the agency. We will continue to take steps to make sure that our processes are open to public scrutiny and participation and that those processes are effective for all interested parties.