On May 24, 2012, the Consumer Financial Protection Bureau
("CFPB" or "Bureau") proposed a rule that will
set up a process to supervise nonbanks that may have engaged in
activities that pose risks to consumers. The CFPB is authorized to
require reports from and conduct examinations of nonbanks subject
to its supervision.
CFPB Director Richard Cordray said in the Bureau's press
release that "[t]his 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 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 in
connection with offering or providing a consumer financial product
or services.
The CFPB's proposed rule includes the following:
- Notice of Reasonable Cause – The Bureau would provide a nonbank that provides a consumer financial product or service a notice stating that the Bureau may have a reasonable cause to determine that it is engaging, or has engaged, in conduct that poses risks to consumers.
- Opportunity to Respond – If the nonbank contests the notice, the nonbank would have 20 days to respond, and may provide a supplemental oral response to provide arguments to the Bureau's Assistant Director or designee. Otherwise, the nonbank may execute a consent agreement to supervision in lieu of a response. In addition, a respondent may voluntarily consent to the Bureau's supervisory authority at any time during a proceeding.
- Petition to Terminate Supervision – The proposal also sets up a process for nonbanks to file a petition to terminate supervision authority after two years.
The statutory authority to supervise nonbanks that pose a risk
to consumers is in addition to the Bureau's authority to (1)
oversee 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 (2) supervise the
larger players, or "larger participants," in other
markets, such as those included in an initial proposal on consumer
reporting companies and debt collectors (for additional information
on this "larger participants" proposal, see the article
on
our website).
Importantly, nonbank entities are also subject to the Bureau's
regulatory and enforcement authority and any applicable Federal
consumer financial law, regardless of whether they are subject to
the CFPB's supervisory authority.
The proposed rule was published in the Federal Register on
May 25, 2012. The deadline for comments is July 24, 2012. The
proposed rule is available online and contains information about how to
submit a response.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
