Proposed Rule2022-27385
Registry of Nonbank Covered Persons Subject to Certain Agency and Court Orders
Primary source
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Published
January 30, 2023
Issuing agencies
Consumer Financial Protection Bureau
Abstract
Pursuant to its authorities under the Consumer Financial Protection Act of 2010 (CFPA), the Consumer Financial Protection Bureau (Bureau or 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 Bureau registry. The Bureau is proposing to include all final public written orders and judgments (including consent and stipulated orders and judgments) obtained or issued by the Bureau or any government agency (Federal, State, or local) for violation of certain consumer protection laws. Pursuant to its authority under the CFPA, the Bureau 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.
Full Text
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<title>Federal Register, Volume 88 Issue 19 (Monday, January 30, 2023)</title>
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[Federal Register Volume 88, Number 19 (Monday, January 30, 2023)]
[Proposed Rules]
[Pages 6088-6142]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-27385]
[[Page 6087]]
Vol. 88
Monday,
No. 19
January 30, 2023
Part IV
Bureau of Consumer Financial Protection
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12 CFR Part 1092
Registry of Nonbank Covered Persons Subject to Certain Agency and Court
Orders; Proposed Rule
Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 /
Proposed Rules
[[Page 6088]]
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BUREAU OF CONSUMER FINANCIAL PROTECTION
12 CFR Part 1092
[Docket No. CFPB-2022-0080]
RIN 3170-AB13
Registry of Nonbank Covered Persons Subject to Certain Agency and
Court Orders
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Proposed rule with request for public comment.
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SUMMARY: Pursuant to its authorities under the Consumer Financial
Protection Act of 2010 (CFPA), the Consumer Financial Protection Bureau
(Bureau or 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 Bureau registry. The Bureau is
proposing to include all final public written orders and judgments
(including consent and stipulated orders and judgments) obtained or
issued by the Bureau or any government agency (Federal, State, or
local) for violation of certain consumer protection laws. Pursuant to
its authority under the CFPA, the Bureau 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.
DATES: Comments must be received on or before March 31, 2023 to be
assured of consideration.
ADDRESSES: You may submit comments, identified by Docket No. CFPB-2022-
0080 or RIN 3170-AB13, by any of the following methods:
<bullet> Electronic: <a href="https://www.regulations.gov">https://www.regulations.gov</a>. Follow the
instructions for submitting comments.
<bullet> Email: <a href="/cdn-cgi/l/email-protection#71434143435c3f21233c5c3e0315140302231416180205030831121701135f161e07"><span class="__cf_email__" data-cfemail="192b292b2b3457494b5434566b7d7c6b6a4b7c7e706a6d6b60597a7f697b377e766f">[email protected]</span></a>. Include Docket
No. CFPB-2022-0080 or RIN 3170-AB13 in the subject line of the message.
<bullet> Mail/Hand Delivery/Courier: Comment Intake--Nonbank
Registration of Certain Agency and Court Orders, c/o Legal Division
Docket Manager, Consumer Financial Protection Bureau, 1700 G Street NW,
Washington, DC 20552. Because paper mail in the Washington, DC area and
at the Bureau is subject to delay, commenters are encouraged to submit
comments electronically.
Instructions: The Bureau encourages the early submission of
comments. All submissions should include the agency name and docket
number or Regulatory Information Number (RIN) for this rulemaking. In
general, all comments received will be posted without change to <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
All comments, including attachments and other supporting materials,
will become part of the public record and are subject to public
disclosure. Proprietary information or sensitive personal information,
such as account numbers or Social Security numbers, or names of other
individuals, should not be included. Comments will not be edited to
remove any identifying or contact information.
FOR FURTHER INFORMATION CONTACT: Clay Coon, Office of Supervision
Policy, at 202-435-7700. If you require this document in an alternative
electronic format, please contact <a href="/cdn-cgi/l/email-protection#b5f6f3e5f7eaf4d6d6d0c6c6dcd7dcd9dcc1ccf5d6d3c5d79bd2dac3"><span class="__cf_email__" data-cfemail="7c3f3a2c3e233d1f1f190f0f151e15101508053c1f1a0c1e521b130a">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
I. Summary of the Proposed Rule
The Bureau is proposing to establish and maintain a registry that
would collect information about certain public agency and court orders
and facilitate the Bureau's supervision of certain companies. In this
way, the Bureau would more effectively be able to monitor and to reduce
the risks to consumers posed by entities that violate consumer
protection laws. The Bureau also proposes to publish the registry
online for use by the public and other regulators.
The proposed rule would require certain nonbank covered person
entities (with exclusions for insured depository institutions, insured
credit unions, related persons, States, certain other entities, and
natural persons) to register with the Bureau upon becoming subject to a
public written order or judgment imposing obligations based on
violations of certain consumer protection laws. Those entities would be
required to register in a system established by the Bureau, provide
basic identifying information about the company and the order
(including a copy of the order), and periodically update the registry
to ensure its continued accuracy and completeness. The Bureau would
publish this information on its website and potentially in other forms.
The Bureau would also require certain nonbanks subject to the
Bureau's supervisory authority under section 1024(a) of the Consumer
Financial Protection Act of 2010 (CFPA) \1\ annually to identify an
executive (or executives) who is responsible for and knowledgeable of
the firm's efforts to comply with the orders identified in the
registry. The name and title of the executive would also be published
in the registry. The supervised nonbank entity would also be required
to submit on an annual basis a written statement signed by that
executive (or executives) regarding the entity's compliance with each
order in the registry.
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\1\ 12 U.S.C. 5514(a).
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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 Bureau. Details on how to
register will be provided in the online system through filing
instructions.
II. Background
A. The Bureau and Other Agencies Issue and Obtain Enforcement Actions
Against Nonbanks To Protect Consumers
The Bureau administers and enforces Federal consumer financial laws
against nonbanks in consumer financial markets. In addition to the
Bureau, Congress authorized multiple other Federal and State agencies
to enforce Federal consumer financial law, including the CFPA
prohibition against unfair, deceptive, or abusive acts or practices
(UDAAP) and enumerated statutes including the Truth in Lending Act, the
Electronic Fund Transfer Act, the Fair Credit Reporting Act, the Equal
Credit Opportunity Act, and other statutes.\2\ Several Federal
agencies, most notably the Federal Trade Commission, also enforce
section 5 of the Federal Trade Commission Act (FTC Act), which
similarly prohibits unfair or deceptive acts or practices (UDAP).\3\
The prohibitions against unfair and deceptive acts or practices in the
CFPA were modeled after the same prohibitions in the FTC Act.
Furthermore, States across the country began codifying State UDAP
statutes modeled after the FTC Act starting in the 1960s and 1970s.\4\
These laws differ
[[Page 6089]]
in many respects from each other, but generally they hail from a common
consumer protection tradition originating with the FTC Act, similar to
the CFPA's prohibition on UDAAP.
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\2\ See 12 U.S.C. 5481(12), 5552; 12 CFR part 1082; Bureau
Interpretive Rule, Authority of States to Enforce the Consumer
Financial Protection Act of 2010, 87 FR 31940 (May 26, 2022).
\3\ 15 U.S.C. 45.
\4\ Dee Pridgen, The Dynamic Duo of Consumer Protection: State
and Private Enforcement of Unfair and Deceptive Trade Practices
Laws, 81 Antitrust L.J. 911, 912 (2017).
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The Bureau was created in the wake of the 2008 financial crisis,
which was caused by a variety of overlapping factors including systemic
malfeasance in the mortgage industry.\5\ Since passage of the CFPA, the
Bureau has brought more than 250 enforcement actions against nonbanks.
When the Bureau issues an order against a covered person (often, but
not always, as a consent order), the Bureau often follows up with
supervisory or enforcement action to ensure the company's compliance
with the order. On numerous occasions, the Bureau has uncovered
companies that failed to comply with consent orders that the companies
entered into with the Bureau voluntarily.\6\
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\5\ See U.S. Fin. Crisis Inquiry Comm'n, The Financial Crisis
Inquiry Report, at 104-11, 113-18 (2011), <a href="https://www.govinfo.gov/content/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf">https://www.govinfo.gov/content/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf</a>; see also S. Rep. No. 111-176,
at 11 (2010) (``Th[e] financial crisis was precipitated by the
proliferation of poorly underwritten mortgages with abusive terms,
followed by a broad fall in housing prices as those mortgages went
into default and led to increasing foreclosures.'').
\6\ See, e.g., Bureau of Consumer Fin. Prot. v. Encore Capital
Grp., No. 3:20-cv-01750-GPC-KSC (S.D. Cal. Oct. 16, 2020); Sec.
Nat'l Automotive Acceptance Co., CFPB No. 2017-CFPB-0013 (Apr. 26,
2017); Military Credit Servs., LLC., CFPB No. 2016-CFPB-0029 (Dec.
20, 2016).
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B. Congress Instructed the Bureau To Monitor Markets for Consumer
Financial Products and Services
Congress established the Bureau to regulate (among other things)
the offering and provision of consumer financial products and services
under the Federal consumer financial laws, and it granted the Bureau
authority to ensure that the Bureau could achieve that mission.\7\ But
it also understood that the Bureau could not fully and effectively
achieve that mission unless it developed a clear window into the
markets for and persons involved in offering and providing such
products and services. To that end, Congress mandated that the Bureau
``shall monitor for risks to consumers in the offering or provision of
consumer financial products or services, including developments in
markets for such products or services.'' \8\
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\7\ See 12 U.S.C. 5511.
\8\ See 12 U.S.C. 5512(c)(1).
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Notably, Congress directed the Bureau to engage in such monitoring
``to support its rulemaking and other functions,'' \9\ instructing the
Bureau to use monitoring to inform all of its work. Congress separately
described the Bureau's ``primary functions'' as ``conducting financial
education programs''; ``collecting, investigating, and responding to
consumer complaints''; ``collecting, researching, monitoring, and
publishing information relevant to the functioning of markets for
consumer financial products and services to identify risks to consumers
and the proper functioning of such markets''; ``supervising covered
persons for compliance with Federal consumer financial law, and taking
appropriate enforcement action to address violations of Federal
consumer financial law''; ``issuing rules, orders, and guidance
implementing Federal consumer financial law''; and ``performing such
support activities as may be necessary or useful to facilitate the
other functions of the Bureau.'' \10\ Put simply, Congress envisioned
that the Bureau would use its market monitoring work to inform its
activities, all with the express purpose of ``ensuring that all
consumers have access to markets for consumer financial products and
services and that markets for consumer financial products and services
are fair, transparent, and competitive.'' \11\
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\9\ Id. (emphasis added).
\10\ 12 U.S.C. 5511(c).
\11\ 12 U.S.C. 5511(a).
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To achieve these ends, Congress took care to ensure that the Bureau
had the tools necessary to effectively monitor for risks in the markets
for consumer financial products and services. It granted the Bureau
authority ``to gather information from time to time regarding the
organization, business conduct, markets, and activities of covered
persons and service providers.'' \12\ In particular, Congress
authorized the Bureau to ``require covered persons and service
providers participating in consumer financial services markets to file
with the Bureau, under oath or otherwise, in such form and within such
reasonable period of time as the Bureau may prescribe by rule or order,
annual or special reports, or answers in writing to specific
questions,'' that would furnish the Bureau with such information ``as
necessary for the Bureau to fulfill the monitoring . . .
responsibilities imposed by Congress.'' \13\
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\12\ 12 U.S.C. 5512(c)(4)(A).
\13\ 12 U.S.C. 5512(c)(4)(B)(ii).
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To assist the Bureau in allocating resources to perform its
monitoring, Congress also identified a non-exhaustive list of factors
that the Bureau may consider, including ``likely risks and costs to
consumers associated with buying or using a type of consumer financial
product or service''; \14\ ``understanding by consumers of the risks of
a type of consumer financial product or service''; \15\ ``the legal
protections applicable to the offering or provision of a consumer
financial product or service, including the extent to which the law is
likely to adequately protect consumers''; \16\ ``the extent, if any, to
which the risks of a consumer financial product or service may
disproportionately affect traditionally underserved consumers''; \17\
and ``the types, number, and other pertinent characteristics of covered
persons that offer or provide the consumer financial product or
service.'' \18\
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\14\ 12 U.S.C. 5512(c)(2)(A).
\15\ 12 U.S.C. 5512(c)(2)(B).
\16\ 12 U.S.C. 5512(c)(2)(C).
\17\ 12 U.S.C. 5512(c)(2)(E).
\18\ 12 U.S.C. 5512(c)(2)(F).
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Congress also anticipated that the insights the Bureau would gain
from such market monitoring should at times become available to a wider
audience than just Bureau employees. Not only did Congress mandate that
the Bureau ``publish not fewer than 1 report of significant findings of
its monitoring . . . in each calendar year,'' but it also instructed
that the Bureau may make non-confidential information available to the
public ``as is in the public interest.'' \19\ Congress gave the Bureau
discretion to determine the format of publication, authorizing the
Bureau to make the information available ``through aggregated reports
or other appropriate formats designed to protect confidential
information in accordance with [specified protections in this
section].'' \20\ These instructions regarding public release of market
monitoring information align with one of the Bureau's ``primary
functions'' mentioned above--to ``publish[ ] information relevant to
the functioning of markets for consumer financial products and services
to identify risks to consumers and the proper functioning of such
markets.'' \21\
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\19\ 12 U.S.C. 5512(c)(3).
\20\ 12 U.S.C. 5512(c)(3)(B).
\21\ 12 U.S.C. 5511(c)(3).
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The Bureau takes its market monitoring obligations seriously, and
it has incorporated valuable insights gained to date from such
monitoring in conducting the multiple functions assigned to it under
the CFPA, including its supervisory and enforcement efforts, as well as
its rulemaking, consumer education, and other functions.\22\ As
discussed in
[[Page 6090]]
further detail below, this proposed rule seeks to continue and build
upon that commitment by creating an order registry to accomplish a
number of goals, with a particular focus on monitoring for risks to
consumers related to repeat offenders of consumer protection law. A
public registry of agency and court orders issued or obtained in
connection with violations of law would help the Bureau and the broader
public monitor trends concerning corporate recidivism relating to
consumer protection law, including areas where prior violations of law
are indicia of risk to consumers.
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\22\ See, e.g., CFPB Semiannual Regulatory Agenda, 87 FR 5326,
5328 (Jan. 31, 2022) (``The Bureau's market monitoring work assists
in identifying issues for potential future rulemaking work.'');
Payday, Vehicle, and Certain High-Cost Installment Loans, 82 FR
54472, 54475, 54488, 54498 (Nov. 17, 2017) (citing information
obtained through Bureau market monitoring efforts); Arbitration
Agreements, 82 FR 33210, 33220 (July 19, 2017) (same). See also,
e.g., Consumer Fin. Prot. Bureau, Buy Now, Pay Later: Market trends
and consumer impacts (Sept. 2022), <a href="https://files.consumerfinance.gov/f/documents/cfpb_buy-now-pay-later-market-trends-consumer-impacts_report_2022-09.pdf">https://files.consumerfinance.gov/f/documents/cfpb_buy-now-pay-later-market-trends-consumer-impacts_report_2022-09.pdf</a> (publishing information
obtained through Bureau market monitoring efforts); Consumer Fin.
Prot. Bureau, Consumer Credit Trends: Credit Card Line Decreases
(June 2022), <a href="https://files.consumerfinance.gov/f/documents/cfpb_credit-card-line-decreases_report_2022-06.pdf">https://files.consumerfinance.gov/f/documents/cfpb_credit-card-line-decreases_report_2022-06.pdf</a> (same); Consumer
Fin. Prot. Bureau, Data Point: Checking Account Overdraft at
Financial Institutions Served by Core Processors (Dec. 2021),
<a href="https://files.consumerfinance.gov/f/documents/cfpb_overdraft-core-processors_report_2021-12.pdf">https://files.consumerfinance.gov/f/documents/cfpb_overdraft-core-processors_report_2021-12.pdf</a> (same).
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More generally, entities subject to such public orders relating to
the offering or provision of consumer financial products and services
may pose ongoing risks to consumers in the markets for those products
and services. A comprehensive collection of such public orders would
shed light on how laws are being enforced across consumer protection
laws, jurisdictions, and markets, and help identify trends and
potential gaps in enforcement. Both heightened enforcement and the
absence of enforcement could possibly provide information regarding
risks to consumers--the former as evidence that government agencies
with various jurisdictions have identified the need to enforce consumer
protection laws, and the latter as potential evidence of less risk to
consumers, or perhaps of inattention by regulatory agencies. A
centralized, up-to-date repository of such public orders would provide
valuable market-based insight that the Bureau could use both to
identify concerning trends in these markets that it otherwise might
miss and to decide which of several different policy tools would best
address the consumer risks presented by these trends. In short, the
information sought would significantly increase the Bureau's ability to
identify, understand, and ultimately prevent harm in the markets for
consumer financial products and services. These and other core goals of
the information the Bureau proposes to collect are discussed further
below at section IV.
C. Congress Authorized the Bureau To Supervise Certain Nonbank Covered
Persons
One of the Bureau's key responsibilities under the CFPA is the
supervision of very large banks, thrifts, and credit unions, and their
affiliates, and certain nonbank covered persons. Congress has
authorized the Bureau to supervise certain categories of nonbank
covered persons under CFPA section 1024.\23\ Congress provided that the
Bureau ``shall require reports and conduct examinations on a periodic
basis'' of nonbank covered persons subject to its supervisory authority
for purposes of ``assessing compliance with the requirements of Federal
consumer financial law''; ``obtaining information about the activities
and compliance systems or procedures of such person[s]''; and
``detecting and assessing risks to consumers and to markets for
consumer financial products and services.'' \24\ Pursuant to the CFPA,
the Bureau implements a risk-based supervision program under which it
prioritizes nonbank covered persons for supervision in accordance with
its assessment of risks posed to consumers.\25\ In making
prioritization determinations, the Bureau considers several factors,
including ``the asset size of the covered person,'' \26\ ``the volume
of transactions involving consumer financial products or services in
which the covered person engages,'' \27\ ``the risks to consumers
created by the provision of such consumer financial products or
services,'' \28\ ``the extent to which such institutions are subject to
oversight by State authorities for consumer protection,'' \29\ and
``any other factors that the Bureau determines to be relevant to a
class of covered persons.'' \30\ CFPA section 1024(b)(7)(A)-(C) further
authorizes the Bureau to prescribe rules to facilitate supervision and
assessing and detecting risks to consumers, as well as to ensure that
supervised nonbanks ``are legitimate entities and are able to perform
their obligations to consumers.'' \31\
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\23\ 12 U.S.C. 5514.
\24\ 12 U.S.C. 5514(b)(1).
\25\ 12 U.S.C. 5514(b)(2).
\26\ 12 U.S.C. 5514(b)(2)(A).
