The CFPB recently published a proposed rule that would create a registry of nonbank covered person entities subject to certain public final orders related to violations of certain consumer protection laws arising out of conduct in connection with the offering or provision of a consumer financial product or service. The proposed rule would also allow for publication of registry information and require certain nonbanks to submit annual written statements, signed by an attesting senior executive, regarding the entity’s compliance with such covered orders.
As expressed throughout the proposal, the CFPB intends for this rule to help it fulfill its obligations under the CFPA for which it has been granted authority, including detecting and assessing risks to consumers and to markets for consumer financial products and services. The CFPB provides a number of potential uses of this information, such as identifying areas and trends requiring further attention, future rulemaking, or potential supervisory or enforcement efforts. In its announcement about the proposed rule, the CFPB reiterated its recent focus on repeat offenders and noted that maintenance of this type of central repository is important since “the issuance of agency and court orders serves as one of the most important tools to pursue lawbreakers in these markets.” The CFPB further indicated that this repository “will allow the CFPB to track and mitigate the risks posed by repeat offenders, while also being able to monitor all lawbreakers subject to agency and court orders” and highlights the intention to make it public.
Under the proposal, any covered nonbank that is identified by name as a party subject to a covered order with an effective date on or after (or that remains in effect as of) the effective date of the rule must register with the newly established nonbank registration (NBR) system and provide and update certain information by submitting filings to the CFPB.
A covered order would include any final, public order issued by an agency or court that: (i) identifies a covered nonbank by name as a party subject to the order; (ii) is issued, at least in part, in an action or proceeding brought by a federal, state, or local agency; (iii) contains public provisions that impose obligations on the covered nonbank to take certain actions or to refrain from taking certain actions; (iv) imposes such obligations based on an alleged violation of a covered law (including federal consumer financial laws, other laws over which the CFPB has enforcement authority, prohibitions on unfair or deceptive acts or practices under Section 5 of the FTC Act, and state UDAP/UDAAP laws, provided 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); and (v) has an effective date on or later than January 1, 2017.
Registering with the NBR system would require filing a host of information, including a copy of the covered order (taking into account redaction requirements), information about the covered order (such as the government entity that issued the order and all covered laws that have been found or alleged to have been violated), and the names of any affiliates that also must register with respect to the covered order. The proposed rule also addresses covered orders that cease to be covered and requirements imposed on terminated, modified, or abrogated covered orders.
The proposed rule provides that the CFPB will make available to the public the information submitted to the NBR system (not including the annual written statement) – such as by publishing the information on the CFPB’s publicly available Internet site – though it may choose not to publish certain such information.
With some exceptions, the proposed rule would also require nondepositories that are subject to CFPB supervision and examination pursuant to 12 U.S.C. § 5514(a) (such as residential mortgage lenders, brokers, and servicers who offer or provide their services to consumers) to submit annual written statements, signed by a designated attesting executive, regarding the entity’s compliance with such covered orders (including steps the executive has taken to review and oversee its entity’s order-related activities and whether any order-related violations or other instances of noncompliance have been identified). Supporting documentation is to be maintained for five years after such submission is required.
The attesting executive must be the entity’s highest-ranking duly appointed senior executive officer whose assigned duties include ensuring the supervised registered entity’s compliance with federal consumer financial law, and who has both: (i) knowledge of the entity’s systems and procedures for achieving compliance with the covered order, and (ii) control over the entity’s efforts to comply with the covered order. If the supervised registered entity does not have any duly appointed officers, it must appoint the highest-ranking individual charged with managerial or oversight responsibility for the supervised registered entity.
However, with respect to the reporting aspects described in this article, please note that the CFPB states in the proposed rule that it anticipates that the registry’s implementation “will be no earlier than January 2024 and may be substantially later”, and that “registrants will only need to submit information once the [CFPB] launches and announces a registration system, which is likely to be no earlier than January 2024.”
The CFPB requests comments on various requirements under the proposed rule, including alternative requirements and the scope of many definitions. Comments are due 60 days after the proposed rule is published in the Federal Register.