Rule2024-12689
Registry of Nonbank Covered Persons Subject to Certain Agency and Court Orders
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
July 8, 2024
Effective
September 16, 2024
Issuing agencies
Consumer Financial Protection Bureau
Abstract
Under the Consumer Financial Protection Act of 2010 (CFPA), the Consumer Financial Protection Bureau (Bureau or CFPB) is issuing this final rule to require certain types of nonbank covered persons subject to certain final public orders obtained or issued by a government agency in connection with the offering or provision of a consumer financial product or service to report the existence of the orders and related information to a Bureau registry. The Bureau is also requiring certain supervised nonbanks to file annual reports regarding compliance with registered orders.
Full Text
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[Federal Register Volume 89, Number 130 (Monday, July 8, 2024)]
[Rules and Regulations]
[Pages 56028-56156]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-12689]
[[Page 56027]]
Vol. 89
Monday,
No. 130
July 8, 2024
Part II
Consumer Financial Protection Bureau
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12 CFR Part 1092
Registry of Nonbank Covered Persons Subject to Certain Agency and Court
Orders; Final Rule
Federal Register / Vol. 89 , No. 130 / Monday, July 8, 2024 / Rules
and Regulations
[[Page 56028]]
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CONSUMER FINANCIAL PROTECTION BUREAU
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: Consumer Financial Protection Bureau.
ACTION: Final rule.
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SUMMARY: Under the Consumer Financial Protection Act of 2010 (CFPA),
the Consumer Financial Protection Bureau (Bureau or CFPB) is issuing
this final rule to require certain types of nonbank covered persons
subject to certain final public orders obtained or issued by a
government agency in connection with the offering or provision of a
consumer financial product or service to report the existence of the
orders and related information to a Bureau registry. The Bureau is also
requiring certain supervised nonbanks to file annual reports regarding
compliance with registered orders.
DATES:
Effective date: This rule is effective on September 16, 2024.
Implementation dates: For implementation dates, see Sec. 1092.206.
FOR FURTHER INFORMATION CONTACT: George Karithanom, Regulatory
Implementation and Guidance Program Analyst, Office of Regulations, at
202-435-7700. If you require this document in an alternative electronic
format, please contact <a href="/cdn-cgi/l/email-protection#5f1c190f1d001e3c3c3a2c2c363d3633362b261f3c392f3d71383029"><span class="__cf_email__" data-cfemail="c3808593819c82a0a0a6b0b0aaa1aaafaab7ba83a0a5b3a1eda4acb5">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
I. Summary of the Final Rule
The Bureau is adopting this final rule to establish and maintain a
registry that will collect information about certain publicly available
agency and court orders and facilitate the Bureau's supervision of
certain companies. In this way, the Bureau will more effectively be
able to monitor and to reduce the risks to consumers posed by entities
that violate consumer protection laws. The final rule also authorizes
the Bureau to consolidate this information in an online registry for
use by the public and other regulators.
The final rule requires 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 imposing obligations based on violations of certain
consumer protection laws. Those entities will 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 intends to publish this
information on its website and potentially in other forms.
The Bureau will 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) responsible for and knowledgeable of the
firm's efforts to comply with the orders identified in the registry.
The supervised nonbank entity will also be required to submit on an
annual basis a written statement signed by the applicable executive
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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Nonbanks that are subject to an order published on the Nationwide
Multistate Licensing System's Consumer Access website (except for
orders issued or obtained at least in part by the Bureau) may elect to
comply with a one-time registration option in lieu of complying with
the rule's notification and written-statement requirements with respect
to that order.
Nonbank registrants will have to register with the Bureau starting
after an applicable implementation date for the registry specified in
the rule. Different implementation dates are specified for larger
participants, other supervised nonbanks, and other nonbanks not subject
to Bureau supervision. Details on how to register will be provided
through filing instructions.
II. Background
A. The Bureau and Other Agencies Take 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 has authorized multiple other Federal and State
agencies to enforce Federal consumer financial laws, 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\
Many State UDAP statutes contain rules of construction requiring State
courts to use interpretations of the FTC Act by the Federal courts and
the FTC as a guide to interpreting their State UDAP statutes.\5\ These
laws differ 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).
\5\ See, e.g., Ariz. Rev. Stat. Ann. sec. 44-1522(C) (courts
``may use as a guide'' FTC and Federal court interpretations of the
FTC Act); Fla. Stat. sec. 501.204(2) (expressing the intent of the
legislature that ``due consideration and great weight'' be given to
interpretations of the FTC Act when interpreting Florida's State
UDAP statute).
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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.\6\ Since passage of the
CFPA, the Bureau has brought nearly 350 enforcement actions against
nonbanks. When the Bureau issues an order against a covered person
(often, but not always, as a consent order), or brings an action in a
court of law that results in an 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
[[Page 56029]]
companies entered into with the Bureau voluntarily.\7\
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\6\ 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.'').
\7\ See, e.g., RMK Financial Corp. d/b/a Majestic Home Loan or
MHL, CFPB No. 2023-CFPB-0002 (Feb. 27, 2023); CFPB v. American
Advisors Group, No. 21-cv-01674-JLS-JDEx (C.D. Cal. Oct. 25, 2021);
Discover Bank, CFPB No. 2020-BCFP-0026 (Dec. 22, 2020); 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.\8\ 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.'' \9\
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\8\ See 12 U.S.C. 5511.
\9\ 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,'' \10\ 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.'' \11\ 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.'' \12\
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\10\ Id. (emphasis added).
\11\ 12 U.S.C. 5511(c).
\12\ 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.'' \13\ 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.'' \14\
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\13\ 12 U.S.C. 5512(c)(4)(A).
\14\ 12 U.S.C. 5512(c)(4)(B)(ii) (emphasis added).
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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''; \15\ ``understanding by consumers of the risks of
a type of consumer financial product or service''; \16\ ``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''; \17\ ``rates of growth in the
offering or provision of a consumer financial product or service'';
\18\ ``the extent, if any, to which the risks of a consumer financial
product or service may disproportionately affect traditionally
underserved consumers''; \19\ and ``the types, number, and other
pertinent characteristics of covered persons that offer or provide the
consumer financial product or service.'' \20\
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\15\ 12 U.S.C. 5512(c)(2)(A).
\16\ 12 U.S.C. 5512(c)(2)(B).
\17\ 12 U.S.C. 5512(c)(2)(C).
\18\ 12 U.S.C. 5512(c)(2)(D).
\19\ 12 U.S.C. 5512(c)(2)(E).
\20\ 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.'' \21\ 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].'' \22\ 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.'' \23\
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\21\ 12 U.S.C. 5512(c)(3).
\22\ 12 U.S.C. 5512(c)(3)(B).
\23\ 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.\24\ As
discussed in further detail below, this final 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
[[Page 56030]]
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 will 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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\24\ 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 broad collection of such public orders will 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 will 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 will
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 will collect are discussed further below at part IV.
Consistent with an approach suggested by commenters, the Bureau is
adopting a one-time registration option for nonbanks that are
identified by name as a party subject to an order that is published on
the Nationwide Multistate Licensing System (NMLS) Consumer Access
website, <a href="http://www.NMLSConsumerAccess.org">www.NMLSConsumerAccess.org</a> (except for orders issued or
obtained by the Bureau). Such nonbanks may choose to submit certain
information to the Bureau in lieu of complying with the other ongoing
requirements of the final rule with respect to the order. The
information provided to the Bureau in connection with such orders will
notify the Bureau about the nonbank and the relevant order and will
enable the Bureau to follow up with the NMLS's operator and any
applicable agency as appropriate.
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.\25\ 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.'' \26\ 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.\27\ In making
prioritization determinations, the Bureau considers several factors,
including ``the asset size of the covered person,'' \28\ ``the volume
of transactions involving consumer financial products or services in
which the covered person engages,'' \29\ ``the risks to consumers
created by the provision of such consumer financial products or
services,'' \30\ ``the extent to which such institutions are subject to
oversight by State authorities for consumer protection,'' \31\ and
``any other factors that the Bureau determines to be relevant to a
class of covered persons.'' \32\ 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.'' \33\
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\25\ 12 U.S.C. 5514.
\26\ 12 U.S.C. 5514(b)(1).
\27\ 12 U.S.C. 5514(b)(2).
\28\ 12 U.S.C. 5514(b)(2)(A).
\29\ 12 U.S.C. 5514(b)(2)(B).
\30\ 12 U.S.C. 5514(b)(2)(C).
\31\ 12 U.S.C. 5514(b)(2)(D).
\32\ 12 U.S.C. 5514(b)(2)(E).
\33\ 12 U.S.C. 5514(b)(7)(A)-(C).
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Under CFPA section 1024(b)(7)(A)-(C), the Bureau is requiring that
certain supervised nonbanks annually submit a written statement
regarding the company's compliance with any outstanding registered
orders. The statement must be signed by a designated senior executive.
In the written statement, the attesting executive must 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 must then provide an attestation
regarding the company's compliance with the order.
The required written statement will assist the Bureau in achieving
each of the statutory objectives listed in CFPA section 1024(b)(7)(A)-
(C). Therefore, each of those objectives provides a distinct,
independently sufficient basis for the final rule's written-statement
requirements.\34\
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\34\ For a more extended discussion of these matters, see part
IV(D) and the section-by-section discussion of Sec. 1092.204 below.
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First, requiring submission of an annual written statement will
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 annual written statement, including the
steps taken by the executive to review and oversee activity related to
the order, will provide the CFPB valuable information in understanding
how compliance is managed at the supervised entity. The requirement
will also provide valuable information in connection with other aspects
of the Bureau's supervisory work and will assist the Bureau's
monitoring efforts. For example, in 2022 the Bureau announced that it
was increasing its supervisory focus on repeat offenders, particularly
those which violate agency or court orders.\35\ 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
[[Page 56031]]
of repeat offenses.\36\ The Repeat Offender Unit is 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.\37\ The Bureau believes that the annual written
statement will greatly facilitate that work, among other things.
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\35\ 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>.
\36\ Id.
\37\ Id. at 3.
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Second, the final rule's written-statement requirements will 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
written-statement requirements will also 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 as intended by the Bureau
will enhance the incentive.