\27\ 12 U.S.C. 5514(b)(2)(B).
\28\ 12 U.S.C. 5514(b)(2)(C).
\29\ 12 U.S.C. 5514(b)(2)(D).
\30\ 12 U.S.C. 5514(b)(2)(E).
\31\ 12 U.S.C. 5514(b)(7)(A)-(C).
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Under those authorities, the Bureau is proposing to require that
certain supervised nonbanks annually submit a written statement
regarding the company's compliance with any outstanding registered
orders. The statement would be signed by a designated senior executive.
In the written statement, the attesting executive would generally
describe the steps the executive has undertaken to review and oversee
the company's activities subject to the applicable order for the
preceding calendar year. The executive would then provide an
attestation regarding the company's compliance with the order.
The Bureau believes that the proposed written statement would
assist it in achieving each of the statutory objectives listed in CFPA
section 1024(b)(7)(A)-(C). Therefore, each of those objectives would
provide a distinct, independently sufficient basis for the proposed
written-statement requirements.\32\
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\32\ For a more extended discussion of these matters, see
section IV(D) below.
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First, requiring submission of an annual written statement would
facilitate Bureau supervision and the Bureau's assessment and detection
of risks to consumers. In particular, as part of the Bureau's risk-
based supervision program, the Bureau considers supervised nonbanks'
compliance record regarding consumer protection law when prioritizing
supervisory resources. The requirement would also provide valuable
information in connection with other aspects of the Bureau's
supervisory work and would assist the Bureau's monitoring efforts. For
example, the Bureau recently announced that it is increasing its
supervisory focus on repeat offenders, particularly those who violate
agency or court orders.\33\ As part of that focus, it created a Repeat
Offender Unit within its supervision program focused on: (i) reviewing
and monitoring the activities of repeat offenders; (ii) identifying the
root cause of recurring violations; (iii) pursuing and recommending
solutions and remedies that hold entities accountable for failing to
consistently comply with Federal consumer financial law; and (iv)
designing a model for order review and monitoring that reduces the
occurrences of repeat offenses.\34\ The Repeat Offender Unit is
[[Page 6091]]
tasked more generally with enhancing detection of repeat offenses,
developing processes for rapid review and response designed to address
root causes of violations, and recommending corrective actions designed
to stop recidivist behavior.\35\ The Bureau anticipates that the
proposed annual written statement would greatly facilitate that work,
among other things.
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\33\ See Consumer Fin. Prot. Bureau, Supervisory Highlights:
Issue 28, Fall 2022, at 2-3 (Nov. 2022), <a href="https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-28_2022-11.pdf">https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-28_2022-11.pdf</a>.
\34\ Id.
\35\ Id. at 3.
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Second, the proposed written statement requirements would help
ensure the company providing the statement is a legitimate entity and
is able to perform its obligations to consumers. Information regarding
a company's compliance with outstanding orders is probative of whether
the company is willing and able to satisfy its legal obligations and of
whether the company treats potential sanctions for repeat violations of
relevant consumer protection laws as a mere cost of doing business. The
Bureau also believes that the written-statement requirement would
provide an incentive for supervised nonbanks to perform their
obligations to consumers by requiring supervised nonbanks to specify
which individual executives are responsible for achieving compliance
with particular orders. Publication of the identity of this executive
would enhance the incentive.
D. Consultation With Other Agencies in Exercising the Authorities
Relied Upon in the Proposal
One of the authorities cited as a proposed basis for components of
the Bureau's proposed rule is CFPA section 1022(c)(7), which provides
that the ``Bureau may prescribe rules regarding registration
requirements applicable to a covered person, other than an insured
depository institution, insured credit union, or related person.'' \36\
Congress provided that ``[i]n developing and implementing registration
requirements under [section 1022(c)(7)], the Bureau shall consult with
State agencies regarding requirements or systems (including coordinated
or combined systems for registration), where appropriate.'' \37\ CFPA
section 1024(b)(7)--the proposed statutory basis for the written-
statement requirement--includes a similar consultation provision.\38\
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\36\ 12 U.S.C. 5512(c)(7)(A).
\37\ 12 U.S.C. 5512(c)(7)(C).
\38\ 12 U.S.C. 5514(b)(7)(D) (``In developing and implementing
requirements under this paragraph, the Bureau shall consult with
State agencies regarding requirements or systems (including
coordinated or combined systems for registration), where
appropriate.'').
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Accordingly, the Bureau has consulted with State agencies,
including State agencies involved in supervision of nonbanks and State
agencies charged with law enforcement, in crafting the proposed
registration requirements and system. In developing this proposal, the
Bureau considered the input it received from State agencies, including
concerns expressed regarding possible duplication between any
registration system the Bureau might build and existing registration
systems.
In addition, before proposing a rule under the Federal consumer
financial laws, including CFPA sections 1022(b)-(c) and 1024(b), the
Bureau must consult with appropriate prudential regulators or other
Federal agencies regarding consistency with prudential, market, or
systemic objectives administered by such agencies.\39\ In developing
this proposal, the Bureau consulted with prudential regulators and
other Federal agencies and considered the input it received.
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\39\ 12 U.S.C. 5512(b)(2)(B) (``In prescribing a rule under the
Federal consumer financial laws . . . the Bureau shall consult with
the appropriate prudential regulators or other Federal agencies
prior to proposing a rule and during the comment process regarding
consistency with prudential, market, or systemic objectives
administered by such agencies . . . .'').
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The Bureau also consulted with tribal governments regarding this
rulemaking pursuant to CFPA sections 1022(c)(7)(C) and
1024(b)(7)(D).\40\ Also, during the rulemaking process for issuing
rules under the Federal consumer financial laws, Bureau policy is to
consult with appropriate tribal governments.\41\ In developing this
proposal, the Bureau considered the input of tribal governments,
including concerns tribal governments expressed regarding maintaining
tribal sovereignty.
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\40\ See 12 U.S.C. 5512(c)(7)(C), 5514(b)(7)(D) (requiring
consultation with ``State agencies''); see also 12 U.S.C. 5481(27)
(term ``State'' includes ``any federally recognized Indian tribe, as
defined by the Secretary of the Interior under'' 25 U.S.C. 5131(a)).
\41\ See Consumer Fin. Prot. Bureau, Policy for Consultation
with Tribal Governments, <a href="https://files.consumerfinance.gov/f/201304_cfpb_consultations.pdf">https://files.consumerfinance.gov/f/201304_cfpb_consultations.pdf</a>.
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III. Legal Authority
The Bureau is issuing this proposal pursuant to its authority under
the CFPA. This section includes a general discussion of several CFPA
provisions on which the Bureau relies in this rulemaking. Additional
description of these authorities, and the proposal's reliance on them,
is also contained in section IV below and in the section-by-section
analysis.
A. CFPA Section 1022(b)
CFPA section 1022(b)(1) authorizes the Bureau to prescribe rules
``as may be necessary or appropriate to enable the Bureau to administer
and carry out the purposes and objectives of the Federal consumer
financial laws, and to prevent evasions thereof.'' \42\ Among other
statutes, the CFPA--i.e., title X of the Dodd-Frank Wall Street Reform
and Consumer Protection Act (Dodd-Frank Act)--is a Federal consumer
financial law.\43\ Accordingly, in issuing the proposed rule, the
Bureau would be exercising its authority under CFPA section 1022(b) to
prescribe rules that carry out the purposes and objectives of the CFPA
and prevent evasions thereof. CFPA section 1022(b)(2) prescribes
certain standards for rulemaking that the Bureau must follow in
exercising its authority under section 1022(b)(1).\44\ For a discussion
of the Bureau's standards for rulemaking under CFPA section 1022(b)(2),
see section VII below.
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\42\ 12 U.S.C. 5512(b)(1).
\43\ See 12 U.S.C. 5481(14) (defining ``Federal consumer
financial law'' to include the provisions of title X of the Dodd-
Frank Act).
\44\ See 12 U.S.C. 5512(b)(2).
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B. CFPA Section 1022(c)(1)-(4) and (7)
The CFPB's proposals to (1) require nonbank covered persons to
inform the CFPB that they have an applicable order entered against
them, (2) provide basic identifying and administrative information and
information regarding the orders (including copies of the orders), and
(3) publish this information, are authorized under CFPA sections
1022(c)(1) through (4) and 1022(c)(7), as well as CFPA section
1022(b).\45\
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\45\ 12 U.S.C. 5512(b), (c)(1)-(4).
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CFPA sections 1022(c)(1)-(4) authorize the CFPB to prescribe rules
to collect information from covered persons for purposes of monitoring
for risks to consumers in the offering or provision of consumer
financial products or services. The CFPB is collecting this information
to monitor, on an ongoing basis, both individual and market-wide
compliance with consumer protection laws and orders for alleged
violations of those laws. The CFPB considers violations of consumer
protection laws probative of ``risks to consumers in the offering and
provision of consumer financial products or services.'' \46\ In
particular, the CFPB believes that entities subject to public orders
enforcing the law relating to the offering or provision of consumer
financial products and services may
[[Page 6092]]
pose heightened and ongoing risks to consumers in the markets for those
products and services. It further anticipates that monitoring for such
orders would allow the CFPB to track specific instances of, and more
general developments regarding, potential corporate recidivism, which
presents special risks to consumers for reasons discussed in greater
detail below. The Bureau also believes that enforcement trends, as
shown by public orders enforcing the law across consumer protection
laws, jurisdictions, and markets, would potentially shed light on risks
to consumers in the offering or provision of consumer financial
products or services. Heightened enforcement could indicate areas where
numerous regulators have identified risk of harm to consumers.
Conversely, the absence of enforcement in other areas could indicate
less risk to consumers, or perhaps a lack of attention by regulators
that shows a need for further monitoring.
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\46\ 12 U.S.C. 5512(c)(1).
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More specifically, section 1022(c)(1) of the CFPA requires the
Bureau to support its rulemaking and other functions by monitoring for
risks to consumers in the offering or provision of consumer financial
products or services, including developments in the markets for such
products or services.\47\ As discussed further below at section IV(B),
section 1022(c)(2) of the CFPA authorizes the Bureau to allocate
resources to perform the monitoring required by section 1022 by
considering ``likely risks and costs to consumers associated with
buying or using a type of consumer financial product or service,''
``understanding by consumers of the risks of a type of consumer
financial product or service,'' ``the legal protections applicable to
the offering or provision of a consumer financial product or service,
including the extent to which the law is likely to adequately protect
consumers,'' ``rates of growth in the offering or provision of a
consumer financial product or service,'' ``the extent, if any, to which
the risks of a consumer financial product or service may
disproportionately affect traditionally underserved consumers,'' and
``the types, number, and other pertinent characteristics of covered
persons that offer or provide the consumer financial product or
service.'' \48\ Section 1022(c)(4)(A) of the CFPA authorizes the Bureau
to conduct the monitoring required by section 1022 by ``gather[ing]
information from time to time regarding the organization, business
conduct, markets, and activities of covered persons and service
providers.'' \49\ The Bureau is authorized to gather this information
by, among other things, requiring covered persons participating in
consumer financial services markets to file annual or special reports,
or answers in writing to specific questions, that furnish information
``as necessary for the Bureau to fulfill the monitoring . . .
responsibilities imposed by Congress.'' \50\ The Bureau may require
such information to be filed ``in such form and within such reasonable
period of time as the Bureau may prescribe by rule or order.'' \51\
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\47\ 12 U.S.C. 5512(c)(1) (``In order to support its rulemaking
and other functions, the Bureau shall monitor for risks to consumers
in the offering or provision of consumer financial products or
services, including developments in markets for such products or
services.'').
\48\ 12 U.S.C. 5512(c)(2)(A)-(F).
\49\ 12 U.S.C. 5512(c)(4)(A).
\50\ 12 U.S.C. 5512(c)(4)(B)(ii) (``In order to gather
information described in subparagraph (A), the Bureau may . . .
require covered persons and service providers participating in
consumer financial services markets to file with the Bureau, under
oath or otherwise, in such form and within such reasonable period of
time as the Bureau may prescribe by rule or order, annual or special
reports, or answers in writing to specific questions, furnishing
information described in paragraph (4), as necessary for the Bureau
to fulfill the monitoring, assessment, and reporting
responsibilities imposed by Congress.'').
\51\ 12 U.S.C. 5512(c)(4)(B)(ii).
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Section 1022(c)(7)(A) of the CFPA further authorizes the Bureau to
``prescribe rules regarding registration requirements applicable to a
covered person, other than an insured depository institution, insured
credit union, or related person.'' \52\ Section 1022(c)(7)(B) provides
that, ``[s]ubject to rules prescribed by the Bureau, the Bureau may
publicly disclose registration information to facilitate the ability of
consumers to identify covered persons that are registered with the
Bureau.'' \53\ The Bureau interprets section 1022(c)(7)(B) as
authorizing it to publish registration information required by Bureau
rule under section 1022(c)(7)(A) so that consumers may identify the
nonbank covered persons on which the Bureau has imposed registration
requirements.
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\52\ 12 U.S.C. 5512(c)(7)(A).
\53\ 12 U.S.C. 5512(c)(7)(B).
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Finally, CFPA section 1022(c)(3) authorizes the Bureau to publicly
release information obtained pursuant to CFPA section 1022, subject to
limitations specified therein.\54\ Specifically, section 1022(c)(3)
states that the Bureau ``may make public such information obtained by
the Bureau under [section 1022] as is in the public interest, through
aggregated reports or other appropriate formats designed to protect
confidential information in accordance with [specified protections in
section 1022].'' \55\ Information submitted to the Bureau's registry is
protected by, among other things, CFPA section 1022(c)(8), which states
that ``[i]n collecting information from any person, publicly releasing
information held by the Bureau, or requiring covered persons to
publicly report information, the Bureau shall take steps to ensure that
proprietary, personal, or confidential consumer information that is
protected from public disclosure under [the Freedom of Information Act,
5 U.S.C. 552(b)] or [the Privacy Act of 1974, 5 U.S.C. 552a,] or any
other provision of law, is not made public under [the CFPA].'' \56\ The
CFPB's registry is designed to not collect any proprietary, personal,
or confidential consumer information, and thus, the CFPB will not
publish, or require public reporting of, any protected information.
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\54\ See 12 U.S.C. 5512(c)(3)(B).
\55\ 12 U.S.C. 5512(c)(3)(B).
\56\ 12 U.S.C. 5512(c)(8).
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C. CFPA Section 1024(b)
As explained above, section 1024(b) of the CFPA authorizes the
Bureau to exercise supervisory authority over certain nonbank covered
persons.\57\ Section 1024(b)(1) requires the Bureau to periodically
require reports and conduct examinations of persons subject to its
supervisory authority to assess compliance with Federal consumer
financial law, obtain information about the activities and compliance
systems or procedures of persons subject to its supervisory authority,
and detect and assess risks to consumers and to markets for consumer
financial products and services.\58\ Section 1024(b)(2) requires that
the Bureau exercise its supervisory authority over nonbank covered
persons based on its assessment of risks posed
[[Page 6093]]
to consumers in the relevant product markets and geographic markets,
and taking into consideration, as applicable: ``(A) the asset size of
the covered person; (B) the volume of transactions involving consumer
financial products or services in which the covered person engages; (C)
the risks to consumers created by the provision of such consumer
financial products or services; (D) the extent to which such
institutions are subject to oversight by State authorities for consumer
protection; and (E) any other factors that the Bureau determines to be
relevant to a class of covered persons.'' \59\
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\57\ The nonbank covered persons over which the Bureau has
supervisory authority are listed in section 1024(a)(1) of the CFPA.
They include covered persons that: offer or provide origination,
brokerage, or servicing of loans secured by real estate for use by
consumers primarily for personal, family, or household purposes, or
loan modification or foreclosure relief services in connection with
such loans; are larger participants of a market for consumer
financial products or services, as defined by Bureau rule; the
Bureau has reasonable cause to determine, by order, that the covered
person is engaging, or has engaged, in conduct that poses risks to
consumers with regard to the offering or provision of consumer
financial products or services; offer or provide private education
loans; or offer or provide payday loans. 12 U.S.C. 5514(a)(1).
\58\ 12 U.S.C. 5514(b)(1) provides: ``The Bureau shall require
reports and conduct examinations on a periodic basis of persons
described in subsection (a)(1) for purposes of--(A) assessing
compliance with the requirements of Federal consumer financial law;
(B) obtaining information about the activities and compliance
systems or procedures of such person; and (C) detecting and
assessing risks to consumers and to markets for consumer financial
products and services.''
\59\ 12 U.S.C. 5514(b)(2).
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Section 1024(b)(7) of the CFPA in turn identifies three independent
sources of Bureau rulemaking authority. First, section 1024(b)(7)(A)
requires the Bureau to prescribe rules to facilitate the supervision of
nonbank covered persons subject to the Bureau's supervisory authority
and assessment and detection of risks to consumers.\60\ Second, section
1024(b)(7)(B) authorizes the Bureau to require nonbank covered persons
subject to its supervisory authority to ``generate, provide, or retain
records for the purposes of facilitating supervision of such persons
and assessing and detecting risks to consumers.'' \61\ This section
authorizes the Bureau to require nonbank covered persons subject to its
supervisory authority to create reports regarding their activities for
submission to the Bureau. ``Records'' is a broad term encompassing any
``[i]nformation that is inscribed on a tangible medium or that, having
been stored in an electronic or other medium, is retrievable in
perceivable form,'' or any ``documentary account of past events.'' \62\
Section 1024(b)(7)(B) thus authorizes the Bureau to require nonbank
covered persons subject to its supervisory authority to ``generate''--
i.e., create \63\--reports regarding their activities and then
``provide'' them to the Bureau.\64\
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\60\ 12 U.S.C. 5514(b)(7)(A) (``The Bureau shall prescribe rules
to facilitate supervision of persons described in subsection (a)(1)
and assessment and detection of risks to consumers.'').
\61\ 12 U.S.C. 5514(b)(7)(B) (``The Bureau may require a person
described in subsection (a)(1), to generate, provide, or retain
records for the purposes of facilitating supervision of such persons
and assessing and detecting risks to consumers.'').
\62\ Record, Black's Law Dictionary (11th ed. 2019); accord,
e.g., Andrews v. Sirius XM Radio Inc., 932 F.3d 1253, 1259 (9th Cir.
2019) (citing Black's Law Dictionary and Webster's Third New
International Dictionary definitions of ``record'').
\63\ See Generate, Merriam-Webster Online Dictionary, <a href="https://www.merriam-webster.com/dictionary/generate">https://www.merriam-webster.com/dictionary/generate</a> (defining ``generate''
as ``to bring into existence'').
\64\ The Bureau's authority under section 1024(b)(7)(B) to
require generation of records complements its authority under
section 1024(b)(1) to ``require reports . . . on a periodic basis''
from nonbank covered persons subject to its supervisory authority.
