Registry of Nonbank Covered Persons Subject to Certain Agency and Court Orders

<RULE> CONSUMER FINANCIAL PROTECTION BUREAU <CFR>12 CFR Part 1092</CFR> <DEPDOC>[Docket No. CFPB-2022-0080]</DEPDOC> <RIN>RIN 3170-AB13</RIN> <SUBJECT>Registry of Nonbank Covered Persons Subject to Certain Agency and Court Orders</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Consumer Financial Protection Bureau. <HD SOURCE="HED">ACTION:</HD> Final rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> 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. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> <E T="03">Effective date:</E> This rule is effective on September 16, 2024. <E T="03">Implementation dates:</E> For implementation dates, see § 1092.206. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> 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 <E T="03">CFPB_Accessibility@cfpb.gov.</E> </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">I. Summary of the Final Rule</HD> 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)  <SU>1</SU> <FTREF/> 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. <FTNT> <SU>1</SU>  12 U.S.C. 5514(a). </FTNT> 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. <HD SOURCE="HD1">II. Background</HD> <HD SOURCE="HD2">A. The Bureau and Other Agencies Take Enforcement Actions Against Nonbanks To Protect Consumers</HD> 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. <SU>2</SU> <FTREF/> 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). <SU>3</SU> <FTREF/> 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. <SU>4</SU> <FTREF/> 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. <SU>5</SU> <FTREF/> 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. <FTNT> <SU>2</SU>   <E T="03">See</E> 12 U.S.C. 5481(12), 5552; 12 CFR part 1082; Bureau Interpretive Rule, <E T="03">Authority of States to Enforce the Consumer Financial Protection Act of 2010,</E> 87 FR 31940 (May 26, 2022). </FTNT> <FTNT> <SU>3</SU>  15 U.S.C. 45. </FTNT> <FTNT> <SU>4</SU>  Dee Pridgen, <E T="03">The Dynamic Duo of Consumer Protection: State and Private Enforcement of Unfair and Deceptive Trade Practices Laws,</E> 81 Antitrust L.J. 911, 912 (2017). </FTNT> <FTNT> <SU>5</SU>   <E T="03">See, e.g.,</E> 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). </FTNT> 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. <SU>6</SU> <FTREF/> 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 companies entered into with the Bureau voluntarily. <SU>7</SU> <FTREF/> <FTNT> <SU>6</SU>   <E T="03">See</E> U.S. Fin. Crisis Inquiry Comm'n, <E T="03">The Financial Crisis Inquiry Report,</E> at 104-11, 113-18 (2011), <E T="03">https://www.govinfo.gov/content/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf; see also</E> 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.”). </FTNT> <FTNT> <SU>7</SU>   <E T="03">See, e.g., RMK Financial Corp. d/b/a Majestic Home Loan or MHL,</E> CFPB No. 2023-CFPB-0002 (Feb. 27, 2023); <E T="03">CFPB</E> v. <E T="03">American Advisors Group,</E> No. 21-cv-01674-JLS-JDEx (C.D. Cal. Oct. 25, 2021); <E T="03">Discover Bank,</E> CFPB No. 2020-BCFP-0026 (Dec. 22, 2020); <E T="03">Bureau of Consumer Fin. Prot.</E> v. <E T="03">Encore Capital Grp.,</E> No. 3:20-cv-01750-GPC-KSC (S.D. Cal. Oct. 16, 2020); <E T="03">Sec. Nat'l Automotive Acceptance Co.,</E> CFPB No. 2017-CFPB-0013 (Apr. 26, 2017); <E T="03">Military Credit Servs., LLC,</E> CFPB No. 2016-CFPB-0029 (Dec. 20, 2016). </FTNT> <HD SOURCE="HD2">B. Congress Instructed the Bureau To Monitor Markets for Consumer Financial Products and Services</HD> 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. <SU>8</SU> <FTREF/> 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.”  <SU>9</SU> <FTREF/> <FTNT> <SU>8</SU>   <E T="03">See</E> 12 U.S.C. 5511. </FTNT> <FTNT> <SU>9</SU>   <E T="03">See</E> 12 U.S.C. 5512(c)(1). </FTNT> Notably, Congress directed the Bureau to engage in such monitoring “to support its rulemaking <E T="03">and other functions,”</E>   <SU>10</SU> <FTREF/> ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 1013k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━