III. Legal Authority
The Bureau is issuing this final rule 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 final rule's
reliance on them, is also contained in part II above and part IV below
as well as 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.'' \38\ 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.\39\ Accordingly, in issuing the final rule, the Bureau
is 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).\40\ For a discussion of the
Bureau's standards for rulemaking under CFPA section 1022(b)(2), see
part VIII below.
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\38\ 12 U.S.C. 5512(b)(1).
\39\ See 12 U.S.C. 5481(14) (defining ``Federal consumer
financial law'' to include the provisions of title X of the Dodd-
Frank Act).
\40\ See 12 U.S.C. 5512(b)(2).
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B. CFPA Section 1022(c)(1)-(4) and (7)
The provisions of the final rule that (1) require nonbank covered
persons to inform the Bureau 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) authorize publication of this information, are
authorized under CFPA sections 1022(c)(1) through (4) and 1022(c)(7),
as well as CFPA section 1022(b).\41\
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\41\ 12 U.S.C. 5512(b), (c)(1)-(4), (c)(7).
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CFPA sections 1022(c)(1)-(4) authorize the Bureau 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 Bureau 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 Bureau considers violations of
consumer protection laws probative of ``risks to consumers in the
offering and provision of consumer financial products or services.''
\42\ In particular, the Bureau believes that entities subject to public
orders enforcing the law relating to the offering or provision of
consumer financial products and services may pose heightened and
ongoing risks to consumers in the markets for those products and
services. It further believes that monitoring for such orders will
allow the Bureau 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, will 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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\42\ 12 U.S.C. 5512(c)(1).
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More specifically, in order to support its rulemaking and other
functions, section 1022(c)(1) of the CFPA requires the Bureau to
monitor 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.\43\ As discussed further below at part
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.'' \44\ 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.'' \45\ 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.'' \46\ The Bureau
[[Page 56032]]
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.'' \47\
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\43\ 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.'').
\44\ 12 U.S.C. 5512(c)(2)(A)-(F).
\45\ 12 U.S.C. 5512(c)(4)(A).
\46\ 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.'').
\47\ 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.'' \48\ 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.'' \49\ 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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\48\ 12 U.S.C. 5512(c)(7)(A).
\49\ 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.\50\ 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].'' \51\ 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].'' \52\ The
Bureau's registry is designed to not collect any protected proprietary,
personal, or confidential consumer information, and thus, the Bureau
will not publish, or require public reporting of, any such information.
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\50\ See 12 U.S.C. 5512(c)(3).
\51\ 12 U.S.C. 5512(c)(3)(B).
\52\ 12 U.S.C. 5512(c)(8). In the remainder of this preamble,
the Bureau refers to information protected from disclosure under
CFPA section 1022(c)(8) as ``protected proprietary, personal, or
confidential consumer information.''
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See the introduction to the section-by-section analysis of Sec.
1092.202 for a discussion of certain comments received by the Bureau
about the discussion in the Bureau's proposed rule \53\ of the Bureau's
authorities under CFPA section 1022(b)(1)-(4) and (7).
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\53\ See 88 FR 6088 (Jan. 30, 2023). For further discussion of
the Bureau's proposed rule, see part V(C) below.
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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.\54\ 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.\55\ Section 1024(b)(2) requires that
the Bureau exercise its supervisory authority over nonbank covered
persons under section 1024(b)(1) based on its assessment of risks posed
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.'' \56\
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\54\ 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).
\55\ 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.''
\56\ 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.\57\ 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.'' \58\ As explained
below in the introduction to the section-by-section analysis of Sec.
1092.204, the Bureau interprets this section as authorizing it to
require nonbank covered persons subject to its supervisory authority to
``generate''--i.e., create \59\--reports regarding their activities and
then ``provide'' them to the Bureau.
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\57\ 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.'').
\58\ 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.'').
\59\ See Generate, Webster's Third New International Dictionary
(1981) (defining ``generate'' as ``to bring into existence'').
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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.'' \60\ The Bureau interprets this section as
authorizing it to prescribe substantive rules to ensure that supervised
entities are willing and able to comply with their legal, financial,
[[Page 56033]]
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.'' \61\ 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.'' \62\ Legitimate entities do not presume they will break the law
and 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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\60\ 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.'').
\61\ Obligation, Black's Law Dictionary (11th ed. 2019).
\62\ 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,
Webster's Third New International Dictionary (1981) (similar).
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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 final rule, 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.'' \63\
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\63\ 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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See the introduction to the section-by-section analysis of Sec.
1092.204 below for a discussion of certain comments received by the
Bureau about the proposal's discussion of the Bureau's authorities
under CFPA section 1024(b).
IV. Why the Bureau Is Issuing This Final Rule
A. Overview
The Bureau is issuing this final rule 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 Bureau's registry will 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 registry for collecting public orders
enforcing the law across different sectors of entity misconduct, the
final rule will 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 final rule 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 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 concludes that collecting information regarding
public agency and court orders enforcing the law will help it identify
broader trends related to risks to consumers in the offering and
provision of consumer financial products and services. For example,
collecting this information would inform the Bureau about enforcement
activity across geographic or product markets with respect to
particular consumer protection laws, increases and decreases over time
in such activity, and many other relevant matters. Notably, by studying
how laws are being enforced across consumer protection laws,
jurisdictions, and markets, the Bureau 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. Or such
enforcement activity might be an indication of appropriate attention by
other regulators, which might be an indication that applicable nonbanks
are subject to adequate oversight, or that risk to consumers in certain
areas may otherwise be reduced. 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 concludes 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).\64\
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\64\ 12 U.S.C. 5512(c).
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As described further below, the Bureau intends to make a registry
of these orders publicly available. The Bureau anticipates that
publishing such a registry will, among other things, allow other
regulators at the Federal, State, and local level tasked with
protecting consumers to realize many of the same market-monitoring
benefits that the Bureau anticipates obtaining from this rule.
Publication will also facilitate the ability of consumers to identify
the covered persons that are registered with the Bureau. In addition,
publication will enhance the ability of investors, research
organizations, firms conducting due diligence, and the media to locate,
review, and monitor orders enforcing the law.
The final rule also will assist the Bureau's 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
[[Page 56034]]
executive to submit the information required to be contained in the
written statement, will 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 will 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
whose duties include ensuring such compliance.\65\
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\65\ 12 U.S.C. 5514(b)(7)(C).
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General Comments Received
This section discusses certain general comments received by the
Bureau regarding the proposal.
Various industry, consumer advocate, and other commenters generally
agreed with the Bureau's statements in the proposal about the need for
a new Bureau registry for nonbank entities that are subject to the
Bureau's jurisdiction and that are subject to certain agency and court
orders. A consumer advocate commenter stated that the registry would be
immensely useful for the Bureau and other Federal and State regulators
alike, and agreed that the proposed registry would advance a wide
variety of statutory objectives, streamline regulatory processes, and
create efficiencies that will result in greater consumer protection. An
industry commenter stated that the proposed registry would help to
compile and track violations and provide a basis from which to initiate
risk-based supervision of nonbanks. Industry and consumer advocate
commenters stated that the proposed registry would appropriately
respond to a dearth of information about nonbank financial companies,
including their number and type and the practices they engage in.
Consumer advocate commenters stated that the proposal would, among
other things, help unify efforts across regulators, help regulators and
policymakers develop additional reforms to consumer protection, and
help prevent future financial crises.
Other commenters objected to the Bureau's proposal on various
grounds, as discussed elsewhere in this preamble. Among other things,
commenters stated the proposed registry would be duplicative of the
NMLS and overly burdensome for registered entities.
Industry commenters stated that the Bureau should either not
finalize the proposal, or should carefully consider not finalizing the
proposal, in light of the Fifth Circuit's decision in Consumer
Financial Protection Bureau (CFPB) v. Community Financial Services
Association of America \66\ and the U.S. Supreme Court's grant of the
petition for certiorari in that case.\67\
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\66\ See Cmty. Fin. Servs. Ass'n of Am., Ltd. v. CFPB, 51 F.4th
616 (5th Cir. 2022).
\67\ No. 22-448 (U.S. argued Oct. 3, 2023).
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A consumer advocate commenter stated that the Bureau should clarify
in the final rule the monetary penalties it will seek for each day of
non-compliance, and that these penalties should be large. In the
commenter's view, the failure to register as required under the final
rule also should be an aggravating factor when assessing monetary
penalties against the entity for other violations.
Response to General Comments Received
The Bureau agrees with commenters regarding the need for a new
Bureau registry for nonbank entities that are subject to the Bureau's
jurisdiction and that are subject to certain agency and court orders.
The final rule will establish a valuable Bureau registry that will
provide the Bureau and other users with important information regarding
such companies and the orders they are subject to. Comments objecting
to the proposal are addressed elsewhere in this preamble.
With respect to comments addressing the U.S. Court of Appeals for
the Fifth Circuit's decision regarding the constitutionality of the
Bureau's funding structure, the Supreme Court has reversed that
decision, holding that the Bureau's funding structure does not violate
the Appropriations Clause.\68\
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\68\ See CFPB v. Cmty. Fin. Servs. Ass'n of Am., Ltd., 601 U.S.
416 (2024).
---------------------------------------------------------------------------
The Bureau declines the consumer advocate commenter's suggestion to
establish special rules or remedies for violation of the rule. The
final rule is a Federal consumer financial law under the CFPA.\69\
Violation of the final rule would be an independent violation of
Federal consumer financial law subject to enforcement as provided in
the CFPA, and applicable remedies under law, including potential civil
money penalties.\70\
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\69\ See 12 U.S.C. 5481(14) (defining term ``Federal consumer
financial law'' as including ``any rule . . . prescribed by the
Bureau'' under the CFPA).
\70\ Violation of the final rule may also violate 12 U.S.C.
5536(a)(2), which provides that it shall be unlawful for ``any
covered person or service provider to fail or refuse, as required by
Federal consumer financial law, or any rule or order issued by the
Bureau thereunder--[] ] (A) to permit access to or copying of
records; [] ] (B) to establish or maintain records; or [] ] (C) to
make reports or provide information to the Bureau.''
