Navigating The CFPB's Nonbank Order Registry: What Fintechs Need To Know

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On July 8, 2024, the Consumer Financial Protection Bureau (CFPB) published a final rule mandating the registration of nonbank financial entities' public orders related to consumer protection violations.
United States Technology
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On July 8, 2024, the Consumer Financial Protection Bureau (CFPB) published a final rule mandating the registration of nonbank financial entities' public orders related to consumer protection violations. The CFPB describes this rule as an attempt to enhance regulatory oversight and prevent repeat offenses by these entities.

The CFPB's new rule actually represents a significant expansion of its regulatory reach, aiming to increase the CFPB's power over fintechs and other nonbank financial entities. It introduces new challenges and risks, including:

  • Increased Regulatory Scrutiny: Nonbank financial entities will face heightened oversight and new reporting requirements.
  • Executive Accountability: Senior executives will be held directly accountable for compliance through mandatory annual statements.
  • Public Transparency and Litigation Risks: Public availability of the registry could lead to increased litigation from private parties and class action lawsuits.

Key Provisions

  • Mandatory Registration: Nonbank financial firms must register any federal, state, or local agency orders related to consumer financial products and services with the CFPB. This initiative aims to improve the CFPB's visibility into nonbank activities and track compliance with consumer protection laws.
  • Annual Compliance Statements: Covered entities are required to submit annual compliance statements signed by senior executives. This measure ensures that top management is directly accountable for compliance and may increase the risk of enforcement actions for false certifications.
  • Public Transparency: Portions of the registry will be made public, potentially exposing nonbank entities to litigation from private parties, including class action lawsuits. The public availability of this information will aid whistleblowers and facilitate private enforcement of consumer financial laws.

Implications for Nonbank Financial Entities

  • Increased Regulatory Burden: Entities that previously did not consider the CFPB their primary regulator must now develop procedures to comply with this new reporting requirement. This shift significantly increases the regulatory burden on fintechs and other nonbank financial firms.
  • Potential Unintended Consequences: The additional reporting requirements may deter companies from settling with state or local agencies if it means incurring further obligations and risks at the federal level. This could impact firms' willingness to enter into consent orders, potentially altering state and local regulatory dynamics.

Strategic Considerations

  • Review and Prepare: Nonbank entities should review existing orders to determine the need for registration and prepare the necessary documentation to comply with the new rule.
  • Executive Accountability: Ensure that senior executives are fully aware of their responsibilities under this rule and the potential risks of signing false compliance statements.
  • Legal and Compliance Support: Firms should seek specialized legal and compliance advice to navigate the complexities introduced by this rule and to mitigate potential risks associated with public disclosure.

For more detailed information, read the CFPB's executive summary here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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