12 U.S.C. 5514(b)(1).
---------------------------------------------------------------------------
The third source of authority, CFPA section 1024(b)(7)(C),
authorizes the Bureau to prescribe rules regarding nonbank covered
persons subject to its supervisory authority ``to ensure that such
persons are legitimate entities and are able to perform their
obligations to consumers.'' \65\ Under this section, the Bureau may
prescribe substantive rules to ensure that supervised entities are
willing and able to comply with their legal, financial, and other
obligations to consumers, including those imposed by Federal consumer
financial law. The term ``obligations'' encompasses ``anything that a
person is bound to do or forbear from doing,'' including duties
``imposed by law, contract, [or] promise.'' \66\ The Bureau construes
the phrase ``legitimate entities'' as encompassing an inquiry into
whether an entity takes seriously its duty to ``[c]omply[ ] with the
law.'' \67\ Legitimate entities do not treat the risk of enforcement
actions for violations of legal obligations as a mere cost of doing
business. Instead, legitimate entities work in good faith to have
protocols in place aimed at ensuring compliance with their legal
obligations and detecting and appropriately addressing any legal
violations that the entity may commit.
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\65\ 12 U.S.C. 5514(b)(7)(C) (``The Bureau may prescribe rules
regarding a person described in subsection (a)(1), to ensure that
such persons are legitimate entities and are able to perform their
obligations to consumers. Such requirements may include background
checks for principals, officers, directors, or key personnel and
bonding or other appropriate financial requirements.'').
\66\ Obligation, Black's Law Dictionary (11th ed. 2019).
\67\ Legitimate, Black's Law Dictionary (11th ed. 2019)
(defining ``legitimate'' as ``[c]omplying with the law; lawful'');
see also Legitimate, Webster's Second New International Dictionary
(1934) (defining ``legitimate'' as ``[a]ccordant with law or with
established legal forms and requirements; lawful''); Legitimate,
Merriam-Webster Online Dictionary, <a href="https://www.merriam-webster.com/dictionary/legitimate">https://www.merriam-webster.com/dictionary/legitimate</a> (defining ``legitimate'' as ``accordant with
law or with established legal forms and requirements'').
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While each of the three subparagraphs of section 1024(b)(7)
discussed above operates as independent sources of rulemaking
authority, the subparagraphs also overlap in several respects, such
that a particular rule may be (and, in the case of this proposal, is)
authorized by more than one of the subparagraphs. For example, rules
requiring the generation, provision, or retention of records generally
will be authorized under both subparagraphs 1024(b)(7)(A) and (B). That
is so because subparagraph 1024(b)(7)(B) makes clear that the Bureau's
authority under subparagraph 1024(b)(7)(A) to prescribe rules to
facilitate supervision and assessment and detection of risks to
consumers extends to requiring covered persons subject to the Bureau's
supervisory authority ``to generate, provide or retain records for the
purposes of facilitating supervision of such persons and assessing and
detecting risks to consumers.'' \68\
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\68\ 12 U.S.C. 5514(b)(7)(B); see also, e.g., Barton v. Barr,
140 S. Ct. 1442, 1453 (2020) (``redundancies . . . in statutory
drafting'' may reflect ``a congressional effort to be doubly
sure''); Atlantic Richfield Co. v. Christian, 140 S. Ct. 1335, 1350
n.5 (2020) (concluding that ``Congress employed a belt and
suspenders approach'' in statute); Marx v. Gen. Revenue Corp., 568
U.S. 371, 383-85 (2013) (statutory language is ``not . . .
superfluous if Congress included it to remove doubt'' about an
issue).
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IV. Why the Bureau Is Issuing This Proposal
A. Overview
The Bureau is issuing this proposal to require nonbanks to report
certain public agency and court orders because the Bureau believes that
not only the Bureau, but also consumers, the public, and other
potential users of the proposed registration system would benefit from
the creation and maintenance of a central public repository for
information regarding certain public orders that have been imposed upon
nonbank covered persons.
Agency and court orders are not suggestions. They are legally
binding orders intended to prevent and remedy violations of the law.
When an agency issues such an order, or seeks a court order, it
typically has determined that the problems at the applicable entity are
sufficiently serious to merit the expenditure of that agency's limited
resources and perhaps the attention of the courts.
By establishing an effective system for collecting public orders
enforcing the law across different sectors of entity misconduct, the
proposed rule would allow the Bureau to more effectively monitor for
potential risks to consumers arising from both individual instances and
broader patterns of recidivism. Persons that are subject to one or more
orders that would require registration under the proposal may pose
greater risks to consumers than others. And the existence of multiple
orders may serve as a particular ``red flag'' with respect to risks to
consumers and as a signal of potential recidivism. The existence of
multiple orders may also indicate broader problems at the entity that
pose related risks to consumers--including lack of sufficient controls
related to the
[[Page 6094]]
offering and provision of consumer financial products and services,
inadequate compliance management systems and processes, and an
unwillingness or inability of senior management to comply with laws
subject to the Bureau's jurisdiction.
The Bureau also believes that a comprehensive collection of public
agency and court orders enforcing the law would help it identify
broader trends related to risks to consumers in the offering and
provision of consumer financial products and services. Notably, by
studying how laws are being enforced across consumer protection laws,
jurisdictions, and markets, the Bureau believes it will be able to
identify indications of risks to consumers. For example, the existence
of enforcement activity in multiple jurisdictions among certain
products, services, or features, or related to certain legal
requirements, or concerning certain consumer risks, could indicate
areas of heightened consumer risk that warrant further attention by
regulators. By contrast, the absence of enforcement activity in certain
areas could potentially indicate less risk to consumers or could be
evidence of less attention by regulators and a need to increase
monitoring activities. The Bureau thus believes that obtaining
information regarding such orders will enable it to better monitor
risks to consumers in the offering or provision of consumer financial
products and services, including developments in the markets for such
products and services, under its authority at CFPA section 1022(c).\69\
---------------------------------------------------------------------------
\69\ 12 U.S.C. 5512(c).
---------------------------------------------------------------------------
The Bureau further anticipates that making a registry of these
orders publicly available would, among other things, allow other
regulators at the Federal, State, and local level tasked with
protecting consumers to realize the same market monitoring benefits
that the Bureau anticipates obtaining from this rule. Publication would
also facilitate the ability of consumers to identify the covered
persons that are registered with the Bureau. In addition, publication
would enhance the ability of consumer advocacy organizations,
researchers, firms conducting due diligence, and the media to locate,
review, and monitor orders enforcing the law.
The Bureau believes that the proposal also will assist its
supervisory work by collecting additional information in the form of a
written statement from certain entities that are subject to the
Bureau's supervision and examination authority. As explained in greater
detail below, requiring certain supervised entities to designate a
senior executive officer with knowledge of, and control over, the
entity's efforts to comply with each relevant order, and requiring that
executive to submit the information required to be contained in the
proposed written statement, would facilitate Bureau supervision efforts
by providing important information about the entity, helping to
prioritize the Bureau's supervisory activities, and otherwise assisting
the Bureau's supervisory work. These requirements would also help
ensure that the relevant entities are ``legitimate'' and ``are able to
perform their obligations to consumers'' under CFPA section
1024(b)(7)(C), in part by incentivizing entities who might otherwise
not take seriously their obligations to instead endeavor to comply with
consumer protection laws and by highlighting the designated senior
executive's personal responsibility for such compliance.\70\
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\70\ 12 U.S.C. 5514(b)(7)(C).
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B. Why the Bureau Is Interested in Issuing a Rule To Monitor for Risks
Associated With Certain Agency and Court Orders
The Bureau believes that requiring registration and submissions
regarding certain agency and court orders as proposed would assist the
Bureau in monitoring for risks to consumers in the offering or
provision of consumer financial products or services, in accordance
with CFPA section 1022(c).\71\ The proposal's requirements to submit
and update information regarding such agency and court orders related
to the provision or offering of consumer financial products or services
would provide important support for a variety of Bureau functions.
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\71\ 12 U.S.C. 5512(c).
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As the principal Federal regulator responsible for administering
the Federal consumer financial laws, the Bureau's ability to
effectively identify and monitor for potential risks to consumers
arising out of apparent violations of core Federal and State consumer
laws is vital to the Bureau achieving its statutory purposes and
objectives. Such information will help the Bureau satisfy its statutory
obligation to monitor for risks to consumers in the markets for
consumer financial products and services.\72\ For example, the system
would enable the Bureau to better identify an increase in the number of
orders in a particular product market, in a particular geographic
market, addressing similar consumer risks, or with other common
features. The Bureau would be able to use this information to identify
areas of heightened consumer risk that warrant further attention, thus
helping to inform and prioritize its other market monitoring efforts,
including research regarding particular markets and the risks to
consumers presented in such markets.\73\ By contrast, the absence of
enforcement activity in certain areas could indicate less risk to
consumers, or it potentially could be evidence of less attention by
regulators and a need to increase monitoring and other supervisory or
regulatory activities.
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\72\ See 12 U.S.C. 5512(c)(1).
\73\ See 12 U.S.C. 5511(c)(3) (identifying as one of the
``primary functions of the Bureau . . . collecting, researching,
monitoring, and publishing information relevant to the functioning
of markets for consumer financial products and services to identify
risks to consumers and the proper functioning of such markets'').
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Likewise, the Bureau's rulemaking efforts would benefit from
information about such orders, so that the Bureau might, for example,
consider drafting rules to address identified consumer risks.\74\ The
Bureau's consumer response function would be informed by increased
monitoring of risks and trends, as the Bureau could direct resources or
investigate risks in a certain area or on a certain topic.\75\ And the
Bureau may choose to direct its consumer education efforts toward
educating consumers about risks identified via the proposed
registry.\76\
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\74\ See 12 U.S.C. 5511(c)(5) (identifying as one of the
``primary functions of the Bureau . . . issuing rules, orders, and
guidance implementing Federal consumer financial law'').
\75\ See 12 U.S.C. 5511(c)(2) (identifying as one of the
``primary functions of the Bureau . . . collecting, investigating,
and responding to consumer complaints''); see also Consumer Fin.
Prot. Bureau, Consumer Response Annual Report: January 1--December
31, 2021, at 5-8 (Mar. 2022), <a href="https://files.consumerfinance.gov/f/documents/cfpb_2021-consumer-response-annual-report_2022-03.pdf">https://files.consumerfinance.gov/f/documents/cfpb_2021-consumer-response-annual-report_2022-03.pdf</a>
(describing the Bureau's consumer-complaint process and how the
Bureau uses complaint information).
\76\ See 12 U.S.C. 5511(c)(1) (identifying as one of the
``primary functions of the Bureau . . . conducting financial
education programs'').
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The information that the Bureau would obtain under the proposed
rule would also be valuable to the Bureau in exercising its supervisory
and enforcement functions.\77\ Among other things, the information may
be informative when the Bureau makes determinations whether a covered
person is engaging, or has engaged, in
[[Page 6095]]
conduct that poses risk to consumers with regard to the offering or
provision of consumer financial products or services under CFPA section
1024(a)(1)(C), such that the Bureau may determine to subject the
covered person to Bureau supervision under that provision.\78\ The
information contained in the proposed registry may also be relevant in
assessing civil penalties for violations of Federal consumer financial
laws, given that Congress has provided that such penalties should take
into account an entity's ``history of previous violations'' and ``such
other matters as justice may require.'' \79\
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\77\ See 12 U.S.C. 5511(c)(4) (identifying as one of the
``primary functions of the Bureau . . . supervising covered persons
for compliance with Federal consumer financial law, and taking
appropriate enforcement action to address violations of Federal
consumer financial law''). Section IV(D) below, and the section-by-
section discussion of proposed Sec. 1092.203, contain additional
discussion of how the proposed rule would facilitate the Bureau's
supervisory efforts.
\78\ See 12 U.S.C. 5514(a)(1)(C) (authorizing Bureau orders
subjecting nonbanks to supervision based upon consumer complaints
``or information from other sources''); 12 CFR part 1091 (Bureau
procedural rule to establish supervisory authority over certain
nonbank covered persons based on risk determination).
\79\ See 12 U.S.C. 5555(c)(3)(D), (E). The Bureau may consider
certain matters identified in previous enforcement actions published
in the proposed registry to be relevant under these provisions.
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Furthermore, there is a heightened likelihood that entities that
are subject to public orders enforcing the law and relating to the
offering or provision of consumer financial products and services may
pose risks to consumers in the markets for those products and services,
and risk of consumer harm is a significant factor that weighs heavily
in the Bureau's decisions regarding the general allocation of its
resources. Knowledge of whether a covered person has engaged in
previous violations of consumer financial protection laws is valuable
information that the Bureau considers when evaluating the risk of
consumer harm. In the Bureau's experience, entities that have
previously been subject to enforcement actions, including those brought
by local, State, and other Federal authorities, present an increased
risk of committing violations of laws subject to the Bureau's
jurisdiction, and thus causing the additional consumer harm associated
with such violations. Prior enforcement actions are also likely to be a
good indication of continuing risks to consumers present in a
particular market for consumer financial products or services. Because
the orders that would be covered by the proposed rule are regularly
issued, modified, and terminated, the Bureau needs to collect this
information regularly and on a timely basis in order to stay abreast of
developments.
Although referrals from and other information provided by other
agencies have been valuable to the Bureau's work, the Bureau currently
often relies on other agencies to take proactive steps to contact it.
Having access to a centralized list of all relevant orders entered
against nonbanks would significantly increase the Bureau's ability to
monitor the market so that the Bureau can identify, better understand,
and ultimately, prevent further consumer harm, particularly from repeat
offenders. Recidivism--whether in the form of a company that repeatedly
violates the law and as a result becomes subject to multiple orders, or
in the form of a company that violates the orders to which it is
subject--poses particular risks to consumers. Companies that repeatedly
violate the law do more than just deprive consumers of protections in
the marketplace. They may also charge their customers more in order to
cover the costs of any fines or other costs resulting from the
company's legal violations. In other words, consumers may end up
subsidizing corporate malfeasance. When government orders fail to deter
future misconduct by a company, that company's operations are more
likely to present risk to consumers. Thus, the existence of multiple
orders may be highly probative of heightened risks to consumers in the
markets for consumer financial products and services, including the
risk of noncompliance with laws subject to the Bureau's jurisdiction.
The Bureau believes that collecting information about such public
orders across markets and agencies as proposed will improve the
Bureau's efforts to determine where entities, either as a group or
individually, are repeatedly violating the law. The Bureau particularly
needs to be made aware of entities that become subject to multiple
orders, or that are found to be out of compliance with existing orders,
as well as of trends in such developments. Systematic or repeat
violations of the law may indicate broader problems within a market for
consumer financial products and services. Such problems might include
lack of sufficient controls related to the offering and provision of
certain consumer financial products and services, inadequate compliance
management systems and processes within a set of market participants,
and an unwillingness or inability of senior management at certain
entities to comply with Federal consumer financial laws. The proposed
registry would provide a valuable mechanism to help ensure that the
Bureau is rapidly made aware of such repeat offenders across a range of
markets and enforcement agencies.
The Bureau believes that the proposed registry would be especially
useful with respect to the particular nonbank markets that are subject
to the Bureau's supervision and examination authority under CFPA
section 1024(a). In those markets, the Bureau would be able to take
account of risks identified through the proposed registry in conducting
its risk-based supervisory prioritization and enforcement work. The
Bureau believes that the existence of an order that would require
registration under the proposal is probative of a potential need for
supervisory examination, to the extent that the nonbank is subject to
the Bureau's supervision and examination authorities. Under CFPA
section 1024(b)(2), the Bureau is required to exercise its supervisory
authority in a manner designed to ensure that such exercise, with
respect to persons described in CFPA section 1024(a), is based on the
assessment by the Bureau of the risks posed to consumers in the
relevant product markets and geographic markets and taking into
consideration the factors enumerated at CFPA section 1024(b)(2)(A)-
(E).\80\
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\80\ 12 U.S.C. 5514(a), (b)(2).
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Depending upon the circumstances, the Bureau may consider the
existence of an order requiring registration under the proposal to be a
risk factor under these provisions for covered persons subject to the
proposed rule. CFPA section 1024(b)(2)(C) refers to ``the risks to
consumers created by the provision of such consumer financial products
or services.'' \81\ The Bureau believes that the existence of an order
that would require registration under the proposal would be probative
of such risks to consumers. CFPA section 1024(b)(2)(D) provides that
the Bureau shall also take into account ``the extent to which such
institutions are subject to oversight by State authorities for consumer
protection.'' \82\ The Bureau believes that the existence of one or
more orders issued or obtained by the types of State agencies described
in the proposal in connection with violations of law would provide
important and directly relevant information regarding the extent to
which nonbanks are subject to oversight by State authorities for
consumer protection. CFPA section 1024(b)(2)(E) provides that the
Bureau shall also take into account ``any other factors that the Bureau
determines to be relevant to a class of covered persons.'' \83\ For the
classes of covered persons subject to the proposal, the Bureau believes
that the existence of an order that would require registration under
the proposal would be a relevant factor under this statutory provision
for the Bureau to take into consideration when exercising its
supervisory authorities under CFPA
[[Page 6096]]
section 1024. Thus, knowledge of such orders would be relevant
information in prioritizing and scoping the Bureau's supervisory
activities under CFPA section 1024(b) with respect to the markets
subject to that provision. In exercising its authorities under section
1024(b), the Bureau may take into account any risks that it identifies
in connection with a covered person's registration with the nonbank
registration (NBR) system and any information submitted under the
proposed rule.
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\81\ 12 U.S.C. 5514(b)(2)(C).
\82\ 12 U.S.C. 5514(b)(2)(D).
\83\ 12 U.S.C. 5514(b)(2)(E).
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In crafting the proposed requirements to register and submit
certain agency and court orders, the Bureau has considered (among
others) the factors listed at CFPA section 1022(c)(2), to the extent
relevant here to the proposed allocation of Bureau resources to perform
market monitoring. For example, the Bureau considered the ``likely
risks and costs to consumers associated with buying or using a type of
consumer financial product or service.'' \84\ As discussed above, the
Bureau believes companies that violate the law, especially repeatedly,
generally pose more risk to consumers. The proposal will assist the
Bureau in identifying and evaluating such risks--and their associated
costs--across companies, industries, products, and regions.
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\84\ 12 U.S.C. 5512(c)(2)(A).
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The Bureau also considered the ``understanding by consumers of the
risks of a type of consumer financial product or service.'' \85\ The
Bureau is concerned that consumers currently may not adequately
understand risks posed by certain institutions, including risks arising
from recidivism. With a clear window into nationwide trends and gaps in
nonbank covered persons' compliance with consumer protection laws, the
Bureau can target its various functions--including consumer education--
to ensure that consumers understand the risks and associated costs of
such conduct on their use of certain consumer financial products or
services.