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B. Why the Bureau Is Issuing a Rule To Monitor for Risks Associated
With Certain Agency and Court Orders
Requiring registration and submissions regarding certain agency and
court orders as provided in the final rule will 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 final rule'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 will
provide important support for a variety of Bureau functions.
---------------------------------------------------------------------------
\71\ 12 U.S.C. 5512(c).
---------------------------------------------------------------------------
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 important 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 registry
will 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 will be able to use this information to identify
areas of heightened consumer risk that warrant further attention, as
well as areas that are receiving adequate attention from other
regulators. 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. Over time,
the Bureau's collection and review of information under the final rule
will better enable the Bureau to evaluate, assess, and understand the
relationship between such matters and the consumer risk that is related
to covered orders. Thus, this information would help to inform and
prioritize the Bureau's other market-monitoring efforts, including
research regarding particular markets and the
[[Page 56035]]
risks to consumers presented in such markets.\73\
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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 will 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 will 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 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 will obtain under the final rule
will 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 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
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''). Part IV(D) and the section-by-section
discussion of Sec. 1092.204 below contain additional discussion of
how the final rule will 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. 5565(c)(3)(D), (E). The Bureau may consider
certain matters identified in orders collected under the final rule
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 final 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.
As discussed in part IV(E) below, under the final rule, nonbanks that
are subject to agency and court orders that are published on the NMLS
Consumer Access website will have an option to notify the Bureau and
provide information that will flag the relevant order and nonbank for
the Bureau's attention. Having access to targeted information regarding
relevant orders entered against nonbanks, whether such orders are
listed on the Bureau's own registry or available through the NMLS, will
significantly increase the Bureau's ability to monitor markets 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; these companies 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.
Collecting information about such public orders across markets and
agencies as provided in the final rule 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 registry established
in the final rule will 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 registry will 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 will be able to take account of
[[Page 56036]]
risks identified through the registry in conducting its risk-based
supervisory prioritization and enforcement work. The existence of an
order that would require registration under the final rule would be
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 final rule to be
a risk factor under these provisions for covered persons subject to the
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 existence of one or more orders that would require
registration under the final rule would be probative of such risks to
consumers because it indicates that an entity may not be willing or
able to ensure compliance with the law. 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 existence of one or more orders
issued or obtained by the types of State agencies described in the
final rule 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 final rule, the Bureau believes that the
existence of an order that would require registration under the final
rule would be a relevant factor under this statutory provision for the
Bureau to take into consideration when exercising its supervisory
authorities under CFPA section 1024. Thus, for the reasons described
above, the existence 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.
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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 final rule's 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 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 final rule 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 final rule will 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 the final rule will 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 unlawful conduct.
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\86\ 12 U.S.C. 5512(c)(2)(C).
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The Bureau also considered ``rates of growth in the offering or
provision of a consumer financial product or service.'' \87\ Commenters
expressed concern about a dearth of information regarding nonbank
financial companies and stated that nonbanks may be obtaining an
increased market share in certain markets for consumer financial
products and services. The Bureau likewise believes that at least in
certain markets, there has been rapid growth in consumer offerings by
nonbanks. The Bureau intends to use the information obtained under the
final rule in assessing and monitoring the rates of such growth and any
associated risks, as evidenced by information regarding relevant
consumer protection orders issued against nonbanks.
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\87\ 12 U.S.C. 5512(c)(2)(D).
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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.'' \88\ 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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\88\ 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.'' \89\ For the reasons
discussed, law violator status--and especially repeat law violator
status--is a highly pertinent characteristic. The Bureau believes that
risks to consumers posed by law violators warrant market monitoring. In
particular, it will 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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\89\ 12 U.S.C. 5512(c)(2)(F).
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As discussed further below in part IV(E), the Bureau is adopting a
modification to the proposed rule in order to provide an option for
one-time registration of orders published on the NMLS Consumer Access
website (except for orders issued or obtained by
[[Page 56037]]
the Bureau). The Bureau will be notified regarding such orders and the
nonbank entities that are subject to them, and, using the information
provided by the nonbank via the registry, will be able to obtain
additional information from applicable Federal, State, and local
authorities, including through the NMLS. Thus, the Bureau will have
access to a comprehensive collection of relevant orders and entities,
accessible either through the Bureau's registry or via the Bureau's
existing access to NMLS and its ability to reach out to other agencies.
The Bureau has concluded that alternative means of collecting the
information subject to the final rule would be inadequate.\90\ For
example, the Bureau considered 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).\91\
However, the Bureau concludes this alternative would be inadequate.
There is no existing comprehensive list of covered persons subject to
Bureau regulation, 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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\90\ For additional discussion of comments received in
connection with other alternative means of collecting this
information, see the section-by-section discussion of Sec. Sec.
1092.202(b) and 1092.203(a) below.
\91\ 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. However, there is no existing comprehensive list of
nonbank entities subject to Bureau supervision, so the Bureau would be
unable to issue a standing order to such entities to produce such
information. Moreover, the Bureau has concluded that collecting
information from a wider range of covered persons, including those that
are not subject to the Bureau's supervisory and examination authority,
is appropriate to achieve its market-monitoring objectives.
C. Why the Bureau Has Identified Orders Issued Under the Types of Laws
Described in the Proposal as Posing Particular Risk
The final rule prescribes registration requirements with reference
to certain types of ``covered laws'' that served as the basis for an
applicable order. As discussed herein, the Bureau concludes 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.\92\
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\92\ See also the discussion of the definition of the term
``covered law'' in the section-by-section discussion of Sec.
1092.201(c) below.
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First, the Bureau is requiring 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 requiring 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).\93\ The Bureau concludes that the 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 concludes
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 \94\ or the Truth in Lending Act,\95\ among other
Federal consumer
[[Page 56038]]
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) will further the Bureau's objective of creating a
cross-market registry that could serve as a 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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\93\ See, e.g., 10 U.S.C. 987(f)(6) (authorizing Bureau
enforcement of the Military Lending Act). As the Bureau has
explained in an 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 rulemaking, however, the Bureau does not need to
rely on the authority described in that interpretive rule. Instead,
to the extent that the final rule would collect information
regarding orders issued under laws described in 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.
\94\ 15 U.S.C. 5531, 5536(a)(1)(B).
\95\ 15 U.S.C. 1601 et seq.
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Third, the Bureau is requiring 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 the 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 heightened risks to consumers in financial markets. For
one thing, the conduct resulting in the order may 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.'' \96\ 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.'' \97\ Congress modeled the CFPA's prohibition of unfair or
deceptive acts or practices after the similar prohibition in section 5
of the FTC Act.\98\ Therefore, violations of FTC Act section 5 in
connection with the provision or offering of a consumer financial
product or service are highly probative of a heightened risk that UDAAP
violations subject to the Bureau's jurisdiction have occurred or are
occurring.
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\96\ 12 U.S.C. 5531(a).
\97\ 12 U.S.C. 5536(a)(1)(B).
\98\ 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 concludes 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 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 is requiring registration in connection with
orders issued under State laws prohibiting unfair, deceptive, or
abusive acts or practices that are identified in appendix A to 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.\99\ 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).\100\ 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.\101\
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\99\ The Bureau is adopting a final version of appendix A to
part 1092 with certain changes to the version in the proposal. For a
discussion of these changes to the proposal, see the section-by-
section discussion of Sec. 1092.201(c) below.
\100\ 15 U.S.C. 45; 12 U.S.C. 5531. See 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.''); see also Cal. Fin. Code sec. 90009(c)(3)
(providing that ``the term `abusive' shall be interpreted consistent
with Title X of the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010''); Michael Greenfield, Unfairness Under
Section 5 of the FTC Act and Its Impact on State Law, 46 Wayne L.
Rev. 1869, 1899 (2000) (noting that ``the state statutes actually
were drafted and promoted by the Federal Trade Commission, which,
one supposes, had a special interest in uniform, nationwide
interpretation of the standards'').
\101\ 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.\102\
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\102\ For discussion of the final rule'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 Sec. 1092.201(c) below.
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[[Page 56039]]
D. Why the Bureau Is Requiring Supervised Nonbanks To Designate
Attesting Executives and Submit Written Statements
The final rule will also require certain entities 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 will be required to (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 final rule further requires 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 intends to publish the name and title of that
executive in the public registry.
The Bureau concludes these requirements will serve two sets of
distinct purposes relating to its exercise of its supervisory and
examination authorities under CFPA section 1024.
First, the Bureau concludes the final rule's requirements that
certain supervised entities (which are referred to in the rule as
``supervised registered entities'') designate attesting executives and
provide written statements will 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.\103\ 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 regarding either compliance or noncompliance with such an
order will provide the Bureau with important additional information
regarding risks to consumers that may be associated with the order and
the applicable supervised registered entity's compliance systems and
procedures. Covered 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. 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 will 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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\103\ 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 required written statements) and then
``provide'' them to the Bureau.
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As a result, the final rule's written statements will be
particularly relevant when prioritizing the Bureau's supervisory
activities under CFPA section 1024(b). As discussed above at part
III(C) and below in the section-by-section discussion of Sec.
1092.204, CFPA section 1024(b)(2) requires that the Bureau exercise its
authority under CFPA section 1024(b)(1) 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.\104\ For the reasons discussed above, the final rule's written
statements will 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.'' \105\
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\104\ 12 U.S.C. 5514(a), (b)(2).
\105\ 12 U.S.C. 5514(b)(2)(C)-(D). See additional discussion of
the factors for risk-based supervisory prioritization in part IV(B)
above.
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The final rule's written-statement requirements also will 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.\106\ Assessing whether entities have
adequate compliance management systems in place is a long-standing and
standard component of the Bureau's examination process, and that
assessment depends in part on understanding with whom certain
responsibilities lie and how a compliance program is carried out.\107\
The Bureau concludes a supervised nonbank's written statements as
required under the proposal will provide important information relevant
[[Page 56040]]
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. Conversely, written statements indicating that the
entity had not identified any instances of noncompliance with a
relevant order would also provide the Bureau with similarly useful
information about the entity's efforts to comply with such orders and
the entity's compliance systems and procedures related to the entity's
offering and provision of consumer financial products and services.
