Registry of Nonbank Covered Persons Subject to Certain Agency and Court Orders, 6088-6142 [2022-27385]
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Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules
BUREAU OF CONSUMER FINANCIAL
PROTECTION
12 CFR Part 1092
[Docket No. CFPB–2022–0080]
RIN 3170–AB13
Registry of Nonbank Covered Persons
Subject to Certain Agency and Court
Orders
Bureau of Consumer Financial
Protection.
ACTION: Proposed rule with request for
public comment.
AGENCY:
Pursuant to its authorities
under the Consumer Financial
Protection Act of 2010 (CFPA), the
Consumer Financial Protection Bureau
(Bureau or CFPB) is proposing to require
certain nonbank covered person entities
(with exclusions for insured depository
institutions, insured credit unions,
related persons, States, certain other
entities, and natural persons) that are
under certain final public orders
obtained or issued by a Federal, State,
or local agency in connection with the
offering or provision of a consumer
financial product or service to report the
existence of such orders to a Bureau
registry. The Bureau is proposing to
include all final public written orders
and judgments (including consent and
stipulated orders and judgments)
obtained or issued by the Bureau or any
government agency (Federal, State, or
local) for violation of certain consumer
protection laws. Pursuant to its
authority under the CFPA, the Bureau is
also proposing to require certain
supervised nonbanks to submit annual
written statements regarding
compliance with each underlying order,
signed by an attesting executive who
has knowledge of the entity’s relevant
systems and procedures for achieving
compliance and control over the entity’s
compliance efforts.
DATES: Comments must be received on
or before March 31, 2023 to be assured
of consideration.
ADDRESSES: You may submit comments,
identified by Docket No. CFPB–2022–
0080 or RIN 3170–AB13, by any of the
following methods:
• Electronic: https://
www.regulations.gov. Follow the
instructions for submitting comments.
• Email: 2022-NPRM-OrdersRegistry@
cfpb.gov. Include Docket No. CFPB–
2022–0080 or RIN 3170–AB13 in the
subject line of the message.
• Mail/Hand Delivery/Courier:
Comment Intake—Nonbank Registration
of Certain Agency and Court Orders,
c/o Legal Division Docket Manager,
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SUMMARY:
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Consumer Financial Protection Bureau,
1700 G Street NW, Washington, DC
20552. Because paper mail in the
Washington, DC area and at the Bureau
is subject to delay, commenters are
encouraged to submit comments
electronically.
Instructions: The Bureau encourages
the early submission of comments. All
submissions should include the agency
name and docket number or Regulatory
Information Number (RIN) for this
rulemaking. In general, all comments
received will be posted without change
to https://www.regulations.gov.
All comments, including attachments
and other supporting materials, will
become part of the public record and are
subject to public disclosure. Proprietary
information or sensitive personal
information, such as account numbers
or Social Security numbers, or names of
other individuals, should not be
included. Comments will not be edited
to remove any identifying or contact
information.
information on its website and
potentially in other forms.
The Bureau would also require certain
nonbanks subject to the Bureau’s
supervisory authority under section
1024(a) of the Consumer Financial
Protection Act of 2010 (CFPA) 1
annually to identify an executive (or
executives) who is responsible for and
knowledgeable of the firm’s efforts to
comply with the orders identified in the
registry. The name and title of the
executive would also be published in
the registry. The supervised nonbank
entity would also be required to submit
on an annual basis a written statement
signed by that executive (or executives)
regarding the entity’s compliance with
each order in the registry.
Nonbank registrants would have to
register in the Bureau system starting
after both the effective date of the final
rule and the launch of a registration
system created by the Bureau. Details on
how to register will be provided in the
online system through filing
instructions.
Clay
Coon, Office of Supervision Policy, at
202–435–7700. If you require this
document in an alternative electronic
format, please contact CFPB_
Accessibility@cfpb.gov.
SUPPLEMENTARY INFORMATION:
II. Background
FOR FURTHER INFORMATION CONTACT:
I. Summary of the Proposed Rule
The Bureau is proposing to establish
and maintain a registry that would
collect information about certain public
agency and court orders and facilitate
the Bureau’s supervision of certain
companies. In this way, the Bureau
would more effectively be able to
monitor and to reduce the risks to
consumers posed by entities that violate
consumer protection laws. The Bureau
also proposes to publish the registry
online for use by the public and other
regulators.
The proposed rule would require
certain nonbank covered person entities
(with exclusions for insured depository
institutions, insured credit unions,
related persons, States, certain other
entities, and natural persons) to register
with the Bureau upon becoming subject
to a public written order or judgment
imposing obligations based on
violations of certain consumer
protection laws. Those entities would be
required to register in a system
established by the Bureau, provide basic
identifying information about the
company and the order (including a
copy of the order), and periodically
update the registry to ensure its
continued accuracy and completeness.
The Bureau would publish this
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A. The Bureau and Other Agencies Issue
and Obtain Enforcement Actions
Against Nonbanks To Protect
Consumers
The Bureau administers and enforces
Federal consumer financial laws against
nonbanks in consumer financial
markets. In addition to the Bureau,
Congress authorized multiple other
Federal and State agencies to enforce
Federal consumer financial law,
including the CFPA prohibition against
unfair, deceptive, or abusive acts or
practices (UDAAP) and enumerated
statutes including the Truth in Lending
Act, the Electronic Fund Transfer Act,
the Fair Credit Reporting Act, the Equal
Credit Opportunity Act, and other
statutes.2 Several Federal agencies, most
notably the Federal Trade Commission,
also enforce section 5 of the Federal
Trade Commission Act (FTC Act),
which similarly prohibits unfair or
deceptive acts or practices (UDAP).3
The prohibitions against unfair and
deceptive acts or practices in the CFPA
were modeled after the same
prohibitions in the FTC Act.
Furthermore, States across the country
began codifying State UDAP statutes
modeled after the FTC Act starting in
the 1960s and 1970s.4 These laws differ
1 12
U.S.C. 5514(a).
12 U.S.C. 5481(12), 5552; 12 CFR part 1082;
Bureau Interpretive Rule, Authority of States to
Enforce the Consumer Financial Protection Act of
2010, 87 FR 31940 (May 26, 2022).
3 15 U.S.C. 45.
4 Dee Pridgen, The Dynamic Duo of Consumer
Protection: State and Private Enforcement of Unfair
2 See
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in many respects from each other, but
generally they hail from a common
consumer protection tradition
originating with the FTC Act, similar to
the CFPA’s prohibition on UDAAP.
The Bureau was created in the wake
of the 2008 financial crisis, which was
caused by a variety of overlapping
factors including systemic malfeasance
in the mortgage industry.5 Since passage
of the CFPA, the Bureau has brought
more than 250 enforcement actions
against nonbanks. When the Bureau
issues an order against a covered person
(often, but not always, as a consent
order), the Bureau often follows up with
supervisory or enforcement action to
ensure the company’s compliance with
the order. On numerous occasions, the
Bureau has uncovered companies that
failed to comply with consent orders
that the companies entered into with the
Bureau voluntarily.6
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B. Congress Instructed the Bureau To
Monitor Markets for Consumer
Financial Products and Services
Congress established the Bureau to
regulate (among other things) the
offering and provision of consumer
financial products and services under
the Federal consumer financial laws,
and it granted the Bureau authority to
ensure that the Bureau could achieve
that mission.7 But it also understood
that the Bureau could not fully and
effectively achieve that mission unless it
developed a clear window into the
markets for and persons involved in
offering and providing such products
and services. To that end, Congress
mandated that the Bureau ‘‘shall
monitor for risks to consumers in the
offering or provision of consumer
financial products or services, including
developments in markets for such
products or services.’’ 8
Notably, Congress directed the Bureau
to engage in such monitoring ‘‘to
support its rulemaking and other
functions,’’ 9 instructing the Bureau to
and Deceptive Trade Practices Laws, 81 Antitrust
L.J. 911, 912 (2017).
5 See U.S. Fin. Crisis Inquiry Comm’n, The
Financial Crisis Inquiry Report, at 104–11, 113–18
(2011), https://www.govinfo.gov/content/pkg/GPOFCIC/pdf/GPO-FCIC.pdf; see also S. Rep. No. 111–
176, at 11 (2010) (‘‘Th[e] financial crisis was
precipitated by the proliferation of poorly
underwritten mortgages with abusive terms,
followed by a broad fall in housing prices as those
mortgages went into default and led to increasing
foreclosures.’’).
6 See, e.g., Bureau of Consumer Fin. Prot. v.
Encore Capital Grp., No. 3:20–cv–01750–GPC–KSC
(S.D. Cal. Oct. 16, 2020); Sec. Nat’l Automotive
Acceptance Co., CFPB No. 2017–CFPB–0013 (Apr.
26, 2017); Military Credit Servs., LLC., CFPB No.
2016–CFPB–0029 (Dec. 20, 2016).
7 See 12 U.S.C. 5511.
8 See 12 U.S.C. 5512(c)(1).
9 Id. (emphasis added).
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use monitoring to inform all of its work.
Congress separately described the
Bureau’s ‘‘primary functions’’ as
‘‘conducting financial education
programs’’; ‘‘collecting, investigating,
and responding to consumer
complaints’’; ‘‘collecting, researching,
monitoring, and publishing information
relevant to the functioning of markets
for consumer financial products and
services to identify risks to consumers
and the proper functioning of such
markets’’; ‘‘supervising covered persons
for compliance with Federal consumer
financial law, and taking appropriate
enforcement action to address violations
of Federal consumer financial law’’;
‘‘issuing rules, orders, and guidance
implementing Federal consumer
financial law’’; and ‘‘performing such
support activities as may be necessary
or useful to facilitate the other functions
of the Bureau.’’ 10 Put simply, Congress
envisioned that the Bureau would use
its market monitoring work to inform its
activities, all with the express purpose
of ‘‘ensuring that all consumers have
access to markets for consumer financial
products and services and that markets
for consumer financial products and
services are fair, transparent, and
competitive.’’ 11
To achieve these ends, Congress took
care to ensure that the Bureau had the
tools necessary to effectively monitor for
risks in the markets for consumer
financial products and services. It
granted the Bureau authority ‘‘to gather
information from time to time regarding
the organization, business conduct,
markets, and activities of covered
persons and service providers.’’ 12 In
particular, Congress authorized the
Bureau to ‘‘require covered persons and
service providers participating in
consumer financial services markets to
file with the Bureau, under oath or
otherwise, in such form and within such
reasonable period of time as the Bureau
may prescribe by rule or order, annual
or special reports, or answers in writing
to specific questions,’’ that would
furnish the Bureau with such
information ‘‘as necessary for the
Bureau to fulfill the monitoring . . .
responsibilities imposed by
Congress.’’ 13
To assist the Bureau in allocating
resources to perform its monitoring,
Congress also identified a nonexhaustive list of factors that the Bureau
may consider, including ‘‘likely risks
and costs to consumers associated with
buying or using a type of consumer
10 12
U.S.C. 5511(c).
U.S.C. 5511(a).
12 12 U.S.C. 5512(c)(4)(A).
13 12 U.S.C. 5512(c)(4)(B)(ii).
11 12
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financial product or service’’; 14
‘‘understanding by consumers of the
risks of a type of consumer financial
product or service’’; 15 ‘‘the legal
protections applicable to the offering or
provision of a consumer financial
product or service, including the extent
to which the law is likely to adequately
protect consumers’’; 16 ‘‘the extent, if
any, to which the risks of a consumer
financial product or service may
disproportionately affect traditionally
underserved consumers’’; 17 and ‘‘the
types, number, and other pertinent
characteristics of covered persons that
offer or provide the consumer financial
product or service.’’ 18
Congress also anticipated that the
insights the Bureau would gain from
such market monitoring should at times
become available to a wider audience
than just Bureau employees. Not only
did Congress mandate that the Bureau
‘‘publish not fewer than 1 report of
significant findings of its monitoring
. . . in each calendar year,’’ but it also
instructed that the Bureau may make
non-confidential information available
to the public ‘‘as is in the public
interest.’’ 19 Congress gave the Bureau
discretion to determine the format of
publication, authorizing the Bureau to
make the information available
‘‘through aggregated reports or other
appropriate formats designed to protect
confidential information in accordance
with [specified protections in this
section].’’ 20 These instructions
regarding public release of market
monitoring information align with one
of the Bureau’s ‘‘primary functions’’
mentioned above—to ‘‘publish[ ]
information relevant to the functioning
of markets for consumer financial
products and services to identify risks to
consumers and the proper functioning
of such markets.’’ 21
The Bureau takes its market
monitoring obligations seriously, and it
has incorporated valuable insights
gained to date from such monitoring in
conducting the multiple functions
assigned to it under the CFPA,
including its supervisory and
enforcement efforts, as well as its
rulemaking, consumer education, and
other functions.22 As discussed in
14 12
U.S.C. 5512(c)(2)(A).
U.S.C. 5512(c)(2)(B).
16 12 U.S.C. 5512(c)(2)(C).
17 12 U.S.C. 5512(c)(2)(E).
18 12 U.S.C. 5512(c)(2)(F).
19 12 U.S.C. 5512(c)(3).
20 12 U.S.C. 5512(c)(3)(B).
21 12 U.S.C. 5511(c)(3).
22 See, e.g., CFPB Semiannual Regulatory Agenda,
87 FR 5326, 5328 (Jan. 31, 2022) (‘‘The Bureau’s
market monitoring work assists in identifying issues
15 12
Continued
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further detail below, this proposed rule
seeks to continue and build upon that
commitment by creating an order
registry to accomplish a number of
goals, with a particular focus on
monitoring for risks to consumers
related to repeat offenders of consumer
protection law. A public registry of
agency and court orders issued or
obtained in connection with violations
of law would help the Bureau and the
broader public monitor trends
concerning corporate recidivism relating
to consumer protection law, including
areas where prior violations of law are
indicia of risk to consumers.
More generally, entities subject to
such public orders relating to the
offering or provision of consumer
financial products and services may
pose ongoing risks to consumers in the
markets for those products and services.
A comprehensive collection of such
public orders would shed light on how
laws are being enforced across
consumer protection laws, jurisdictions,
and markets, and help identify trends
and potential gaps in enforcement. Both
heightened enforcement and the
absence of enforcement could possibly
provide information regarding risks to
consumers—the former as evidence that
government agencies with various
jurisdictions have identified the need to
enforce consumer protection laws, and
the latter as potential evidence of less
risk to consumers, or perhaps of
inattention by regulatory agencies. A
centralized, up-to-date repository of
such public orders would provide
valuable market-based insight that the
Bureau could use both to identify
concerning trends in these markets that
it otherwise might miss and to decide
which of several different policy tools
would best address the consumer risks
presented by these trends. In short, the
information sought would significantly
increase the Bureau’s ability to identify,
for potential future rulemaking work.’’); Payday,
Vehicle, and Certain High-Cost Installment Loans,
82 FR 54472, 54475, 54488, 54498 (Nov. 17, 2017)
(citing information obtained through Bureau market
monitoring efforts); Arbitration Agreements, 82 FR
33210, 33220 (July 19, 2017) (same). See also, e.g.,
Consumer Fin. Prot. Bureau, Buy Now, Pay Later:
Market trends and consumer impacts (Sept. 2022),
https://files.consumerfinance.gov/f/documents/
cfpb_buy-now-pay-later-market-trends-consumerimpacts_report_2022-09.pdf (publishing
information obtained through Bureau market
monitoring efforts); Consumer Fin. Prot. Bureau,
Consumer Credit Trends: Credit Card Line
Decreases (June 2022), https://
files.consumerfinance.gov/f/documents/cfpb_creditcard-line-decreases_report_2022-06.pdf (same);
Consumer Fin. Prot. Bureau, Data Point: Checking
Account Overdraft at Financial Institutions Served
by Core Processors (Dec. 2021), https://
files.consumerfinance.gov/f/documents/cfpb_
overdraft-core-processors_report_2021-12.pdf
(same).
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understand, and ultimately prevent
harm in the markets for consumer
financial products and services. These
and other core goals of the information
the Bureau proposes to collect are
discussed further below at section IV.
C. Congress Authorized the Bureau To
Supervise Certain Nonbank Covered
Persons
One of the Bureau’s key
responsibilities under the CFPA is the
supervision of very large banks, thrifts,
and credit unions, and their affiliates,
and certain nonbank covered persons.