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\85\ 12 U.S.C. 5512(c)(2)(B).
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The Bureau further considered ``the legal protections applicable to
the offering or provision of a consumer financial product or service,
including the extent to which the law is likely to adequately protect
consumers.'' \86\ The Bureau believes that the proposal would enhance
the Bureau's ability to effectively assess whether and to what extent
the orders themselves, as well as other relevant laws, in practice
adequately protect consumers. Information collected in connection with
this proposal would aid the Bureau in better understanding how
effectively the nation's consumer protection laws operate in practice,
which should assist the Bureau in determining (among other things) how
best to allocate its resources to ensure consumers are adequately
protected from bad actors.
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\86\ 12 U.S.C. 5512(c)(2)(C).
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The Bureau also considered ``the extent . . . to which the risks of
a consumer financial product or service may disproportionately affect
traditionally underserved consumers.'' \87\ The Bureau generally is
concerned that traditionally underserved communities may be
disproportionately the target of consumer protection violations--
particularly, unfair, deceptive, or abusive acts or practices--in the
offering or provision of consumer financial products or services. The
information collected should provide the Bureau with robust nationwide
data to identify and evaluate the extent to which this is the case.
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\87\ 12 U.S.C. 5512(c)(2)(E).
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Finally, the Bureau considered ``the types, number, and other
pertinent characteristics of covered persons that offer or provide the
consumer financial product or service.'' \88\ For the reasons
discussed, law violator status--but especially repeat law violator
status--is a highly pertinent characteristic. The Bureau believes that
risks to consumers posed by law violators warrants market monitoring.
In particular, it would provide greater visibility into nonbank covered
persons' compliance with consumer protection laws in the offering or
provision of consumer financial products and services, in addition to
more generally aiding the Bureau's overall understanding of nonbank
covered persons and the products or services they provide.
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\88\ 12 U.S.C. 5512(c)(2)(F).
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The Bureau has considered alternative means of collecting the
information subject to the proposed rule, including requesting the
information on an ad hoc basis from entities that are subject to
relevant orders through a Bureau order issued pursuant to CFPA section
1022(c)(4)(B)(ii).\89\ However, the Bureau believes this alternative
would be inadequate. There is no existing comprehensive list of covered
persons subject to Bureau regulation or supervision, so the Bureau
would be unable to issue a standing order to such entities to produce
information. It is not clear how the Bureau would obtain this
information without issuing a rule. Also, the Bureau wishes to collect
information that changes over time--for example, information regarding
new orders and changes to orders, as well as with respect to changes in
registration information. An order that required submission of
information at a single point in time--assuming that the Bureau could
identify the entities to which such an order should be addressed--would
be inadequate to capture such changes in information. While the Bureau
might issue frequently recurring orders under its market-monitoring
authority, such an approach would be less reliable and predictable for
all parties than a rule-based approach.
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\89\ 12 U.S.C. 5512(c)(4)(B)(ii).
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The Bureau further considered using its supervisory and examination
authority to obtain information solely from entities that are subject
to that authority. While the Bureau believes that approach would
certainly provide the Bureau with invaluable information, it
preliminarily concludes that collecting information from a wider range
of covered persons is appropriate to achieve its market monitoring
objectives.
The Bureau seeks comment on its preliminary conclusion that
collecting and registering public agency and court orders imposing
obligations based upon violations of consumer law would assist with
monitoring for risks to consumers in the offering or provision of
consumer financial products and services. The Bureau seeks comment on
whether the types of orders described in the proposal, and the types of
information that would be collected about those orders and covered
nonbanks under the proposal, would provide useful information to the
Bureau. The Bureau also seeks comment on any other risks that might be
identified through collecting the information described in the
proposal. Finally, the Bureau seeks comment on whether it should
consider collecting any other information in order to identify risks to
consumers associated with orders.
C. Why the Bureau Has Identified Orders Issued Under the Types of Laws
Described in the Proposal as Posing Particular Risk
The proposal would prescribe registration requirements with
reference to certain types of ``covered laws'' that served as the basis
for an applicable order. As discussed herein, the Bureau believes that
orders issued under the types of covered laws described in the proposal
are likely to be probative of risks to consumers in the offering or
provision of consumer financial products or services, including
[[Page 6097]]
developments in markets for such products or services.\90\
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\90\ See also the discussion of the definition of the term
``covered law'' in the section-by-section discussion of proposed
Sec. 1092.201(c) below.
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First, the Bureau is proposing to require registration in
connection with orders issued under the Federal consumer financial
laws, to the extent that the violation of law found or alleged arises
out of conduct in connection with the offering or provision of a
consumer financial product or service. As explained above, numerous
Federal and State agencies besides the Bureau have authority to enforce
Federal consumer financial laws. In matters where an agency other than
the Bureau has issued or obtained a final, public order concluding that
a covered person has violated Federal consumer financial law, the
Bureau also will generally have jurisdiction over the conduct that
resulted in that order. Requiring registration of such orders will
facilitate effective market monitoring by providing the Bureau a tool
to identify and understand the nature of the risks to consumers
presented by the conduct addressed in those orders, including the risk
that the conduct might continue unabated outside of the particular
jurisdiction that issued the order. For example, such information may
inform the Bureau's supervisory or enforcement activities, as the
Bureau may consider bringing its own action in connection with the same
or related conduct. Or the conduct may be probative of a more systemic
problem with one or more entities' overall willingness or capacity to
comply with Federal consumer financial law across different product
lines or aspects of their operations. Likewise, requiring registration
of orders involving Federal consumer financial law will facilitate
effective market monitoring by ensuring that the Bureau can quickly and
effectively identify patterns of similar conduct across multiple
nonbank covered persons. The identification of such patterns may
indicate a problem that the Bureau could best address by engaging in
rulemaking to clarify or expand available consumer protections to
address emerging consumer risk trends. It may also prompt the Bureau to
use other tools, such as consumer education, to address the identified
risks.
Second, the Bureau is proposing to require registration of orders
in connection with a violation of any other law as to which the Bureau
may exercise enforcement authority, to the extent such violation arises
out of conduct in connection with the offering or provision of a
consumer financial product or service. The Bureau may enforce certain
laws other than Federal consumer financial laws, as that term is
defined in CFPA section 1002(14).\91\ The Bureau believes that the
proposed registry should collect information regarding orders issued
under any law that the Bureau may enforce, where the violation of law
found or alleged arises out of conduct in connection with the offering
or provision of a consumer financial product or service. By definition,
the conduct addressed in such orders will generally fall within the
scope of the Bureau's enforcement authority. More generally, the Bureau
believes that evidence of such conduct could be probative of a broader
risk that the entity has engaged or will engage in conduct that may
violate Federal consumer financial law. For example, violations of the
Military Lending Act, as to which the Bureau has enforcement authority,
may overlap with, or be closely associated with, violations of the
CFPA's UDAAP prohibitions \92\ or the Truth in Lending Act,\93\ among
other Federal consumer financial laws. In addition, in the Bureau's
experience, a violation of one law within the Bureau's enforcement
authority may be indicative of broader inadequacies in an entity's
compliance systems that are resulting or could result in other legal
violations, including violations of Federal consumer financial laws.
Furthermore, including in the registry orders issued under any law that
the Bureau may enforce (where the violation of law found or alleged
arises out of conduct in connection with the offering or provision of a
consumer financial product or service) would further the Bureau's
objective of creating a registry that could serve as a single,
consolidated reference tool for use in monitoring for risks to
consumers, thereby increasing the Bureau's ability to use the registry
to monitor for patterns of risky conduct of nonbank covered persons
across entities, industries, and product offerings.
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\91\ See, e.g., 10 U.S.C. 987(f)(6) (authorizing Bureau
enforcement of the Military Lending Act). As the Bureau has
explained in a recent interpretive rule, it also has authority to
supervise nonbanks subject to its supervision regarding risks to
consumers arising from conduct that violates the Military Lending
Act. See Bureau Interpretive Rule, Examinations for Risks to Active-
Duty Servicemembers and Their Covered Dependents, 86 FR 32723 (June
23, 2021). In this proposed rulemaking, however, the Bureau does not
need to rely on the authority described in that interpretive rule.
Instead, to the extent that the Bureau's proposal would collect
information regarding orders issued under laws described in proposed
Sec. 1092.201(c)(2) for the purpose of facilitating the Bureau's
supervisory activities, the Bureau would do so because the Bureau
believes such orders may be probative of a broader risk that an
entity has engaged or will engage in conduct that may violate
Federal consumer financial law.
\92\ 15 U.S.C. 5531, 5536(a)(1)(B).
\93\ 15 U.S.C. 1601 et seq.
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Third, the Bureau is proposing to require registration in
connection with orders issued under the prohibition on unfair or
deceptive acts or practices under section 5 of the FTC Act, 15 U.S.C.
45, or any rule or order issued for purpose of implementing that
prohibition, to the extent that the violation of law found or alleged
arises out of conduct in connection with the offering or provision of a
consumer financial product or service. In matters where a government
agency has reached a determination that an entity has violated section
5 of the FTC Act in connection with the offering or provision of a
consumer financial product or service, the Bureau has reason to be
concerned that the entity poses unusual risks to consumers in financial
markets. For one thing, the conduct resulting in the order well might
have violated Federal consumer financial law. CFPA section 1031, for
example, authorizes the Bureau to take action ``to prevent a covered
person or service provider from committing or engaging in an unfair,
deceptive, or abusive act or practice under Federal law in connection
with any transaction with a consumer for a consumer financial product
or service, or the offering of a consumer financial product or
service.'' \94\ And CFPA section 1036(a)(1)(B) provides that ``[i]t
shall be unlawful'' for a covered person ``to engage in any unfair,
deceptive, or abusive act or practice.'' \95\ Congress modeled the
CFPA's prohibition of unfair or deceptive acts or practices after the
similar prohibition in section 5 of the FTC Act.\96\ Therefore,
violations of FTC Act section 5 in connection with the provision or
offering of a consumer financial product or service is highly probative
of a heightened risk that UDAAP violations subject to the Bureau's
jurisdiction have occurred or are occurring.
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\94\ 12 U.S.C. 5531(a).
\95\ 12 U.S.C. 5536(a)(1)(B).
\96\ See 15 U.S.C. 45; see also, e.g., Consumer Fin. Prot.
Bureau v. ITT Educ. Servs., Inc., 219 F. Supp. 3d 878, 902-04 (S.D.
Ind. 2015).
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Moreover, the high probative value of such orders is not simply a
function of the likelihood that underlying conduct could violate
Federal consumer financial law. The Bureau believes that, where an
entity has engaged in conduct prohibited under FTC Act section 5 in
connection with offering or providing a consumer financial product or
service, there is a significant risk that upon
[[Page 6098]]
closer inspection of the entity's activities it has engaged in other
acts or omissions that either violate Federal consumer financial law or
otherwise present risks to consumers in the consumer financial markets.
For example, inadequacies in compliance systems are not likely limited
to a particular Federal or State consumer protection law, and
compliance-system inadequacies that result in FTC Act section 5
violations indicate a heightened risk of similar inadequacies related
to the prevention of violations of Federal consumer financial laws.
And, as described above, a registry of orders is particularly useful
because a core purpose of the Bureau's monitoring efforts is to analyze
patterns of risky conduct across entities, industries, product
offerings, and jurisdictions. Such patterns would help the Bureau
identify risks to consumers that warrant further action, such as more
monitoring, increased supervisory attention in the case of supervised
persons, regulation, or consumer education.
Fourth, the Bureau proposes to require registration in connection
with orders issued under State laws prohibiting unfair, deceptive, or
abusive acts or practices that are identified in proposed appendix A of
part 1092, to the extent that the violation of law found or alleged
arises out of conduct in connection with the offering or provision of a
consumer financial product or service. State UDAP/UDAAP laws are
generally modeled after--or otherwise prohibit conduct similar to that
prohibited by--FTC Act section 5 or CFPA sections 1031 and
1036(a)(1)(B).\97\ Therefore, violations of State UDAP/UDAAP law in
connection with the provision or offering of a consumer financial
product or service are similarly highly probative of a heightened risk
that UDAAP violations subject to the Bureau's jurisdiction have
occurred or are occurring. In addition, violations of State UDAP/UDAAP
law may be probative of the existence of violations of other laws
within the Bureau's jurisdiction.\98\
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\97\ 15 U.S.C. 45; 12 U.S.C. 5531. See, e.g., Request for
Information on Payday Loans, Vehicle Title Loans, Installment Loans,
and Open-End Lines of Credit, 81 FR 47781, 47783 (July 22, 2016)
(``In the 1960s, States began passing their own consumer protection
statutes modeled on the [Federal Trade Commission] Act to prohibit
unfair and deceptive practices.'').
\98\ To take just one example, UDAAP violations in connection
with debt-collection efforts may also violate the Fair Debt
Collection Practices Act's prohibition against unfair, deceptive, or
abusive debt-collection practices. See 15 U.S.C. 1692d-1692f.
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Obtaining a better understanding of entities' compliance with State
UDAP/UDAAP laws will assist the Bureau in the assessment and detection
of risks for the same general reasons described with respect to alleged
or found violations of FTC Act section 5--namely, that (i) conduct that
violates State UDAP/UDAAP prohibitions commonly also violates laws
under the Bureau's jurisdiction; and (ii) the Bureau believes that
evidence of such conduct may be highly probative of a broader risk that
the entity has engaged or will engage in similar conduct that may
violate laws within the Bureau's jurisdiction, either as a result of a
willingness to violate such laws or a lack of sufficient protections in
place to prevent violations. Registration of State UDAP/UDAAP orders
will facilitate effective market monitoring by ensuring that the Bureau
can quickly and effectively identify patterns of risky conduct across
entities, industries, consumer financial product or service offerings,
and jurisdictions. The Bureau could then decide which Bureau functions
are best suited to address the consumer risks raised by the orders.\99\
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\99\ For discussion of the proposal's requirements with respect
to State laws amending or otherwise succeeding a law identified in
appendix A, and rules or orders issued by State agencies for the
purpose of implementing State UDAP/UDAAP laws, see the section-by-
section discussion of proposed Sec. 1092.201(c) below.
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The Bureau seeks comment on its preliminary conclusion that these
categories of public orders would assist with monitoring for risks to
consumers in the offering or provision of consumer financial products
and services, including any information regarding whether and how the
categories of orders described in the proposal correlate with
additional risk to consumers, or conversely, any information indicating
that these types of orders are overinclusive and do not correlate with
additional risk to consumers.
D. Why the Bureau Is Proposing To Require Supervised Nonbanks To
Designate Attesting Executives and Submit Written Statements
The proposal would also require entities above a certain size that
are subject to the Bureau's supervision and examination authority to
annually submit a written statement signed by a designated attesting
executive regarding each covered order to which they are subject. In
the written statement, the attesting executive would (i) generally
describe the steps that the executive has undertaken to review and
oversee the entity's activities subject to the applicable covered order
for the preceding calendar year, and (ii) attest whether, to the
executive's knowledge, the entity during the preceding calendar year
has identified any violations or other instances of noncompliance with
any of the obligations that were imposed in a public provision of the
covered order by the applicable agency or court based on a violation of
a covered law. The proposed rule would further require that the entity
designate as the attesting executive for each covered order its
highest-ranking duly appointed senior executive officer (or, if the
entity does not have any duly appointed officers, the highest-ranking
individual charged with managerial or oversight responsibility for the
entity) whose assigned duties include ensuring the entity's compliance
with Federal consumer financial law, who has knowledge of the entity's
systems and procedures for achieving compliance with the covered order,
and who has control over the entity's efforts to comply with the
covered order. The Bureau would publish the name and title of that
executive in the proposed public registry.
The Bureau believes these requirements would serve two sets of
distinct purposes relating to its exercise of its supervisory and
examination authorities under CFPA section 1024.
First, the Bureau believes the proposed requirements that certain
supervised entities (which are referred to in the proposed rule as
``supervised registered entities'') designate attesting executives and
provide written statements would facilitate the Bureau's supervision
efforts, including its efforts to assess compliance with the
requirements of Federal consumer financial law, obtain information
about supervised entities' activities and compliance systems or
procedures, and detect and assess risks to consumers and to markets for
consumer financial products and services.\100\ As discussed, the
existence of one or more covered orders involving a supervised
registered entity already raises red flags regarding the entity's
compliance with Federal consumer financial law and the overall risk
posed by such entity to consumers in the offering or provision of
consumer financial products and services. Submission of a written
statement indicating an absence of good faith efforts to comply with
the law or
[[Page 6099]]
identifying problematic instances of noncompliance with reported orders
would provide the Bureau with important additional information
regarding risks to consumers that may be associated with the orders.
Such orders frequently contain provisions aimed at ensuring an entity's
future legal compliance, such as reporting requirements, recordkeeping
requirements, and provisions requiring the entity to obtain the issuing
agency's nonobjection before adopting or amending relevant policies and
procedures. An entity's sustained compliance with such provisions may
mitigate the continuing risks to consumers presented by the entity and
thus reduce the potential need for current supervisory activities. By
contrast, an entity's noncompliance with the terms of an order may
indicate a heightened need for current supervisory activities. And if
an entity is committing significant or repeated violations of a covered
order, or it is failing to take appropriate steps to address such
violations and prevent their recurrence, that may indicate that the
entity lacks the protocols and institutional commitment necessary to
ensure compliance with legal obligations aimed at protecting consumers
and ultimately with the Federal consumer financial laws. The Bureau
believes that entities that fail to comply with orders enforcing the
law may be at greater risk of violating one or more laws within the
Bureau's jurisdiction. Submission of the proposed written statements
would enable the Bureau to conduct additional supervisory reviews or to
otherwise investigate the matter in order to identify any such
violations and related risks.
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\100\ See 12 U.S.C. 5514(b)(1), (7)(A)-(B). As explained in the
``legal authority'' section, 12 U.S.C. 5514(b)(7)(A) authorizes the
Bureau to prescribe rules to facilitate Bureau supervision and the
assessment and detection of risks to consumers, and 12 U.S.C.
5514(b)(7)(B) authorizes the Bureau to require supervised registered
entities to ``generate''--i.e., create--reports regarding their
activities (including the proposed written statements) and then
``provide'' them to the Bureau.
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As a result, the proposed written statements would be particularly
relevant when prioritizing the Bureau's supervisory activities under
CFPA section 1024(b). As discussed above at sections III and IV(B),
CFPA section 1024(b)(2) requires that the Bureau exercise its authority
under CFPA section 1024(a) in a manner designed to ensure that such
exercise, with respect to persons described in section 1024(a), is
based on the assessment by the Bureau of certain identified risks.\101\
For the reasons discussed above, the proposed written statements would
help inform the Bureau's risk-based prioritization of its supervisory
program under CFPA section 1024(b)(2). The Bureau anticipates that the
written statements would be particularly helpful in assessing, among
other things, ``the risks to consumers created by the provision of . .