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.\108\
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\106\ 12 U.S.C. 5514(b)(1).
\107\ See CFPB Supervision and Examination Manual at CMR 1 (``To
maintain legal compliance, an institution must develop and maintain
a sound compliance management system . . . that is integrated into
the overall framework for product design, delivery, and
administration across their entire product and service
lifecycle.'').
\108\ As explained below in the section-by-section discussion of
Sec. 1092.204(e), the Bureau is requiring 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 final rule's written-statement requirements will help
ensure that supervised registered entities ``are legitimate entities
and are able to perform their obligations to consumers.'' \109\ As
discussed in part VIII 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.\110\
The final rule's written-statement requirements will 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 concludes that the written-
statement requirement will 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 final rule's 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 will likely
provide an incentive to pay more attention to the entity's legal
obligations.
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\109\ 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.
\110\ As explained above, in several cases, the Bureau has found
that entities have violated prior orders that the Bureau has issued
or obtained. See supra note 7.
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To be clear, the final rule does 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 does the final rule establish any minimum level of
compliance management or expectation for compliance systems and
procedures at such entities, or purport to impose any restrictions on
the manner in which supervised registered entities address such
matters. 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 will require supervised registered
entities to identify, on an annual basis, a high-level executive with
knowledge and responsibility regarding an entity's efforts to comply
with a covered order, which will facilitate any Bureau supervisory
efforts related to the order or the matters addressed therein.
The Bureau is finalizing its preliminary findings that requiring
certain supervised nonbanks to designate attesting executives and to
submit 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.
E. Why the Bureau Is Adopting an Option for One-Time Registration of
Orders Published on the NMLS Consumer Access Website
The Bureau received multiple comments on the proposal stating that
the proposed registry was redundant with existing registries and other
published information, and in particular with the NMLS. See the
section-by-section analysis of Sec. 1092.203 below for a discussion of
these comments and the Bureau's response. Some consulting parties
expressed similar concerns during the Bureau's interagency consultation
process, as discussed in part V below. In light of those comments and
concerns, the Bureau is adopting a one-time registration option for
orders that are published on the NMLS Consumer Access website, which
may be exercised at the election of the covered nonbank. Nonbanks that
exercise this option may submit a one-time registration regarding
certain agency and court orders that are published on the NMLS Consumer
Access website maintained at <a href="http://www.NMLSConsumerAccess.org">www.NMLSConsumerAccess.org</a> (except for
orders issued or obtained by the Bureau), in lieu of complying with
other requirements of the rule with respect to the order. Such nonbanks
will be required to submit certain limited information to the Bureau's
nonbank registry regarding the order to enable the Bureau to identify
the relevant nonbank and order and otherwise coordinate the nonbank
registry with the NMLS. Upon exercising this option and submitting the
required information about the relevant order, a nonbank will have no
further obligation under subpart B to provide information to, or update
information provided to, the Bureau's nonbank registry regarding the
order.
The one-time registration option established in the final rule will
ensure that the Bureau is informed regarding risks to consumers in the
offering or provision of consumer financial products and services,
including developments in markets for such
[[Page 56041]]
products and services, in a manner that promotes coordination and
cooperation with the States while reducing potential burden on the
companies that are required to register. This option is not available
for orders that are issued or obtained at least in part by the Bureau
itself.
The one-time registration option is consistent with Sec.
1092.102(b), which provides that in administering the nonbank registry,
the Bureau may rely on information a person previously submitted to the
nonbank registry under part 1092 and may coordinate or combine systems
in consultation 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. As Sec. 1092.102(b) makes clear, the
Bureau may develop or rely on such systems as part of maintaining the
nonbank registry and may also rely on previously submitted information.
F. Why the Bureau Intends To Publish Certain Information Collected
Under the Registration Requirements
The Bureau intends to publish a registry that contains certain
information about nonbanks and orders collected under the rule.
However, the Bureau is reserving the option not to publish information
based on operational considerations, such as resource constraints.\111\
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\111\ For additional discussion regarding the Bureau's
discretion not to publish information under Sec. 1092.205(a), see
the section-by-section discussion of that provision below.
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While the orders subject to the rule will already be public,
information about the orders may not be readily accessible in a
comprehensive and collected manner, and some of the information
submitted to the registry may not be readily available to the public.
The Bureau intends to publish this information because it believes
publication will 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.\112\ 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,'' \113\ 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.'' \114\ As discussed further in the
section-by-section discussion of Sec. 1092.205(a) below, the Bureau
finds that, except under certain circumstances, it will be in the
public interest to publish certain information collected by the nonbank
registry.
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\112\ See also the discussion of these issues in the section-by-
section discussion of Sec. 1092.205 below.
\113\ 12 U.S.C. 5512(c)(3)(B).
\114\ 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 final rule
will address that issue by creating a registry of orders that relate to
offering or providing consumer financial products or services and the
nonbanks that are subject to them. The registry will enable users of
the nonbank registry to become better informed about those orders and
nonbanks and promote transparency in the markets for consumer financial
products and services.
The Bureau recognizes that much public information about such
orders already exists. In particular, some information is available to
potential users through the NMLS Consumer Access website, which is
owned and operated by the State Regulatory Registry LLC, which is a
wholly owned subsidiary of the Conference of State Bank Supervisors. In
addition, 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 or other multiagency websites. And still other information is
published and maintained by private actors.
As discussed in part IV(E) above and in the section-by-section
discussion of Sec. 1092.203 below, the Bureau is adopting a one-time
registration option with respect to orders that are published on the
NMLS Consumer Access website, <a href="http://www.NMLSConsumerAccess.org">www.NMLSConsumerAccess.org</a> (except for
orders issued or obtained by the Bureau). This option will reduce
burden on eligible entities that are subject to the rule, help avoid
confusion, and promote coordination with the States in exercising the
Bureau's nonbank registration authorities by leveraging information
already gathered and published by the States. The Bureau intends to
publish certain limited information collected under this one-time
registration option for the purposes of informing users of the registry
of particular orders published on the NMLS Consumer Access website and
the applicable nonbanks subject to them. The Bureau's registry will
alert users of the NMLS that orders have been issued against nonbanks
subject to the Bureau's jurisdiction in connection with the offering or
provision of consumer financial products or services. Where an order
has been registered with the Bureau's registry under the option
discussed in part IV(E) above, users may also refer to the NMLS for
additional information about that order, to the extent consistent with
any terms of use or other conditions of access that the NMLS's operator
may impose.
The Bureau is authorizing the establishment of its own public
registry in order to provide access to a new centralized and publicly
available database containing information about applicable nonbanks and
the orders to which they are subject, specifically in connection with
the offering and provision of consumer financial products and services.
While certain State regulators provide information about certain public
enforcement actions through the NMLS, including in some cases
publishing related orders on the NMLS Consumer Access website, such
information does not extend to all of the orders and all of the
agencies that are addressed by the final rule, including orders issued
by Federal agencies. It is also limited to only certain industry
sectors. Therefore, 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
registry at the Federal or State level for the collection
[[Page 56042]]
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. The Bureau believes that consumers would benefit from a
registry that is maintained by the Federal Government for the purpose
of providing information regarding such orders.
The Bureau believes that there will be significant value in
creating a public repository of information related to public agency
and court orders that impose obligations based on violations of
consumer protection laws, and the nonbanks under the Bureau's
jurisdiction that are subject to them.\115\ 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 will 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 will 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 can use a public 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. A public registry
will also provide potential investors, contractual partners, financial
firms, and others that are conducting due diligence on a registered
nonbank a consolidated source of information regarding public orders.
Establishing a source for public data on entity lawbreaking and
recidivism will 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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\115\ See also the discussion of these issues in the section-by-
section discussions of Sec. Sec. 1092.202(b) and 1092.205(a) below.
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Government agencies--including, but not limited to, the Bureau--
will also benefit from the public registry. While the orders that the
Bureau intends to publish under the rule will 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 can use the published information
to better identify registered nonbanks and determine their legal
structure and organization, since the registry will (subject to the
option for NMLS-published covered orders) require registered nonbanks
to submit and maintain up-to-date identifying information, including
legal name and principal place of business. Also, 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 Bureau's 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 public
Bureau 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.\116\
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\116\ As described in part V below, certain consulting parties
confirmed to the Bureau during the interagency consultation process
that they would find the registry useful in conducting their own
operations, while certain other consulting parties stated that they
would not.
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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 likely 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 registry with Federal Government standards calling
for publishing information online as open data.\117\
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\117\ See, e.g., Open, Public, Electronic, and Necessary
Government Data Act, in title II of Public Law 115-435 (Jan. 14,
2019).
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Consumers may also benefit from the collection and publication of
the information collected by the registry, including information about
orders that are already public. At least in certain cases, publishing
information about the entity and its applicable orders in a public
registry as intended by the Bureau will potentially help certain
consumers make informed decisions regarding their choice of consumer
financial products or services. As discussed at part VIII below, the
Bureau does not necessarily expect a wide group of consumers to rely
routinely on the Bureau's registry when selecting consumer financial
products or services. However, the Bureau believes that the registry
will 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 can use the registry to report which entities have the most
government orders enforcing the law against them, which would inform
consumers about such repeat offenders.
Publication of the registry as intended by the Bureau will 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. Such
publication will 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
[[Page 56043]]
regarding how to assert their legal rights. And availability of this
information could lead consumers and other persons to report to the
Bureau instances of similar conduct for the Bureau to investigate.
Under the final rule, the Bureau will not publish the written
statement submitted by a supervised registered entity but will 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 intend to
publish the name and title of the attesting executive(s) submitted by
the supervised registered entity. The Bureau intends to disclose this
name and title information because it concludes that, except as
described in the section-by-section discussion of Sec. 1092.205 below,
publication of this information will be in the public interest. In
particular, it will help ensure accountability at the entity for
noncompliance. The Bureau concludes that the publication of the
executive's name and title will provide an incentive to pay more
attention to covered orders. The Bureau believes that designating an
attesting executive will prompt that executive to focus greater
attention on ensuring the entity's compliance with a covered order, and
in turn increase the likelihood of compliance. Publication of this
designation as intended by the Bureau will increase the likelihood of
these effects. Such publication of the designation will identify for
other regulators (and the general public) the highest-ranking executive
at the supervised registered entity who has control over the entity's
efforts to comply with the covered order and otherwise satisfies the
rule's designation requirements. 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 part IV(D).
