CFPB to Begin Tracking Offenders through National Registry

The CFPB has issued a final rule to provide transparency and track certain covered nonbank offenders. On June 3, 2024, the CFPB introduced a significant regulatory measure known as the Registry of Nonbank Covered Persons Subject to Certain Agency and Court Orders Final Rule (“Nonbank Registration of Orders Final Rule” or “final rule”). 

The final rule will require most nonbank financial entities subject to certain final agency and court orders to register information about their company and the covered orders. This is the first-ever rule under the CFPB’s authority to register nonbank companies. As part of the registration process, covered entities must submit copies of those orders to the CFPB and comply with ongoing, attested reporting requirements on the entity’s compliance with such orders. This information will be incorporated into a newly established registry designed to allow the CFPB, other regulators, industry watchdogs, and the public to identify and deter offenders who have broken consumer laws and are subject to federal, state, or local government or court orders. “Too often, financial firms treat penalties for illegal activity as the cost of doing business,” said CFPB Director Rohit Chopra. “The CFPB’s new rule will help law enforcement across the country detect and stop repeat offenders.”

Who is Covered Under the Rule?

The final rule applies to nonbank entities that are “covered persons” under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) with certain limited exceptions. In general, covered persons are those that participate in offering or providing consumer financial products or services, meaning this final rule will broadly apply to various sectors of the financial industry, including but not limited to mortgage lenders, payday lenders, consumer lenders, debt collectors, debt relief companies, credit reporting agencies, and fintech companies. 

What Orders are Covered by the Rule?

The final rule applies to final, written public orders (“order” to include any written order or judgement in an investigation, matter, or proceeding) issued by agencies or courts, whether or not issued as a consent order, that meet the following criteria:

  • Identifies a covered nonbank by name as a party subject to the order;
  • Was issued at least in part in any action or proceeding brought by any Federal agency, State agency, or local agency;
  • Contains public provisions that impose obligations on the covered nonbank to take certain actions or to refrain from taking certain actions;
  • Imposes obligations on the covered nonbank based on an alleged violation of a “covered law”, which includes, but is not limited to, Federal consumer financial laws, other laws enforced by the CFPB, and certain unfair, deceptive, or abusive acts or practices laws, rules or orders at both Federal and State levels identified in the final rule; and
  • Has an effective date on or after January 1, 2017.
    • Note: An order is effective on the date specified in the order. If an order does not have an effective date identified, the date of issuance is the effective date. If the issuing agency or a court stays or otherwise suspends an order’s effectiveness, the order’s effective date for purposes of the final rule is delayed until the stay or suspension is lifted.

Registration Process

Those covered under the new final rule will be required to register comprehensive information with the CFPB about their operations, business models, and compliance frameworks. The final rule also imposes additional requirements on covered nonbanks that are subject to CFPB supervision and have at least $5 million in qualifying annual receipts. On an annual basis, these covered nonbanks must review and submit, as applicable, certain additional information regarding covered orders with an effective date on or after the beginning of their applicable implementation submission period. The CFPB may conduct examinations and assessments of all registered entities to ensure compliance with the provisions of the final rule and covered orders. Ongoing registration requirements apply until the covered order is deemed to expire or all relevant provisions are fully terminated. A covered order that does not expressly provide for a termination date and is not terminated earlier is deemed to expire 10 years after its effective date. The final rule requires the covered nonbank to file a notice with the CFPB within 90 days of any modification, termination, or abrogation of the order.

When Does it Go into Effect?

The final rule takes effect on September 16, 2024, and the CFPB contemplates a phased-in registration process starting with “larger participant” supervised nonbanks on October 16, 2024, moving to other supervised nonbanks on January 14, 2025, and finishing with all other covered nonbanks starting April 14, 2025. The CFPB will publish filing instructions regarding the specific information that must be submitted, as well as formatting requirements.

The introduction of the Nonbank Registration Orders Final Rule signifies a pivotal development in the regulatory landscape of the nonbank financial sector, with the CFPB extending regulatory oversight to a diverse array of nonbank entities. As the rule takes effect, nonbank entities must prioritize compliance efforts and engage proactively with regulatory authorities to navigate the evolving regulatory framework effectively. 

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