Congress has authorized the Bureau to
supervise certain categories of nonbank
covered persons under CFPA section
1024.23 Congress provided that the
Bureau ‘‘shall require reports and
conduct examinations on a periodic
basis’’ of nonbank covered persons
subject to its supervisory authority for
purposes of ‘‘assessing compliance with
the requirements of Federal consumer
financial law’’; ‘‘obtaining information
about the activities and compliance
systems or procedures of such
person[s]’’; and ‘‘detecting and assessing
risks to consumers and to markets for
consumer financial products and
services.’’ 24 Pursuant to the CFPA, the
Bureau implements a risk-based
supervision program under which it
prioritizes nonbank covered persons for
supervision in accordance with its
assessment of risks posed to
consumers.25 In making prioritization
determinations, the Bureau considers
several factors, including ‘‘the asset size
of the covered person,’’ 26 ‘‘the volume
of transactions involving consumer
financial products or services in which
the covered person engages,’’ 27 ‘‘the
risks to consumers created by the
provision of such consumer financial
products or services,’’ 28 ‘‘the extent to
which such institutions are subject to
oversight by State authorities for
consumer protection,’’ 29 and ‘‘any other
factors that the Bureau determines to be
relevant to a class of covered
persons.’’ 30 CFPA section
1024(b)(7)(A)–(C) further authorizes the
Bureau to prescribe rules to facilitate
supervision and assessing and detecting
risks to consumers, as well as to ensure
that supervised nonbanks ‘‘are
legitimate entities and are able to
23 12
U.S.C. 5514.
U.S.C. 5514(b)(1).
25 12 U.S.C. 5514(b)(2).
26 12 U.S.C. 5514(b)(2)(A).
27 12 U.S.C. 5514(b)(2)(B).
28 12 U.S.C. 5514(b)(2)(C).
29 12 U.S.C. 5514(b)(2)(D).
30 12 U.S.C. 5514(b)(2)(E).
24 12
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perform their obligations to
consumers.’’ 31
Under those authorities, the Bureau is
proposing to require that certain
supervised nonbanks annually submit a
written statement regarding the
company’s compliance with any
outstanding registered orders. The
statement would be signed by a
designated senior executive. In the
written statement, the attesting
executive would generally describe the
steps the executive has undertaken to
review and oversee the company’s
activities subject to the applicable order
for the preceding calendar year. The
executive would then provide an
attestation regarding the company’s
compliance with the order.
The Bureau believes that the proposed
written statement would assist it in
achieving each of the statutory
objectives listed in CFPA section
1024(b)(7)(A)–(C). Therefore, each of
those objectives would provide a
distinct, independently sufficient basis
for the proposed written-statement
requirements.32
First, requiring submission of an
annual written statement would
facilitate Bureau supervision and the
Bureau’s assessment and detection of
risks to consumers. In particular, as part
of the Bureau’s risk-based supervision
program, the Bureau considers
supervised nonbanks’ compliance
record regarding consumer protection
law when prioritizing supervisory
resources. The requirement would also
provide valuable information in
connection with other aspects of the
Bureau’s supervisory work and would
assist the Bureau’s monitoring efforts.
For example, the Bureau recently
announced that it is increasing its
supervisory focus on repeat offenders,
particularly those who violate agency or
court orders.33 As part of that focus, it
created a Repeat Offender Unit within
its supervision program focused on: (i)
reviewing and monitoring the activities
of repeat offenders; (ii) identifying the
root cause of recurring violations; (iii)
pursuing and recommending solutions
and remedies that hold entities
accountable for failing to consistently
comply with Federal consumer financial
law; and (iv) designing a model for
order review and monitoring that
reduces the occurrences of repeat
offenses.34 The Repeat Offender Unit is
31 12
U.S.C. 5514(b)(7)(A)–(C).
a more extended discussion of these
matters, see section IV(D) below.
33 See Consumer Fin. Prot. Bureau, Supervisory
Highlights: Issue 28, Fall 2022, at 2–3 (Nov. 2022),
https://files.consumerfinance.gov/f/documents/
cfpb_supervisory-highlights_issue-28_2022-11.pdf.
34 Id.
32 For
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tasked more generally with enhancing
detection of repeat offenses, developing
processes for rapid review and response
designed to address root causes of
violations, and recommending
corrective actions designed to stop
recidivist behavior.35 The Bureau
anticipates that the proposed annual
written statement would greatly
facilitate that work, among other things.
Second, the proposed written
statement requirements would help
ensure the company providing the
statement is a legitimate entity and is
able to perform its obligations to
consumers. Information regarding a
company’s compliance with outstanding
orders is probative of whether the
company is willing and able to satisfy
its legal obligations and of whether the
company treats potential sanctions for
repeat violations of relevant consumer
protection laws as a mere cost of doing
business. The Bureau also believes that
the written-statement requirement
would provide an incentive for
supervised nonbanks to perform their
obligations to consumers by requiring
supervised nonbanks to specify which
individual executives are responsible
for achieving compliance with
particular orders. Publication of the
identity of this executive would
enhance the incentive.
D. Consultation With Other Agencies in
Exercising the Authorities Relied Upon
in the Proposal
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One of the authorities cited as a
proposed basis for components of the
Bureau’s proposed rule is CFPA section
1022(c)(7), which provides that the
‘‘Bureau may prescribe rules regarding
registration requirements applicable to a
covered person, other than an insured
depository institution, insured credit
union, or related person.’’ 36 Congress
provided that ‘‘[i]n developing and
implementing registration requirements
under [section 1022(c)(7)], the Bureau
shall consult with State agencies
regarding requirements or systems
(including coordinated or combined
systems for registration), where
appropriate.’’ 37 CFPA section
1024(b)(7)—the proposed statutory basis
for the written-statement requirement—
includes a similar consultation
provision.38
35 Id.
at 3.
U.S.C. 5512(c)(7)(A).
37 12 U.S.C. 5512(c)(7)(C).
38 12 U.S.C. 5514(b)(7)(D) (‘‘In developing and
implementing requirements under this paragraph,
the Bureau shall consult with State agencies
regarding requirements or systems (including
coordinated or combined systems for registration),
where appropriate.’’).
36 12
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Accordingly, the Bureau has
consulted with State agencies, including
State agencies involved in supervision
of nonbanks and State agencies charged
with law enforcement, in crafting the
proposed registration requirements and
system. In developing this proposal, the
Bureau considered the input it received
from State agencies, including concerns
expressed regarding possible
duplication between any registration
system the Bureau might build and
existing registration systems.
In addition, before proposing a rule
under the Federal consumer financial
laws, including CFPA sections 1022(b)–
(c) and 1024(b), the Bureau must consult
with appropriate prudential regulators
or other Federal agencies regarding
consistency with prudential, market, or
systemic objectives administered by
such agencies.39 In developing this
proposal, the Bureau consulted with
prudential regulators and other Federal
agencies and considered the input it
received.
The Bureau also consulted with tribal
governments regarding this rulemaking
pursuant to CFPA sections 1022(c)(7)(C)
and 1024(b)(7)(D).40 Also, during the
rulemaking process for issuing rules
under the Federal consumer financial
laws, Bureau policy is to consult with
appropriate tribal governments.41 In
developing this proposal, the Bureau
considered the input of tribal
governments, including concerns tribal
governments expressed regarding
maintaining tribal sovereignty.
III. Legal Authority
The Bureau is issuing this proposal
pursuant to its authority under the
CFPA. This section includes a general
discussion of several CFPA provisions
on which the Bureau relies in this
rulemaking. Additional description of
these authorities, and the proposal’s
reliance on them, is also contained in
section IV below and in the section-bysection analysis.
39 12 U.S.C. 5512(b)(2)(B) (‘‘In prescribing a rule
under the Federal consumer financial laws . . . the
Bureau shall consult with the appropriate
prudential regulators or other Federal agencies prior
to proposing a rule and during the comment process
regarding consistency with prudential, market, or
systemic objectives administered by such agencies
. . . .’’).
40 See 12 U.S.C. 5512(c)(7)(C), 5514(b)(7)(D)
(requiring consultation with ‘‘State agencies’’); see
also 12 U.S.C. 5481(27) (term ‘‘State’’ includes ‘‘any
federally recognized Indian tribe, as defined by the
Secretary of the Interior under’’ 25 U.S.C. 5131(a)).
41 See Consumer Fin. Prot. Bureau, Policy for
Consultation with Tribal Governments, https://
files.consumerfinance.gov/f/201304_cfpb_
consultations.pdf.
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A. CFPA Section 1022(b)
CFPA section 1022(b)(1) authorizes
the Bureau to prescribe rules ‘‘as may be
necessary or appropriate to enable the
Bureau to administer and carry out the
purposes and objectives of the Federal
consumer financial laws, and to prevent
evasions thereof.’’ 42 Among other
statutes, the CFPA—i.e., title X of the
Dodd-Frank Wall Street Reform and
Consumer Protection Act (Dodd-Frank
Act)—is a Federal consumer financial
law.43 Accordingly, in issuing the
proposed rule, the Bureau would be
exercising its authority under CFPA
section 1022(b) to prescribe rules that
carry out the purposes and objectives of
the CFPA and prevent evasions thereof.
CFPA section 1022(b)(2) prescribes
certain standards for rulemaking that
the Bureau must follow in exercising its
authority under section 1022(b)(1).44
For a discussion of the Bureau’s
standards for rulemaking under CFPA
section 1022(b)(2), see section VII
below.
B. CFPA Section 1022(c)(1)–(4) and (7)
The CFPB’s proposals to (1) require
nonbank covered persons to inform the
CFPB that they have an applicable order
entered against them, (2) provide basic
identifying and administrative
information and information regarding
the orders (including copies of the
orders), and (3) publish this
information, are authorized under CFPA
sections 1022(c)(1) through (4) and
1022(c)(7), as well as CFPA section
1022(b).45
CFPA sections 1022(c)(1)–(4)
authorize the CFPB to prescribe rules to
collect information from covered
persons for purposes of monitoring for
risks to consumers in the offering or
provision of consumer financial
products or services. The CFPB is
collecting this information to monitor,
on an ongoing basis, both individual
and market-wide compliance with
consumer protection laws and orders for
alleged violations of those laws. The
CFPB considers violations of consumer
protection laws probative of ‘‘risks to
consumers in the offering and provision
of consumer financial products or
services.’’ 46 In particular, the CFPB
believes that entities subject to public
orders enforcing the law relating to the
offering or provision of consumer
financial products and services may
42 12
U.S.C. 5512(b)(1).
12 U.S.C. 5481(14) (defining ‘‘Federal
consumer financial law’’ to include the provisions
of title X of the Dodd-Frank Act).
44 See 12 U.S.C. 5512(b)(2).
45 12 U.S.C. 5512(b), (c)(1)–(4).
46 12 U.S.C. 5512(c)(1).
43 See
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pose heightened and ongoing risks to
consumers in the markets for those
products and services. It further
anticipates that monitoring for such
orders would allow the CFPB to track
specific instances of, and more general
developments regarding, potential
corporate recidivism, which presents
special risks to consumers for reasons
discussed in greater detail below. The
Bureau also believes that enforcement
trends, as shown by public orders
enforcing the law across consumer
protection laws, jurisdictions, and
markets, would potentially shed light on
risks to consumers in the offering or
provision of consumer financial
products or services. Heightened
enforcement could indicate areas where
numerous regulators have identified risk
of harm to consumers. Conversely, the
absence of enforcement in other areas
could indicate less risk to consumers, or
perhaps a lack of attention by regulators
that shows a need for further
monitoring.
More specifically, section 1022(c)(1)
of the CFPA requires the Bureau to
support its rulemaking and other
functions by monitoring for risks to
consumers in the offering or provision
of consumer financial products or
services, including developments in the
markets for such products or services.47
As discussed further below at section
IV(B), section 1022(c)(2) of the CFPA
authorizes the Bureau to allocate
resources to perform the monitoring
required by section 1022 by considering
‘‘likely risks and costs to consumers
associated with buying or using a type
of consumer financial product or
service,’’ ‘‘understanding by consumers
of the risks of a type of consumer
financial product or service,’’ ‘‘the legal
protections applicable to the offering or
provision of a consumer financial
product or service, including the extent
to which the law is likely to adequately
protect consumers,’’ ‘‘rates of growth in
the offering or provision of a consumer
financial product or service,’’ ‘‘the
extent, if any, to which the risks of a
consumer financial product or service
may disproportionately affect
traditionally underserved consumers,’’
and ‘‘the types, number, and other
pertinent characteristics of covered
persons that offer or provide the
consumer financial product or
service.’’ 48 Section 1022(c)(4)(A) of the
CFPA authorizes the Bureau to conduct
47 12 U.S.C. 5512(c)(1) (‘‘In order to support its
rulemaking and other functions, the Bureau shall
monitor for risks to consumers in the offering or
provision of consumer financial products or
services, including developments in markets for
such products or services.’’).
48 12 U.S.C. 5512(c)(2)(A)–(F).
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the monitoring required by section 1022
by ‘‘gather[ing] information from time to
time regarding the organization,
business conduct, markets, and
activities of covered persons and service
providers.’’ 49 The Bureau is authorized
to gather this information by, among
other things, requiring covered persons
participating in consumer financial
services markets to file annual or special
reports, or answers in writing to specific
questions, that furnish information ‘‘as
necessary for the Bureau to fulfill the
monitoring . . . responsibilities
imposed by Congress.’’ 50 The Bureau
may require such information to be filed
‘‘in such form and within such
reasonable period of time as the Bureau
may prescribe by rule or order.’’ 51
Section 1022(c)(7)(A) of the CFPA
further authorizes the Bureau to
‘‘prescribe rules regarding registration
requirements applicable to a covered
person, other than an insured
depository institution, insured credit
union, or related person.’’ 52 Section
1022(c)(7)(B) provides that, ‘‘[s]ubject to
rules prescribed by the Bureau, the
Bureau may publicly disclose
registration information to facilitate the
ability of consumers to identify covered
persons that are registered with the
Bureau.’’ 53 The Bureau interprets
section 1022(c)(7)(B) as authorizing it to
publish registration information
required by Bureau rule under section
1022(c)(7)(A) so that consumers may
identify the nonbank covered persons
on which the Bureau has imposed
registration requirements.
Finally, CFPA section 1022(c)(3)
authorizes the Bureau to publicly
release information obtained pursuant
to CFPA section 1022, subject to
limitations specified therein.54
Specifically, section 1022(c)(3) states
that the Bureau ‘‘may make public such
information obtained by the Bureau
under [section 1022] as is in the public
interest, through aggregated reports or
other appropriate formats designed to
protect confidential information in
accordance with [specified protections
49 12
U.S.C. 5512(c)(4)(A).
U.S.C. 5512(c)(4)(B)(ii) (‘‘In order to gather
information described in subparagraph (A), the
Bureau may . . . require covered persons and
service providers participating in consumer
financial services markets to file with the Bureau,
under oath or otherwise, in such form and within
such reasonable period of time as the Bureau may
prescribe by rule or order, annual or special reports,
or answers in writing to specific questions,
furnishing information described in paragraph (4),
as necessary for the Bureau to fulfill the monitoring,
assessment, and reporting responsibilities imposed
by Congress.’’).
51 12 U.S.C. 5512(c)(4)(B)(ii).
52 12 U.S.C. 5512(c)(7)(A).
53 12 U.S.C. 5512(c)(7)(B).
54 See 12 U.S.C. 5512(c)(3)(B).
50 12
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in section 1022].’’ 55 Information
submitted to the Bureau’s registry is
protected by, among other things, CFPA
section 1022(c)(8), which states that
‘‘[i]n collecting information from any
person, publicly releasing information
held by the Bureau, or requiring covered
persons to publicly report information,
the Bureau shall take steps to ensure
that proprietary, personal, or
confidential consumer information that
is protected from public disclosure
under [the Freedom of Information Act,
5 U.S.C. 552(b)] or [the Privacy Act of
1974, 5 U.S.C. 552a,] or any other
provision of law, is not made public
under [the CFPA].’’ 56 The CFPB’s
registry is designed to not collect any
proprietary, personal, or confidential
consumer information, and thus, the
CFPB will not publish, or require public
reporting of, any protected information.
C. CFPA Section 1024(b)
As explained above, section 1024(b)
of the CFPA authorizes the Bureau to
exercise supervisory authority over
certain nonbank covered persons.57
Section 1024(b)(1) requires the Bureau
to periodically require reports and
conduct examinations of persons subject
to its supervisory authority to assess
compliance with Federal consumer
financial law, obtain information about
the activities and compliance systems or
procedures of persons subject to its
supervisory authority, and detect and
assess risks to consumers and to markets
for consumer financial products and
services.58 Section 1024(b)(2) requires
that the Bureau exercise its supervisory
authority over nonbank covered persons
based on its assessment of risks posed
55 12
U.S.C. 5512(c)(3)(B).
U.S.C. 5512(c)(8).
57 The nonbank covered persons over which the
Bureau has supervisory authority are listed in
section 1024(a)(1) of the CFPA. They include
covered persons that: offer or provide origination,
brokerage, or servicing of loans secured by real
estate for use by consumers primarily for personal,
family, or household purposes, or loan modification
or foreclosure relief services in connection with
such loans; are larger participants of a market for
consumer financial products or services, as defined
by Bureau rule; the Bureau has reasonable cause to
determine, by order, that the covered person is
engaging, or has engaged, in conduct that poses
risks to consumers with regard to the offering or
provision of consumer financial products or
services; offer or provide private education loans;
or offer or provide payday loans. 12 U.S.C.
5514(a)(1).