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, as intended by the Bureau, will benefit users of the
registry in other ways. For example, publishing this information may
help certain consumers better understand and monitor the conduct of the
entities with whom they do business, including how the company assigns
responsibility for compliance with Federal consumer financial law.
Researchers, media, and other users of the information may be able to
detect trends or patterns associated with such information. Publication
as intended by the Bureau may also help whistleblowers and consumers
better understand the operations and structure of the supervised
entity, such as to which department or division of the company to
direct whistleblowing complaints, information about violations, or
requests for information with respect to the covered order in order to
ensure that their complaint, information, or request is being sent to
the appropriate part of the organization. Clients or other companies
that do business with the entity will also have a better understanding
of which areas of the company are affected by a covered order and who
is responsible for compliance with it.
Publishing such name and title information will also facilitate
coordination and communication regarding the order between the Bureau,
other government agencies, and the nonbank entity. Other regulators,
especially those that have issued orders regarding the supervised
entity, would likely benefit from understanding which executive(s) have
been tasked with ensuring compliance with their orders. And disclosure
of this information would increase transparency regarding how the
Bureau processes and verifies information submitted as part of the
registry.
V. Summary of Rulemaking Process
A. Consultation With Other Agencies in Exercising the Authorities
Relied Upon in the Proposal and Final Rule
One of the authorities cited as a basis for components of the
Bureau's proposed rule and final 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.''
\118\ 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.'' \119\ CFPA section 1024(b)(7)--the statutory basis for
the written-statement requirement--includes a similar consultation
provision.\120\
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\118\ 12 U.S.C. 5512(c)(7)(A).
\119\ 12 U.S.C. 5512(c)(7)(C).
\120\ 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 proposal's and
final rule's registration requirements and system. In developing the
proposal and this final rule, 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), and
during the applicable comment process, the Bureau must consult with
appropriate prudential regulators or other Federal agencies regarding
consistency with prudential, market, or systemic objectives
administered by such agencies.\121\ In developing the proposal and this
final rule, the Bureau consulted with prudential regulators and other
Federal agencies and considered the input it received.
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\121\ 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).\122\ In addition, the Bureau consulted with tribal
governments in accordance with applicable Bureau policy.\123\ In
developing this final rule, the Bureau considered the input of Tribal
governments, including concerns tribal governments expressed regarding
maintaining Tribal sovereignty.
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\122\ 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)).
\123\ 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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Each of the Bureau's outreach efforts is discussed in turn below.
B. Pre-Proposal Outreach
The Bureau received feedback from external stakeholders in
developing the
[[Page 56044]]
notice of proposed rulemaking. The following is a summary of that
effort.
1. State Agencies and Tribal Governments
As required by CFPA sections 1022(c)(7) and 1024(b)(7),\124\ the
Bureau consulted with State agencies and Tribal governments, including
agencies involved in supervision of nonbanks and agencies charged with
law enforcement, in crafting the proposed registration requirements and
registry. Among other meetings, the Bureau's consultation efforts
included presentations to State and Tribal governments on October 13,
October 20, October 27, November 3, November 10, November 17, and
November 21, 2022, explaining proposals then under consideration and
requesting feedback. In addition, on October 31, 2022, Bureau staff met
with State financial regulators and staff of the Conference of State
Bank Supervisors to discuss technical questions to better understand
whether and how the Bureau could combine or coordinate its proposed
registry with the NMLS.\125\ In developing its proposed rule, the
Bureau considered the input it received from State agencies and Tribal
governments. This input included concerns State agencies expressed
regarding possible duplication between any registration system the
Bureau might build and existing registration systems. This input also
included concerns Tribal governments expressed regarding maintaining
Tribal sovereignty.
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\124\ 12 U.S.C. 5512(c)(7)(C); 12 U.S.C. 5514(b)(7)(D).
\125\ In addition to the listed meetings, the Bureau
participated in other meetings with one or more representatives of
State financial regulators regarding the Bureau's proposed registry,
including meetings in August and September 2022.
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2. Federal Regulators
Before proposing a rule under the Federal consumer financial laws,
including CFPA sections 1022(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.\126\ In developing this proposal, the
Bureau consulted with prudential regulators and other Federal agencies
and considered the input it received.
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\126\ 12 U.S.C. 5512(b)(2)(B).
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C. Notice of Proposed Rulemaking
On December 12, 2022, the Bureau issued its proposed rule to
establish a public registration system for nonbank covered persons
subject to certain agency and court orders. The proposal was published
in the Federal Register on January 30, 2023, and the public comment
period closed on March 31, 2023.\127\ The Bureau received more than 60
comments on the proposal during the comment period. Commenters included
individual consumers, consumer advocate commenters, tribes, the U.S.
Small Business Administration Office of Advocacy (SBA Office of
Advocacy), industry, and others, including a joint comment letter from
State regulators.
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\127\ 88 FR 6088 (Jan. 30, 2023).
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In addition, the Bureau also received three ex parte
communications, one from a journalist commenter, one from a consumer
advocate commenter, and another from an industry commenter.\128\
Summaries of those ex parte communications are available on the public
docket for this rulemaking.\129\ The Bureau also received a joint
comment letter from Members of Congress related to the proposed rule,
which is also available on the public docket.
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\128\ See CFPB, Policy on Ex Parte Presentations in Rulemaking
Proceedings, 82 FR 18687 (Apr. 21, 2017).
\129\ See <a href="https://www.regulations.gov/docket/CFPB-2022-0080">https://www.regulations.gov/docket/CFPB-2022-0080</a>.
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Relevant information received via comment letters, as well as ex
parte submissions, is discussed above in part IV, as well as the
section-by-section analysis and subsequent parts of this document, as
applicable. The Bureau considered all comments it received regarding
the proposal, made certain modifications, and is adopting the final
rule set forth herein. Comments regarding the Bureau's impact analyses
are discussed in parts VIII and IX below.
D. Further Outreach
Before finalizing a proposed rule under the Federal consumer
financial laws, including CFPA sections 1022(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.\130\ In developing this final
rule, the Bureau consulted with prudential regulators and other Federal
agencies and considered the input it received.
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\130\ 12 U.S.C. 5512(b)(2)(B).
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As required by CFPA sections 1022(c)(7) and 1024(b)(7),\131\ the
Bureau also consulted with State agencies and Tribal governments,
including agencies involved in supervision of nonbanks and agencies
charged with law enforcement, in crafting the registration requirements
and system.\132\ Among other meetings, the Bureau's consultation
efforts included presentations to State agencies and Tribal governments
on February 21, 22, and 23, 2024, explaining proposals then under
consideration and requesting feedback, as well as a meeting between
representatives of the Bureau and State agencies on April 18, 2024. In
developing the final rule, the Bureau considered the public comments it
received from tribes and via a joint comment letter from State
regulators, as well as the input it received from State agencies and
Tribal governments during the consultation process.
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\131\ 12 U.S.C. 5512(c)(7)(C); 12 U.S.C. 5514(b)(7)(D).
\132\ As explained above, during the rulemaking process for
issuing rules under the Federal consumer financial laws, Bureau
policy is to consult with appropriate Tribal governments. See
<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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In interagency consultations, several consulting parties reasserted
issues that had been raised in the comment letters. Those comments are
addressed elsewhere in the applicable sections of this preamble.
Consistent with an approach suggested by commenters, including in a
joint comment letter submitted by a group of State regulators, the
Bureau is adopting a one-time registration option for nonbanks to
submit certain information about orders published on the NMLS Consumer
Access website (except for orders issued or obtained by the Bureau), in
lieu of complying with the other requirements of the rule with respect
to such orders.\133\
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\133\ See part IV(E) and the section-by-section discussion of
Sec. 1092.203 below.
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Consulting partners also raised certain additional issues that the
Bureau addresses in this section. During consultation, some consulting
parties expressed concerns with aspects of the final rule and stated
that they would not use the information collected by the Bureau and
potentially published as provided in the rule.\134\ However, other
consulting parties expressed general support for the Bureau's adoption
of the final rule, and confirmed to the Bureau during the interagency
consultation process that they would find the registry useful in
conducting their own operations.
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\134\ For further discussion regarding the final rule's approach
to authorizing publication of registry information by the Bureau,
including the ability of other agencies to use such information, see
part IV(F) and the section-by-section discussion of Sec. 1092.205
below.
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The Bureau satisfied all applicable statutory requirements with
respect to interagency consultations, including CFPA sections
1022(c)(7) and
[[Page 56045]]
1024(b)(7). As described in this section, the Bureau engaged in oral
and written discussions with State regulators as it developed the
proposal, during the notice-and-comment process, and before finalizing
the rule. Throughout the consultation process, it has solicited the
views of State regulators regarding the combination and coordination of
systems as well as other matters relating to both the proposal and the
final rule. Some consulting parties sought further engagement with the
Bureau on aspects of the rulemaking, which the Bureau granted.
The Bureau also offered the States an opportunity to give specific,
concrete feedback on the proposed registry, including providing
feedback regarding how that system might be combined or further
coordinated with other registration systems, as contemplated by CFPA
sections 1022(c)(7)(C) and 1024(b)(7)(D).
Certain consulting parties raised questions about the one-time
registration option for NMLS-published covered orders in Sec.
1092.203, stating that any final rule should strike reporting and
registration requirements for any violations of State consumer
financial laws, rules, and agency orders. As discussed in part IV(E)
above and the section-by-section discussion of Sec. 1092.203 below,
the Bureau concluded that the option provided under Sec. 1092.203 is
an appropriate means of furthering the purposes of the final rule,
including the final rule's provisions restricting the availability of
that option to ``NMLS-published covered orders'' as that term is
defined at Sec. 1092.201(k). For discussion of the application of the
final rule to State laws and orders, see the section-by-section
discussions of Sec. 1092.201(c) and (d) below.