. consumer financial products or services'' and ``the extent to which
such institutions are subject to oversight by State authorities for
consumer protection.'' \102\
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\101\ 12 U.S.C. 5514(a), (b)(2).
\102\ 12 U.S.C. 5514(b)(2)(C)-(D). See additional discussion of
the factors for risk-based supervisory prioritization in section
IV(B) above.
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The proposed written-statement requirement also would improve the
Bureau's ability to conduct its supervisory and examination activities
with respect to the supervised nonbank, when it does choose to exercise
its supervisory authority. The Bureau exercises its supervisory
authority with respect to supervised nonbanks for certain purposes,
including assessing compliance with the requirements of Federal
consumer financial law, obtaining information about the activities and
compliance systems or procedures of supervised nonbanks, and detecting
and assessing risks to consumers and markets for consumer financial
products and services.\103\ The Bureau expects a supervised nonbank's
written statements as required under the proposal to provide important
information relevant to all of these statutory purposes. As explained
below, a supervised nonbank's failure to comply with a relevant order
under a covered law could indicate that the entity more generally lacks
the will or ability to comply with its legal obligations, including its
obligations under Federal consumer financial law. Such noncompliance
may also indicate that the entity generally lacks adequate compliance
systems or procedures, which in turn would create risks to consumers
and to the markets for consumer financial products and services that
the entity participates in. Thus, in cases where the Bureau determines
to exercise its supervisory authorities with respect to a supervised
nonbank required to submit written statements under the proposal, the
Bureau would expect those written statements to be of value in
conducting its examination work. For example, the Bureau may use the
written statements in determining what information to require from a
supervised nonbank, in determining the content of supervisory
communications and recommendations, or in making other decisions
regarding the use of its supervisory authority.\104\
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\103\ 12 U.S.C. 5514(b)(1).
\104\ As explained below in the section-by-section discussion of
proposed Sec. 1092.203(e), the Bureau is proposing to require
supervised registered entities to maintain records to support their
written statements. That recordkeeping requirement will further
facilitate the Bureau's supervisory and examination activities
because it will ensure the availability of records for the Bureau to
review regarding the matters addressed in the written statements.
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Second, the proposed written-statement requirements would help
ensure that supervised registered entities ``are legitimate entities
and are able to perform their obligations to consumers.'' \105\ As
discussed in section VII below, the Bureau believes that most
supervised registered entities subject to covered orders endeavor in
good faith to comply with consumer protection laws and, accordingly,
have put in place some manner of systems and procedures to help achieve
such compliance. But the Bureau also expects that other supervised
registered entities will not take their legal obligations seriously,
including their obligations under Federal consumer financial law.\106\
The proposed written statement would provide information that would
help the Bureau assess in which category a particular entity falls. If,
after reviewing a written statement, the Bureau concludes that an
entity is not working in good faith to comply with its legal
obligations, that conclusion might provide grounds for prioritizing the
entity for supervisory examinations to assess its compliance with
Federal consumer financial law. The Bureau expects that the risk of
such increased supervisory scrutiny will provide an incentive for some
entities to improve their compliance efforts so that they can submit a
written statement that is less likely to result in increased scrutiny
from the Bureau. Thus, by making it more difficult to quietly disregard
the law, the Bureau anticipates that the written-statement requirement
would likely motivate at least a few supervised entities with
substandard compliance practices to enhance their compliance efforts
and comply with their legal obligations, including their obligations
under Federal consumer financial law. The Bureau likewise believes that
the proposed requirement to designate an attesting executive with
knowledge of the entity's systems and procedures for achieving
compliance with the covered order and with control over the efforts to
comply with the covered order would likely provide an incentive to pay
more attention to the entity's legal obligations.
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\105\ 12 U.S.C. 5514(b)(7)(C). As explained in the ``legal
authority'' section above, 12 U.S.C. 5514(b)(7)(A), (B), and (C)
provide independent sources of rulemaking authority.
\106\ In several cases, the Bureau has found that entities have
violated prior orders that the Bureau has issued or obtained. See,
e.g., Discover Bank, CFPB No. 2020-BCFP-0026 (Dec. 22, 2020); CFPB
v. Encore Capital Grp., No. 20-cv-01750-GPC-KSC (S.D. Cal. Oct. 16,
2020); Military Credit Servs., LLC, CFPB No. 2016-CFPB-0029 (Dec.
20, 2016).
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[[Page 6100]]
To be clear, the proposed rule would not establish any minimum
procedures or otherwise specify the steps the attesting executive must
take in order to review and oversee the supervised registered entity's
activities. Nor would the proposal establish any minimum level of
compliance management or expectation for compliance systems and
procedures at such entities. However, as explained above, the Bureau
expects that most supervised registered entities will be at least
somewhat hesitant to repeatedly report the absence of good faith
efforts to comply with covered orders. Also, the rule would require
supervised registered entities to identify a central point of contact
and responsibility regarding an entity's efforts to comply with a
covered order.
The Bureau seeks comment on all aspects of the proposed written-
statement requirement, including its preliminary findings that
requiring supervised nonbanks to designate attesting executives and to
submit certain written statements relating to compliance with reported
orders will facilitate the Bureau's supervisory efforts and better
ensure that supervised registered entities are legitimate entities and
are able to perform their obligations to consumers. Among other things,
the Bureau seeks comment on whether the proposed requirements would
help ensure such entities are legitimate and are able to perform their
obligations to consumers, and whether they would facilitate supervision
of such entities and assessment and detection of risks to consumers.
The Bureau also seeks comment on whether the proposed eligibility
requirements regarding which individuals may be designated as attesting
executives are too broad or too narrow. The Bureau also seeks comment
on whether supervised registered entities should submit additional or
different information to the Bureau.\107\
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\107\ See additional discussion about other information that the
Bureau might seek to collect in the section-by-section discussion of
proposed Sec. 1092.203(d) below.
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E. Why the Bureau Is Proposing To Publish the Information Collected
Under the Proposed Registration Requirements
The Bureau is proposing to publish the information collected under
the proposed registration requirements (except for the written
statement submitted under Sec. 1092.203, which would be treated as
confidential supervisory information). While the orders that would be
published under the proposal would already be public, they may not all
be readily accessible in a comprehensive and collected manner, and some
of the additional information submitted to the registry may not be
readily available to the public. The Bureau is proposing to publish
this information because it believes publication would provide benefits
to the general public, other regulators, and to consumers, and would be
consistent with Federal government efforts to make government data
assets publicly available.\108\ The Bureau has authority to publish the
registration information under CFPA section 1022(c)(3)(B), which
authorizes it to publish information obtained under section 1022 ``as
is in the public interest,'' \109\ and under CFPA section
1022(c)(7)(B), which authorizes the Bureau to ``publicly disclose
registration information to facilitate the ability of consumers to
identify covered persons that are registered with the Bureau.'' \110\
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\108\ See also the discussion of these issues in the section-by-
section discussion of proposed Sec. 1092.204 below.
\109\ 12 U.S.C. 5512(c)(3)(B).
\110\ 12 U.S.C. 5512(c)(7)(B).
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A variety of Federal regulators, including the prudential
regulators, as well as State attorneys general and other State
agencies, all have authority to issue orders to address legal
violations in the provision or offering of consumer financial products
or services. Consequently, similar conduct may be addressed through
separate orders, by separate regulators, or across separate lines of
business. Again, the orders that would be published under the proposal
would already be public. But such orders, while public, are currently
subject to distinct publication regimes. The distinct enforcement and
publication regimes for the various agencies with authority over
nonbank covered persons make it more difficult for the Bureau,
consumers, and other interested parties to identify entities that
engage in misconduct and repeatedly violate the law. The proposed rule
would address that issue by creating such a single, consolidated
registry of orders that enforce applicable law.
The Bureau recognizes that much public information about such
orders already exists. The applicable Federal and State regulators
generally each publish their own orders enforcing consumer financial
law; thus, potential users may be able to access some of this
information by means of the various websites and other databases
maintained by individual agencies. Some information is also available
to potential users through certain multiagency websites such as the
Nationwide Multistate Licensing System & Registry (NMLS) owned and
operated by the State Regulatory Registry LLC, which is owned and
operated by the Conference of State Bank Supervisors. And still other
information is published and maintained by private actors.
However, there appears to be limited collective information
regarding all of the orders that have been issued by multiple
regulators to particular entities across multiple product markets and
geographic markets related to consumer financial products and services.
To the Bureau's knowledge, there is currently no public government
system at the Federal or State level for the collection of information
about such orders across the entities subject to the Bureau's
jurisdiction (though privately maintained databases may exist). No
government agency appears to maintain a publicly available repository
of such orders and other related information with respect to particular
entities as they relate to consumer financial products and services.
Furthermore, while certain State regulators publish certain public
enforcement actions to the NMLS, such publication does not extend to
all of the orders and all of the agencies that are addressed by the
proposal, including orders issued by Federal agencies. It is also
limited to only certain industry sectors. The Bureau believes that
consumers would benefit from a registration system that is maintained
by the Federal government for the purpose of providing comprehensive
information regarding such orders, including copies of the orders.
The Bureau believes that there would be significant value in
creating a single public repository of information related to public
agency and court orders that impose obligations based on violations of
consumer protection laws, and the nonbanks that are subject to
them.\111\ The Bureau believes that publication of certain data
collected pursuant to this rule is in the public interest in a variety
of ways. By improving public transparency, the Bureau intends to
mitigate recidivism and more effectively deter unlawful behavior.
Providing better tools to monitor repeat law violators and corporate
recidivism is in the public interest. Researchers would be able to use
published information to better understand the markets regulated by the
Bureau and the participants in those markets, and their efforts may
result in more thorough understanding and promote compliance with the
law. Non-government entities would
[[Page 6101]]
likewise be able to use published information in conducting their work
and in identifying potential issues and risks affecting consumers in
the markets for consumer financial protection and services. Industry
could use the registry as a convenient source of information regarding
regulator actions and trends across jurisdictions, helping industry
actors to better understand legal risks and compliance obligations.
Potential investors, contractual partners, financial firms, and others
that are conducting due diligence on a registered nonbank would have a
consolidated and updated source of accurate information regarding
public orders. Establishing a source for reliable and public data on
entity lawbreaking and recidivism will likely promote tracking and
awareness of such matters by consumer groups, trade associations, firms
conducting due diligence, the media, and other parties.
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\111\ See also the discussion of these issues in the section-by-
section discussions of proposed Sec. Sec. 1092.202(b) and
1092.204(a) below.
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Government agencies--including, but not limited to, the Bureau--
would also benefit from the proposed public registry. While the orders
that would be published under the proposal would already be public,
every Federal, State, and local agency with jurisdiction over a covered
nonbank will benefit from access to a regularly maintained database
providing up-to-date information on relevant public orders that have
been issued against such entities. Such information will help agencies
to detect risks to consumers, and to coordinate and maintain
consistency with the Bureau and other agencies in their enforcement
strategies and approaches. Agencies might use the published information
to better identify registered nonbanks and determine their legal
structure and organization, since the registry would require registered
nonbanks to submit and maintain up-to-date identifying information,
including legal name and principal place of business. The Bureau also
believes that the publication of registration information and
information regarding orders will assist other agencies in assessing
the potential risks to consumers that may be posed by registered
nonbanks and in making their own determinations regarding whether to
conduct examinations or investigations, bring enforcement actions
against nonbanks, or engage in other regulatory activities. For
example, a State regulator attempting to improve its assessments of
consumer risk trends among nonbank payday lenders in its State should
be able to use the registry to identify what other regulators of the
same or similar nonbank providers or products have recently identified
in terms of such risks. In addition, the Bureau believes that many
agencies would find the published information useful in making other
determinations regarding the nonbanks registered under the proposal.
For example, an agency may be able to use this information when making
determinations regarding an application or license, or to ask relevant
questions regarding the information that is published. Thus, the Bureau
believes that, with access to a single, public registry of these
orders, those similarly tasked with protecting consumers in the markets
for consumer financial products and services would obtain many of the
same powerful market monitoring benefits that the Bureau anticipates
obtaining from this rule.
In developing the proposal, the Bureau considered whether it might
be better to use confidential channels, or perhaps a private electronic
portal, to exchange this information with other government agencies.
However, the Bureau believes that such an approach would be
impractical. Not every agency that would be able to use the information
would be aware of the need to request access to the information from
the Bureau or would necessarily be able to expend the resources to
maintain access. The Bureau would need to expend its own resources to
establish and maintain such channels. And the Bureau believes that such
a system would not achieve the benefits of disclosure to consumers and
the public discussed in this section. Publication also would formally
align the proposed registration system with Federal government
standards calling for publishing information online as open data.\112\
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\112\ See, e.g., Open, Public, Electronic, and Necessary
Government Data Act, in title II of Public Law No. 115-435 (Jan. 14,
2019).
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Consumers may also benefit from the collection and publication of
the information collected by the system, including information about
orders that are already public. The Bureau believes that, at least in
certain cases, publishing information about the entity and its
applicable orders in a public registry would potentially help certain
consumers make informed decisions regarding their choice of consumer
financial products or services. As discussed at section VII below
regarding the Bureau's analysis of this proposal under CFPA section
1022(b),\113\ the Bureau does not necessarily expect a wide group of
consumers to rely routinely on the proposed registry when selecting
consumer financial products or services. However, the Bureau believes
that the registry would benefit certain consumers if the information in
the registry is recirculated, compiled, or analyzed by other users such
as consumer advocacy organizations, researchers, or the media. For
example, media outlets could use the registry to report which entities
have the most government orders enforcing the law against them, which
could inform consumers about the most egregious repeat offenders.
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\113\ 12 U.S.C. 5512(b).
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The proposed registry may also facilitate private enforcement of
the Federal consumer financial laws by consumers, to the extent those
laws provide private rights of action, where consumers have been harmed
by a registered nonbank. The information that would be published under
the proposal might be useful in helping consumers understand the
identity of a company that has offered or provided a particular
consumer financial product or service, and in determining whether to
file suit or otherwise make choices regarding how to assert their legal
rights. And availability of this information may lead consumers and
other persons to report to the Bureau instances of similar conduct for
the Bureau to investigate.
Under the proposal, the Bureau would not publish the written
statement submitted by a supervised registered entity but would instead
treat the written statement as Bureau confidential supervisory
information subject to the provisions of its rule on the disclosure of
records and information at 12 CFR part 1070. The Bureau does propose to
publish the name and title of the attesting executive(s) submitted by
the supervised registered entity. The Bureau proposes to disclose this
name and title information because it believes publication of this
information would be in the public interest--namely, it would help
ensure accountability at the entity for noncompliance. The Bureau
believes that the publication of the executive's name and title would
provide an incentive to pay more attention to covered orders. The
Bureau believes that designating an executive as ultimately accountable
for ensuring compliance with a covered order will prompt the executive
to focus greater attention on ensuring the entity's compliance, and in
turn increase the likelihood of compliance. The Bureau believes that
publication of this designation will increase the likelihood of these
effects. Publication of the designation will identify for other
regulators (and the general public) the person at the supervised
registered entity who is ultimately responsible for compliance with the
covered order, as
[[Page 6102]]
well as more general efforts to comply with Federal consumer financial
law. Just as the possibility of Bureau scrutiny of the attesting
executive's conduct is likely to motivate the executive to devote
greater attention to compliance efforts, the additional scrutiny from
others outside the Bureau will further promote compliance. Publishing
the attesting executive's name and title thus dovetails with the
supervisory goals discussed above in section IV(D).
The Bureau also believes that publishing the name and title of the
executive who has knowledge and control of the supervised entity's
efforts to comply with the covered order would benefit users of the
system in other ways. Such information would enable employee
whistleblowers, or other consumers who have knowledge and information
about violations of the applicable order, to ensure that such
information gets to the person who is in charge of such compliance. The
Bureau also believes that the public would benefit from understanding
the names and titles of the highest-ranking executive who is
responsible for compliance with a public order enforcing the law, as
this information could help consumers better understand and monitor the
conduct of the entities with whom they do business. It would also
inform consumers of a person to whom they could direct escalated
complaints. Other regulators, especially those that have issued covered
orders regarding the supervised entity, would likely benefit from
understanding which executive(s) have been tasked with ensuring
compliance with their orders. Finally, disclosure of this information
would increase transparency regarding how the Bureau processes and
verifies information submitted as part of the registration system. The
Bureau requests comment on this provision, including whether this
requirement would assist users of the NBR system and whether it would
unduly interfere with the privacy interests of the attesting executive
or other interests of the supervised registered entity.
The Bureau seeks comment on the proposed publication requirements
and the above-stated rationales for them. Among other things, the
Bureau seeks information on the current state of published information
in existing systems or databases about the types of orders addressed in
this proposed rule. The Bureau also seeks comment on whether the Bureau
should publish less information in the proposed registry, or retain
discretion to do so, and whether publication of the names and titles of
attesting executives will have the desired effects.
V. Section-by-Section Analysis
Part 1092
Subpart A--General
Section 1092.100 Authority and Purpose
100(a) Authority
Proposed Sec. 1092.100(a) would set forth the legal authority for
proposed 12 CFR part 1092, including all subparts. Proposed Sec.
1092.100 would refer to CFPA section 1022(b) and (c) and section
1024(b),\114\ which are discussed in section III of the proposal above.
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\114\ 12 U.S.C. 5512(b), (c); 12 U.S.C. 5514(b).
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100(b) Purpose
Proposed Sec. 1092.100(b) would explain that the purpose of part
1092 is to prescribe rules regarding NBR requirements, to prescribe
rules concerning the collection of information from registered
entities, and to provide for public release of that information as
appropriate.
Section 1092.101 General Definitions
Proposed Sec. 1092.101 would define terms that are utilized
elsewhere in proposed part 1092 of the rules. Proposed Sec.
1092.101(a) would define the terms ``affiliate,'' ``consumer,''
``consumer financial product or service,'' ``covered person,''
``Federal consumer financial law,'' ``insured credit union,''
``person,'' ``related person,'' ``service provider,'' and ``State'' as
having the meanings set forth in the CFPA, 12 U.S.C. 5481. Some of
these terms would be used only in subpart B.
Proposed Sec. 1092.101(b) would define the term ``Bureau'' as a
reference to the Consumer Financial Protection Bureau.
Proposed Sec. 1092.101(c) would clarify that the terms
``include,'' ``includes,'' and ``including'' throughout part 1092 would
denote non-exhaustive examples covered by the relevant provision.\115\
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\115\ See, e.g., Christopher v. SmithKline Beecham Corp., 567
U.S. 142, 162 (2012) (use of ``includes'' indicates that ``the
examples enumerated in the text are intended to be illustrative, not
exhaustive'').