58 12 U.S.C. 5514(b)(1) provides: ‘‘The Bureau
shall require reports and conduct examinations on
a periodic basis of persons described in subsection
(a)(1) for purposes of—(A) assessing compliance
with the requirements of Federal consumer
financial law; (B) obtaining information about the
activities and compliance systems or procedures of
such person; and (C) detecting and assessing risks
to consumers and to markets for consumer financial
products and services.’’
56 12
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to consumers in the relevant product
markets and geographic markets, and
taking into consideration, as applicable:
‘‘(A) the asset size of the covered
person; (B) the volume of transactions
involving consumer financial products
or services in which the covered person
engages; (C) the risks to consumers
created by the provision of such
consumer financial products or services;
(D) the extent to which such institutions
are subject to oversight by State
authorities for consumer protection; and
(E) any other factors that the Bureau
determines to be relevant to a class of
covered persons.’’ 59
Section 1024(b)(7) of the CFPA in turn
identifies three independent sources of
Bureau rulemaking authority. First,
section 1024(b)(7)(A) requires the
Bureau to prescribe rules to facilitate the
supervision of nonbank covered persons
subject to the Bureau’s supervisory
authority and assessment and detection
of risks to consumers.60 Second, section
1024(b)(7)(B) authorizes the Bureau to
require nonbank covered persons
subject to its supervisory authority to
‘‘generate, provide, or retain records for
the purposes of facilitating supervision
of such persons and assessing and
detecting risks to consumers.’’ 61 This
section authorizes the Bureau to require
nonbank covered persons subject to its
supervisory authority to create reports
regarding their activities for submission
to the Bureau. ‘‘Records’’ is a broad term
encompassing any ‘‘[i]nformation that is
inscribed on a tangible medium or that,
having been stored in an electronic or
other medium, is retrievable in
perceivable form,’’ or any ‘‘documentary
account of past events.’’ 62 Section
1024(b)(7)(B) thus authorizes the Bureau
to require nonbank covered persons
subject to its supervisory authority to
‘‘generate’’—i.e., create 63—reports
regarding their activities and then
‘‘provide’’ them to the Bureau.64
59 12
U.S.C. 5514(b)(2).
U.S.C. 5514(b)(7)(A) (‘‘The Bureau shall
prescribe rules to facilitate supervision of persons
described in subsection (a)(1) and assessment and
detection of risks to consumers.’’).
61 12 U.S.C. 5514(b)(7)(B) (‘‘The Bureau may
require a person described in subsection (a)(1), to
generate, provide, or retain records for the purposes
of facilitating supervision of such persons and
assessing and detecting risks to consumers.’’).
62 Record, Black’s Law Dictionary (11th ed. 2019);
accord, e.g., Andrews v. Sirius XM Radio Inc., 932
F.3d 1253, 1259 (9th Cir. 2019) (citing Black’s Law
Dictionary and Webster’s Third New International
Dictionary definitions of ‘‘record’’).
63 See Generate, Merriam-Webster Online
Dictionary, https://www.merriam-webster.com/
dictionary/generate (defining ‘‘generate’’ as ‘‘to
bring into existence’’).
64 The Bureau’s authority under section
1024(b)(7)(B) to require generation of records
complements its authority under section 1024(b)(1)
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The third source of authority, CFPA
section 1024(b)(7)(C), authorizes the
Bureau to prescribe rules regarding
nonbank covered persons subject to its
supervisory authority ‘‘to ensure that
such persons are legitimate entities and
are able to perform their obligations to
consumers.’’ 65 Under this section, the
Bureau may prescribe substantive rules
to ensure that supervised entities are
willing and able to comply with their
legal, financial, and other obligations to
consumers, including those imposed by
Federal consumer financial law. The
term ‘‘obligations’’ encompasses
‘‘anything that a person is bound to do
or forbear from doing,’’ including duties
‘‘imposed by law, contract, [or]
promise.’’ 66 The Bureau construes the
phrase ‘‘legitimate entities’’ as
encompassing an inquiry into whether
an entity takes seriously its duty to
‘‘[c]omply[ ] with the law.’’ 67 Legitimate
entities do not treat the risk of
enforcement actions for violations of
legal obligations as a mere cost of doing
business. Instead, legitimate entities
work in good faith to have protocols in
place aimed at ensuring compliance
with their legal obligations and
detecting and appropriately addressing
any legal violations that the entity may
commit.
While each of the three subparagraphs
of section 1024(b)(7) discussed above
operates as independent sources of
rulemaking authority, the subparagraphs
also overlap in several respects, such
that a particular rule may be (and, in the
case of this proposal, is) authorized by
more than one of the subparagraphs. For
example, rules requiring the generation,
provision, or retention of records
generally will be authorized under both
subparagraphs 1024(b)(7)(A) and (B).
That is so because subparagraph
1024(b)(7)(B) makes clear that the
Bureau’s authority under subparagraph
to ‘‘require reports . . . on a periodic basis’’ from
nonbank covered persons subject to its supervisory
authority. 12 U.S.C. 5514(b)(1).
65 12 U.S.C. 5514(b)(7)(C) (‘‘The Bureau may
prescribe rules regarding a person described in
subsection (a)(1), to ensure that such persons are
legitimate entities and are able to perform their
obligations to consumers. Such requirements may
include background checks for principals, officers,
directors, or key personnel and bonding or other
appropriate financial requirements.’’).
66 Obligation, Black’s Law Dictionary (11th ed.
2019).
67 Legitimate, Black’s Law Dictionary (11th ed.
2019) (defining ‘‘legitimate’’ as ‘‘[c]omplying with
the law; lawful’’); see also Legitimate, Webster’s
Second New International Dictionary (1934)
(defining ‘‘legitimate’’ as ‘‘[a]ccordant with law or
with established legal forms and requirements;
lawful’’); Legitimate, Merriam-Webster Online
Dictionary, https://www.merriam-webster.com/
dictionary/legitimate (defining ‘‘legitimate’’ as
‘‘accordant with law or with established legal forms
and requirements’’).
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1024(b)(7)(A) to prescribe rules to
facilitate supervision and assessment
and detection of risks to consumers
extends to requiring covered persons
subject to the Bureau’s supervisory
authority ‘‘to generate, provide or retain
records for the purposes of facilitating
supervision of such persons and
assessing and detecting risks to
consumers.’’ 68
IV. Why the Bureau Is Issuing This
Proposal
A. Overview
The Bureau is issuing this proposal to
require nonbanks to report certain
public agency and court orders because
the Bureau believes that not only the
Bureau, but also consumers, the public,
and other potential users of the
proposed registration system would
benefit from the creation and
maintenance of a central public
repository for information regarding
certain public orders that have been
imposed upon nonbank covered
persons.
Agency and court orders are not
suggestions. They are legally binding
orders intended to prevent and remedy
violations of the law. When an agency
issues such an order, or seeks a court
order, it typically has determined that
the problems at the applicable entity are
sufficiently serious to merit the
expenditure of that agency’s limited
resources and perhaps the attention of
the courts.
By establishing an effective system for
collecting public orders enforcing the
law across different sectors of entity
misconduct, the proposed rule would
allow the Bureau to more effectively
monitor for potential risks to consumers
arising from both individual instances
and broader patterns of recidivism.
Persons that are subject to one or more
orders that would require registration
under the proposal may pose greater
risks to consumers than others. And the
existence of multiple orders may serve
as a particular ‘‘red flag’’ with respect to
risks to consumers and as a signal of
potential recidivism. The existence of
multiple orders may also indicate
broader problems at the entity that pose
related risks to consumers—including
lack of sufficient controls related to the
68 12 U.S.C. 5514(b)(7)(B); see also, e.g., Barton v.
Barr, 140 S. Ct. 1442, 1453 (2020) (‘‘redundancies
. . . in statutory drafting’’ may reflect ‘‘a
congressional effort to be doubly sure’’); Atlantic
Richfield Co. v. Christian, 140 S. Ct. 1335, 1350 n.5
(2020) (concluding that ‘‘Congress employed a belt
and suspenders approach’’ in statute); Marx v. Gen.
Revenue Corp., 568 U.S. 371, 383–85 (2013)
(statutory language is ‘‘not . . . superfluous if
Congress included it to remove doubt’’ about an
issue).
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offering and provision of consumer
financial products and services,
inadequate compliance management
systems and processes, and an
unwillingness or inability of senior
management to comply with laws
subject to the Bureau’s jurisdiction.
The Bureau also believes that a
comprehensive collection of public
agency and court orders enforcing the
law would help it identify broader
trends related to risks to consumers in
the offering and provision of consumer
financial products and services.
Notably, by studying how laws are being
enforced across consumer protection
laws, jurisdictions, and markets, the
Bureau believes it will be able to
identify indications of risks to
consumers. For example, the existence
of enforcement activity in multiple
jurisdictions among certain products,
services, or features, or related to certain
legal requirements, or concerning
certain consumer risks, could indicate
areas of heightened consumer risk that
warrant further attention by regulators.
By contrast, the absence of enforcement
activity in certain areas could
potentially indicate less risk to
consumers or could be evidence of less
attention by regulators and a need to
increase monitoring activities. The
Bureau thus believes that obtaining
information regarding such orders will
enable it to better monitor risks to
consumers in the offering or provision
of consumer financial products and
services, including developments in the
markets for such products and services,
under its authority at CFPA section
1022(c).69
The Bureau further anticipates that
making a registry of these orders
publicly available would, among other
things, allow other regulators at the
Federal, State, and local level tasked
with protecting consumers to realize the
same market monitoring benefits that
the Bureau anticipates obtaining from
this rule. Publication would also
facilitate the ability of consumers to
identify the covered persons that are
registered with the Bureau. In addition,
publication would enhance the ability
of consumer advocacy organizations,
researchers, firms conducting due
diligence, and the media to locate,
review, and monitor orders enforcing
the law.
The Bureau believes that the proposal
also will assist its supervisory work by
collecting additional information in the
form of a written statement from certain
entities that are subject to the Bureau’s
supervision and examination authority.
As explained in greater detail below,
requiring certain supervised entities to
designate a senior executive officer with
knowledge of, and control over, the
entity’s efforts to comply with each
relevant order, and requiring that
executive to submit the information
required to be contained in the
proposed written statement, would
facilitate Bureau supervision efforts by
providing important information about
the entity, helping to prioritize the
Bureau’s supervisory activities, and
otherwise assisting the Bureau’s
supervisory work. These requirements
would also help ensure that the relevant
entities are ‘‘legitimate’’ and ‘‘are able to
perform their obligations to consumers’’
under CFPA section 1024(b)(7)(C), in
part by incentivizing entities who might
otherwise not take seriously their
obligations to instead endeavor to
comply with consumer protection laws
and by highlighting the designated
senior executive’s personal
responsibility for such compliance.70
B. Why the Bureau Is Interested in
Issuing a Rule To Monitor for Risks
Associated With Certain Agency and
Court Orders
The Bureau believes that requiring
registration and submissions regarding
certain agency and court orders as
proposed would assist the Bureau in
monitoring for risks to consumers in the
offering or provision of consumer
financial products or services, in
accordance with CFPA section
1022(c).71 The proposal’s requirements
to submit and update information
regarding such agency and court orders
related to the provision or offering of
consumer financial products or services
would provide important support for a
variety of Bureau functions.
As the principal Federal regulator
responsible for administering the
Federal consumer financial laws, the
Bureau’s ability to effectively identify
and monitor for potential risks to
consumers arising out of apparent
violations of core Federal and State
consumer laws is vital to the Bureau
achieving its statutory purposes and
objectives. Such information will help
the Bureau satisfy its statutory
obligation to monitor for risks to
consumers in the markets for consumer
financial products and services.72 For
example, the system would enable the
Bureau to better identify an increase in
the number of orders in a particular
product market, in a particular
geographic market, addressing similar
consumer risks, or with other common
70 12
U.S.C. 5514(b)(7)(C).
U.S.C. 5512(c).
72 See 12 U.S.C. 5512(c)(1).
71 12
69 12
U.S.C. 5512(c).
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features. The Bureau would be able to
use this information to identify areas of
heightened consumer risk that warrant
further attention, thus helping to inform
and prioritize its other market
monitoring efforts, including research
regarding particular markets and the
risks to consumers presented in such
markets.73 By contrast, the absence of
enforcement activity in certain areas
could indicate less risk to consumers, or
it potentially could be evidence of less
attention by regulators and a need to
increase monitoring and other
supervisory or regulatory activities.
Likewise, the Bureau’s rulemaking
efforts would benefit from information
about such orders, so that the Bureau
might, for example, consider drafting
rules to address identified consumer
risks.74 The Bureau’s consumer
response function would be informed by
increased monitoring of risks and
trends, as the Bureau could direct
resources or investigate risks in a certain
area or on a certain topic.75 And the
Bureau may choose to direct its
consumer education efforts toward
educating consumers about risks
identified via the proposed registry.76
The information that the Bureau
would obtain under the proposed rule
would also be valuable to the Bureau in
exercising its supervisory and
enforcement functions.77 Among other
things, the information may be
informative when the Bureau makes
determinations whether a covered
person is engaging, or has engaged, in
73 See 12 U.S.C. 5511(c)(3) (identifying as one of
the ‘‘primary functions of the Bureau . . .
collecting, researching, monitoring, and publishing
information relevant to the functioning of markets
for consumer financial products and services to
identify risks to consumers and the proper
functioning of such markets’’).
74 See 12 U.S.C. 5511(c)(5) (identifying as one of
the ‘‘primary functions of the Bureau . . . issuing
rules, orders, and guidance implementing Federal
consumer financial law’’).
75 See 12 U.S.C. 5511(c)(2) (identifying as one of
the ‘‘primary functions of the Bureau . . .
collecting, investigating, and responding to
consumer complaints’’); see also Consumer Fin.
Prot. Bureau, Consumer Response Annual Report:
January 1—December 31, 2021, at 5–8 (Mar. 2022),
https://files.consumerfinance.gov/f/documents/
cfpb_2021-consumer-response-annual-report_202203.pdf (describing the Bureau’s consumercomplaint process and how the Bureau uses
complaint information).
76 See 12 U.S.C. 5511(c)(1) (identifying as one of
the ‘‘primary functions of the Bureau . . .
conducting financial education programs’’).
77 See 12 U.S.C. 5511(c)(4) (identifying as one of
the ‘‘primary functions of the Bureau . . .
supervising covered persons for compliance with
Federal consumer financial law, and taking
appropriate enforcement action to address
violations of Federal consumer financial law’’).
Section IV(D) below, and the section-by-section
discussion of proposed § 1092.203, contain
additional discussion of how the proposed rule
would facilitate the Bureau’s supervisory efforts.
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conduct that poses risk to consumers
with regard to the offering or provision
of consumer financial products or
services under CFPA section
1024(a)(1)(C), such that the Bureau may
determine to subject the covered person
to Bureau supervision under that
provision.78 The information contained
in the proposed registry may also be
relevant in assessing civil penalties for
violations of Federal consumer financial
laws, given that Congress has provided
that such penalties should take into
account an entity’s ‘‘history of previous
violations’’ and ‘‘such other matters as
justice may require.’’ 79
Furthermore, there is a heightened
likelihood that entities that are subject
to public orders enforcing the law and
relating to the offering or provision of
consumer financial products and
services may pose risks to consumers in
the markets for those products and
services, and risk of consumer harm is
a significant factor that weighs heavily
in the Bureau’s decisions regarding the
general allocation of its resources.
Knowledge of whether a covered person
has engaged in previous violations of
consumer financial protection laws is
valuable information that the Bureau
considers when evaluating the risk of
consumer harm. In the Bureau’s
experience, entities that have previously
been subject to enforcement actions,
including those brought by local, State,
and other Federal authorities, present an
increased risk of committing violations
of laws subject to the Bureau’s
jurisdiction, and thus causing the
additional consumer harm associated
with such violations. Prior enforcement
actions are also likely to be a good
indication of continuing risks to
consumers present in a particular
market for consumer financial products
or services. Because the orders that
would be covered by the proposed rule
are regularly issued, modified, and
terminated, the Bureau needs to collect
this information regularly and on a
timely basis in order to stay abreast of
developments.
Although referrals from and other
information provided by other agencies
have been valuable to the Bureau’s
work, the Bureau currently often relies
on other agencies to take proactive steps
to contact it. Having access to a
78 See 12 U.S.C. 5514(a)(1)(C) (authorizing Bureau
orders subjecting nonbanks to supervision based
upon consumer complaints ‘‘or information from
other sources’’); 12 CFR part 1091 (Bureau
procedural rule to establish supervisory authority
over certain nonbank covered persons based on risk
determination).
79 See 12 U.S.C. 5555(c)(3)(D), (E). The Bureau
may consider certain matters identified in previous
enforcement actions published in the proposed
registry to be relevant under these provisions.