Certain consulting parties urged the Bureau to exempt from its rule
any nonbank entity meeting the Small Business Administration's
definition of ``small business'' because, in the consulting parties'
view, the rule would be overly expansive and particularly burdensome
for small nonbank entities not subject to Bureau supervision. As
explained in parts VIII and IX below, however, the Bureau has
determined that the rule will not impose significant burdens on a
substantial number of small entities. The Bureau thus declines to
exempt all small businesses from the rule's requirements. As explained
below, however, entities with less than $5 million in annual receipts
resulting from offering or providing all consumer financial products
and services described in CFPA section 1024(a) \135\ are not subject to
the requirements imposed in Sec. 1092.204 of the rule.
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\135\ 12 U.S.C. 5514(a).
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One consulting party asserted that the final rule's treatment of
Tribal instrumentalities or entities wholly owned by tribes was
inconsistent with the treatment proposed by the Bureau in its 2023
proposed rule regarding registration of nonbanks that use certain terms
and conditions.\136\ The Bureau disagrees with the consulting party's
characterization of its other proposal. The present final rule does not
adopt a different or narrower approach to issues related to tribally
affiliated entities than the Bureau proposed in its other proposed
rule. That proposed rule, like the present final rule, did not propose
to exempt entities that are not part of the tribe itself from its
proposed registration requirements. As discussed further in the
section-by-section discussion of Sec. 1092.201(d) below, the Bureau
declines to provide an express exemption from the final rule for Tribal
instrumentalities or entities wholly owned by tribes because the Bureau
does not choose to use this rulemaking as the vehicle for determining
the circumstances under which tribally affiliated entities qualify as
part of the tribe itself. As discussed in the section-by-section
discussion of Sec. Sec. 1092.202(g) and 1092.204(f) below, the Bureau
believes that the voluntary good-faith filing option established in
those sections of the final rule provides a satisfactory mechanism for
tribally affiliated entities to avoid the risk of an enforcement action
where they decide not to register an order or submit a written
statement based on a good-faith belief that they are not a covered
nonbank or a supervised registered entity, such as on the grounds that
they qualify as part of a federally recognized tribe and thus as a
``State.''
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\136\ See Registry of Supervised Nonbanks That Use Form
Contracts To Impose Terms and Conditions That Seek To Waive or Limit
Consumer Legal Protections, 88 FR 6906, 6937-38 (Feb. 1, 2023).
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Consulting parties also expressed concerns, including
confidentiality and privacy concerns, regarding the notifications of
non-registration provided for in Sec. Sec. 1092.202(g) and 1092.204(f)
of the final rule. As discussed in the section-by-section discussion of
those sections below, the option to file notifications of non-
registration under these provisions is voluntary and does not impose
any mandatory process or other obligation on tribes or any other
persons. Nor would a decision not to file a voluntary good-faith
notification change or enlarge the coverage of the rule. Certain
consulting parties stated that the Bureau should adopt a more informal
mechanism for submitting such notifications, such as via electronic
mail or regular mail to a designated Bureau representative. The Bureau
does not believe that eliminating the voluntary option to file
notifications of non-registration via the nonbank registry under
Sec. Sec. 1092.202(g) and 1092.204(f), or soliciting separate
communications from persons that may wish to notify the Bureau of the
type of information that would be submitted to the Bureau under those
sections of the final rule, would improve the confidentiality or
privacy of those communications. Nor would such an informal approach
enhance the efficiency or effectiveness of the nonbank registry.
Instead, such an approach would add complexity to the process of
notifying the Bureau about issues relevant to the registry and thus
deter the submission of relevant information to the Bureau. The Bureau
concludes that a system-based approach to such matters will be more
efficient and effective in accomplishing the purposes of the final
rule. Nor is it clear that it would be less burdensome for either a
tribe or the Bureau to engage in such informal and ad hoc
communications than it would be for the tribe to submit a succinct
electronic notification of non-registration under Sec. Sec.
1092.202(g) and 1092.204(f) via the nonbank registry.
A consulting party stated that the Bureau should specify whether or
not, in what level of detail, and how the Bureau intends to make
registry information publicly available. For discussions addressing
these matters, see part IV(F) and the section-by-section discussion of
Sec. 1092.205(a) regarding the information the Bureau intends to
publish under Sec. 1092.205(a) of the final rule.
See the section-by-section discussion of Sec. Sec. 1092.201(d),
1092.202(g), and 1092.204(f) below for additional discussion of issues
related to tribes and the notifications of non-registration provided
for in the final rule.
VI. Section-by-Section Analysis
Part 1092
Subpart A--General
Section 1092.100 Authority and Purpose
Proposed Rule
Proposed Sec. 1092.100(a) would have set forth the legal authority
for proposed 12 CFR part 1092, including all subparts. Proposed Sec.
1092.100 would have referred to CFPA sections 1022(b)
[[Page 56046]]
and (c) and 1024(b),\137\ which were discussed in section III of the
proposal.
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\137\ 12 U.S.C. 5512(b), (c); 12 U.S.C. 5514(b).
---------------------------------------------------------------------------
Proposed Sec. 1092.100(b) would have explained that the purpose of
part 1092 is to prescribe rules regarding nonbank registration
requirements, to prescribe rules concerning the collection of
information from registered entities, and to provide for public release
of that information as appropriate.
Comments Received and Final Rule
The Bureau solicited comment on proposed Sec. 1092.100 and did not
receive any comments specifically regarding proposed Sec. 1092.100.
See part III above for a general discussion of several CFPA provisions
on which the Bureau relies in this rulemaking. The Bureau is finalizing
Sec. 1092.100 as proposed, with minor technical changes.
Section 1092.101 General Definitions
Section 1092.101(a)
Proposed Sec. 1092.101(a) would have defined 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. The Bureau solicited comment on this proposed provision and
received no comments. The Bureau is finalizing Sec. 1092.101(a) as
proposed.
Section 1092.101(b)
Proposed Sec. 1092.101(b) would have defined the term ``Bureau''
as a reference to the Consumer Financial Protection Bureau. The Bureau
solicited comment on this proposed definition and received no comments
on this proposed definition. The Bureau is finalizing Sec. 1092.101(b)
as proposed.
Section 1092.101(c)
Proposed Sec. 1092.101(c) would have clarified that the terms
``include,'' ``includes,'' and ``including'' throughout part 1092 would
denote non-exhaustive examples covered by the relevant provision.\138\
The Bureau solicited comment on proposed Sec. 1092.101(c). No
commenters addressed proposed Sec. 1092.101(c). The Bureau is
finalizing Sec. 1092.101(c) as proposed. As used in the final rule,
these terms should not be construed more restrictively than the
ordinary usage of such terms so as to exclude any other thing not
referred to or described.\139\
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\138\ 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'').
\139\ See 12 U.S.C. 5301(18)(A) (similarly defining the term
``including'' for purposes of the Dodd-Frank Act by reference to 12
U.S.C. 1813).
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Section 1092.101(d)
Proposed Sec. 1092.101(d) would have defined 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. The Bureau solicited comment on this proposed definition and
received no comments on the proposed definition.
The Bureau is finalizing Sec. 1092.101(d) as proposed, with minor
revisions to change this term to ``nonbank registry,'' which as adopted
in the final rule means ``the Bureau's electronic registry identified
and maintained by the Bureau for the purposes of part 1092.'' The
Bureau is adopting the revised definition for stylistic reasons, with
no change in meaning from the term ``nonbank registration system'' that
was used in the proposed rule. The Bureau is also adopting
corresponding changes to the proposed rule to use the term ``nonbank
registry'' instead of the term ``nonbank registration system''
throughout the final rule, including at Sec. Sec. 1092.102(a) through
(c); 1092.201(a); 1092.202(b), (c), (f), (g); 1092.204(d), (f); and
1092.205(a), (c) of the final rule.
Section 1092.101(e)
Proposed Sec. 1092.101(e) would have defined 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 nonbank registration (NBR)
system in connection with that requirement or subpart. The Bureau
anticipated that the nonbank registration system implementation date
with respect to proposed subpart B would occur sometime after the
effective date of the final rule and no earlier than January 2024. The
Bureau explained that the actual nonbank registration system
implementation date would depend, in significant part, upon the
Bureau's ability to develop and launch the required technical systems
that would support the submission and review of applicable filings, and
on feedback provided by commenters regarding the time registrants would
need to implement proposed part 1092's requirements. The Bureau
proposed to provide advance public notice regarding the nonbank
registration 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. No comments addressed this proposal.
The Bureau is finalizing Sec. 1092.101(e) largely as proposed with
two revisions as follows.
First, for stylistic reasons, the Bureau is adopting a revision to
change this term to ``nonbank registry implementation date'' (without
any change in meaning). This revision corresponds with the Bureau's
adoption of the term ``nonbank registry'' in Sec. 1092.101(d) as
discussed above. The Bureau is also adopting corresponding changes to
the proposed rule to use the term ``nonbank registry implementation
date'' instead of the term ``nonbank registration system implementation
date'' throughout the final rule, including at Sec. Sec. 1092.202(b)
and 1092.204(a) of the final rule.
Second, the final rule provides that the definition of the term
``nonbank registry implementation date'' in Sec. 1092.101(e) means,
for a given requirement or subpart of part 1092, or a given person or
category of persons, the date(s) determined by the Bureau to commence
the operations of the nonbank registry in connection with that
requirement or subpart. Thus, the final rule clarifies that the nonbank
registry implementation date may be different for different persons or
categories of persons.
Also, in connection with this change, the Bureau is adopting a new
section of the final rule at Sec. 1092.206 that specifies the nonbank
registry implementation date in connection with the requirements of
subpart B for three different categories of covered persons subject to
the final rule. While the proposal would have provided for a separate
later determination by the Bureau of the ``nonbank registration system
implementation date,'' the Bureau concludes that specifying the nonbank
registry implementation date in the final rule will provide registrants
and the Bureau with more information and certainty regarding the timing
of the launch of the registry and the requirements imposed under the
final rule. Section 1092.206 of subpart B establishes different nonbank
registry implementation dates for covered nonbanks that are larger
participants in supervised markets, other supervised nonbanks, and
other covered nonbanks for registrations under subpart B. For further
information, see the section-by-section analysis of Sec. 1092.206
below.