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Proposed Sec. 1092.101(d) would define the term ``nonbank
registration system'' to mean the Bureau's electronic registration
system identified and maintained by the Bureau for the purposes of part
1092. Proposed Sec. 1092.101(e) would define the term ``nonbank
registration system implementation date'' to mean, for a given
requirement or subpart of part 1092, the date(s) determined by the
Bureau to commence the operations of the NBR system in connection with
that requirement or subpart. The Bureau seeks comment on how much time
entities would need to comply with the requirements of part 1092 and to
register with the NBR system. The Bureau currently anticipates that the
NBR system implementation date with respect to subpart B would occur
sometime after the effective date of the proposed rule, and no earlier
than January 2024. The actual NBR system implementation date would
depend upon the Bureau's ability to develop and launch the required
technical systems that will support the submission and review of
applicable filings, and on feedback provided by commenters regarding
the time registrants would need to implement this part's requirements.
The Bureau would provide advance public notice regarding the NBR system
implementation date with respect to subpart B to enable entities
subject to subpart B to prepare and submit timely filings to the NBR
system.
Section 1092.102 Submission and Use of Registration Information
102(a) Filing Instructions
Proposed Sec. 1092.102(a) would provide that the Bureau shall
specify the form and manner for electronic filings and submissions to
the NBR system that are required or made voluntarily under part 1092.
The Bureau would issue specific guidance for filings and submissions.
The Bureau anticipates that its filing instructions may, among other
things, specify information that filers must submit to verify that they
have authority to act on behalf of the entities for which they are
purporting to register. The Bureau proposes to accept electronic
filings and submissions to the NBR system only and does not propose to
accept paper filings or submissions.
Proposed Sec. 1092.102(a) also would state that the Bureau may
provide for extensions of deadlines or time periods prescribed by the
proposed rule for persons affected by declared disasters or other
emergency situations. Such situations could include natural disasters
such as hurricanes, fires, or pandemics, and also could include other
emergency situations or undue hardships, including technical problems
involving the NBR system. For example, the Bureau could defer deadlines
during a presidentially declared emergency or major disaster under the
Robert T. Stafford Disaster Relief and Emergency Assistance Act (42
U.S.C. 5121 et seq.) or a presidentially declared pandemic-related
national emergency under the National Emergencies Act (50 U.S.C. 1601
et seq.). The Bureau would issue guidance regarding such situations.
The Bureau seeks comment on the types of
[[Page 6103]]
situations that may arise in this context, and about appropriate
mechanisms for addressing them.
102(b) Coordination or Combination of Systems
Proposed Sec. 1092.102(b) would provide that in administering the
NBR system, the Bureau may rely on information a person previously
submitted to the NBR system under part 1092 and may coordinate or
combine systems with State agencies as described in CFPA sections
1022(c)(7)(C) and 1024(b)(7)(D). Those statutory provisions provide
that the Bureau shall consult with State agencies regarding
requirements or systems (including coordinated or combined systems for
registration), where appropriate. This proposed section would clarify
that the Bureau may develop or rely on such systems as part of
maintaining the NBR system and may also rely on previously submitted
information. The Bureau seeks comment on the types of coordinated or
combined systems that would be appropriate and the types of information
that could be obtained from or provided to State agencies.
102(c) Bureau Use of Registration Information
Proposed Sec. 1092.102(c) would provide that the Bureau may use
the information submitted to the NBR system under this part to support
its objectives and functions, including in determining when to exercise
its authority under CFPA section 1024 to conduct examinations and when
to exercise its enforcement powers under subtitle E of the CFPA.
The Bureau proposes to establish the NBR system under its
registration and market-monitoring rulemaking authorities under CFPA
section 1022(b)(1), (c)(1)-(4), and (c)(7), and under its supervisory
rulemaking authorities under CFPA section 1024(b)(7)(A), (B), and (C).
As discussed in greater detail elsewhere in this preamble, the Bureau
intends to use the information submitted under the NBR system to
monitor for risks to consumers in the offering or provision of consumer
financial products or services, and to support all of its functions as
appropriate, including its supervisory, rulemaking, enforcement, and
other functions.
Proposed Sec. 1092.102(c) also would provide that part 1092, and
registration under that part, would not alter any applicable process
whereby a person may dispute that it qualifies as a person subject to
Bureau authority. For example, 12 CFR 1090.103 establishes a Bureau
administrative process for assessing a person's status as a larger
participant under CFPA section 1024(a)(1)(B) and 1024(a)(2) and 12 CFR
part 1090. As specified in 12 CFR 1090.103(a), if a person receives a
written communication from the Bureau initiating a supervisory activity
pursuant to CFPA section 1024, such person may respond by asserting
that the person does not meet the definition of a larger participant of
a market covered by 12 CFR part 1090 within 45 days of the date of the
communication. 12 CFR 1090.103 establishes a process for review and
determination by a Bureau official regarding the person's larger
participant status. 12 CFR 1090.103(c) provides that, in reaching that
determination, the Bureau official shall review the person's affidavit
and related information, as well as any other information the official
deems relevant.
Under proposed Sec. 1092.102(c), a person may submit such an
assertion regarding the person's status as a larger participant under
12 CFR 1090.103 notwithstanding any registration or information
submitted to the NBR system under part 1092, including any submission
of identifying information or a written statement, or any designation
of attesting executive(s) for purposes of proposed subpart B.
Submission of such assertions regarding larger participant status to
the Bureau under 12 CFR 1090.103, including the Bureau's processes
regarding the treatment of such assertions and the effect of any
determinations regarding the person's supervised status, would be
governed by the provisions of 12 CFR part 1090. The Bureau may use the
information provided to the NBR system in connection with making any
determination regarding a person's supervised status under 12 CFR
1090.103, along with the affidavit submitted by the person and other
information as provided in that section. However, the submission of
information to the NBR system would not prevent a person from also
submitting other information under 12 CFR 1090.103.
Section 1092.103 Severability
Proposed Sec. 1092.103 would provide that the provisions of the
proposed rule are separate and severable from one another, and that if
any provision is stayed or determined to be invalid, the remaining
provisions shall continue in effect. This is a standard severability
clause of the kind that is included in many regulations to clearly
express agency intent about the course that is preferred if such events
were to occur. The Bureau has carefully considered the requirements of
the proposed rule, both individually and in their totality, including
their potential costs and benefits to covered persons and consumers. In
the event a court were to stay or invalidate one or more provisions of
this rule as finalized, the Bureau would want the remaining portions of
the rule as finalized to remain in full force and legal effect.
Subpart B--Registry of Nonbank Covered Persons Subject to Certain
Agency and Court Orders
Section 1092.200 Scope and Purpose
200(a) Scope
Proposed Sec. 1092.200(a) would describe the scope of proposed
subpart B. Proposed subpart B would require nonbank covered persons
that are subject to certain public agency and court orders enforcing
the law to register with the Bureau and to submit copies of the orders
to the Bureau and would describe the registration information the
Bureau would make publicly available. It would also provide that
proposed subpart B would require certain nonbank covered persons that
are supervised by the Bureau to prepare and submit an annual written
statement. The requirements regarding annual written statements are
described in proposed Sec. 1092.204. The Bureau solicits comment on
this proposed statement of scope.
200(b) Purpose
Proposed Sec. 1092.200(b) would explain that the purposes of the
information collection requirements in proposed subpart B would be to
support Bureau functions by monitoring for risks to consumers in the
offering or provision of consumer financial products or services,
including developments in markets for such products or services,
pursuant to CFPA section 1022(c)(1); to prescribe rules regarding
registration requirements applicable to nonbank covered persons,
pursuant to CFPA section 1022(c)(7); and to facilitate the supervision
of persons described in CFPA section 1024(a)(1), to ensure that such
persons are legitimate entities and are able to perform their
obligations to consumers, and to assess and detect risks to consumers,
pursuant to CFPA section 1024(b).\116\ The Bureau solicits comment on
this proposed statement of purpose.
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\116\ More detailed discussions of how the proposal would
achieve these purposes are contained elsewhere in this preamble.
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Section 1092.201 Definitions
Proposed Sec. 1092.201 would define terms used in proposed subpart
B. These definitions would supplement the general definitions for the
entirety of
[[Page 6104]]
part 1092 that would be provided in proposed Sec. 1092.101. The Bureau
seeks comment on each of the definitions set forth in proposed subpart
B and any suggested clarifications, modifications, or alternatives.
201(a) Administrative Information
Proposed Sec. 1092.201(a) would define the term ``administrative
information'' to mean contact information regarding persons subject to
subpart B and other information submitted or collected to facilitate
the administration of the NBR system. Administrative information would
include information such as date and time stamps of submissions to the
NBR system, contact information for nonbank personnel involved in
making submissions, filer questions and other communications regarding
submissions and submission procedures, reconciliation or correction of
errors, information submitted under proposed Sec. Sec. 1092.202(g) and
1092.203(f),\117\ and other information that would be submitted or
collected to facilitate the administration of the NBR system.
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\117\ See discussion in the section-by-section discussion of
these provisions below.
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Proposed Sec. 1092.204(a) would provide that the Bureau may
determine not to publish such administrative information, as discussed
below in the section-by-section discussion of proposed Sec.
1092.204(a). The Bureau seeks comment whether any other information
that might be collected through the NBR system should also be treated
as administrative information.
201(b) Attesting Executive
Proposed Sec. 1092.201(b) would define the term ``attesting
executive'' to mean, with respect to any covered order regarding a
supervised registered entity, the individual designated by the
supervised registered entity to perform the supervised registered
entity's duties with respect to the covered order under proposed Sec.
1092.203. That section would require a supervised registered entity to
designate as its ``attesting executive'' its highest-ranking duly
appointed senior executive officer (or, if the supervised registered
entity does not have any duly appointed officers, the highest-ranking
individual charged with managerial or oversight responsibility for the
supervised registered entity) whose assigned duties include ensuring
the supervised registered entity's compliance with Federal consumer
financial law, who has knowledge of the entity's systems and procedures
for achieving compliance with the covered order, and who has control
over the entity's efforts to comply with the covered order.
Below, in the section-by-section discussion of proposed Sec.
1092.203, the Bureau proposes requirements regarding attesting
executives.
201(c) Covered Law
Proposed Sec. 1092.201(c) would define the term ``covered law'' to
mean one of several types of laws, as described. The proposed term
``covered law'' would be central to defining which orders and portions
of orders would be subject to the requirements of proposed subpart B.
Proposed Sec. 1092.201(e) would define the term covered order to
include certain orders that impose certain obligations on a covered
nonbank based on an alleged violation of a covered law. Thus, the
proposed term ``covered law'' would help determine the application of
proposed subpart B's registration requirements. The Bureau believes
that requiring registration of covered nonbanks that are subject to
covered orders issued under these laws would further the purposes of
proposed subpart B.
Under the proposal, a law listed in proposed Sec. 1092.201(c)(1)
through (6) would qualify as a covered law only to the extent that the
violation of law found or alleged arises out of conduct in connection
with the offering or provision of a consumer financial product or
service. The Bureau is interested in registering orders that relate to
offering or providing consumer financial products or services. The
Bureau recognizes that the laws listed in proposed Sec. 1092.201(d)(1)
through (6) may apply to a wide range of conduct not involving consumer
financial products or services. While the Bureau believes that
reporting on such violations could still be probative of risks to
consumers in the markets for consumer financial products and services--
as misconduct in one line of business is not necessarily cabined to
that line of business--the Bureau believes that a more limited
definition of covered law strikes the right balance between ensuring
that the Bureau remains adequately informed of risks to consumers in
the offering or provision of consumer financial products and services
and minimizing the potential burden of the reporting requirements on
nonbank covered persons. The Bureau seeks comment on whether this
definition achieves this balance or should be modified to achieve it.
The proposal lists categories of laws that would constitute
``covered laws'' to the extent that the violation of law found or
alleged arises out of conduct in connection with the offering or
provision of a consumer financial product or service. For the reasons
discussed above in section IV(C), the Bureau believes that orders
issued under the types of covered laws described in the proposal are
likely to be probative of risks to consumers in the offering or
provision of consumer financial products or services, including
developments in markets for such products or services.
First, proposed Sec. 1092.201(c) would define the term covered law
to include a Federal consumer financial law, as that term is defined in
proposed Sec. 1092.101(a) and the CFPA.\118\ The Bureau is charged
with administering, interpreting, and enforcing the Federal consumer
financial laws, which include the CFPA itself, 18 enumerated consumer
laws (such as the Fair Credit Reporting Act and the Truth in Lending
Act),\119\ and the laws for which authorities were transferred to the
Bureau under subtitles F and H of the CFPA, as well as rules and orders
issued by the Bureau under any of these laws.\120\
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\118\ See 12 U.S.C. 5481(14).
\119\ See 12 U.S.C. 5481(12).
\120\ 12 U.S.C. 5481(14).
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The Bureau believes that requiring registration of covered nonbanks
in connection with certain orders issued under Federal consumer
financial laws will further the purposes of proposed subpart B. As
discussed in section IV, ``to support [the Bureau's] rulemaking and
other functions,'' Congress mandated that the Bureau ``shall monitor
for risks to consumers in the offering or provision of consumer
financial products or services, including developments in markets for
such products or services.'' \121\ In matters where an agency other
than the Bureau has issued or obtained a final, public order concluding
that an entity has violated Federal consumer financial law in
connection with the offering or provision of a consumer financial
product or service, the Bureau will generally have jurisdiction over
the conduct that resulted in that order. The Bureau therefore has a
clear interest in identifying and understanding the nature of the risks
to consumers presented by such conduct, including the risk that the
conduct continues outside the particular jurisdiction or in connection
with other consumer financial products or services that are offered or
provided by the covered nonbank. A pattern of similar alleged or found
violations of Federal consumer financial law across multiple nonbank
covered persons may indicate a problem
[[Page 6105]]
that the Bureau can best address by engaging in rulemaking to clarify
or expand available consumer protection to address emerging consumer
risk trends, or by using other tools, such as consumer education, to
address the identified risks. And, depending on the facts and
circumstances, the Bureau may consider bringing its own supervisory or
enforcement action in connection with the same or related conduct.\122\
Thus, the Bureau believes that violations of the Federal consumer
financial laws, and especially repeat violations of such laws, may be
probative of risks to consumers and may indicate more systemic problems
at an entity or in the relevant market related to offering or provision
of consumer financial products or services.
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\121\ 12 U.S.C. 5512(c)(1).
\122\ The Bureau is also proposing to require registration of
orders that the Bureau has obtained or issued for violations of
Federal consumer financial laws. While the Bureau is of course aware
of such orders, collecting all orders for violations of covered
laws--including those obtained or issued by the Bureau--within the
proposed registry would benefit the Bureau, other regulators, and
the general public by providing a single point of reference for such
orders. The Bureau would also benefit from receiving the written
statements required under proposed Sec. 1092.203 with respect to
orders it obtains or issues.
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The Bureau seeks comment on including Federal consumer financial
laws in the definition of ``covered law'' and whether it should
consider any related inclusions, exclusions, or conditions relating to
Federal consumer financial laws.
Second, proposed Sec. 1092.201(c)(2) would define the term
``covered law'' to include any other law as to which the Bureau may
exercise enforcement authority. As explained above in section IV(C),
the Bureau may enforce certain laws other than Federal consumer
financial laws, such as the Military Lending Act.\123\ The Bureau
believes that the proposed registry should collect information
regarding agency and court orders issued under any law that the Bureau
may enforce, where the violation of law found or alleged arises out of
conduct in connection with the offering or provision of a consumer
financial product or service. By definition, the conduct addressed in
such orders will generally fall within the scope of the Bureau's
enforcement authority. More generally, in the Bureau's experience,
evidence of such conduct could be highly probative of a broader risk
that the entity has engaged or will engage in conduct that may violate
Federal consumer financial laws. For example, violations of the
Military Lending Act may overlap with, or be closely associated with,
violations of the CFPA's UDAAP prohibitions \124\ or the Truth in
Lending Act,\125\ among other Federal consumer financial laws. In
addition, in the Bureau's experience, a violation of one law within the
Bureau's enforcement authority may be indicative of broader
inadequacies in an entity's compliance systems that are resulting in or
could result in other legal violations, including violations of Federal
consumer financial laws. Furthermore, including in the registry orders
issued under any law that the Bureau may enforce (where the violation
of law found or alleged arises out of conduct in connection with the
offering or provision of a consumer financial product or service) would
further the Bureau's objective of creating a registry that could serve
as a single, consolidated reference tool for use in monitoring for
risks to consumers, thereby increasing the Bureau's ability to use the
registry to monitor for patterns of risky conduct of nonbank covered
persons across entities, industries, and product offerings.
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\123\ 10 U.S.C. 987(f)(6) (authorizing Bureau enforcement of the
Military Lending Act).
\124\ 15 U.S.C. 5531, 5536(a)(1)(B).
\125\ 15 U.S.C. 1601 et seq.
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The Bureau seeks comment on whether it should include the laws
described in proposed Sec. 1092.201(c)(2) in the definition of
``covered law.'' The Bureau also seeks comment on whether it should
consider any exclusions from, or revisions to, the description of the
laws captured by proposed Sec. 1092.201(c)(2).
Third, proposed Sec. 1092.201(c)(3) would define the term
``covered law'' to include the prohibition of unfair or deceptive acts
or practices under section 5 of the FTC Act, 15 U.S.C. 45, or any rule
or order issued for the purpose of implementing that prohibition. The
proposal would not include within the definition of ``covered law'' FTC
Act section 5's prohibition of ``[u]nfair methods of competition in or
affecting commerce,'' or rules or orders issued solely pursuant to that
prohibition.\126\ The Bureau expects that entities would be aware in
any specific case whether a provision of an applicable order has been
issued under FTC Act section 5's prohibition of unfair or deceptive
acts or practices (or a rule or order issued for the purpose of
implementing that prohibition), as opposed to section 5's prohibition
of ``[u]nfair methods of competition in or affecting commerce'' (or a
rule or order issued thereunder), and thus whether the order provision
was issued under a ``covered law'' or not. The Bureau understands that
orders issued in connection with violations of FTC Act section 5
routinely distinguish between these two authorities, and that orders
issued under FTC Act section 5's prohibition of ``[u]nfair methods of
competition in or affecting commerce'' rarely, if ever, relate to UDAP
violations involving the offering or provision of a consumer financial
product or service. The Bureau requests comment on whether the proposal
should also require registration of orders issued under FTC Act section
5's prohibition of ``[u]nfair methods of competition in or affecting
commerce,'' or rules or orders issued pursuant to that prohibition. The
Bureau also seeks comment on whether the proposal should include
measures to clarify any matters relating to this proposed distinction
between types of FTC Act section 5 order provisions.
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\126\ 15 U.S.C. 45(a)(1).