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centralized list of all relevant orders
entered against nonbanks would
significantly increase the Bureau’s
ability to monitor the market so that the
Bureau can identify, better understand,
and ultimately, prevent further
consumer harm, particularly from repeat
offenders. Recidivism—whether in the
form of a company that repeatedly
violates the law and as a result becomes
subject to multiple orders, or in the form
of a company that violates the orders to
which it is subject—poses particular
risks to consumers. Companies that
repeatedly violate the law do more than
just deprive consumers of protections in
the marketplace. They may also charge
their customers more in order to cover
the costs of any fines or other costs
resulting from the company’s legal
violations. In other words, consumers
may end up subsidizing corporate
malfeasance. When government orders
fail to deter future misconduct by a
company, that company’s operations are
more likely to present risk to
consumers. Thus, the existence of
multiple orders may be highly probative
of heightened risks to consumers in the
markets for consumer financial products
and services, including the risk of
noncompliance with laws subject to the
Bureau’s jurisdiction.
The Bureau believes that collecting
information about such public orders
across markets and agencies as proposed
will improve the Bureau’s efforts to
determine where entities, either as a
group or individually, are repeatedly
violating the law. The Bureau
particularly needs to be made aware of
entities that become subject to multiple
orders, or that are found to be out of
compliance with existing orders, as well
as of trends in such developments.
Systematic or repeat violations of the
law may indicate broader problems
within a market for consumer financial
products and services. Such problems
might include lack of sufficient controls
related to the offering and provision of
certain consumer financial products and
services, inadequate compliance
management systems and processes
within a set of market participants, and
an unwillingness or inability of senior
management at certain entities to
comply with Federal consumer financial
laws. The proposed registry would
provide a valuable mechanism to help
ensure that the Bureau is rapidly made
aware of such repeat offenders across a
range of markets and enforcement
agencies.
The Bureau believes that the proposed
registry would be especially useful with
respect to the particular nonbank
markets that are subject to the Bureau’s
supervision and examination authority
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under CFPA section 1024(a). In those
markets, the Bureau would be able to
take account of risks identified through
the proposed registry in conducting its
risk-based supervisory prioritization
and enforcement work. The Bureau
believes that the existence of an order
that would require registration under
the proposal is probative of a potential
need for supervisory examination, to the
extent that the nonbank is subject to the
Bureau’s supervision and examination
authorities. Under CFPA section
1024(b)(2), the Bureau is required to
exercise its supervisory authority in a
manner designed to ensure that such
exercise, with respect to persons
described in CFPA section 1024(a), is
based on the assessment by the Bureau
of the risks posed to consumers in the
relevant product markets and
geographic markets and taking into
consideration the factors enumerated at
CFPA section 1024(b)(2)(A)–(E).80
Depending upon the circumstances,
the Bureau may consider the existence
of an order requiring registration under
the proposal to be a risk factor under
these provisions for covered persons
subject to the proposed rule. CFPA
section 1024(b)(2)(C) refers to ‘‘the risks
to consumers created by the provision of
such consumer financial products or
services.’’ 81 The Bureau believes that
the existence of an order that would
require registration under the proposal
would be probative of such risks to
consumers. CFPA section 1024(b)(2)(D)
provides that the Bureau shall also take
into account ‘‘the extent to which such
institutions are subject to oversight by
State authorities for consumer
protection.’’ 82 The Bureau believes that
the existence of one or more orders
issued or obtained by the types of State
agencies described in the proposal in
connection with violations of law would
provide important and directly relevant
information regarding the extent to
which nonbanks are subject to oversight
by State authorities for consumer
protection. CFPA section 1024(b)(2)(E)
provides that the Bureau shall also take
into account ‘‘any other factors that the
Bureau determines to be relevant to a
class of covered persons.’’ 83 For the
classes of covered persons subject to the
proposal, the Bureau believes that the
existence of an order that would require
registration under the proposal would
be a relevant factor under this statutory
provision for the Bureau to take into
consideration when exercising its
supervisory authorities under CFPA
80 12
U.S.C. 5514(a), (b)(2).
U.S.C. 5514(b)(2)(C).
82 12 U.S.C. 5514(b)(2)(D).
83 12 U.S.C. 5514(b)(2)(E).
81 12
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section 1024. Thus, knowledge of such
orders would be relevant information in
prioritizing and scoping the Bureau’s
supervisory activities under CFPA
section 1024(b) with respect to the
markets subject to that provision. In
exercising its authorities under section
1024(b), the Bureau may take into
account any risks that it identifies in
connection with a covered person’s
registration with the nonbank
registration (NBR) system and any
information submitted under the
proposed rule.
In crafting the proposed requirements
to register and submit certain agency
and court orders, the Bureau has
considered (among others) the factors
listed at CFPA section 1022(c)(2), to the
extent relevant here to the proposed
allocation of Bureau resources to
perform market monitoring. For
example, the Bureau considered the
‘‘likely risks and costs to consumers
associated with buying or using a type
of consumer financial product or
service.’’ 84 As discussed above, the
Bureau believes companies that violate
the law, especially repeatedly, generally
pose more risk to consumers. The
proposal will assist the Bureau in
identifying and evaluating such risks—
and their associated costs—across
companies, industries, products, and
regions.
The Bureau also considered the
‘‘understanding by consumers of the
risks of a type of consumer financial
product or service.’’ 85 The Bureau is
concerned that consumers currently
may not adequately understand risks
posed by certain institutions, including
risks arising from recidivism. With a
clear window into nationwide trends
and gaps in nonbank covered persons’
compliance with consumer protection
laws, the Bureau can target its various
functions—including consumer
education—to ensure that consumers
understand the risks and associated
costs of such conduct on their use of
certain consumer financial products or
services.
The Bureau further considered ‘‘the
legal protections applicable to the
offering or provision of a consumer
financial product or service, including
the extent to which the law is likely to
adequately protect consumers.’’ 86 The
Bureau believes that the proposal would
enhance the Bureau’s ability to
effectively assess whether and to what
extent the orders themselves, as well as
other relevant laws, in practice
adequately protect consumers.
U.S.C. 5512(c)(2)(A).
U.S.C. 5512(c)(2)(B).
86 12 U.S.C. 5512(c)(2)(C).
Information collected in connection
with this proposal would aid the Bureau
in better understanding how effectively
the nation’s consumer protection laws
operate in practice, which should assist
the Bureau in determining (among other
things) how best to allocate its resources
to ensure consumers are adequately
protected from bad actors.
The Bureau also considered ‘‘the
extent . . . to which the risks of a
consumer financial product or service
may disproportionately affect
traditionally underserved
consumers.’’ 87 The Bureau generally is
concerned that traditionally
underserved communities may be
disproportionately the target of
consumer protection violations—
particularly, unfair, deceptive, or
abusive acts or practices—in the offering
or provision of consumer financial
products or services. The information
collected should provide the Bureau
with robust nationwide data to identify
and evaluate the extent to which this is
the case.
Finally, the Bureau considered ‘‘the
types, number, and other pertinent
characteristics of covered persons that
offer or provide the consumer financial
product or service.’’ 88 For the reasons
discussed, law violator status—but
especially repeat law violator status—is
a highly pertinent characteristic. The
Bureau believes that risks to consumers
posed by law violators warrants market
monitoring. In particular, it would
provide greater visibility into nonbank
covered persons’ compliance with
consumer protection laws in the offering
or provision of consumer financial
products and services, in addition to
more generally aiding the Bureau’s
overall understanding of nonbank
covered persons and the products or
services they provide.
The Bureau has considered alternative
means of collecting the information
subject to the proposed rule, including
requesting the information on an ad hoc
basis from entities that are subject to
relevant orders through a Bureau order
issued pursuant to CFPA section
1022(c)(4)(B)(ii).89 However, the Bureau
believes this alternative would be
inadequate. There is no existing
comprehensive list of covered persons
subject to Bureau regulation or
supervision, so the Bureau would be
unable to issue a standing order to such
entities to produce information. It is not
clear how the Bureau would obtain this
information without issuing a rule.
Also, the Bureau wishes to collect
84 12
87 12
85 12
88 12
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U.S.C. 5512(c)(2)(F).
89 12 U.S.C. 5512(c)(4)(B)(ii).
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information that changes over time—for
example, information regarding new
orders and changes to orders, as well as
with respect to changes in registration
information. An order that required
submission of information at a single
point in time—assuming that the Bureau
could identify the entities to which such
an order should be addressed—would
be inadequate to capture such changes
in information. While the Bureau might
issue frequently recurring orders under
its market-monitoring authority, such an
approach would be less reliable and
predictable for all parties than a rulebased approach.
The Bureau further considered using
its supervisory and examination
authority to obtain information solely
from entities that are subject to that
authority. While the Bureau believes
that approach would certainly provide
the Bureau with invaluable information,
it preliminarily concludes that
collecting information from a wider
range of covered persons is appropriate
to achieve its market monitoring
objectives.
The Bureau seeks comment on its
preliminary conclusion that collecting
and registering public agency and court
orders imposing obligations based upon
violations of consumer law would assist
with monitoring for risks to consumers
in the offering or provision of consumer
financial products and services. The
Bureau seeks comment on whether the
types of orders described in the
proposal, and the types of information
that would be collected about those
orders and covered nonbanks under the
proposal, would provide useful
information to the Bureau. The Bureau
also seeks comment on any other risks
that might be identified through
collecting the information described in
the proposal. Finally, the Bureau seeks
comment on whether it should consider
collecting any other information in
order to identify risks to consumers
associated with orders.
C. Why the Bureau Has Identified
Orders Issued Under the Types of Laws
Described in the Proposal as Posing
Particular Risk
The proposal would prescribe
registration requirements with reference
to certain types of ‘‘covered laws’’ that
served as the basis for an applicable
order. As discussed herein, the Bureau
believes that orders issued under the
types of covered laws described in the
proposal are likely to be probative of
risks to consumers in the offering or
provision of consumer financial
products or services, including
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developments in markets for such
products or services.90
First, the Bureau is proposing to
require registration in connection with
orders issued under the Federal
consumer financial laws, to the extent
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. As explained above,
numerous Federal and State agencies
besides the Bureau have authority to
enforce Federal consumer financial
laws. In matters where an agency other
than the Bureau has issued or obtained
a final, public order concluding that a
covered person has violated Federal
consumer financial law, the Bureau also
will generally have jurisdiction over the
conduct that resulted in that order.
Requiring registration of such orders
will facilitate effective market
monitoring by providing the Bureau a
tool to identify and understand the
nature of the risks to consumers
presented by the conduct addressed in
those orders, including the risk that the
conduct might continue unabated
outside of the particular jurisdiction
that issued the order. For example, such
information may inform the Bureau’s
supervisory or enforcement activities, as
the Bureau may consider bringing its
own action in connection with the same
or related conduct. Or the conduct may
be probative of a more systemic problem
with one or more entities’ overall
willingness or capacity to comply with
Federal consumer financial law across
different product lines or aspects of
their operations. Likewise, requiring
registration of orders involving Federal
consumer financial law will facilitate
effective market monitoring by ensuring
that the Bureau can quickly and
effectively identify patterns of similar
conduct across multiple nonbank
covered persons. The identification of
such patterns may indicate a problem
that the Bureau could best address by
engaging in rulemaking to clarify or
expand available consumer protections
to address emerging consumer risk
trends. It may also prompt the Bureau
to use other tools, such as consumer
education, to address the identified
risks.
Second, the Bureau is proposing to
require registration of orders in
connection with a violation of any other
law as to which the Bureau may
exercise enforcement authority, to the
extent such violation arises out of
conduct in connection with the offering
90 See also the discussion of the definition of the
term ‘‘covered law’’ in the section-by-section
discussion of proposed § 1092.201(c) below.
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or provision of a consumer financial
product or service. The Bureau may
enforce certain laws other than Federal
consumer financial laws, as that term is
defined in CFPA section 1002(14).91
The Bureau believes that the proposed
registry should collect information
regarding orders issued under any law
that the Bureau may enforce, where 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. By
definition, the conduct addressed in
such orders will generally fall within
the scope of the Bureau’s enforcement
authority. More generally, the Bureau
believes that evidence of such conduct
could be probative of a broader risk that
the entity has engaged or will engage in
conduct that may violate Federal
consumer financial law. For example,
violations of the Military Lending Act,
as to which the Bureau has enforcement
authority, may overlap with, or be
closely associated with, violations of the
CFPA’s UDAAP prohibitions 92 or the
Truth in Lending Act,93 among other
Federal consumer financial laws. In
addition, in the Bureau’s experience, a
violation of one law within the Bureau’s
enforcement authority may be indicative
of broader inadequacies in an entity’s
compliance systems that are resulting or
could result in other legal violations,
including violations of Federal
consumer financial laws. Furthermore,
including in the registry orders issued
under any law that the Bureau may
enforce (where 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) would further the
Bureau’s objective of creating a registry
that could serve as a single,
consolidated reference tool for use in
monitoring for risks to consumers,
thereby increasing the Bureau’s ability
91 See, e.g., 10 U.S.C. 987(f)(6) (authorizing
Bureau enforcement of the Military Lending Act).
As the Bureau has explained in a recent interpretive
rule, it also has authority to supervise nonbanks
subject to its supervision regarding risks to
consumers arising from conduct that violates the
Military Lending Act. See Bureau Interpretive Rule,
Examinations for Risks to Active-Duty
Servicemembers and Their Covered Dependents, 86
FR 32723 (June 23, 2021). In this proposed
rulemaking, however, the Bureau does not need to
rely on the authority described in that interpretive
rule. Instead, to the extent that the Bureau’s
proposal would collect information regarding
orders issued under laws described in proposed
§ 1092.201(c)(2) for the purpose of facilitating the
Bureau’s supervisory activities, the Bureau would
do so because the Bureau believes such orders may
be probative of a broader risk that an entity has
engaged or will engage in conduct that may violate
Federal consumer financial law.
92 15 U.S.C. 5531, 5536(a)(1)(B).
93 15 U.S.C. 1601 et seq.
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to use the registry to monitor for
patterns of risky conduct of nonbank
covered persons across entities,
industries, and product offerings.
Third, the Bureau is proposing to
require registration in connection with
orders issued under the prohibition on
unfair or deceptive acts or practices
under section 5 of the FTC Act, 15
U.S.C. 45, or any rule or order issued for
purpose of implementing that
prohibition, to the extent 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. In matters
where a government agency has reached
a determination that an entity has
violated section 5 of the FTC Act in
connection with the offering or
provision of a consumer financial
product or service, the Bureau has
reason to be concerned that the entity
poses unusual risks to consumers in
financial markets. For one thing, the
conduct resulting in the order well
might have violated Federal consumer
financial law. CFPA section 1031, for
example, authorizes the Bureau to take
action ‘‘to prevent a covered person or
service provider from committing or
engaging in an unfair, deceptive, or
abusive act or practice under Federal
law in connection with any transaction
with a consumer for a consumer
financial product or service, or the
offering of a consumer financial product
or service.’’ 94 And CFPA section
1036(a)(1)(B) provides that ‘‘[i]t shall be
unlawful’’ for a covered person ‘‘to
engage in any unfair, deceptive, or
abusive act or practice.’’ 95 Congress
modeled the CFPA’s prohibition of
unfair or deceptive acts or practices
after the similar prohibition in section 5
of the FTC Act.96 Therefore, violations
of FTC Act section 5 in connection with
the provision or offering of a consumer
financial product or service is highly
probative of a heightened risk that
UDAAP violations subject to the
Bureau’s jurisdiction have occurred or
are occurring.
Moreover, the high probative value of
such orders is not simply a function of
the likelihood that underlying conduct
could violate Federal consumer
financial law. The Bureau believes that,
where an entity has engaged in conduct
prohibited under FTC Act section 5 in
connection with offering or providing a
consumer financial product or service,
there is a significant risk that upon
94 12
U.S.C. 5531(a).
U.S.C. 5536(a)(1)(B).
96 See 15 U.S.C. 45; see also, e.g., Consumer Fin.
Prot. Bureau v. ITT Educ. Servs., Inc., 219 F. Supp.
3d 878, 902–04 (S.D. Ind. 2015).
95 12
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closer inspection of the entity’s
activities it has engaged in other acts or
omissions that either violate Federal
consumer financial law or otherwise
present risks to consumers in the
consumer financial markets. For
example, inadequacies in compliance
systems are not likely limited to a
particular Federal or State consumer
protection law, and compliance-system
inadequacies that result in FTC Act
section 5 violations indicate a
heightened risk of similar inadequacies
related to the prevention of violations of
Federal consumer financial laws. And,
as described above, a registry of orders
is particularly useful because a core
purpose of the Bureau’s monitoring
efforts is to analyze patterns of risky
conduct across entities, industries,
product offerings, and jurisdictions.
Such patterns would help the Bureau
identify risks to consumers that warrant
further action, such as more monitoring,
increased supervisory attention in the
case of supervised persons, regulation,
or consumer education.
