CFPB Revives ‘Dormant’ Rule to Regulate ‘Risky’ Nonbanks

The Consumer Financial Protection Bureau has issued a procedural rule to expand its supervision over nonbank entities that the regulator “has reasonable cause to determine pose risks to consumers” and is seeking comment on reviving the rule, which has been “dormant” and unused for a number of years.

Initially invoked back in 2013, the rule was intended to be a catch-all, giving the CFPB the authority to go after entities that may have been engaging in unfair, deceptive, or abusive acts or practices but did not fit into the buckets of supervision maintained by the CFPB. But the documents and records of investigations or proceedings under that rule were to be kept confidential. Now, the CFPB is seeking to be allowed to make such decisions and orders public, when it deems necessary to do so. Companies involved in these orders would have seven days to request to keep the information private, at which point the Director of the CFPB would determine whether the information will be kept private, or released in whole or in part.

“There is a public interest in transparency when it comes to these potentially significant rulings by the Director as head of the agency,” the Bureau noted in its publication of the rule. “Also, if a decision or order is publicly released, it would be available as a precedent in future proceedings.”

The comment period on the rule will remain open for 30 days once the rule is published in The Federal Register.

“Given the rapid growth of consumer offerings by nonbanks, the CFPB is now utilizing a dormant authority to hold nonbanks to the same standards that banks are held to,” said CFPB Director Rohit Chopra, in a statement. “This authority gives us critical agility to move as quickly as the market, allowing us to conduct examinations of financial companies posing risks to consumers and stop harm before it spreads.”

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