CFPB Proposes Rule to Narrow Scope of Nonbank Supervision

The CFPB issued a proposed rule to define the type of conduct which will cause the agency to designate a nonbank financial services provider for supervision.

For certain nonbanks which are not automatically subject to CFPB supervision, the agency can designate them to become supervised if they are engaging, or have engaged, in conduct that poses “risks to consumers with regard to the offering or provision of consumer financial products or services.”  The new rule defines this phrase to mean conduct that presents a high likelihood of significant harm to consumers and that is directly connected to the offering or provision of a consumer financial product or service.

The CFPB stated that it proposed this rule in order to ensure these designations stay within the bounds of the agency’s statutory authority, to provide clarity on what its supervision will focus on, and to prevent the standard from encompassing issues that are speculative or trivial in impact.  Comments to the rule must be received by September 25, 2025.

For prior coverage on the standard and the expansion of the CFPB’s supervision of nonbank entities, see here.