Fourth, the Bureau proposes to
require registration in connection with
orders issued under State laws
prohibiting unfair, deceptive, or abusive
acts or practices that are identified in
proposed appendix A of part 1092, to
the extent 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. State UDAP/UDAAP
laws are generally modeled after—or
otherwise prohibit conduct similar to
that prohibited by—FTC Act section 5
or CFPA sections 1031 and
1036(a)(1)(B).97 Therefore, violations of
State UDAP/UDAAP law in connection
with the provision or offering of a
consumer financial product or service
are similarly highly probative of a
heightened risk that UDAAP violations
subject to the Bureau’s jurisdiction have
occurred or are occurring. In addition,
violations of State UDAP/UDAAP law
may be probative of the existence of
violations of other laws within the
Bureau’s jurisdiction.98
Obtaining a better understanding of
entities’ compliance with State UDAP/
97 15 U.S.C. 45; 12 U.S.C. 5531. See, e.g., Request
for Information on Payday Loans, Vehicle Title
Loans, Installment Loans, and Open-End Lines of
Credit, 81 FR 47781, 47783 (July 22, 2016) (‘‘In the
1960s, States began passing their own consumer
protection statutes modeled on the [Federal Trade
Commission] Act to prohibit unfair and deceptive
practices.’’).
98 To take just one example, UDAAP violations in
connection with debt-collection efforts may also
violate the Fair Debt Collection Practices Act’s
prohibition against unfair, deceptive, or abusive
debt-collection practices. See 15 U.S.C. 1692d–
1692f.
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UDAAP laws will assist the Bureau in
the assessment and detection of risks for
the same general reasons described with
respect to alleged or found violations of
FTC Act section 5—namely, that (i)
conduct that violates State UDAP/
UDAAP prohibitions commonly also
violates laws under the Bureau’s
jurisdiction; and (ii) the Bureau believes
that evidence of such conduct may be
highly probative of a broader risk that
the entity has engaged or will engage in
similar conduct that may violate laws
within the Bureau’s jurisdiction, either
as a result of a willingness to violate
such laws or a lack of sufficient
protections in place to prevent
violations. Registration of State UDAP/
UDAAP orders will facilitate effective
market monitoring by ensuring that the
Bureau can quickly and effectively
identify patterns of risky conduct across
entities, industries, consumer financial
product or service offerings, and
jurisdictions. The Bureau could then
decide which Bureau functions are best
suited to address the consumer risks
raised by the orders.99
The Bureau seeks comment on its
preliminary conclusion that these
categories of public orders would assist
with monitoring for risks to consumers
in the offering or provision of consumer
financial products and services,
including any information regarding
whether and how the categories of
orders described in the proposal
correlate with additional risk to
consumers, or conversely, any
information indicating that these types
of orders are overinclusive and do not
correlate with additional risk to
consumers.
D. Why the Bureau Is Proposing To
Require Supervised Nonbanks To
Designate Attesting Executives and
Submit Written Statements
The proposal would also require
entities above a certain size that are
subject to the Bureau’s supervision and
examination authority to annually
submit a written statement signed by a
designated attesting executive regarding
each covered order to which they are
subject. In the written statement, the
attesting executive would (i) generally
describe the steps that the executive has
undertaken to review and oversee the
entity’s activities subject to the
applicable covered order for the
preceding calendar year, and (ii) attest
99 For discussion of the proposal’s requirements
with respect to State laws amending or otherwise
succeeding a law identified in appendix A, and
rules or orders issued by State agencies for the
purpose of implementing State UDAP/UDAAP
laws, see the section-by-section discussion of
proposed § 1092.201(c) below.
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whether, to the executive’s knowledge,
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 proposed rule would further require
that the entity designate as the attesting
executive for each covered order its
highest-ranking duly appointed senior
executive officer (or, if the entity does
not have any duly appointed officers,
the highest-ranking individual charged
with managerial or oversight
responsibility for the entity) whose
assigned duties include ensuring the
entity’s compliance with Federal
consumer financial law, who has
knowledge of the entity’s systems and
procedures for achieving compliance
with the covered order, and who has
control over the entity’s efforts to
comply with the covered order. The
Bureau would publish the name and
title of that executive in the proposed
public registry.
The Bureau believes these
requirements would serve two sets of
distinct purposes relating to its exercise
of its supervisory and examination
authorities under CFPA section 1024.
First, the Bureau believes the
proposed requirements that certain
supervised entities (which are referred
to in the proposed rule as ‘‘supervised
registered entities’’) designate attesting
executives and provide written
statements would facilitate the Bureau’s
supervision efforts, including its efforts
to assess compliance with the
requirements of Federal consumer
financial law, obtain information about
supervised entities’ activities and
compliance systems or procedures, and
detect and assess risks to consumers and
to markets for consumer financial
products and services.100 As discussed,
the existence of one or more covered
orders involving a supervised registered
entity already raises red flags regarding
the entity’s compliance with Federal
consumer financial law and the overall
risk posed by such entity to consumers
in the offering or provision of consumer
financial products and services.
Submission of a written statement
indicating an absence of good faith
efforts to comply with the law or
100 See 12 U.S.C. 5514(b)(1), (7)(A)–(B). As
explained in the ‘‘legal authority’’ section, 12 U.S.C.
5514(b)(7)(A) authorizes the Bureau to prescribe
rules to facilitate Bureau supervision and the
assessment and detection of risks to consumers, and
12 U.S.C. 5514(b)(7)(B) authorizes the Bureau to
require supervised registered entities to
‘‘generate’’—i.e., create—reports regarding their
activities (including the proposed written
statements) and then ‘‘provide’’ them to the Bureau.
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identifying problematic instances of
noncompliance with reported orders
would provide the Bureau with
important additional information
regarding risks to consumers that may
be associated with the orders. Such
orders frequently contain provisions
aimed at ensuring an entity’s future
legal compliance, such as reporting
requirements, recordkeeping
requirements, and provisions requiring
the entity to obtain the issuing agency’s
nonobjection before adopting or
amending relevant policies and
procedures. An entity’s sustained
compliance with such provisions may
mitigate the continuing risks to
consumers presented by the entity and
thus reduce the potential need for
current supervisory activities. By
contrast, an entity’s noncompliance
with the terms of an order may indicate
a heightened need for current
supervisory activities. And if an entity
is committing significant or repeated
violations of a covered order, or it is
failing to take appropriate steps to
address such violations and prevent
their recurrence, that may indicate that
the entity lacks the protocols and
institutional commitment necessary to
ensure compliance with legal
obligations aimed at protecting
consumers and ultimately with the
Federal consumer financial laws. The
Bureau believes that entities that fail to
comply with orders enforcing the law
may be at greater risk of violating one
or more laws within the Bureau’s
jurisdiction. Submission of the
proposed written statements would
enable the Bureau to conduct additional
supervisory reviews or to otherwise
investigate the matter in order to
identify any such violations and related
risks.
As a result, the proposed written
statements would be particularly
relevant when prioritizing the Bureau’s
supervisory activities under CFPA
section 1024(b). As discussed above at
sections III and IV(B), CFPA section
1024(b)(2) requires that the Bureau
exercise its authority under CFPA
section 1024(a) in a manner designed to
ensure that such exercise, with respect
to persons described in section 1024(a),
is based on the assessment by the
Bureau of certain identified risks.101 For
the reasons discussed above, the
proposed written statements would help
inform the Bureau’s risk-based
prioritization of its supervisory program
under CFPA section 1024(b)(2). The
Bureau anticipates that the written
statements would be particularly
helpful in assessing, among other
101 12
U.S.C. 5514(a), (b)(2).
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things, ‘‘the risks to consumers created
by the provision of . . . consumer
financial products or services’’ and ‘‘the
extent to which such institutions are
subject to oversight by State authorities
for consumer protection.’’ 102
The proposed written-statement
requirement also would improve the
Bureau’s ability to conduct its
supervisory and examination activities
with respect to the supervised nonbank,
when it does choose to exercise its
supervisory authority. The Bureau
exercises its supervisory authority with
respect to supervised nonbanks for
certain purposes, including assessing
compliance with the requirements of
Federal consumer financial law,
obtaining information about the
activities and compliance systems or
procedures of supervised nonbanks, and
detecting and assessing risks to
consumers and markets for consumer
financial products and services.103 The
Bureau expects a supervised nonbank’s
written statements as required under the
proposal to provide important
information relevant to all of these
statutory purposes. As explained below,
a supervised nonbank’s failure to
comply with a relevant order under a
covered law could indicate that the
entity more generally lacks the will or
ability to comply with its legal
obligations, including its obligations
under Federal consumer financial law.
Such noncompliance may also indicate
that the entity generally lacks adequate
compliance systems or procedures,
which in turn would create risks to
consumers and to the markets for
consumer financial products and
services that the entity participates in.
Thus, in cases where the Bureau
determines to exercise its supervisory
authorities with respect to a supervised
nonbank required to submit written
statements under the proposal, the
Bureau would expect those written
statements to be of value in conducting
its examination work. For example, the
Bureau may use the written statements
in determining what information to
require from a supervised nonbank, in
determining the content of supervisory
communications and recommendations,
or in making other decisions regarding
the use of its supervisory authority.104
102 12
U.S.C. 5514(b)(2)(C)–(D). See additional
discussion of the factors for risk-based supervisory
prioritization in section IV(B) above.
103 12 U.S.C. 5514(b)(1).
104 As explained below in the section-by-section
discussion of proposed § 1092.203(e), the Bureau is
proposing to require supervised registered entities
to maintain records to support their written
statements. That recordkeeping requirement will
further facilitate the Bureau’s supervisory and
examination activities because it will ensure the
availability of records for the Bureau to review
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Second, the proposed writtenstatement requirements would help
ensure that supervised registered
entities ‘‘are legitimate entities and are
able to perform their obligations to
consumers.’’ 105 As discussed in section
VII below, the Bureau believes that most
supervised registered entities subject to
covered orders endeavor in good faith to
comply with consumer protection laws
and, accordingly, have put in place
some manner of systems and procedures
to help achieve such compliance. But
the Bureau also expects that other
supervised registered entities will not
take their legal obligations seriously,
including their obligations under
Federal consumer financial law.106 The
proposed written statement would
provide information that would help the
Bureau assess in which category a
particular entity falls. If, after reviewing
a written statement, the Bureau
concludes that an entity is not working
in good faith to comply with its legal
obligations, that conclusion might
provide grounds for prioritizing the
entity for supervisory examinations to
assess its compliance with Federal
consumer financial law. The Bureau
expects that the risk of such increased
supervisory scrutiny will provide an
incentive for some entities to improve
their compliance efforts so that they can
submit a written statement that is less
likely to result in increased scrutiny
from the Bureau. Thus, by making it
more difficult to quietly disregard the
law, the Bureau anticipates that the
written-statement requirement would
likely motivate at least a few supervised
entities with substandard compliance
practices to enhance their compliance
efforts and comply with their legal
obligations, including their obligations
under Federal consumer financial law.
The Bureau likewise believes that the
proposed requirement to designate an
attesting executive with knowledge of
the entity’s systems and procedures for
achieving compliance with the covered
order and with control over the efforts
to comply with the covered order would
likely provide an incentive to pay more
attention to the entity’s legal
obligations.
regarding the matters addressed in the written
statements.
105 12 U.S.C. 5514(b)(7)(C). As explained in the
‘‘legal authority’’ section above, 12 U.S.C.
5514(b)(7)(A), (B), and (C) provide independent
sources of rulemaking authority.
106 In several cases, the Bureau has found that
entities have violated prior orders that the Bureau
has issued or obtained. See, e.g., Discover Bank,
CFPB No. 2020–BCFP–0026 (Dec. 22, 2020); CFPB
v. Encore Capital Grp., No. 20–cv–01750–GPC–KSC
(S.D. Cal. Oct. 16, 2020); Military Credit Servs., LLC,
CFPB No. 2016–CFPB–0029 (Dec. 20, 2016).
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and some of the additional information
submitted to the registry may not be
readily available to the public. The
Bureau is proposing to publish this
information because it believes
publication would provide benefits to
the general public, other regulators, and
to consumers, and would be consistent
with Federal government efforts to make
government data assets publicly
available.108 The Bureau has authority
to publish the registration information
under CFPA section 1022(c)(3)(B),
which authorizes it to publish
information obtained under section
1022 ‘‘as is in the public interest,’’ 109
and under CFPA section 1022(c)(7)(B),
which authorizes the Bureau to
‘‘publicly disclose registration
information to facilitate the ability of
consumers to identify covered persons
that are registered with the Bureau.’’ 110
A variety of Federal regulators,
including the prudential regulators, as
well as State attorneys general and other
State agencies, all have authority to
issue orders to address legal violations
in the provision or offering of consumer
financial products or services.
Consequently, similar conduct may be
addressed through separate orders, by
separate regulators, or across separate
lines of business. Again, the orders that
would be published under the proposal
would already be public. But such
orders, while public, are currently
subject to distinct publication regimes.
The distinct enforcement and
publication regimes for the various
agencies with authority over nonbank
covered persons make it more difficult
for the Bureau, consumers, and other
interested parties to identify entities
that engage in misconduct and
repeatedly violate the law. The
proposed rule would address that issue
by creating such a single, consolidated
registry of orders that enforce applicable
law.
The Bureau recognizes that much
E. Why the Bureau Is Proposing To
public information about such orders
Publish the Information Collected Under already exists. The applicable Federal
the Proposed Registration Requirements and State regulators generally each
publish their own orders enforcing
The Bureau is proposing to publish
consumer financial law; thus, potential
the information collected under the
users may be able to access some of this
proposed registration requirements
information by means of the various
(except for the written statement
websites and other databases
submitted under § 1092.203, which
maintained by individual agencies.
would be treated as confidential
Some information is also available to
supervisory information). While the
potential users through certain
orders that would be published under
multiagency websites such as the
the proposal would already be public,
they may not all be readily accessible in Nationwide Multistate Licensing System
a comprehensive and collected manner,
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To be clear, the proposed rule would
not establish any minimum procedures
or otherwise specify the steps the
attesting executive must take in order to
review and oversee the supervised
registered entity’s activities. Nor would
the proposal establish any minimum
level of compliance management or
expectation for compliance systems and
procedures at such entities. However, as
explained above, the Bureau expects
that most supervised registered entities
will be at least somewhat hesitant to
repeatedly report the absence of good
faith efforts to comply with covered
orders. Also, the rule would require
supervised registered entities to identify
a central point of contact and
responsibility regarding an entity’s
efforts to comply with a covered order.
The Bureau seeks comment on all
aspects of the proposed writtenstatement requirement, including its
preliminary findings that requiring
supervised nonbanks to designate
attesting executives and to submit
certain written statements relating to
compliance with reported orders will
facilitate the Bureau’s supervisory
efforts and better ensure that supervised
registered entities are legitimate entities
and are able to perform their obligations
to consumers. Among other things, the
Bureau seeks comment on whether the
proposed requirements would help
ensure such entities are legitimate and
are able to perform their obligations to
consumers, and whether they would
facilitate supervision of such entities
and assessment and detection of risks to
consumers. The Bureau also seeks
comment on whether the proposed
eligibility requirements regarding which
individuals may be designated as
attesting executives are too broad or too
narrow. The Bureau also seeks comment
on whether supervised registered
entities should submit additional or
different information to the Bureau.107
107 See
additional discussion about other
information that the Bureau might seek to collect
in the section-by-section discussion of proposed
§ 1092.203(d) below.
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108 See also the discussion of these issues in the
section-by-section discussion of proposed
§ 1092.204 below.
109 12 U.S.C. 5512(c)(3)(B).
110 12 U.S.C. 5512(c)(7)(B).
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& Registry (NMLS) owned and operated
by the State Regulatory Registry LLC,
which is owned and operated by the
Conference of State Bank Supervisors.
And still other information is published
and maintained by private actors.
However, there appears to be limited
collective information regarding all of
the orders that have been issued by
multiple regulators to particular entities
across multiple product markets and
geographic markets related to consumer
financial products and services. To the
Bureau’s knowledge, there is currently
no public government system at the
Federal or State level for the collection
of information about such orders across
the entities subject to the Bureau’s
jurisdiction (though privately
maintained databases may exist). No
government agency appears to maintain
a publicly available repository of such
orders and other related information
with respect to particular entities as
they relate to consumer financial
products and services. Furthermore,
while certain State regulators publish
certain public enforcement actions to
the NMLS, such publication does not
extend to all of the orders and all of the
agencies that are addressed by the
proposal, including orders issued by
Federal agencies. It is also limited to
only certain industry sectors. The
Bureau believes that consumers would
benefit from a registration system that is
maintained by the Federal government
for the purpose of providing
comprehensive information regarding
such orders, including copies of the
orders.
The Bureau believes that there would
be significant value in creating a single
public repository of information related
to public agency and court orders that
impose obligations based on violations
of consumer protection laws, and the
nonbanks that are subject to them.111
The Bureau believes that publication of
certain data collected pursuant to this
rule is in the public interest in a variety
of ways. By improving public
transparency, the Bureau intends to
mitigate recidivism and more effectively
deter unlawful behavior. Providing
better tools to monitor repeat law
violators and corporate recidivism is in
the public interest. Researchers would
be able to use published information to
better understand the markets regulated
by the Bureau and the participants in
those markets, and their efforts may
result in more thorough understanding
and promote compliance with the law.
Non-government entities would
111 See also the discussion of these issues in the
section-by-section discussions of proposed
§§ 1092.202(b) and 1092.204(a) below.
