WASHINGTON, D.C.– The Consumer Financial Protection Bureau (CFPB) today is proposing a rule that would set up procedures to supervise nonbanks that may have engaged in activities that pose risks to consumers. This rule would clarify procedures the CFPB would use when exercising the authority granted to it by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).
“This is an important step in the development of our nonbank supervision program,” said CFPB Director Richard Cordray. “This proposal allows us to reach nonbanks that we would not otherwise supervise, while providing industry with a streamlined process that is fair and efficient.”
The proposed rule is available online at http://www.consumerfinance.gov/notice-and-comment/.
A nonbank – or non-depository business – is a company that offers or provides consumer financial products or services but does not have a bank, thrift, or credit union charter. Nonbanks include companies such as mortgage lenders, mortgage servicers, payday lenders, consumer reporting agencies, debt collectors, and money services companies.
Under the Dodd-Frank Act, the CFPB has authority to supervise any nonbank that it has reasonable cause to determine is posing a risk to consumers based on complaints or other information it receives. This is in addition to overseeing nonbanks, regardless of size, in certain specific markets of: mortgage companies (originators, brokers, and servicers including loan modification or foreclosure relief services); payday lenders; and private education lenders. And it is in addition to CFPB’s authority to supervise the larger players, or “larger participants,” in other markets, such as those included in an initial proposal published earlier this year.
The proposed rule sets out procedures to notify a nonbank that it is being considered for supervision because the Bureau may have reasonable cause to determine that it poses risks to consumers. The proposed rule also gives the nonbank a reasonable opportunity to respond. The proposed rule, for example, sets out what the CFPB requires in the notice and the response. It says that nonbanks may respond not just in writing, but also orally. And, the proposal creates a mechanism for nonbanks to file a petition to terminate supervision authority after two years.
Importantly, notifying a nonbank under this proposed rule would simply mean that the CFPB may be supervising it. The CFPB is authorized to require reports from and conduct examinations of nonbanks subject to its supervision.
Although the Dodd-Frank Act does not require that the CFPB issue this rule, the CFPB is issuing it to be transparent in its authorities and procedures.
The proposed rule is open for comment for 60 days after the rule is published in the Federal Register. The CFPB welcomes comments from the public.
More information about the CFPB’s Nonbank Supervision Program is available here.