The Consumer Financial Protection Bureau (CFPB) has finalized a proposal to establish a nonbank registry related to enforcement matters. This new rule mandates that certain nonbank entities register information about their company and specific orders, and submit copies of these orders to the CFPB. Additionally, the rule requires certain supervised nonbanks to file annual compliance reports, signed by an executive.
Critics argue that the proposed rule is overly broad and conflicts with existing consumer protections at both federal and state levels. Concerns have been raised that this registry could lead to multiple actions by various regulators for activities that have already been addressed. There are also questions regarding the CFPB's authority to impose the executive attestation requirement.
"Over the past few months AFSA has said that the CFPB should engage in rulemaking that provides clear rules of the road for industry while protecting consumers," said Celia Winslow, Executive Vice President of AFSA. "While we applaud the Bureau for taking the time to engage in rulemaking, it is unfortunate that the CFPB ignored the important feedback the rulemaking process provided."
Winslow further emphasized, "Consumers and the nonbank financial services companies that serve them do not need more policies that are conflicting, duplicative, and costly; they need commonsense rules that do not add unnecessary costs to products and services in the marketplace."
The structure of this new registry has also raised concerns about its potential impact on nonbank financial institutions. Critics suggest it may act as a tool to "name and shame" companies rather than effectively monitor risks to consumers. There is apprehension that institutions may be less willing to enter into consent agreements if they risk being included in such a registry, potentially exposing them to trivial and costly class-action litigation.
Additionally, critics argue against what they perceive as inflammatory language used by CFPB in announcing this rule. They contest claims made by CFPB Director alleging financial firms treat penalties for illegal activity as merely a cost of doing business. Opponents assert financial firms invest significant resources into compliance management systems to adhere strictly to legal standards.
They also contend this rule unnecessarily expands CFPB's authority beyond Congressional intent and undermines state authorities which already track regulatory actions comprehensively through platforms like state websites or NMLS (Nationwide Multistate Licensing System). Moreover, opponents argue nonbank financial companies do not face inconsistent oversight since they are subject to supervision from each state where they operate as well as federal regulations under CFPB and FTC jurisdiction.