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likewise be able to use published
information in conducting their work
and in identifying potential issues and
risks affecting consumers in the markets
for consumer financial protection and
services. Industry could use the registry
as a convenient source of information
regarding regulator actions and trends
across jurisdictions, helping industry
actors to better understand legal risks
and compliance obligations. Potential
investors, contractual partners, financial
firms, and others that are conducting
due diligence on a registered nonbank
would have a consolidated and updated
source of accurate information regarding
public orders. Establishing a source for
reliable and public data on entity
lawbreaking and recidivism will likely
promote tracking and awareness of such
matters by consumer groups, trade
associations, firms conducting due
diligence, the media, and other parties.
Government agencies—including, but
not limited to, the Bureau—would also
benefit from the proposed public
registry. While the orders that would be
published under the proposal would
already be public, every Federal, State,
and local agency with jurisdiction over
a covered nonbank will benefit from
access to a regularly maintained
database providing up-to-date
information on relevant public orders
that have been issued against such
entities. Such information will help
agencies to detect risks to consumers,
and to coordinate and maintain
consistency with the Bureau and other
agencies in their enforcement strategies
and approaches. Agencies might use the
published information to better identify
registered nonbanks and determine their
legal structure and organization, since
the registry would require registered
nonbanks to submit and maintain up-todate identifying information, including
legal name and principal place of
business. The Bureau also believes that
the publication of registration
information and information regarding
orders will assist other agencies in
assessing the potential risks to
consumers that may be posed by
registered nonbanks and in making their
own determinations regarding whether
to conduct examinations or
investigations, bring enforcement
actions against nonbanks, or engage in
other regulatory activities. For example,
a State regulator attempting to improve
its assessments of consumer risk trends
among nonbank payday lenders in its
State should be able to use the registry
to identify what other regulators of the
same or similar nonbank providers or
products have recently identified in
terms of such risks. In addition, the
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Bureau believes that many agencies
would find the published information
useful in making other determinations
regarding the nonbanks registered under
the proposal. For example, an agency
may be able to use this information
when making determinations regarding
an application or license, or to ask
relevant questions regarding the
information that is published. Thus, the
Bureau believes that, with access to a
single, public registry of these orders,
those similarly tasked with protecting
consumers in the markets for consumer
financial products and services would
obtain many of the same powerful
market monitoring benefits that the
Bureau anticipates obtaining from this
rule.
In developing the proposal, the
Bureau considered whether it might be
better to use confidential channels, or
perhaps a private electronic portal, to
exchange this information with other
government agencies. However, the
Bureau believes that such an approach
would be impractical. Not every agency
that would be able to use the
information would be aware of the need
to request access to the information
from the Bureau or would necessarily be
able to expend the resources to maintain
access. The Bureau would need to
expend its own resources to establish
and maintain such channels. And the
Bureau believes that such a system
would not achieve the benefits of
disclosure to consumers and the public
discussed in this section. Publication
also would formally align the proposed
registration system with Federal
government standards calling for
publishing information online as open
data.112
Consumers may also benefit from the
collection and publication of the
information collected by the system,
including information about orders that
are already public. The Bureau believes
that, at least in certain cases, publishing
information about the entity and its
applicable orders in a public registry
would potentially help certain
consumers make informed decisions
regarding their choice of consumer
financial products or services. As
discussed at section VII below regarding
the Bureau’s analysis of this proposal
under CFPA section 1022(b),113 the
Bureau does not necessarily expect a
wide group of consumers to rely
routinely on the proposed registry when
selecting consumer financial products
or services. However, the Bureau
112 See, e.g., Open, Public, Electronic, and
Necessary Government Data Act, in title II of Public
Law No. 115–435 (Jan. 14, 2019).
113 12 U.S.C. 5512(b).
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believes that the registry would benefit
certain consumers if the information in
the registry is recirculated, compiled, or
analyzed by other users such as
consumer advocacy organizations,
researchers, or the media. For example,
media outlets could use the registry to
report which entities have the most
government orders enforcing the law
against them, which could inform
consumers about the most egregious
repeat offenders.
The proposed registry may also
facilitate private enforcement of the
Federal consumer financial laws by
consumers, to the extent those laws
provide private rights of action, where
consumers have been harmed by a
registered nonbank. The information
that would be published under the
proposal might be useful in helping
consumers understand the identity of a
company that has offered or provided a
particular consumer financial product
or service, and in determining whether
to file suit or otherwise make choices
regarding how to assert their legal
rights. And availability of this
information may lead consumers and
other persons to report to the Bureau
instances of similar conduct for the
Bureau to investigate.
Under the proposal, the Bureau would
not publish the written statement
submitted by a supervised registered
entity but would instead treat the
written statement as Bureau confidential
supervisory information subject to the
provisions of its rule on the disclosure
of records and information at 12 CFR
part 1070. The Bureau does propose to
publish the name and title of the
attesting executive(s) submitted by the
supervised registered entity. The Bureau
proposes to disclose this name and title
information because it believes
publication of this information would
be in the public interest—namely, it
would help ensure accountability at the
entity for noncompliance. The Bureau
believes that the publication of the
executive’s name and title would
provide an incentive to pay more
attention to covered orders. The Bureau
believes that designating an executive as
ultimately accountable for ensuring
compliance with a covered order will
prompt the executive to focus greater
attention on ensuring the entity’s
compliance, and in turn increase the
likelihood of compliance. The Bureau
believes that publication of this
designation will increase the likelihood
of these effects. Publication of the
designation will identify for other
regulators (and the general public) the
person at the supervised registered
entity who is ultimately responsible for
compliance with the covered order, as
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well as more general efforts to comply
with Federal consumer financial law.
Just as the possibility of Bureau scrutiny
of the attesting executive’s conduct is
likely to motivate the executive to
devote greater attention to compliance
efforts, the additional scrutiny from
others outside the Bureau will further
promote compliance. Publishing the
attesting executive’s name and title thus
dovetails with the supervisory goals
discussed above in section IV(D).
The Bureau also believes that
publishing the name and title of the
executive who has knowledge and
control of the supervised entity’s efforts
to comply with the covered order would
benefit users of the system in other
ways. Such information would enable
employee whistleblowers, or other
consumers who have knowledge and
information about violations of the
applicable order, to ensure that such
information gets to the person who is in
charge of such compliance. The Bureau
also believes that the public would
benefit from understanding the names
and titles of the highest-ranking
executive who is responsible for
compliance with a public order
enforcing the law, as this information
could help consumers better understand
and monitor the conduct of the entities
with whom they do business. It would
also inform consumers of a person to
whom they could direct escalated
complaints. Other regulators, especially
those that have issued covered orders
regarding the supervised entity, would
likely benefit from understanding which
executive(s) have been tasked with
ensuring compliance with their orders.
Finally, disclosure of this information
would increase transparency regarding
how the Bureau processes and verifies
information submitted as part of the
registration system. The Bureau requests
comment on this provision, including
whether this requirement would assist
users of the NBR system and whether it
would unduly interfere with the privacy
interests of the attesting executive or
other interests of the supervised
registered entity.
The Bureau seeks comment on the
proposed publication requirements and
the above-stated rationales for them.
Among other things, the Bureau seeks
information on the current state of
published information in existing
systems or databases about the types of
orders addressed in this proposed rule.
The Bureau also seeks comment on
whether the Bureau should publish less
information in the proposed registry, or
retain discretion to do so, and whether
publication of the names and titles of
attesting executives will have the
desired effects.
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V. Section-by-Section Analysis
Part 1092
Subpart A—General
Section 1092.100
Purpose
Authority and
100(a) Authority
Proposed § 1092.100(a) would set
forth the legal authority for proposed 12
CFR part 1092, including all subparts.
Proposed § 1092.100 would refer to
CFPA section 1022(b) and (c) and
section 1024(b),114 which are discussed
in section III of the proposal above.
100(b) Purpose
Proposed § 1092.100(b) would explain
that the purpose of part 1092 is to
prescribe rules regarding NBR
requirements, to prescribe rules
concerning the collection of information
from registered entities, and to provide
for public release of that information as
appropriate.
Section 1092.101 General Definitions
Proposed § 1092.101 would define
terms that are utilized elsewhere in
proposed part 1092 of the rules.
Proposed § 1092.101(a) would define
the terms ‘‘affiliate,’’ ‘‘consumer,’’
‘‘consumer financial product or
service,’’ ‘‘covered person,’’ ‘‘Federal
consumer financial law,’’ ‘‘insured
credit union,’’ ‘‘person,’’ ‘‘related
person,’’ ‘‘service provider,’’ and
‘‘State’’ as having the meanings set forth
in the CFPA, 12 U.S.C. 5481. Some of
these terms would be used only in
subpart B.
Proposed § 1092.101(b) would define
the term ‘‘Bureau’’ as a reference to the
Consumer Financial Protection Bureau.
Proposed § 1092.101(c) would clarify
that the terms ‘‘include,’’ ‘‘includes,’’
and ‘‘including’’ throughout part 1092
would denote non-exhaustive examples
covered by the relevant provision.115
Proposed § 1092.101(d) would define
the term ‘‘nonbank registration system’’
to mean the Bureau’s electronic
registration system identified and
maintained by the Bureau for the
purposes of part 1092. Proposed
§ 1092.101(e) would define the term
‘‘nonbank registration system
implementation date’’ to mean, for a
given requirement or subpart of part
1092, the date(s) determined by the
Bureau to commence the operations of
the NBR system in connection with that
requirement or subpart. The Bureau
seeks comment on how much time
114 12
U.S.C. 5512(b), (c); 12 U.S.C. 5514(b).
e.g., Christopher v. SmithKline Beecham
Corp., 567 U.S. 142, 162 (2012) (use of ‘‘includes’’
indicates that ‘‘the examples enumerated in the text
are intended to be illustrative, not exhaustive’’).
115 See,
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entities would need to comply with the
requirements of part 1092 and to register
with the NBR system. The Bureau
currently anticipates that the NBR
system implementation date with
respect to subpart B would occur
sometime after the effective date of the
proposed rule, and no earlier than
January 2024. The actual NBR system
implementation date would depend
upon the Bureau’s ability to develop
and launch the required technical
systems that will support the
submission and review of applicable
filings, and on feedback provided by
commenters regarding the time
registrants would need to implement
this part’s requirements. The Bureau
would provide advance public notice
regarding the NBR system
implementation date with respect to
subpart B to enable entities subject to
subpart B to prepare and submit timely
filings to the NBR system.
Section 1092.102 Submission and Use
of Registration Information
102(a) Filing Instructions
Proposed § 1092.102(a) would provide
that the Bureau shall specify the form
and manner for electronic filings and
submissions to the NBR system that are
required or made voluntarily under part
1092. The Bureau would issue specific
guidance for filings and submissions.
The Bureau anticipates that its filing
instructions may, among other things,
specify information that filers must
submit to verify that they have authority
to act on behalf of the entities for which
they are purporting to register. The
Bureau proposes to accept electronic
filings and submissions to the NBR
system only and does not propose to
accept paper filings or submissions.
Proposed § 1092.102(a) also would
state that the Bureau may provide for
extensions of deadlines or time periods
prescribed by the proposed rule for
persons affected by declared disasters or
other emergency situations. Such
situations could include natural
disasters such as hurricanes, fires, or
pandemics, and also could include
other emergency situations or undue
hardships, including technical problems
involving the NBR system. For example,
the Bureau could defer deadlines during
a presidentially declared emergency or
major disaster under the Robert T.
Stafford Disaster Relief and Emergency
Assistance Act (42 U.S.C. 5121 et seq.)
or a presidentially declared pandemicrelated national emergency under the
National Emergencies Act (50 U.S.C.
1601 et seq.). The Bureau would issue
guidance regarding such situations. The
Bureau seeks comment on the types of
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situations that may arise in this context,
and about appropriate mechanisms for
addressing them.
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102(b) Coordination or Combination of
Systems
Proposed § 1092.102(b) would
provide that in administering the NBR
system, the Bureau may rely on
information a person previously
submitted to the NBR system under part
1092 and may coordinate or combine
systems with State agencies as described
in CFPA sections 1022(c)(7)(C) and
1024(b)(7)(D). Those statutory
provisions provide that the Bureau shall
consult with State agencies regarding
requirements or systems (including
coordinated or combined systems for
registration), where appropriate. This
proposed section would clarify that the
Bureau may develop or rely on such
systems as part of maintaining the NBR
system and may also rely on previously
submitted information. The Bureau
seeks comment on the types of
coordinated or combined systems that
would be appropriate and the types of
information that could be obtained from
or provided to State agencies.
102(c) Bureau Use of Registration
Information
Proposed § 1092.102(c) would provide
that the Bureau may use the information
submitted to the NBR system under this
part to support its objectives and
functions, including in determining
when to exercise its authority under
CFPA section 1024 to conduct
examinations and when to exercise its
enforcement powers under subtitle E of
the CFPA.
The Bureau proposes to establish the
NBR system under its registration and
market-monitoring rulemaking
authorities under CFPA section
1022(b)(1), (c)(1)–(4), and (c)(7), and
under its supervisory rulemaking
authorities under CFPA section
1024(b)(7)(A), (B), and (C). As discussed
in greater detail elsewhere in this
preamble, the Bureau intends to use the
information submitted under the NBR
system to monitor for risks to consumers
in the offering or provision of consumer
financial products or services, and to
support all of its functions as
appropriate, including its supervisory,
rulemaking, enforcement, and other
functions.
Proposed § 1092.102(c) also would
provide that part 1092, and registration
under that part, would not alter any
applicable process whereby a person
may dispute that it qualifies as a person
subject to Bureau authority. For
example, 12 CFR 1090.103 establishes a
Bureau administrative process for
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assessing a person’s status as a larger
participant under CFPA section
1024(a)(1)(B) and 1024(a)(2) and 12 CFR
part 1090. As specified in 12 CFR
1090.103(a), if a person receives a
written communication from the Bureau
initiating a supervisory activity
pursuant to CFPA section 1024, such
person may respond by asserting that
the person does not meet the definition
of a larger participant of a market
covered by 12 CFR part 1090 within 45
days of the date of the communication.
12 CFR 1090.103 establishes a process
for review and determination by a
Bureau official regarding the person’s
larger participant status. 12 CFR
1090.103(c) provides that, in reaching
that determination, the Bureau official
shall review the person’s affidavit and
related information, as well as any other
information the official deems relevant.
Under proposed § 1092.102(c), a
person may submit such an assertion
regarding the person’s status as a larger
participant under 12 CFR 1090.103
notwithstanding any registration or
information submitted to the NBR
system under part 1092, including any
submission of identifying information or
a written statement, or any designation
of attesting executive(s) for purposes of
proposed subpart B. Submission of such
assertions regarding larger participant
status to the Bureau under 12 CFR
1090.103, including the Bureau’s
processes regarding the treatment of
such assertions and the effect of any
determinations regarding the person’s
supervised status, would be governed by
the provisions of 12 CFR part 1090. The
Bureau may use the information
provided to the NBR system in
connection with making any
determination regarding a person’s
supervised status under 12 CFR
1090.103, along with the affidavit
submitted by the person and other
information as provided in that section.
However, the submission of information
to the NBR system would not prevent a
person from also submitting other
information under 12 CFR 1090.103.
Section 1092.103 Severability
Proposed § 1092.103 would provide
that the provisions of the proposed rule
are separate and severable from one
another, and that if any provision is
stayed or determined to be invalid, the
remaining provisions shall continue in
effect. This is a standard severability
clause of the kind that is included in
many regulations to clearly express
agency intent about the course that is
preferred if such events were to occur.
The Bureau has carefully considered the
requirements of the proposed rule, both
individually and in their totality,
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6103
including their potential costs and
benefits to covered persons and
consumers. In the event a court were to
stay or invalidate one or more
provisions of this rule as finalized, the
Bureau would want the remaining
portions of the rule as finalized to
remain in full force and legal effect.
Subpart B—Registry of Nonbank
Covered Persons Subject to Certain
Agency and Court Orders
Section 1092.200
Scope and Purpose
200(a) Scope
Proposed § 1092.200(a) would
describe the scope of proposed subpart
B. Proposed subpart B would require
nonbank covered persons that are
subject to certain public agency and
court orders enforcing the law to register
with the Bureau and to submit copies of
the orders to the Bureau and would
describe the registration information the
Bureau would make publicly available.
It would also provide that proposed
subpart B would require certain
nonbank covered persons that are
supervised by the Bureau to prepare and
submit an annual written statement. The
requirements regarding annual written
statements are described in proposed
§ 1092.204. The Bureau solicits
comment on this proposed statement of
scope.
200(b) Purpose
Proposed § 1092.200(b) would explain
that the purposes of the information
collection requirements in proposed
subpart B would be to support Bureau
functions by monitoring for risks to
consumers in the offering or provision
of consumer financial products or
services, including developments in
markets for such products or services,
pursuant to CFPA section 1022(c)(1); to
prescribe rules regarding registration
requirements applicable to nonbank
covered persons, pursuant to CFPA
section 1022(c)(7); and to facilitate the
supervision of persons described in
CFPA section 1024(a)(1), to ensure that
such persons are legitimate entities and
are able to perform their obligations to
consumers, and to assess and detect
risks to consumers, pursuant to CFPA
section 1024(b).116 The Bureau solicits
comment on this proposed statement of
purpose.