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As discussed further in section IV(C) above, the Bureau believes
that an order issued under FTC Act section 5's prohibition of unfair or
deceptive acts or practices may be probative of violations of Federal
consumer financial law, including CFPA sections 1031 and
1036(a)(1)(B).\127\ Because the CFPA's prohibition of unfair or
deceptive acts or practices is modeled after FTC Act section 5's
similar prohibition,\128\ conduct that constitutes a UDAP violation
under FTC Act section 5 also likely violates the CFPA's UDAAP
provisions. The Bureau also believes that FTC Act section 5 unfairness
and deception violations related to the offering or provision of
consumer financial products or services may indicate more systemic
problems at an entity that may impact the offering or provision of
consumer financial products or services other than those issues
specifically identified in the order. The Bureau would need to know
about such findings so that it can assess whether the violation is
indicative of a larger and potentially more systemic problem at the
covered nonbank, or potentially throughout an entire market. And, as
discussed, information about such violations would inform the Bureau's
exercise of its various rulemaking, supervisory, enforcement, consumer
education, and other functions.
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\127\ 12 U.S.C. 5531, 5536(a)(1)(B).
\128\ See, e.g., Consumer Fin. Prot. Bureau v. ITT Educ. Servs.,
219 F. Supp. 3d at 902-04.
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``Covered law'' under the proposal would include not only FTC Act
section 5, but also any rules or orders issued for the purpose of
implementing FTC Act section 5's UDAP prohibition.\129\
[[Page 6106]]
Section 18 of the FTC Act, 15 U.S.C. 57a, authorizes the FTC to
prescribe ``rules which define with specificity acts or practices which
are unfair or deceptive acts or practices in or affecting commerce''
within the meaning of FTC Act section 5(a)(1).\130\ These FTC rules,
which are known as ``trade regulation rules,'' would be covered laws
under the proposed definition to the extent the conduct found or
alleged to violate such rules relates to the offering or provision of a
consumer financial product or service. Violations of these rules
generally constitute violations of FTC Act section 5 itself.\131\ And
the Bureau believes that, like violations of FTC Act section 5 itself,
violations of the rules issued under FTC Act section 5, where they
arise out of conduct in connection with the offering or provision of
consumer financial products or services, would likely be probative of
risks to consumers and warrant attention by the Bureau.
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\129\ In certain circumstances, the Bureau may enforce a rule
prescribed under the FTC Act by the FTC with respect to an unfair or
deceptive act or practice. See 12 U.S.C. 5581(b)(5)(B)(ii). Such an
FTC rule, where issued by the FTC to implement FTC Act section 5,
would be a covered law under the proposed definition.
\130\ 15 U.S.C. 57a(a)(1)(B).
\131\ 15 U.S.C. 57a(d)(3) (``When any rule under subsection
(a)(1)(B) takes effect a subsequent violation thereof shall
constitute an unfair or deceptive act or practice in violation of
section 45(a)(1) of this title, unless the Commission otherwise
expressly provides in such rule.'').
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The proposed definition of ``covered law'' would also include
orders issued by the FTC itself under FTC Act section 5's UDAP
prohibition, as well as by other agencies. The Bureau believes that
violations of such orders present similar risks to consumers as those
presented by violations of FTC Act section 5 and the rules issued
thereunder. The Bureau seeks comment on including the prohibition on
unfair or deceptive acts or practices under FTC Act section 5, and
rules and orders issued for the purpose of implementing that
prohibition, in the definition of ``covered law,'' and whether it
should consider any related inclusions, exclusions, or conditions.
Fourth, proposed Sec. 1092.201(c)(4) would define the term
``covered law'' to include a State law prohibiting unfair, deceptive,
or abusive acts or practices that is identified in appendix A of part
1092. Proposed appendix A provides a list of State statutes that
prohibit unfair, deceptive, or abusive acts or practices and that the
Bureau has reviewed and proposes to define as a covered law under this
provision. As with the other laws described in proposed Sec.
1092.201(c), a State UDAAP law would only qualify as a covered law to
the extent the conduct found or alleged to violate the State UDAAP law
relates to the offering or provision of a consumer financial product or
service. The Bureau has reviewed the State statutes identified in
proposed appendix A and as explained below, it believes that requiring
registration of covered nonbanks that are subject to covered orders
issued under such statutes would likely further the purposes of
proposed subpart B.
Proposed appendix A includes State laws of general applicability
that prohibit unfair, deceptive, or abusive acts or practices and that
might apply to the offering or provision of consumer financial products
or services. Although the scope and content of these State laws may
vary at the margin, the Bureau believes these statutes cover a core
concept of unfairness, deception, or abusiveness that makes violations
of them likely probative of risks to consumers in the offering or
provision of consumer financial products and services. These statutes
may commonly be referred to as ``UDAP'' or ``UDAAP'' statutes, or
``little FTC Acts,'' and are often labeled in State statutes as State
``consumer protection acts'' or as laws addressing ``unfair'' or
``deceptive'' ``trade practices.'' State or local agencies may use
these statutes to bring cases or actions with respect to practices that
injure consumers. While these State statutes may also authorize private
suits by consumers and other persons, the proposal would only require
registration with respect to covered orders issued at least in part in
any action or proceeding brought by any Federal agency, State agency,
or local agency (as described further below in the section-by-section
discussion of proposed Sec. 1092.201(e)(2)).
The Bureau is proposing to list these statutes in appendix A, and
thus to include them in the proposed rule's definition of covered law,
in part because those statutes are generally analogous to CFPA sections
1031 and 1036(a)(1)(B) and FTC Act section 5.\132\ Several of these
State statutes specifically provide that ``it is the intent of the
legislature that in construing [the State statute], the courts will be
guided by the interpretations given by the Federal Trade Commission and
the federal courts to Section 5(a)(1) of the Federal Trade Commission
Act,'' or words to this effect.\133\ Obtaining a better understanding
of entities' compliance with State UDAP/UDAAP laws will assist the
Bureau in the assessment and detection of risks for the same general
reasons described with respect to alleged or found violations of FTC
Act section 5. The Bureau believes that entities that have violated one
of these State statutes, and especially repeat violators of such
statutes, may pose heightened risks to consumers in the offering or
provision of consumer financial products and services, including the
risk that they have engaged, and may continue to engage, in unfair,
deceptive, or abusive acts and practices in violation of CFPA section
1031. And information identifying patterns of such risky conduct across
entities, industries, product offerings, or jurisdictions would be
highly informative to the Bureau's monitoring work. The Bureau has
attempted to identify all of the applicable State UDAP/UDAAP statutes
of general applicability in appendix A, but requests comment on whether
it has comprehensively done so. The Bureau proposes to include in
appendix A all such State statutes and seeks comment on any additions,
subtractions, or modifications to the State UDAP/UDAAP statutes of
general applicability in appendix A.
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\132\ 12 U.S.C. 5531, 5536(a)(1)(B); 15 U.S.C. 45.
\133\ E.g., Mass. Gen. Laws ch. 93A, sec. 2(b); Conn. Gen. Stat.
sec. 42-110b(b).
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The Bureau is also proposing to include in appendix A, and thus to
include in the definition of the term covered law, certain other
industry-specific State statutes that prevent unfair, deceptive, or
abusive conduct in connection with certain specific consumer financial
industries or markets. For example, proposed appendix A would include
New York Banking Law section 719(2), regarding prohibited practices by
student loan servicers. This State statutory provision prohibits
``[e]ngag[ing] in any unfair, deceptive or predatory act or practice
toward any person or misrepresent[ing] or omit[ting] any material
information in connection with the servicing of a student loan.'' \134\
The Bureau is proposing to include this New York State law and others
like it in appendix A, to the extent that the conduct found or alleged
to violate such law relates to the offering or provision of a consumer
financial product or service.
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\134\ New York Banking Law sec. 719(2).
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As with State UDAP/UDAAP laws of general applicability, the Bureau
believes that violation of such industry-specific State statutes that
prohibit unfair, deceptive, or abusive acts or practices in connection
with consumer financial industries or markets and in connection with
the offering or provision of consumer financial products or services
would be probative of potential violations of CFPA sections 1031 and
1036, and also of other related risks to consumers within the scope of
[[Page 6107]]
the Bureau's jurisdiction. The Bureau believes that omitting these
industry-specific statutes from the definition of ``covered law'' may
cause the information submitted to the proposed registry to be
incomplete. Among other things, the Bureau understands that many State
agencies typically rely upon such industry-specific statutes to enforce
prohibitions on conduct by covered nonbanks that is similar to that
prohibited under UDAP/UDAAP laws of general applicability. Thus, the
Bureau believes registration of orders issued under such State statutes
would provide information that is probative of the types of risks the
Bureau believes to be associated with orders issued under State UDAP/
UDAAP laws of general applicability. The Bureau has attempted to
identify applicable State UDAP/UDAAP statutes related to applicable
consumer financial industries or markets in appendix A, but requests
comment on whether it has comprehensively done so. The Bureau proposes
to include in appendix A all such State statutes.
The Bureau proposes to require registration of all orders issued
under State laws listed in appendix A, as long as the conduct at issue
relates to the offering or provision of a consumer financial product or
service, and the order satisfies the definition of ``covered order'' in
proposed Sec. 1092.201(e). The Bureau recognizes that some State UDAP/
UDAAP statutes listed in appendix A may prohibit conduct that regulated
entities might argue is not prohibited under CFPA sections 1031 and
1036(a)(1)(B). For example, State UDAP/UDAAP statutes modeled after FTC
Act section 5 may include provisions that, in addition to prohibiting
``unfair'' and ``deceptive'' conduct, also prohibit ``unfair methods of
competition'' in connection with antitrust or anticompetition matters.
While it is possible that such orders might be less probative than
other orders, the Bureau believes that limiting the scope of such
covered laws to those involving the offering or provision of consumer
financial products and services sufficiently assures that most orders
reported will be valuable in effectively monitoring for risks to
consumers in the offering or the provision of such products and
services. Moreover, the Bureau anticipates that it will not always be
the case that an agency or court order will clearly distinguish whether
it is issued under State statutory provisions preventing ``unfair,''
``deceptive,'' or ``abusive'' acts and practices on the one hand, or
``anticompetitive'' acts or practices on the other--especially in cases
where a State statute addresses all of them. Unlike orders issued under
FTC Act section 5, it is not clear to the Bureau that orders issued
under such State laws routinely distinguish between these two types of
authorities. Therefore, attempting to carve out portions of State UDAP/
UDAAP statutes that extend beyond the conduct prohibited by CFPA
sections 1031 and 1036(a)(1)(B) would be impracticable and risk
undermining the effectiveness of the rule. The Bureau thus proposes to
define the term ``covered law'' by listing specific State statutes.
Where a State statute is listed in appendix A and otherwise satisfies
proposed Sec. 1092.201(c), the Bureau would propose to treat it as a
covered law, regardless of whether any specific order issued under that
law expressly refers to the State law's prohibition of ``unfair,''
``deceptive,'' or ``abusive'' acts and practices. In most cases, the
Bureau anticipates that violations of the listed State statutes that
relate to the offering or provision of a consumer financial product or
service will be probative of risks to consumers within the Bureau's
jurisdiction. The Bureau seeks comment on this approach, including
whether it should further clarify the definition of covered law in this
regard, and whether the proposed list at proposed appendix A adequately
identifies such State laws.
The Bureau also seeks specific comment on whether to require
registration, and to list in appendix A, additional State statutes that
prohibit ``unconscionable'' conduct but do not also contain a specific
reference to ``unfair,'' ``deceptive,'' or ``abusive'' conduct.\135\
While the Bureau has not included such State laws in appendix A, the
Bureau believes that such prohibitions on unconscionable conduct often
reach conduct that qualifies as a UDAAP violation subject to the
Bureau's jurisdiction under CFPA sections 1031 and 1036(a)(1)(B).\136\
Therefore, the Bureau seeks comment regarding whether requiring nonbank
covered persons to report violations of such State unconscionability
prohibitions, when they relate to the offering or provision of a
consumer financial product or service, would significantly assist the
Bureau in effectively monitoring for risks to consumers within the
Bureau's jurisdiction, or facilitate the Bureau's exercise of its
rulemaking and other authorities.
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\135\ See, e.g., Kan. Stat. Ann. sec. 50-627.
\136\ Compare, e.g., Kan. Stat. Ann. sec. 50-627(b)(1)
(providing that, in determining whether an act or practice is
unconscionable, a court shall consider whether ``[t]he supplier took
advantage of the inability of the consumer reasonably to protect the
consumer's interests because of the consumer's physical infirmity,
ignorance, illiteracy, inability to understand the language of an
agreement or similar factor''), with 12 U.S.C. 5531(d)(2)(B) (act or
practice is abusive if, among other things, it ``takes unreasonable
advantage of . . . the inability of the consumer to protect the
interests of the consumer in selecting or using a consumer financial
product or service'').
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The Bureau has not included laws of tribal governments in appendix
A. While the Bureau believes that many orders issued under such laws
may be highly probative of risks to consumers and could assist the
Bureau in carrying out its market monitoring obligations--as well as
assist the Bureau in assembling an effective nonbank registry--the
Bureau preliminarily concludes that considerations of administrative
efficiency favor focusing on other orders. The Bureau, however, is
continuing to consider whether to include tribal UDAP/UDAAP laws in
appendix A. The Bureau seeks comment on whether tribal UDAP/UDAAP laws
should be included among the list of ``covered laws,'' and if so, which
specific tribal UDAP/UDAAP laws should be included in the list.
Fifth, proposed Sec. 1092.201(c)(5) would include in the
definition of the term ``covered law'' a State law amending or
otherwise succeeding a law identified in appendix A, to the extent that
such law is materially similar to its predecessor, and the conduct
found or alleged to violate such law relates to the offering or
provision of a consumer financial product or service.
The Bureau is proposing Sec. 1092.201(c)(5) in order to clarify
that appendix A is intended to capture certain future changes made by
States to the State laws listed therein. States may make immaterial
changes from time to time, including renumbering or amending the
statutes listed in appendix A, in a manner that could cause proposed
appendix A to become technically ``incorrect'' or ``obsolete'' in the
view of some regulated entities. Proposed Sec. 1092.201(c)(5) makes
clear that is not the Bureau's intent. To the extent the amended or
otherwise succeeding law is materially similar to its predecessor,
proposed Sec. 1092.201(c)(5) would ensure that it would still qualify
as a ``covered law.'' The definition of covered law thus would capture
a successor to a law listed in appendix A if, for example, the conduct
found or alleged to violate the successor law would have constituted a
violation of the predecessor law were it still in effect. The Bureau
seeks comment on all aspects of proposed Sec. 1092.201(c)(5),
including whether the Bureau should define successor laws covered by
appendix A more broadly or
[[Page 6108]]
narrowly than the approach adopted here, and whether regulated entities
would benefit from any additional guidance in determining whether a
successor law is materially similar to a predecessor law listed in
appendix A.
Finally, proposed Sec. 1092.201(c)(6) would include in the
definition of the term ``covered law'' a rule or order issued by a
State agency for the purpose of implementing a State law described in
proposed Sec. 1092.201(c)(4) or (5), to the extent the conduct found
or alleged to violate such regulation relates to the offering or
provision of a consumer financial product or service. Various State
statutes authorize one or more State agencies to issue regulations
implementing the terms of those statutes, thereby authorizing the State
agency to further define specific unfair, deceptive, or abusive acts or
practices.\137\ Proposed Sec. 1092.201(c)(6) would include such State
agency regulations within the meaning of the term ``covered law.''
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\137\ See, e.g., Cal. Fin. Code sec. 90009(c).
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The Bureau seeks comment on all aspects of proposed section Sec.
1092.201(c), including whether the types of covered laws proposed are
appropriate, whether they may be either overinclusive or underinclusive
in light of the Bureau's objectives in this rulemaking, and whether the
definition of the term ``covered law'' may be clarified or strengthened
to achieve the purposes of proposed subpart B.
201(d) Covered Nonbank
The proposal would define the term ``covered nonbank'' to mean a
covered person \138\ that does not fall into one of five categories.
First, the Bureau proposes to exclude from the definition insured
depository institutions, insured credit unions, or related persons. The
Bureau has considered proposing to collect information about relevant
orders in place against such persons under its authority to issue rules
mandating collection of information set forth in CFPA section
1022(c)(4)(B)(ii). While the Bureau might at some point consider
collecting or publishing the information described in the proposal from
such persons, the Bureau believes that there is currently greater need
to collect this information from the nonbanks under its jurisdiction.
Among other things, the identity and size of all insured depository
institutions and insured credit unions is known to the Bureau due to
registration regimes maintained by the prudential regulators, which
track and make public such information. Also, there are only four
prudential regulators, and they regularly publish their consumer
financial protection orders. In contrast, comprehensive, readily
accessible information is currently lacking about the identity of, and
orders issued against, nonbanks subject either to the Bureau's market
monitoring authority or to its supervisory authority across the various
markets for consumer financial products and services. As a result,
there is a unique need to identify nonbanks subject to orders through
this proposed registration system. In addition, the proposal would
conform with the Bureau's registration authority under CFPA section
1022(c)(7), which states that the Bureau may impose registration
requirements applicable to a covered person, other than an insured
depository institution, insured credit union, or related person.\139\
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\138\ As provided in proposed Sec. 1092.101(a), the proposal
would define the term ``covered person'' to have the same meaning as
in 12 U.S.C. 5481(6). The proposal would not define ``service
providers,'' as defined in 12 U.S.C. 5481(26), as covered nonbanks
per se. Entities that are service providers, however, may
nevertheless also be covered persons under the CFPA. Among other
things, a person that is a service provider shall be deemed to be a
covered person to the extent that such person engages in the
offering or provision of its own consumer financial product or
service. See 12 U.S.C. 5481(26)(C). And a service provider that acts
as a service provider to its covered person affiliate may itself be
deemed to be a covered person as provided in 12 U.S.C. 5481(6)(B).
\139\ An affiliate of an insured depository institution, insured
credit union, or related person could be subject to the proposed
rule if it is not itself an insured depository institution, insured
credit union, or related person.
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Second, the proposal would exclude from the definition of the term
``covered nonbank'' a ``State,'' as defined in CFPA section 1002(27)--a
term that includes ``any federally recognized Indian tribe, as defined
by the Secretary of the Interior'' under section 104(a) of the Federal
Recognized Indian Tribe List Act of 1994, 25 U.S.C. 5131(a).\140\ The
Bureau has other avenues of collaborating with State partners
(including tribal partners) and, out of considerations of comity, does
not seek to subject them to an information collection requirement in
this proposal.
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\140\ 12 U.S.C. 5481(27).
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Third, the proposal excludes natural persons from the definition of
``covered nonbank.'' The Bureau is not proposing to impose subpart B's
registration requirements on natural persons, even though natural
persons may be covered persons and may be subject to the types of
orders described in the proposal. (For example, a sole proprietor not
incorporated as a legal entity could qualify as a covered person.)
