CFPB establishes new registry for nonbank offenders

Registry aimed at detecting and deterring repeat violators of consumer protection regulations

The Consumer Financial Protection Bureau (CFPB) has greenlit the establishment of a new registry of nonbank financial companies that repeatedly break regulations set up to protect consumers.

The federal agency has finalized a rule to create the new registry, which will help “identify repeat offenders and recidivism trends,” according to a statement from the CFPB. The rule will require nonbanks with “covered orders” from agencies or courts to register information about their company, as well as any orders issued to their company, with the bureau.

Per the text of the final rule, an order is covered if it was issued on or after Jan. 1, 2017, and:

  • Is a final, public order issued by an agency or court.
  • Identifies a 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, state 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 federal consumer financial laws; other laws enforced by the CFPB; and certain unfair, deceptive or abusive acts or practices laws.

Additionally, registering companies will have to provide a written attestation from an executive confirming compliance with any relevant orders.

“Too often, financial firms treat penalties for illegal activity as the cost of doing business,” said Rohit Chopra, director of the CFPB. “The CFPB’s new rule will help law enforcement across the country detect and stop repeat offenders.”

It’s not the first time the CFPB has taken action to rein in recidivist offenders of consumer protection laws; the agency created a Repeat Offender Unit in 2010 to monitor and police recurring violators. This is, however, the first rule ever established by the CFPB to utilize its authority to register nonbank entities, a power granted to the CFPB via the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The final rule is set to take effect on Sept. 16, with registration beginning for covered nonbanks as early as Oct. 16. Registration requirements will be phased in on a rolling basis.

According to the CFPB’s statement, some changes were made to the proposed rule in response to public feedback collected during a comment period last spring, but a number of banking and lending trade organizations, have already voiced criticisms of the plan.

“(The Mortgage Bankers Association) is disappointed with the CFPB’s final rule of a Public Orders Registry, as it creates a costly and duplicative reporting framework for the mortgage industry,” said Pete Mills, senior vice president of residential policy at the MBA.

“Including mortgage lenders and servicers in the registry is an unnecessary and redundant move … and contradicts the CFPB’s concerns about lowering costs. The CFPB missed an opportunity to simply add its enforcement information on mortgage companies to the already comprehensive consumer-facing data base maintained — and already operative — by the Conference of State Bank Supervisors’ NMLS Consumer Access portal.”

The Conference of State Bank Supervisors (CSBS) also expressed dissatisfaction with the registry’s establishment.

“We are disappointed that the CFPB is proceeding with its Public Orders Registry and stand by the concerns expressed by state regulators during the consultation process and in CSBS’s comment letter [submitted during the comment period],” said Brandon Milhorn, president and CEO of the organization. “CSBS’s primary focus now is to help ensure alignment between the CFPB’s Registry and the Nationwide Multistate Licensing System to prevent consumer and industry confusion and redundant reporting. We encourage the CFPB to further consult with state regulators on requirements for coordinated systems as mandated by the Dodd-Frank Act.”

The Community Home Lenders of America (CHLA), meanwhile, reiterated criticism of the registry’s perceived redundancy in supervising smaller independent mortgage banks (IMBs).

“While CHLA appreciates a staggered compliance period for smaller IMBs, CHLA renews our request in our comment letter to exempt smaller IMBs, since they already report violations to the NMLS,” the statement read.


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