Section 1092.201 Definitions
Proposed § 1092.201 would define
terms used in proposed subpart B.
These definitions would supplement the
general definitions for the entirety of
116 More detailed discussions of how the proposal
would achieve these purposes are contained
elsewhere in this preamble.
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part 1092 that would be provided in
proposed § 1092.101. The Bureau seeks
comment on each of the definitions set
forth in proposed subpart B and any
suggested clarifications, modifications,
or alternatives.
entity’s efforts to comply with the
covered order.
Below, in the section-by-section
discussion of proposed § 1092.203, the
Bureau proposes requirements regarding
attesting executives.
201(a) Administrative Information
201(c) Covered Law
Proposed § 1092.201(c) would define
the term ‘‘covered law’’ to mean one of
several types of laws, as described. The
proposed term ‘‘covered law’’ would be
central to defining which orders and
portions of orders would be subject to
the requirements of proposed subpart B.
Proposed § 1092.201(e) would define
the term covered order to include
certain orders that impose certain
obligations on a covered nonbank based
on an alleged violation of a covered law.
Thus, the proposed term ‘‘covered law’’
would help determine the application of
proposed subpart B’s registration
requirements. The Bureau believes that
requiring registration of covered
nonbanks that are subject to covered
orders issued under these laws would
further the purposes of proposed
subpart B.
Under the proposal, a law listed in
proposed § 1092.201(c)(1) through (6)
would qualify as a covered law only to
the extent 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. The Bureau is
interested in registering orders that
relate to offering or providing consumer
financial products or services. The
Bureau recognizes that the laws listed in
proposed § 1092.201(d)(1) through (6)
may apply to a wide range of conduct
not involving consumer financial
products or services. While the Bureau
believes that reporting on such
violations could still be probative of
risks to consumers in the markets for
consumer financial products and
services—as misconduct in one line of
business is not necessarily cabined to
that line of business—the Bureau
believes that a more limited definition
of covered law strikes the right balance
between ensuring that the Bureau
remains adequately informed of risks to
consumers in the offering or provision
of consumer financial products and
services and minimizing the potential
burden of the reporting requirements on
nonbank covered persons. The Bureau
seeks comment on whether this
definition achieves this balance or
should be modified to achieve it.
The proposal lists categories of laws
that would constitute ‘‘covered laws’’ to
the extent that the violation of law
found or alleged arises out of conduct in
connection with the offering or
Proposed § 1092.201(a) would define
the term ‘‘administrative information’’
to mean contact information regarding
persons subject to subpart B and other
information submitted or collected to
facilitate the administration of the NBR
system. Administrative information
would include information such as date
and time stamps of submissions to the
NBR system, contact information for
nonbank personnel involved in making
submissions, filer questions and other
communications regarding submissions
and submission procedures,
reconciliation or correction of errors,
information submitted under proposed
§§ 1092.202(g) and 1092.203(f),117 and
other information that would be
submitted or collected to facilitate the
administration of the NBR system.
Proposed § 1092.204(a) would provide
that the Bureau may determine not to
publish such administrative
information, as discussed below in the
section-by-section discussion of
proposed § 1092.204(a). The Bureau
seeks comment whether any other
information that might be collected
through the NBR system should also be
treated as administrative information.
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201(b) Attesting Executive
Proposed § 1092.201(b) would define
the term ‘‘attesting executive’’ to mean,
with respect to any covered order
regarding a supervised registered entity,
the individual designated by the
supervised registered entity to perform
the supervised registered entity’s duties
with respect to the covered order under
proposed § 1092.203. That section
would require a supervised registered
entity to designate as its ‘‘attesting
executive’’ its highest-ranking duly
appointed senior executive officer (or, if
the supervised registered entity does not
have any duly appointed officers, the
highest-ranking individual charged with
managerial or oversight responsibility
for the supervised registered entity)
whose assigned duties include ensuring
the supervised registered entity’s
compliance with Federal consumer
financial law, who has knowledge of the
entity’s systems and procedures for
achieving compliance with the covered
order, and who has control over the
117 See discussion in the section-by-section
discussion of these provisions below.
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provision of a consumer financial
product or service. For the reasons
discussed above in section IV(C), the
Bureau believes that orders issued
under the types of covered laws
described in the proposal are likely to
be probative of risks to consumers in the
offering or provision of consumer
financial products or services, including
developments in markets for such
products or services.
First, proposed § 1092.201(c) would
define the term covered law to include
a Federal consumer financial law, as
that term is defined in proposed
§ 1092.101(a) and the CFPA.118 The
Bureau is charged with administering,
interpreting, and enforcing the Federal
consumer financial laws, which include
the CFPA itself, 18 enumerated
consumer laws (such as the Fair Credit
Reporting Act and the Truth in Lending
Act),119 and the laws for which
authorities were transferred to the
Bureau under subtitles F and H of the
CFPA, as well as rules and orders issued
by the Bureau under any of these
laws.120
The Bureau believes that requiring
registration of covered nonbanks in
connection with certain orders issued
under Federal consumer financial laws
will further the purposes of proposed
subpart B. As discussed in section IV,
‘‘to support [the Bureau’s] rulemaking
and other functions,’’ Congress
mandated that the Bureau ‘‘shall
monitor for risks to consumers in the
offering or provision of consumer
financial products or services, including
developments in markets for such
products or services.’’ 121 In matters
where an agency other than the Bureau
has issued or obtained a final, public
order concluding that an entity has
violated Federal consumer financial law
in connection with the offering or
provision of a consumer financial
product or service, the Bureau will
generally have jurisdiction over the
conduct that resulted in that order. The
Bureau therefore has a clear interest in
identifying and understanding the
nature of the risks to consumers
presented by such conduct, including
the risk that the conduct continues
outside the particular jurisdiction or in
connection with other consumer
financial products or services that are
offered or provided by the covered
nonbank. A pattern of similar alleged or
found violations of Federal consumer
financial law across multiple nonbank
covered persons may indicate a problem
118 See
12 U.S.C. 5481(14).
12 U.S.C. 5481(12).
120 12 U.S.C. 5481(14).
121 12 U.S.C. 5512(c)(1).
119 See
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that the Bureau can best address by
engaging in rulemaking to clarify or
expand available consumer protection
to address emerging consumer risk
trends, or by using other tools, such as
consumer education, to address the
identified risks. And, depending on the
facts and circumstances, the Bureau
may consider bringing its own
supervisory or enforcement action in
connection with the same or related
conduct.122 Thus, the Bureau believes
that violations of the Federal consumer
financial laws, and especially repeat
violations of such laws, may be
probative of risks to consumers and may
indicate more systemic problems at an
entity or in the relevant market related
to offering or provision of consumer
financial products or services.
The Bureau seeks comment on
including Federal consumer financial
laws in the definition of ‘‘covered law’’
and whether it should consider any
related inclusions, exclusions, or
conditions relating to Federal consumer
financial laws.
Second, proposed § 1092.201(c)(2)
would define the term ‘‘covered law’’ to
include any other law as to which the
Bureau may exercise enforcement
authority. As explained above in section
IV(C), the Bureau may enforce certain
laws other than Federal consumer
financial laws, such as the Military
Lending Act.123 The Bureau believes
that the proposed registry should collect
information regarding agency and court
orders issued under any law that the
Bureau may enforce, where 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. By definition, the
conduct addressed in such orders will
generally fall within the scope of the
Bureau’s enforcement authority. More
generally, in the Bureau’s experience,
evidence of such conduct could be
highly probative of a broader risk that
the entity has engaged or will engage in
conduct that may violate Federal
consumer financial laws. For example,
violations of the Military Lending Act
may overlap with, or be closely
122 The Bureau is also proposing to require
registration of orders that the Bureau has obtained
or issued for violations of Federal consumer
financial laws. While the Bureau is of course aware
of such orders, collecting all orders for violations
of covered laws—including those obtained or
issued by the Bureau—within the proposed registry
would benefit the Bureau, other regulators, and the
general public by providing a single point of
reference for such orders. The Bureau would also
benefit from receiving the written statements
required under proposed § 1092.203 with respect to
orders it obtains or issues.
123 10 U.S.C. 987(f)(6) (authorizing Bureau
enforcement of the Military Lending Act).
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associated with, violations of the
CFPA’s UDAAP prohibitions 124 or the
Truth in Lending Act,125 among other
Federal consumer financial laws. In
addition, in the Bureau’s experience, a
violation of one law within the Bureau’s
enforcement authority may be indicative
of broader inadequacies in an entity’s
compliance systems that are resulting in
or could result in other legal violations,
including violations of Federal
consumer financial laws. Furthermore,
including in the registry orders issued
under any law that the Bureau may
enforce (where 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) would further the
Bureau’s objective of creating a registry
that could serve as a single,
consolidated reference tool for use in
monitoring for risks to consumers,
thereby increasing the Bureau’s ability
to use the registry to monitor for
patterns of risky conduct of nonbank
covered persons across entities,
industries, and product offerings.
The Bureau seeks comment on
whether it should include the laws
described in proposed § 1092.201(c)(2)
in the definition of ‘‘covered law.’’ The
Bureau also seeks comment on whether
it should consider any exclusions from,
or revisions to, the description of the
laws captured by proposed
§ 1092.201(c)(2).
Third, proposed § 1092.201(c)(3)
would define the term ‘‘covered law’’ to
include the prohibition of unfair or
deceptive acts or practices under section
5 of the FTC Act, 15 U.S.C. 45, or any
rule or order issued for the purpose of
implementing that prohibition. The
proposal would not include within the
definition of ‘‘covered law’’ FTC Act
section 5’s prohibition of ‘‘[u]nfair
methods of competition in or affecting
commerce,’’ or rules or orders issued
solely pursuant to that prohibition.126
The Bureau expects that entities would
be aware in any specific case whether a
provision of an applicable order has
been issued under FTC Act section 5’s
prohibition of unfair or deceptive acts or
practices (or a rule or order issued for
the purpose of implementing that
prohibition), as opposed to section 5’s
prohibition of ‘‘[u]nfair methods of
competition in or affecting commerce’’
(or a rule or order issued thereunder),
and thus whether the order provision
was issued under a ‘‘covered law’’ or
not. The Bureau understands that orders
issued in connection with violations of
124 15
U.S.C. 5531, 5536(a)(1)(B).
U.S.C. 1601 et seq.
126 15 U.S.C. 45(a)(1).
125 15
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FTC Act section 5 routinely distinguish
between these two authorities, and that
orders issued under FTC Act section 5’s
prohibition of ‘‘[u]nfair methods of
competition in or affecting commerce’’
rarely, if ever, relate to UDAP violations
involving the offering or provision of a
consumer financial product or service.
The Bureau requests comment on
whether the proposal should also
require registration of orders issued
under FTC Act section 5’s prohibition of
‘‘[u]nfair methods of competition in or
affecting commerce,’’ or rules or orders
issued pursuant to that prohibition. The
Bureau also seeks comment on whether
the proposal should include measures to
clarify any matters relating to this
proposed distinction between types of
FTC Act section 5 order provisions.
As discussed further in section IV(C)
above, the Bureau believes that an order
issued under FTC Act section 5’s
prohibition of unfair or deceptive acts or
practices may be probative of violations
of Federal consumer financial law,
including CFPA sections 1031 and
1036(a)(1)(B).127 Because the CFPA’s
prohibition of unfair or deceptive acts or
practices is modeled after FTC Act
section 5’s similar prohibition,128
conduct that constitutes a UDAP
violation under FTC Act section 5 also
likely violates the CFPA’s UDAAP
provisions. The Bureau also believes
that FTC Act section 5 unfairness and
deception violations related to the
offering or provision of consumer
financial products or services may
indicate more systemic problems at an
entity that may impact the offering or
provision of consumer financial
products or services other than those
issues specifically identified in the
order. The Bureau would need to know
about such findings so that it can assess
whether the violation is indicative of a
larger and potentially more systemic
problem at the covered nonbank, or
potentially throughout an entire market.
And, as discussed, information about
such violations would inform the
Bureau’s exercise of its various
rulemaking, supervisory, enforcement,
consumer education, and other
functions.
‘‘Covered law’’ under the proposal
would include not only FTC Act section
5, but also any rules or orders issued for
the purpose of implementing FTC Act
section 5’s UDAP prohibition.129
127 12
U.S.C. 5531, 5536(a)(1)(B).
e.g., Consumer Fin. Prot. Bureau v. ITT
Educ. Servs., 219 F. Supp. 3d at 902–04.
129 In certain circumstances, the Bureau may
enforce a rule prescribed under the FTC Act by the
FTC with respect to an unfair or deceptive act or
practice. See 12 U.S.C. 5581(b)(5)(B)(ii). Such an
128 See,
Continued
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Section 18 of the FTC Act, 15 U.S.C.
57a, authorizes the FTC to prescribe
‘‘rules which define with specificity acts
or practices which are unfair or
deceptive acts or practices in or
affecting commerce’’ within the
meaning of FTC Act section 5(a)(1).130
These FTC rules, which are known as
‘‘trade regulation rules,’’ would be
covered laws under the proposed
definition to the extent the conduct
found or alleged to violate such rules
relates to the offering or provision of a
consumer financial product or service.
Violations of these rules generally
constitute violations of FTC Act section
5 itself.131 And the Bureau believes that,
like violations of FTC Act section 5
itself, violations of the rules issued
under FTC Act section 5, where they
arise out of conduct in connection with
the offering or provision of consumer
financial products or services, would
likely be probative of risks to consumers
and warrant attention by the Bureau.
The proposed definition of ‘‘covered
law’’ would also include orders issued
by the FTC itself under FTC Act section
5’s UDAP prohibition, as well as by
other agencies. The Bureau believes that
violations of such orders present similar
risks to consumers as those presented by
violations of FTC Act section 5 and the
rules issued thereunder. The Bureau
seeks comment on including the
prohibition on unfair or deceptive acts
or practices under FTC Act section 5,
and rules and orders issued for the
purpose of implementing that
prohibition, in the definition of
‘‘covered law,’’ and whether it should
consider any related inclusions,
exclusions, or conditions.
Fourth, proposed § 1092.201(c)(4)
would define the term ‘‘covered law’’ to
include a State law prohibiting unfair,
deceptive, or abusive acts or practices
that is identified in appendix A of part
1092. Proposed appendix A provides a
list of State statutes that prohibit unfair,
deceptive, or abusive acts or practices
and that the Bureau has reviewed and
proposes to define as a covered law
under this provision. As with the other
laws described in proposed
§ 1092.201(c), a State UDAAP law
would only qualify as a covered law to
the extent the conduct found or alleged
to violate the State UDAAP law relates
FTC rule, where issued by the FTC to implement
FTC Act section 5, would be a covered law under
the proposed definition.
130 15 U.S.C. 57a(a)(1)(B).
131 15 U.S.C. 57a(d)(3) (‘‘When any rule under
subsection (a)(1)(B) takes effect a subsequent
violation thereof shall constitute an unfair or
deceptive act or practice in violation of section
45(a)(1) of this title, unless the Commission
otherwise expressly provides in such rule.’’).
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to the offering or provision of a
consumer financial product or service.
The Bureau has reviewed the State
statutes identified in proposed appendix
A and as explained below, it believes
that requiring registration of covered
nonbanks that are subject to covered
orders issued under such statutes would
likely further the purposes of proposed
subpart B.
Proposed appendix A includes State
laws of general applicability that
prohibit unfair, deceptive, or abusive
acts or practices and that might apply to
the offering or provision of consumer
financial products or services. Although
the scope and content of these State
laws may vary at the margin, the Bureau
believes these statutes cover a core
concept of unfairness, deception, or
abusiveness that makes violations of
them likely probative of risks to
consumers in the offering or provision
of consumer financial products and
services. These statutes may commonly
be referred to as ‘‘UDAP’’ or ‘‘UDAAP’’
statutes, or ‘‘little FTC Acts,’’ and are
often labeled in State statutes as State
‘‘consumer protection acts’’ or as laws
addressing ‘‘unfair’’ or ‘‘deceptive’’
‘‘trade practices.’’ State or local agencies
may use these statutes to bring cases or
actions with respect to practices that
injure consumers. While these State
statutes may also authorize private suits
by consumers and other persons, the
proposal would only require registration
with respect to covered orders issued at
least in part in any action or proceeding
brought by any Federal agency, State
agency, or local agency (as described
further below in the section-by-section
discussion of proposed
§ 1092.201(e)(2)).
The Bureau is proposing to list these
statutes in appendix A, and thus to
include them in the proposed rule’s
definition of covered law, in part
because those statutes are generally
analogous to CFPA sections 1031 and
1036(a)(1)(B) and FTC Act section 5.132
Several of these State statutes
specifically provide that ‘‘it is the intent
of the legislature that in construing [the
State statute], the courts will be guided
by the interpretations given by the
Federal Trade Commission and the
federal courts to Section 5(a)(1) of the
Federal Trade Commission Act,’’ or
words to this effect.133 Obtaining a
better understanding of entities’
compliance with State UDAP/UDAAP
laws will assist the Bureau in the
assessment and detection of risks for the
same general reasons described with
132 12
U.S.C. 5531, 5536(a)(1)(B); 15 U.S.C. 45.