Under the proposed exclusion, for example, natural persons subject to
orders issued under FTC Act section 5, removal and prohibition orders
or orders assessing civil money penalties issued by an appropriate
Federal banking agency under section 8 of the Federal Deposit Insurance
Act,\141\ or State licensing orders or orders issued under the S.A.F.E.
Mortgage Licensing Act of 2008 \142\ would not be subject to the
proposal's registration requirements. The ``natural person'' exception
in proposed Sec. 1092.201(c)(3) is intended only to exclude individual
human beings from the definition of ``covered nonbank.'' The definition
of ``covered nonbank'' would include trusts and other entities that
meet the definition of ``covered person'' under CFPA section
1002(6).\143\ The Bureau is primarily interested in obtaining
information regarding orders that apply to entities because it believes
such orders will be most useful in identifying relevant risks to
consumers. The Bureau believes that many of the agency and court orders
enforcing the law issued against individuals are highly specific to the
facts and circumstances relevant to the individual's conduct and are
less likely to implicate broader risks to consumers and markets. In
addition, the Bureau is primarily interested in obtaining and
publishing registration information regarding nonbank entities that are
subject to its jurisdiction, which among other things would enable
consumers to better identify such entities and would provide
information to the public and other regulators. The Bureau is concerned
that, if the Bureau should extend the registration requirement to
natural persons, the information provided would be less relevant to
consumers and the other users of the NBR system. Therefore, the
potential benefit of extending the registration requirement to natural
persons likely would not justify the additional Bureau resources that
would need to be allocated to implement and administer such an
expansion of the Bureau's registration system. The Bureau also believes
that proposed Sec. 1092.203's requirements to designate one or more
attesting executives and submit written statements would not be
appropriate for natural persons. The Bureau requests comment on this
proposed exclusion.
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\141\ 12 U.S.C. 1818.
\142\ 12 U.S.C. 5101 et seq.
\143\ See 12 U.S.C. 5481(6). See also 12 U.S.C. 5481 (defining
the term ``person'' to include, in addition to individuals, any
``partnership, company, corporation, association (incorporated or
unincorporated), trust, estate, cooperative organization, or other
entity'').
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Fourth, the proposal excludes from the definition of ``covered
nonbank'' a motor vehicle dealer that is predominantly engaged in the
sale and
[[Page 6109]]
servicing of motor vehicles, the leasing and servicing of motor
vehicles, or both, within the meaning of 12 U.S.C. 5519(a), except to
the extent such a person engages in functions that are excepted from
the application of 12 U.S.C. 5519(a) as described in 12 U.S.C. 5519(b).
CFPA section 1029 provides an exclusion from the Bureau's rulemaking
authority for certain motor vehicle dealers.\144\ However, CFPA section
1029(b) exempts certain persons from this exclusion. Persons covered by
section 1029(a) would qualify as ``covered nonbanks'' under the
proposal so long as they engage in the functions described in section
1029(b)--in which case they would be ``covered nonbanks.'' Proposed
Sec. 1092.201(e), discussed below, would further provide that the only
orders issued to such motor vehicle dealers that would require
registration would be those issued in connection with the functions
that are excepted from the application of 12 U.S.C. 5519(a) as
described in 12 U.S.C. 5519(b).
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\144\ 12 U.S.C. 5519 (``Exclusion for Auto Dealers'').
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Fifth, the proposal excludes a person from the definition of
``covered nonbank'' if the person qualifies as a covered person based
solely on conduct that is the subject of, and that is not otherwise
exempted from, an exclusion from the Bureau's rulemaking authority
under 12 U.S.C. 5517.\145\ This provision would clarify that persons
whose activities are wholly excluded from the rulemaking authority of
the Bureau under one or more of the provisions of section 1027 of the
CFPA are not ``covered nonbanks.'' However, where the CFPA provides
that any of the activities engaged in by such persons are subject to
the Bureau's rulemaking authority, this limitation would not exclude
the person from qualifying as a ``covered nonbank.'' For example, CFPA
section 1027(l)(1) provides an exclusion from the Bureau's rulemaking
authority for certain persons engaging in certain activities relating
to charitable contributions.\146\ Under the proposal, a covered person
would not be deemed a ``covered person'' if it qualifies for this
statutory exclusion and is not otherwise exempt from it. But CFPA
section 1027(l)(2) exempts certain activities from this statutory
exclusion by providing that ``the exclusion in [CFPA section
1027(l)(1)] does not apply to any activities not described in [CFPA
section 1027(l)(1)] that are the offering or provision of any consumer
financial product or service, or are otherwise subject to any
enumerated consumer law or any law for which authorities are
transferred under subtitle F or H.'' \147\ As proposed, persons
described in CFPA section 1027(l)(1) engaging in the activities
described therein would qualify as ``covered nonbanks'' so long as they
engage in any of the activities described in CFPA section 1027(l)(2),
and they would thus be subject to all of the information-collection
requirements of the rule applicable to ``covered nonbanks,'' regardless
of whether the applicable ``covered order'' addressed the conduct
subject to the statutory exclusion.
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\145\ 12 U.S.C. 5517.
\146\ 12 U.S.C. 5517(l)(1) (``Exclusion for Activities Relating
to Charitable Contributions'').
\147\ 12 U.S.C. 5517(l)(2).
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The Bureau is also considering whether it should adopt an
alternative approach that would limit all of the proposal's
registration requirements to covered persons that are subject to the
Bureau's supervision and examination authority under CFPA section
1024(a).\148\ The Bureau believes this approach would significantly
narrow the number of entities that would be required to register under
proposed subpart B, and therefore would also limit the information
provided to the NBR system. However, this alternative approach would
nevertheless provide significant benefits to the Bureau and other users
of the system. The Bureau would be able to use the information provided
to identify risk to consumers, to prioritize its supervisory
activities, and to support its other functions as described in this
proposal. In addition, the Bureau has a particular interest in those
supervised entities due to its exclusive Federal supervisory and
enforcement authority, with certain exceptions as described in the
CFPA.\149\ The Bureau seeks comment on this alternative approach,
including whether the proposed scope of the approach is appropriate and
why or why not.
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\148\ 12 U.S.C. 5514(a).
\149\ See 12 U.S.C. 5514(c)(1), (d).
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More generally, the Bureau seeks comment regarding the overall
scope of the proposed definition of ``covered nonbank,'' including
whether the definition should be expanded or limited in light of the
purposes and objectives of subpart B. The Bureau further seeks comment
on whether a more limited or expanded approach to the registration of
covered persons would be appropriate instead of the proposed
requirements, whether it should consider any other modifications to the
scope of the rule, and how such modifications would match the Bureau's
policy goals.
201(e) Covered Order
The Bureau proposes to add proposed Sec. 1092.201(e) to define the
term ``covered order.'' The proposal would define the term to include
only orders that are both public and final. The term ``public'' is
defined at proposed Sec. 1092.201(k). The proposed term ``covered
order'' is intended to cover only final settlement or consent orders,
or final agency or court orders resulting from litigation or
adjudicated agency proceedings. By ``final'' order, the proposal means
to exclude such orders as preliminary injunctions, temporary
restraining orders, orders partially granting and partially denying
motions to dismiss or summary-judgment motions, and other interlocutory
orders.\150\ The proposed term would also exclude temporary cease-and-
desist orders that come into effect pending the resolution of an
underlying contested matter but would include a related final cease-
and-desist or other order resolving the matter. The proposed term would
also exclude notices of charges, accusations, or complaints that are
part of disciplinary or enforcement proceedings but do not constitute a
final order. The Bureau proposes to include orders that are final by
their own terms or under applicable law, even where Federal, State, or
local law allows for the appeal of such orders. Proposed Sec.
1092.201(f), defining the term ``effective date,'' addresses situations
where an order is subject to a stay following issuance. The Bureau
seeks comment on whether the term ``final'' should be further defined
in the regulatory text. The Bureau also seeks comment on whether
certain types of non-final orders should be included in the proposed
definition of ``covered order,'' or whether the Bureau should consider
expressly excluding other types of orders.
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\150\ See, e.g., Gelboim v. Bank of Am. Corp., 574 U.S. 405,
408-09 (2015) (discussing the meaning of ``final decision'' under 28
U.S.C. 1291).
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The proposed definition includes orders issued by either an agency
or a court. The proposal would clarify that the definition would
include an otherwise covered order whether or not issued upon consent.
Accordingly, ``covered orders'' may be issued upon consent or
settlement. They may also be issued after the filing of a lawsuit or
complaint and a process of litigation or adjudication. The proposed
term would not include corporate resolutions adopted by an entity and
not issued by an agency or court. Nor would the proposed term generally
include licenses, including conditional licenses; but the term would
include an order
[[Page 6110]]
suspending, conditioning, or revoking a license based on a violation of
law. Nor would the proposed term include related stipulations or
consents, where those documents are not incorporated into or otherwise
made part of the order. The Bureau seeks comment on whether certain
types of orders should be categorically excluded from registration.
Proposed Sec. 1092.201(e)(1) would also include, as a component of
the definition of the term ``covered order'' for a given covered
nonbank, a requirement that the order identify the covered nonbank by
name as a party subject to the order. Thus, for example, orders that
indirectly refer to a covered nonbank as an ``affiliate'' of a named
party, but do not name the covered nonbank as itself a party subject to
the order, would not be covered orders under proposed Sec. 1092.201(e)
with respect to the covered nonbank. Nor would orders that apply to a
covered nonbank only as a ``successor and assign'' of a named party,
where the order does not expressly identify the covered nonbank by name
as a party subject to the order. The proposal would include in the
definition a covered nonbank that is listed by name as a party
somewhere within the body of the order, even if the covered nonbank is
not listed in the order's title or caption. In other words, to fall
within the proposed Sec. 1092.201(e) definition, it would be
sufficient that the order identifies the covered nonbank by name as a
party subject to the order even if the covered nonbank is not listed in
the title or caption of the order, or as the primary respondent,
defendant, or subject of the order. A covered nonbank may satisfy the
proposed definition even if the issuing agency or court does not list
the covered nonbank as a party in related press releases or internet
links. The Bureau seeks comment on the scope of proposed Sec.
1092.201(e)(1)'s limitation of the definition of ``covered order,'' and
whether proposed Sec. 1092.201(e)(1) should also include affiliates,
successors and assigns, or other methods of identifying entities
subject to orders, even though they are not expressly named in the
order.
Proposed Sec. 1092.201(e)(2) would include, as a component of the
definition of the term ``covered order,'' a requirement that the order
have been issued at least in part in any action or proceeding brought
by any Federal agency, State agency, or local agency. The Bureau
believes that limiting the registration requirement to orders involving
such agencies will provide sufficient information to support Bureau
functions. This proposed requirement would include orders issued by the
Bureau itself, the ``prudential regulators,'' as that term is defined
at CFPA section 1002(24),\151\ and any ``Executive agency,'' as that
term is defined at 5 U.S.C. 105. The proposed requirement would also
include orders issued by ``State agencies'' as defined at proposed
Sec. 1092.201(n) and ``local agencies'' as defined at proposed Sec.
1092.201(i). An order issued by a local agency would satisfy this
proposed requirement, but such an order would not satisfy the
requirement set forth in proposed Sec. 1092.201(e)(4) (described
below) unless the order imposes the obligations described in proposed
Sec. 1092.201(e)(3) on the covered nonbank based on one or more
violations of a covered law. While certain Federal and State laws are
included in the Sec. 1092.201(c) definition of the term covered law,
local laws are not. The Bureau seeks comment on its use and
descriptions of the terms ``Federal agency,'' ``State agency,'' and
``local agency'' and whether the Bureau should consider excluding any
agencies as defined or, conversely, broadening these terms to include
other relevant agencies or entities.
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\151\ 12 U.S.C. 5481(24).
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Proposed Sec. 1092.201(e)(3) further would include, as a component
of the definition of the term ``covered order,'' a requirement that the
order contain public provisions that impose obligations on the covered
nonbank to take certain actions or to refrain from taking certain
actions. Such obligations may include, for example, injunctions or
other obligations to cease and desist from violations of the law; to
pay civil money penalties, refunds, restitution, disgorgement, or other
money; to amend certain policies and procedures, including but not
limited to instances where the order requires submission of the
proposed amendments to policies and procedures for nonobjection; to
maintain records or to provide them upon request; or to take or to
refrain from taking other actions. An order suspending, conditioning,
or revoking a license based on a violation of law would meet this
requirement. An order that lacks any public provision imposing such an
obligation on the covered nonbank would not meet the requirement in
proposed Sec. 1092.201(e)(3). An example of the type of orders that
might not satisfy this requirement would be a declaratory judgment
order finding that an entity has violated the law, but not imposing any
remedial obligations. Other examples might include orders whose only
public provisions are releases and general contractual terms frequently
contained in consent orders, such as severability and counterpart
signature provisions, but only to the extent these provisions do not
impose any other obligations described by proposed Sec.
1092.201(e)(3).
The proposed Sec. 1092.201(e)(3) requirement would exclude order
provisions that are not ``public'' as that term is defined in proposed
Sec. 1092.201(k). For example, obligations imposed by non-public
provisions that constitute confidential supervisory information of
another agency would not be considered when determining whether a
particular order satisfies this proposed requirement. Proposed Sec.
1092.201(e)(3) would also exclude orders that lack any public provision
imposing an obligation on the covered nonbank to take certain actions
or to refrain from taking certain actions. For example, an order that
describes unlawful conduct but does not contain any such public
provisions imposing obligations described at proposed Sec.
1092.201(e)(3) would not satisfy this requirement. The Bureau proposes
to exclude from the rule's information-collection requirements
nonpublic orders and portions of orders in order to help protect the
confidential processes of other agencies, including their supervisory
processes. The Bureau is concerned that requiring registration of
confidential supervisory information might interfere with the functions
and missions of other agencies and does not believe that requiring such
registration is necessary to accomplish the purposes of the proposed
rule. To the extent that the Bureau has a need to review nonpublic
orders or nonpublic portions of orders, it may seek access to relevant
information through inter-agency information sharing that protects
applicable privileges and confidentiality. In addition, as discussed
below in the section-by-section discussion of proposed Sec.
1092.201(k), the Bureau believes that publication of nonpublic
information, including but not limited to confidential supervisory
information of the Bureau or other agencies, would be inappropriate.
The Bureau requests comment on its proposed exclusion from the registry
of nonpublic orders and nonpublic portions of orders, including whether
these provisions would sufficiently protect confidential information of
other agencies, and whether covered nonbanks would have sufficient
information to comply with these provisions.
Proposed Sec. 1092.201(e)(4) would also include, as a component of
the definition of the term covered order, a requirement that the order
impose one
[[Page 6111]]
or more of the obligations described in proposed Sec. 1092.201(e)(3)
on the covered nonbank based on an alleged violation of a covered law.
A covered order need not include an admission of liability or any
particular factual predicate. The Bureau anticipates that agency and
court orders will vary widely in form and content, depending in part on
such matters as the relevant individual laws being enforced, the
historical practices of the various enforcement agencies, and the
negotiations and facts and circumstances underlying specific orders.
Because of these expected variations in form and content in the orders
that the Bureau would expect to be registered under the proposal, the
Bureau believes that requiring registration only of orders that contain
an admission of liability, or a statement setting forth certain types
of findings or other factual predicates underlying the order, would
omit relevant orders. The Bureau believes that an order that contains
neither an admission of liability nor a statement setting forth the
factual predicate underlying the order may nevertheless be probative of
risks to consumers of the type that the Bureau is obligated to monitor.
For purposes of this proposed definition, an obligation would be
``based on'' an alleged violation where the order identifies the
covered law in question, asserts or otherwise indicates that the
covered nonbank has violated it, and imposes the obligation on the
covered nonbank at least in part as a result of the alleged
violation.\152\ This would include, for example, obligations imposed as
``fencing-in'' or injunctive relief, so long as those obligations were
imposed at least in part as a result of the entity's violation of a
covered law. This element of the definition would also be satisfied,
for example, by any obligation imposed as part of other legal or
equitable relief granted with respect to the violation, as well as by
any obligation imposed in order to prevent, remedy, or otherwise
address a violation of a covered law, or the conditions resulting from
the violation. However, an order that does not identify a covered law
as at least one of the legal bases for the obligations it imposes on a
covered bank would not satisfy the requirement set forth at proposed
Sec. 1092.201(e)(4). An order may identify a covered law as a legal
basis for the obligations imposed by referencing another document, such
as a written opinion, stipulation, or complaint, that shows that a
covered law served as the legal basis for the obligations imposed in
the order. But the requirements of proposed Sec. 1092.201(e)(4) would
not be satisfied where the legal basis for the obligations imposed is
specified only in extrinsic documents not referenced in the order at
issue, such as a press release or blog post.
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\152\ An obligation imposed based on multiple violations, some
of covered laws and some of other laws, would qualify as an
``obligation[ ] . . . based on an alleged violation of a covered
law'' within the meaning of proposed Sec. 1092.201(e)(4), even if
the violations of the non-covered laws would themselves have
sufficed to warrant the imposition of the obligation.
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The Bureau seeks comment on whether the requirement articulated in
proposed Sec. 1092.201(e)(4) is appropriate, and whether it should be
expanded or restricted. The Bureau also seeks comment on whether this
requirement would exclude a material number of otherwise applicable
orders from the scope of proposed subpart B or would exclude otherwise
applicable orders because of a particular agency or court drafting
practice.
The Sec. 1092.201(e)(4) requirement would include an order issued
by an agency exercising any powers conferred on such agency by
applicable law to enforce a covered law, so long as the order imposes
one or more of the obligations described in proposed Sec.
1092.201(e)(4) on the covered nonbank based on an alleged violation of
a covered law. For example, certain Federal agencies may issue an order
predicated on violation of a Federal consumer financial law under the
authority of another enabling enforcement or licensing statute. Among
other examples, an appropriate Federal banking agency may issue orders
in connection with certain violations of Federal consumer financial law
under section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818),
the Administrator of the National Credit Union Administration may issue
such orders under the Federal Credit Union Act (12 U.S.C. 1751 et
seq.), and the Securities and Exchange Commission may issue such orders
under the Federal securities laws. Such an order issued in connection
with violations of Federal consumer financial law would satisfy the
requirement set forth in proposed Sec. 1092.201(e)(4) in cases where
the order imposes the obligations described in proposed Sec.
1092.201(e)(3) on the covered nonbank based on one or more violations
of Federal consumer financial law (or another covered law).
Other agencies also may rely upon their enforcement authorities
under other laws in issuing orders in connection with violations of FTC
Act section 5 (and rules and orders issued thereunder). For example, an
appropriate Federal banking agency may issue orders in connection with
violations of FTC Act section 5 by relying on its enforcement
authori
[…truncated; see source link]Indexed from Federal Register on January 30, 2023.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.