[[Page 56047]]
Section 1092.102 Submission and Use of Registration Information
Section 1092.102(a) Filing Instructions
Proposed Rule
Proposed Sec. 1092.102(a) would have provided 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 explained that it would issue specific
guidance for filings and submissions. The Bureau anticipated 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
proposed to accept electronic filings and submissions to the NBR system
only and did not propose to accept paper filings or submissions.
Proposed Sec. 1092.102(a) also would have stated 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. The Bureau explained in the proposal that 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
stated that it would issue guidance regarding such situations.
Comments Received and Final Rule
The Bureau did not receive comments specifically about proposed
Sec. 1092.102(a). The Bureau is finalizing Sec. 1092.102(a) as
proposed.\140\
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\140\ See the section-by-section discussion of Sec. 1092.101(d)
above regarding the Bureau's adoption of the revised term ``nonbank
registry.''
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Section 1092.102(b) Coordination or Combination of Systems
Proposed Rule
Proposed Sec. 1092.102(b) would have provided that in
administering the NBR system, the Bureau may rely on information a
person previously submitted to the NBR system under part 1092. This
proposed section would have clarified, for example, that the
registration process for proposed subpart B may take account of
information previously submitted, such as in a prior registration under
subpart B or, if applicable, a registration of nonbanks that use
certain terms and conditions and related information under subpart C.
Proposed Sec. 1092.102(b) also would have provided that in
administering the NBR system, the Bureau may coordinate or combine
systems in consultation 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. The Bureau sought 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.
Comments Received
In connection with proposed Sec. 1092.102(b), the Bureau sought
comment on the types of coordinated or combined systems that would be
appropriate under CFPA sections 1022(c)(7)(C) and 1024(b)(7)(D) and the
types of information that could be obtained from or provided to State
agencies. For a discussion of certain comments related to this topic,
and the Bureau's response thereto, see the section-by-section
discussion of Sec. 1092.203.
A consumer advocate commenter agreed that the Bureau, in
administering the NBR system, should rely on information an entity
previously submitted to the registry under part 1092 and coordinate or
combine systems with State agencies, as provided in proposed Sec.
1092.102(b). The commenter stated that not only would this provision
allow for more efficient implementation of the registry by avoiding
duplicative or redundant efforts but would also reflect the importance
of this registry to both Federal and State regulators, and that the
Bureau should consider coordination with existing State consumer
financial protection agencies.
Response to Comments Received
As required by CFPA sections 1022(c)(7)(C) and 1024(b)(7)(D) and
described in part V, the Bureau has consulted with State agencies on
requirements and systems related to the nonbank registry. The Bureau
also intends to continue to consult with State agencies in implementing
the nonbank registry. Under Sec. 1092.203, with respect to any NMLS-
published covered order, a covered nonbank that is identified by name
as a party subject to the order may elect to comply with the one-time
registration option described in that section in lieu of complying with
the requirements of Sec. Sec. 1092.202 and 1092.204. As discussed in
the section-by-section discussion of Sec. 1092.203, the Bureau is
adopting this option partly in recognition of the statutory mandates to
consult with State agencies regarding combined or coordinated systems
for registration in CFPA sections 1022(c)(7)(C) and 1024(b)(7)(D).
Final Rule
For the reasons discussed above, the Bureau is finalizing Sec.
1092.102(b) as proposed.\141\
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\141\ See the section-by-section discussion of Sec. 1092.101(d)
above regarding the Bureau's adoption of the revised term ``nonbank
registry.''
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Section 1092.102(c) Bureau Use of Information
Proposed Rule
Proposed Sec. 1092.102(c) would have provided 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 proposed 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).
The Bureau explained in its proposal that it intended 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. The Bureau stated that it may, among other things, rely on
the information submitted under part 1092 as it considers whether to
initiate supervisory activity at a particular entity, in determining
the frequency and nature of its supervisory activity with respect to
particular entities or markets, in prioritizing and scoping its
supervisory, examination, and enforcement activities, and otherwise in
assessing and detecting risks to consumers. In particular, the Bureau
[[Page 56048]]
explained that it could consider this information in developing its
risk-based supervision program and in assessing the risks posed to
consumers in relevant product markets and geographic markets and the
factors described in 12 U.S.C. 5514(b)(2) with respect to particular
covered persons, and for enforcement purposes.\142\
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\142\ See, e.g., 12 U.S.C. 5514(b)(2)(C), (D), (E) (providing
that in prioritizing examinations the Bureau shall consider ``the
risks to consumers created by the provision of such consumer
financial products or services,'' ``the extent to which such
institutions are subject to oversight by State authorities for
consumer protection,'' and ``any other factors that the Bureau
determines to be relevant to a class of covered persons''); see
also, e.g., 12 U.S.C. 5565(c)(3)(D), (E) (providing that in
determining the amount of civil money penalties the Bureau shall
consider ``the history of previous violations'' and ``such other
matters as justice shall require'').
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Proposed Sec. 1092.102(c) also would have provided 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. As an example of such a process, the
Bureau cited in the proposal 12 CFR 1090.103, which establishes a
Bureau administrative process for assessing a person's status as a
larger participant under CFPA section 1024(a)(1)(B) and (2) and 12 CFR
part 1090. The Bureau explained that, under proposed Sec. 1092.102(c),
a person could dispute its status as a larger participant under 12 CFR
1090.103 notwithstanding any registration or information submitted to
the NBR system under part 1092. Submission of such a dispute regarding
larger participant status to the Bureau under 12 CFR 1090.103,
including the Bureau's processes regarding the treatment of such
disputes 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 explained that it could 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 have prevented a person from also submitting other
information under 12 CFR 1090.103.
Comments Received and Final Rule
The Bureau received no comments on proposed Sec. 1092.102(c) and
is finalizing it as proposed.\143\
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\143\ See the section-by-section discussion of Sec. 1092.101(d)
above regarding the Bureau's adoption of the revised term ``nonbank
registry.''
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Section 1092.102(d) Calculation of Time Periods
The Bureau is finalizing Sec. 1092.102(d), which the Bureau did
not propose, to clarify how dates and time periods prescribed in part
1092 are calculated.
In calculating dates and time periods, the day of the event that
triggers the time period is excluded. Every day, including intermediate
Saturdays, Sundays, and Federal holidays, is included. If any provision
of part 1092 would establish a deadline for an action that is a
Saturday, Sunday, or Federal holiday, the deadline is extended to the
next day that is not a Saturday, Sunday, or Federal holiday. The
clarifications for calculation of dates and time periods apply to all
such calculations in subpart B.
Section 1092.103 Severability
Proposed Rule
Proposed Sec. 1092.103 would have provided 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. As the Bureau stated in the
proposal, 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
explained that it 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. The
Bureau further explained that in the event a court were to stay or
invalidate one or more provisions of the proposed rule as finalized,
the Bureau would have wanted the remaining portions of the rule as
finalized to remain in full force and legal effect.
Comments Received and Final Rule
The Bureau received no comments on proposed Sec. 1092.103. It is
finalizing proposed Sec. 1092.103 with revisions to clarify that
applications of provisions are also severable. The Bureau has carefully
considered the requirements of the final rule, both individually and in
their totality, including their potential costs and benefits to covered
persons and consumers. The Bureau intends that, if any provision of
this rule, or any application of a provision, is stayed or determined
to be invalid, the remaining provisions or applications are severable
and shall continue in effect.
Subpart B--Registry of Nonbank Covered Persons Subject to Certain
Agency and Court Orders
Section 1092.200 Scope and Purpose
Proposed Rule
Proposed Sec. 1092.200(a) and (b) would have described the scope
and purpose of proposed subpart B. Proposed subpart B would have
required 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. It also would have
described the registration information the Bureau would make publicly
available. Proposed Sec. 1092.200(a) also explained that subpart B
would have required certain nonbank covered persons that are supervised
by the Bureau to prepare and submit an annual written statement. The
requirements regarding annual written statements were described in
proposed Sec. 1092.203.
Proposed Sec. 1092.200(b) would have explained that the purposes
of the information collection requirements in proposed subpart B were
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).
Comments Received and Final Rule
Comments addressing CFPA section 1024(b)(3) and (4) \144\ are
addressed in the section-by-section discussion of Sec.
1092.202(b).\145\ The Bureau received no other comments specifically
addressing proposed Sec. 1092.200.
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\144\ 12 U.S.C. 5514(b)(3), (4).
\145\ See also the section-by-section discussion of Sec. Sec.
1092.201(e) and 1092.203(a) below.
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The Bureau is finalizing Sec. 1092.200(a) and (b) as proposed,
with a revision to reflect the Bureau's adoption of a revised Sec.
1092.205(a) that provides that the Bureau ``may'' publish the
information submitted to the nonbank registry pursuant to Sec. Sec.
1092.202 and 1092.203.
[[Page 56049]]
Section 1092.201 Definitions
In its proposal, the Bureau sought comment on various definitions
set forth in proposed subpart B and any suggested clarifications,
modifications, or alternatives.
The Bureau is finalizing a number of definitions for terms used in
subpart B in Sec. 1092.201. These definitions are each discussed in
detail below. These definitions supplement the general definitions for
the entirety of part 1092 provided in Sec. 1092.101.
Section 1092.201(a) Administrative Information
Proposed Rule
Proposed Sec. 1092.201(a) would have defined 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. The
Bureau explained that administrative information would have included
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),\146\ and other information that would be submitted or
collected to facilitate the administration of the NBR system. Proposed
Sec. 1092.204(a) would have provided that the Bureau may determine not
to publish such administrative information. The Bureau sought comment
on whether any other information that might be collected through the
NBR system should also be treated as administrative information.
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\146\ See discussion in the section-by-section discussion of
these provisions below.
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Comments Received
A trade association commenter stated that the proposal's definition
of ``administrative information'' was unclear and thus could include a
limitless breadth of information. As a result, the commenter argued,
the proposal's estimate of the rule's burden was inaccurate. In
particular, the commenter stated that entities would need to hire
outside legal counsel in order to determine what constitutes
``administrative information.''
