The Consumer Financial Protection Bureau (CFPB) proposed a rule that would require certain nonbank financial firms to register consumer protection orders filed against them by other federal agencies, courts, or states into a new, publicly accessible registry.
The CFPB’s repeat offender registry would “help unify the efforts of consumer financial protection enforcers” regarding nonbank financial firms and “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,” the agency said Monday in a press release.
The proposed rule, which will be open for public comment for 60 days following publication in the Federal Register, would require covered nonbank financial institutions to report to the new CFPB registry “final agency and court orders and judgments, including consent and stipulated orders, brought under federal consumer financial protection laws or state laws regarding unfair, deceptive, or abusive acts or practices,” the press release said.
Currently, the CFPB relies on other agencies to take proactive steps to alert it when consumer protection orders are levied. Collecting information about orders and making them accessible “will improve the bureau’s efforts to determine where entities, either as a group or individually, are repeatedly violating the law,” according to the proposed rule.
Scott Pearson, partner at law firm Manatt, Phelps & Phillips, said the proposed rule “really tramples on state regulators and their ability to enforce the laws of their states. It also appears to violate a number of other limitations on the bureau’s authority under Dodd-Frank. The number of pages the bureau spent justifying its authority to promulgate this rule is pretty telling.”
The CFPB has been under attack lately in the courts, including a federal appeals court ruling in October that questioned the constitutionality of the agency’s funding source. The U.S. Chamber of Commerce and a contingent of banking groups also sued the CFPB in federal court, claiming an update to its examination manual represented an overstep of its statutory authority.
In addition to submitting certain consumer protection orders to the CFPB, the proposed rule would require nonbank firms with more than $1 million in annual receipts attest annually the firm is in compliance with the rule. Firms with less than $1 million in annual receipts would still be required to collect and submit information about consumer protection-related orders levied against them to the registry.
The attestation would consist of a written statement by a firm’s senior manager that describes the steps the executive “has undertaken to review and oversee the entity’s activities subject to the applicable covered order for the preceding calendar year” and whether the entity “during the preceding calendar year has identified any violations or other instances of noncompliance with any of the obligations that were imposed in a public provision of the covered order by the applicable agency or court based on a violation of a covered law.”
The rule does not specify what title the senior manager should hold. The attestations would help the CFPB conduct its supervisory and examination activities on covered nonbank firms, the rule said.
The registry would not apply to banks, credit unions, and other more regulated institutions, which are already required to report consumer protection orders filed against them with other regulators, the CFPB said.