Several Tribal commenters commented that good-faith notifications
to the Bureau under proposed Sec. Sec. 1092.202(g) and 1092.204(f)
should not be published, as publishing such notifications would invite
debate and disagreement on the issues addressed in those notifications,
require the utilization of limited Tribal resources to support the
tribe's position, and invite frivolous litigation.
Comments addressing the publication of information more generally
are addressed in the section-by-section discussion of Sec. 1092.205
below.
Response to Comments Received
The Tribal commenters expressed concern regarding publication of
information with respect to good faith notifications submitted under
proposed Sec. Sec. 1092.202(g) and 1092.204(f). Under the final rule,
the Bureau will not publish under Sec. 1092.205(a) the administrative
information collected under subpart B; for a discussion of this issue
see the section-by-section discussion of Sec. 1092.205 below. In
addition, in the final rule, the Bureau has codified in the text of
Sec. 1092.201(a) its proposal to treat good faith notifications
submitted under Sec. Sec. 1092.202(g) and 1092.204(f) as
``administrative information.'' Thus, under the final rule, the Bureau
will not publish the good faith notification information described in
Sec. 1092.201(a) under Sec. 1092.205.
As discussed in the section-by-section discussion of Sec.
1092.202(d) below, the Bureau is finalizing Sec. 1092.202(d)(2)
without proposed Sec. 1092.202(d)(2)(v), under which the Bureau would
have collected and published the names of a registered entity's
affiliates registered under subpart B with respect to the same covered
order. Under the final rule, however, the Bureau may still collect such
information under Sec. 1092.202(c), which provides for the collection
of ``administrative information.'' Should the Bureau determine to
collect such information regarding affiliates, the Bureau's filing
instructions under Sec. 1092.102(a) will categorize this information
as ``administrative information,'' meaning that the Bureau will not
publish the information under Sec. 1092.205. For more information, see
the section-by-section discussions of Sec. Sec. 1092.202(d) and
1092.205(a) below.
The trade association commenter expresses concern that it will not
be clear to covered nonbanks what ``administrative information'' they
are required to submit under the rule. That comment, however, ignores
that Sec. 1092.202(c) only requires registered entities to submit the
specific ``administrative information'' that is ``required by'' the
nonbank registry, and the Bureau has made clear that it will ``specify
the types of . . . administrative information registered entities would
be required to submit'' in ``filing instructions . . . issue[d] under .
. . Sec. 1092.102(a).'' \147\ Therefore, covered nonbanks should have
no need to hire outside legal counsel to ascertain what information
qualifies as ``administrative information'' required to be submitted
under the rule. Instead, the Bureau's filing instructions will specify
what categories of information covered nonbanks must submit as
``administrative information.''
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\147\ 88 FR 6088 at 6118.
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Further reducing potential uncertainty, the Bureau has identified
certain categories of information that it currently intends to
categorize as ``administrative information'' in its filing
instructions--e.g., ``contact information for nonbank personnel
involved in making submissions.'' \148\ And, as discussed above, the
Bureau is also finalizing the definition to expressly treat as
``administrative information'' good faith notification information
submitted under Sec. Sec. 1092.202(g) and 1092.204(f). Under Sec.
1092.201(a), any new categories of administrative information that the
Bureau might address in its filing instructions, and which were not
already discussed in the Bureau's notice of proposed rulemaking and
this preamble, would include only contact information regarding persons
subject to subpart B or other information submitted or collected to
facilitate the administration of the nonbank registry. For example, the
Bureau may require entities to comply with a login or identity-
authentication process, and the Bureau may categorize information
submitted in connection with such a process as ``administrative
information.'' \149\ Submitting required administrative information
should not impose significant substantive burdens on covered nonbanks.
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\148\ 88 FR 6088 at 6104.
\149\ The Bureau has retained the discretion to adjust the
contents of required administrative information through filing
instructions in order to maintain the viability of the nonbank
registry over time. For example, if some new form of electronic
communication were to replace email as the preferred method for
business communications, the Bureau's filing instructions might
designate as required administrative information contact information
associated with that new medium.
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Final Rule
For the reasons discussed above and as follows, the Bureau is
finalizing Sec. 1092.201(a) as proposed, with a revision to expressly
include ``[i]nformation submitted under Sec. Sec. 1092.202(g) and
1092.203(f)'' within the definition of ``administrative
[[Page 56050]]
information.'' \150\ The Bureau's filing instructions under Sec.
1092.102(a) will also categorize this information as ``administrative
information.'' The Bureau has already identified this information as
information that it intended to categorize as ``administrative
information'' in its filing instructions,\151\ but is finalizing this
provision in the text of the regulation to provide further clarity that
the Bureau will treat this information as ``administrative
information.'' In addition to the notifications themselves, the Bureau
may also choose to collect information to facilitate the administration
of the notification process.
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\150\ See also the section-by-section discussion of Sec.
1092.101(d) above regarding the Bureau's adoption of the revised
term ``nonbank registry.''
\151\ 88 FR 6088 at 6104.
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In addition, the Bureau does not intend to publish under Sec.
1092.205(a) any Federal employer identification numbers (EIN) that may
be obtained from covered nonbanks. The Bureau will not collect this
information from covered nonbanks as ``identifying information,'' as
that term is defined at Sec. 1092.201(g), but may determine to collect
this information as ``administrative information'' under Sec.
1092.202(c). In filing instructions issued under Sec. 1092.102(a), the
Bureau will specify whether and how it will collect such information.
The Bureau understands that EINs are not commonly used to identify
covered nonbanks in covered orders and in related public databases that
are maintained by relevant Federal, State, and local agencies. Thus, as
with other administrative information, the publication of EINs may not
in all instances be especially useful to external users of the
registry, although the Bureau may find such information useful in its
administration of the nonbank registry.
Section 1092.201(b) Attesting Executive
Proposed Rule
Proposed Sec. 1092.201(b) would have defined 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. In the section-by-section discussion of proposed Sec.
1092.203, the Bureau proposed requirements regarding attesting
executives.
Comments Received and Final Rule
The Bureau did not receive any comments specifically regarding
proposed Sec. 1092.201(b)'s definition of ``attesting executive.''
Comments addressing the proposal's approach to the written statement,
including requirements regarding designation of attesting executives
and associated criteria for such a designation, are addressed in the
section-by-section discussion of Sec. 1092.204 below.
The Bureau is finalizing Sec. 1092.201(b) as proposed, with a
revision to reflect the renumbering of Sec. 1092.204 in the final
rule.
Section 1092.201(c) Covered Law
Proposed Rule
Proposed Sec. 1092.201(c) would have defined the term ``covered
law'' to mean one of several types of laws, as described. The proposed
term ``covered law'' would have been 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 have defined 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 have helped determine the
application of proposed subpart B's registration requirements.
Under the proposal, a law listed in proposed Sec. 1092.201(c)(1)
through (6) would have qualified as a covered law only to the extent
that the violation of law found or alleged arose out of conduct in
connection with the offering or provision of a consumer financial
product or service. The Bureau was interested in registering orders
that relate to offering or providing consumer financial products or
services. The Bureau recognized 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
believed 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 believed that a more
limited definition of covered law would strike 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 proposal listed categories of laws that would have constituted
``covered laws'' to the extent that the violation of law found or
alleged arose out of conduct in connection with the offering or
provision of a consumer financial product or service. For the reasons
discussed in section V(C) of the proposal, the Bureau believed 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)(1) would have defined the term
``covered law'' to include a Federal consumer financial law, as that
term was defined in proposed Sec. 1092.101(a) and the CFPA.\152\ The
Bureau explained that it 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),\153\ 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.\154\
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\152\ See 12 U.S.C. 5481(14).
\153\ See 12 U.S.C. 5481(12).
\154\ 12 U.S.C. 5481(14).
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The Bureau believed that requiring registration of covered nonbanks
in connection with certain orders issued under Federal consumer
financial laws would further the purposes of proposed subpart B. As the
Bureau discussed in section IV of the proposal, ``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.'' \155\ The
Bureau noted that, 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 explained that it therefore has a clear interest in
identifying and understanding the nature of the risks to consumers
presented by such conduct,
[[Page 56051]]
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 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.\156\ Thus, the
Bureau believed 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 the offering or provision of
consumer financial products or services.
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\155\ 12 U.S.C. 5512(c)(1).
\156\ The Bureau also proposed to require registration of orders
that the Bureau has obtained or issued for violations of Federal
consumer financial laws. In the proposal, the Bureau explained that,
while it 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 explained that
it 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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Second, proposed Sec. 1092.201(c)(2) would have defined the term
``covered law'' to include any other law as to which the Bureau may
exercise enforcement authority. As explained in section IV(C) of the
proposal, the Bureau may enforce certain laws other than Federal
consumer financial laws, such as the Military Lending Act.\157\
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\157\ 10 U.S.C. 987(f)(6) (authorizing Bureau enforcement of the
Military Lending Act).
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The Bureau believed 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 would generally fall within the scope of the
Bureau's enforcement authority. More generally, the Bureau noted that
in its 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 \158\ or
the Truth in Lending Act,\159\ among other Federal consumer financial
laws. In addition, the Bureau noted that 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, the Bureau believed that
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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\158\ 15 U.S.C. 5531, 5536(a)(1)(B).
\159\ 15 U.S.C. 1601 et seq.
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Third, proposed Sec. 1092.201(c)(3) would have defined 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 have included 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.\160\ The Bureau explained that it
expected 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 understood 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.
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\160\ 15 U.S.C. 45(a)(1).
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As discussed further in section IV(C) of the proposal, the Bureau
believed 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).\161\ Because the CFPA's prohibition of unfair or
deceptive acts or practices is modeled after FTC Act section 5's
similar prohibition,\162\ conduct in connection with the offering or
provision of a consumer financial product or service that constitutes a
UDAP violation under FTC Act section 5 also likely violates the CFPA's
UDAAP provisions. The Bureau also believed that FTC Act section 5
unfairness and deception violations related to the
[…truncated; see source link]Indexed from Federal Register on July 8, 2024.
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.