Mass. Gen. Laws ch. 93A, sec. 2(b); Conn.
Gen. Stat. sec. 42–110b(b).
respect to alleged or found violations of
FTC Act section 5. The Bureau believes
that entities that have violated one of
these State statutes, and especially
repeat violators of such statutes, may
pose heightened risks to consumers in
the offering or provision of consumer
financial products and services,
including the risk that they have
engaged, and may continue to engage, in
unfair, deceptive, or abusive acts and
practices in violation of CFPA section
1031. And information identifying
patterns of such risky conduct across
entities, industries, product offerings, or
jurisdictions would be highly
informative to the Bureau’s monitoring
work. The Bureau has attempted to
identify all of the applicable State
UDAP/UDAAP statutes of general
applicability in appendix A, but
requests comment on whether it has
comprehensively done so. The Bureau
proposes to include in appendix A all
such State statutes and seeks comment
on any additions, subtractions, or
modifications to the State UDAP/
UDAAP statutes of general applicability
in appendix A.
The Bureau is also proposing to
include in appendix A, and thus to
include in the definition of the term
covered law, certain other industryspecific State statutes that prevent
unfair, deceptive, or abusive conduct in
connection with certain specific
consumer financial industries or
markets. For example, proposed
appendix A would include New York
Banking Law section 719(2), regarding
prohibited practices by student loan
servicers. This State statutory provision
prohibits ‘‘[e]ngag[ing] in any unfair,
deceptive or predatory act or practice
toward any person or misrepresent[ing]
or omit[ting] any material information
in connection with the servicing of a
student loan.’’ 134 The Bureau is
proposing to include this New York
State law and others like it in appendix
A, to the extent that the conduct found
or alleged to violate such law relates to
the offering or provision of a consumer
financial product or service.
As with State UDAP/UDAAP laws of
general applicability, the Bureau
believes that violation of such industryspecific State statutes that prohibit
unfair, deceptive, or abusive acts or
practices in connection with consumer
financial industries or markets and in
connection with the offering or
provision of consumer financial
products or services would be probative
of potential violations of CFPA sections
1031 and 1036, and also of other related
risks to consumers within the scope of
133 E.g.,
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the Bureau’s jurisdiction. The Bureau
believes that omitting these industryspecific statutes from the definition of
‘‘covered law’’ may cause the
information submitted to the proposed
registry to be incomplete. Among other
things, the Bureau understands that
many State agencies typically rely upon
such industry-specific statutes to
enforce prohibitions on conduct by
covered nonbanks that is similar to that
prohibited under UDAP/UDAAP laws of
general applicability. Thus, the Bureau
believes registration of orders issued
under such State statutes would provide
information that is probative of the
types of risks the Bureau believes to be
associated with orders issued under
State UDAP/UDAAP laws of general
applicability. The Bureau has attempted
to identify applicable State UDAP/
UDAAP statutes related to applicable
consumer financial industries or
markets in appendix A, but requests
comment on whether it has
comprehensively done so. The Bureau
proposes to include in appendix A all
such State statutes.
The Bureau proposes to require
registration of all orders issued under
State laws listed in appendix A, as long
as the conduct at issue relates to the
offering or provision of a consumer
financial product or service, and the
order satisfies the definition of ‘‘covered
order’’ in proposed § 1092.201(e). The
Bureau recognizes that some State
UDAP/UDAAP statutes listed in
appendix A may prohibit conduct that
regulated entities might argue is not
prohibited under CFPA sections 1031
and 1036(a)(1)(B). For example, State
UDAP/UDAAP statutes modeled after
FTC Act section 5 may include
provisions that, in addition to
prohibiting ‘‘unfair’’ and ‘‘deceptive’’
conduct, also prohibit ‘‘unfair methods
of competition’’ in connection with
antitrust or anticompetition matters.
While it is possible that such orders
might be less probative than other
orders, the Bureau believes that limiting
the scope of such covered laws to those
involving the offering or provision of
consumer financial products and
services sufficiently assures that most
orders reported will be valuable in
effectively monitoring for risks to
consumers in the offering or the
provision of such products and services.
Moreover, the Bureau anticipates that it
will not always be the case that an
agency or court order will clearly
distinguish whether it is issued under
State statutory provisions preventing
‘‘unfair,’’ ‘‘deceptive,’’ or ‘‘abusive’’ acts
and practices on the one hand, or
‘‘anticompetitive’’ acts or practices on
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the other—especially in cases where a
State statute addresses all of them.
Unlike orders issued under FTC Act
section 5, it is not clear to the Bureau
that orders issued under such State laws
routinely distinguish between these two
types of authorities. Therefore,
attempting to carve out portions of State
UDAP/UDAAP statutes that extend
beyond the conduct prohibited by CFPA
sections 1031 and 1036(a)(1)(B) would
be impracticable and risk undermining
the effectiveness of the rule. The Bureau
thus proposes to define the term
‘‘covered law’’ by listing specific State
statutes. Where a State statute is listed
in appendix A and otherwise satisfies
proposed § 1092.201(c), the Bureau
would propose to treat it as a covered
law, regardless of whether any specific
order issued under that law expressly
refers to the State law’s prohibition of
‘‘unfair,’’ ‘‘deceptive,’’ or ‘‘abusive’’ acts
and practices. In most cases, the Bureau
anticipates that violations of the listed
State statutes that relate to the offering
or provision of a consumer financial
product or service will be probative of
risks to consumers within the Bureau’s
jurisdiction. The Bureau seeks comment
on this approach, including whether it
should further clarify the definition of
covered law in this regard, and whether
the proposed list at proposed appendix
A adequately identifies such State laws.
The Bureau also seeks specific
comment on whether to require
registration, and to list in appendix A,
additional State statutes that prohibit
‘‘unconscionable’’ conduct but do not
also contain a specific reference to
‘‘unfair,’’ ‘‘deceptive,’’ or ‘‘abusive’’
conduct.135 While the Bureau has not
included such State laws in appendix A,
the Bureau believes that such
prohibitions on unconscionable conduct
often reach conduct that qualifies as a
UDAAP violation subject to the
Bureau’s jurisdiction under CFPA
sections 1031 and 1036(a)(1)(B).136
Therefore, the Bureau seeks comment
regarding whether requiring nonbank
covered persons to report violations of
such State unconscionability
prohibitions, when they relate to the
135 See,
e.g., Kan. Stat. Ann. sec. 50–627.
e.g., Kan. Stat. Ann. sec. 50–
627(b)(1) (providing that, in determining whether
an act or practice is unconscionable, a court shall
consider whether ‘‘[t]he supplier took advantage of
the inability of the consumer reasonably to protect
the consumer’s interests because of the consumer’s
physical infirmity, ignorance, illiteracy, inability to
understand the language of an agreement or similar
factor’’), with 12 U.S.C. 5531(d)(2)(B) (act or
practice is abusive if, among other things, it ‘‘takes
unreasonable advantage of . . . the inability of the
consumer to protect the interests of the consumer
in selecting or using a consumer financial product
or service’’).
136 Compare,
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offering or provision of a consumer
financial product or service, would
significantly assist the Bureau in
effectively monitoring for risks to
consumers within the Bureau’s
jurisdiction, or facilitate the Bureau’s
exercise of its rulemaking and other
authorities.
The Bureau has not included laws of
tribal governments in appendix A.
While the Bureau believes that many
orders issued under such laws may be
highly probative of risks to consumers
and could assist the Bureau in carrying
out its market monitoring obligations—
as well as assist the Bureau in
assembling an effective nonbank
registry—the Bureau preliminarily
concludes that considerations of
administrative efficiency favor focusing
on other orders. The Bureau, however,
is continuing to consider whether to
include tribal UDAP/UDAAP laws in
appendix A. The Bureau seeks comment
on whether tribal UDAP/UDAAP laws
should be included among the list of
‘‘covered laws,’’ and if so, which
specific tribal UDAP/UDAAP laws
should be included in the list.
Fifth, proposed § 1092.201(c)(5)
would include in the definition of the
term ‘‘covered law’’ a State law
amending or otherwise succeeding a law
identified in appendix A, to the extent
that such law is materially similar to its
predecessor, and the conduct found or
alleged to violate such law relates to the
offering or provision of a consumer
financial product or service.
The Bureau is proposing
§ 1092.201(c)(5) in order to clarify that
appendix A is intended to capture
certain future changes made by States to
the State laws listed therein. States may
make immaterial changes from time to
time, including renumbering or
amending the statutes listed in
appendix A, in a manner that could
cause proposed appendix A to become
technically ‘‘incorrect’’ or ‘‘obsolete’’ in
the view of some regulated entities.
Proposed § 1092.201(c)(5) makes clear
that is not the Bureau’s intent. To the
extent the amended or otherwise
succeeding law is materially similar to
its predecessor, proposed
§ 1092.201(c)(5) would ensure that it
would still qualify as a ‘‘covered law.’’
The definition of covered law thus
would capture a successor to a law
listed in appendix A if, for example, the
conduct found or alleged to violate the
successor law would have constituted a
violation of the predecessor law were it
still in effect. The Bureau seeks
comment on all aspects of proposed
§ 1092.201(c)(5), including whether the
Bureau should define successor laws
covered by appendix A more broadly or
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narrowly than the approach adopted
here, and whether regulated entities
would benefit from any additional
guidance in determining whether a
successor law is materially similar to a
predecessor law listed in appendix A.
Finally, proposed § 1092.201(c)(6)
would include in the definition of the
term ‘‘covered law’’ a rule or order
issued by a State agency for the purpose
of implementing a State law described
in proposed § 1092.201(c)(4) or (5), to
the extent the conduct found or alleged
to violate such regulation relates to the
offering or provision of a consumer
financial product or service. Various
State statutes authorize one or more
State agencies to issue regulations
implementing the terms of those
statutes, thereby authorizing the State
agency to further define specific unfair,
deceptive, or abusive acts or
practices.137 Proposed § 1092.201(c)(6)
would include such State agency
regulations within the meaning of the
term ‘‘covered law.’’
The Bureau seeks comment on all
aspects of proposed section
§ 1092.201(c), including whether the
types of covered laws proposed are
appropriate, whether they may be either
overinclusive or underinclusive in light
of the Bureau’s objectives in this
rulemaking, and whether the definition
of the term ‘‘covered law’’ may be
clarified or strengthened to achieve the
purposes of proposed subpart B.
201(d) Covered Nonbank
The proposal would define the term
‘‘covered nonbank’’ to mean a covered
person 138 that does not fall into one of
five categories. First, the Bureau
proposes to exclude from the definition
insured depository institutions, insured
credit unions, or related persons. The
Bureau has considered proposing to
collect information about relevant
orders in place against such persons
under its authority to issue rules
mandating collection of information set
forth in CFPA section 1022(c)(4)(B)(ii).
While the Bureau might at some point
consider collecting or publishing the
137 See,
e.g., Cal. Fin. Code sec. 90009(c).
provided in proposed § 1092.101(a), the
proposal would define the term ‘‘covered person’’
to have the same meaning as in 12 U.S.C. 5481(6).
The proposal would not define ‘‘service providers,’’
as defined in 12 U.S.C. 5481(26), as covered
nonbanks per se. Entities that are service providers,
however, may nevertheless also be covered persons
under the CFPA. Among other things, a person that
is a service provider shall be deemed to be a
covered person to the extent that such person
engages in the offering or provision of its own
consumer financial product or service. See 12
U.S.C. 5481(26)(C). And a service provider that acts
as a service provider to its covered person affiliate
may itself be deemed to be a covered person as
provided in 12 U.S.C. 5481(6)(B).
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information described in the proposal
from such persons, the Bureau believes
that there is currently greater need to
collect this information from the
nonbanks under its jurisdiction. Among
other things, the identity and size of all
insured depository institutions and
insured credit unions is known to the
Bureau due to registration regimes
maintained by the prudential regulators,
which track and make public such
information. Also, there are only four
prudential regulators, and they regularly
publish their consumer financial
protection orders. In contrast,
comprehensive, readily accessible
information is currently lacking about
the identity of, and orders issued
against, nonbanks subject either to the
Bureau’s market monitoring authority or
to its supervisory authority across the
various markets for consumer financial
products and services. As a result, there
is a unique need to identify nonbanks
subject to orders through this proposed
registration system. In addition, the
proposal would conform with the
Bureau’s registration authority under
CFPA section 1022(c)(7), which states
that the Bureau may impose registration
requirements applicable to a covered
person, other than an insured
depository institution, insured credit
union, or related person.139
Second, the proposal would exclude
from the definition of the term ‘‘covered
nonbank’’ a ‘‘State,’’ as defined in CFPA
section 1002(27)—a term that includes
‘‘any federally recognized Indian tribe,
as defined by the Secretary of the
Interior’’ under section 104(a) of the
Federal Recognized Indian Tribe List
Act of 1994, 25 U.S.C. 5131(a).140 The
Bureau has other avenues of
collaborating with State partners
(including tribal partners) and, out of
considerations of comity, does not seek
to subject them to an information
collection requirement in this proposal.
Third, the proposal excludes natural
persons from the definition of ‘‘covered
nonbank.’’ The Bureau is not proposing
to impose subpart B’s registration
requirements on natural persons, even
though natural persons may be covered
persons and may be subject to the types
of orders described in the proposal. (For
example, a sole proprietor not
incorporated as a legal entity could
qualify as a covered person.) Under the
proposed exclusion, for example,
natural persons subject to orders issued
under FTC Act section 5, removal and
prohibition orders or orders assessing
civil money penalties issued by an
appropriate Federal banking agency
under section 8 of the Federal Deposit
Insurance Act,141 or State licensing
orders or orders issued under the
S.A.F.E. Mortgage Licensing Act of
2008 142 would not be subject to the
proposal’s registration requirements.
The ‘‘natural person’’ exception in
proposed § 1092.201(c)(3) is intended
only to exclude individual human
beings from the definition of ‘‘covered
nonbank.’’ The definition of ‘‘covered
nonbank’’ would include trusts and
other entities that meet the definition of
‘‘covered person’’ under CFPA section
1002(6).143 The Bureau is primarily
interested in obtaining information
regarding orders that apply to entities
because it believes such orders will be
most useful in identifying relevant risks
to consumers. The Bureau believes that
many of the agency and court orders
enforcing the law issued against
individuals are highly specific to the
facts and circumstances relevant to the
individual’s conduct and are less likely
to implicate broader risks to consumers
and markets. In addition, the Bureau is
primarily interested in obtaining and
publishing registration information
regarding nonbank entities that are
subject to its jurisdiction, which among
other things would enable consumers to
better identify such entities and would
provide information to the public and
other regulators. The Bureau is
concerned that, if the Bureau should
extend the registration requirement to
natural persons, the information
provided would be less relevant to
consumers and the other users of the
NBR system. Therefore, the potential
benefit of extending the registration
requirement to natural persons likely
would not justify the additional Bureau
resources that would need to be
allocated to implement and administer
such an expansion of the Bureau’s
registration system. The Bureau also
believes that proposed § 1092.203’s
requirements to designate one or more
attesting executives and submit written
statements would not be appropriate for
natural persons. The Bureau requests
comment on this proposed exclusion.
Fourth, the proposal excludes from
the definition of ‘‘covered nonbank’’ a
motor vehicle dealer that is
predominantly engaged in the sale and
141 12
U.S.C. 1818.
U.S.C. 5101 et seq.
143 See 12 U.S.C. 5481(6). See also 12 U.S.C. 5481
(defining the term ‘‘person’’ to include, in addition
to individuals, any ‘‘partnership, company,
corporation, association (incorporated or
unincorporated), trust, estate, cooperative
organization, or other entity’’).
142 12
139 An affiliate of an insured depository
institution, insured credit union, or related person
could be subject to the proposed rule if it is not
itself an insured depository institution, insured
credit union, or related person.
140 12 U.S.C. 5481(27).
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servicing of motor vehicles, the leasing
and servicing of motor vehicles, or both,
within the meaning of 12 U.S.C. 5519(a),
except to the extent such a person
engages in functions that are excepted
from the application of 12 U.S.C.
5519(a) as described in 12 U.S.C.
5519(b). CFPA section 1029 provides an
exclusion from the Bureau’s rulemaking
authority for certain motor vehicle
dealers.144 However, CFPA section
1029(b) exempts certain persons from
this exclusion. Persons covered by
section 1029(a) would qualify as
‘‘covered nonbanks’’ under the proposal
so long as they engage in the functions
described in section 1029(b)—in which
case they would be ‘‘covered
nonbanks.’’ Proposed § 1092.201(e),
discussed below, would further provide
that the only orders issued to such
motor vehicle dealers that would
require registration would be those
issued in connection with the functions
that are excepted from the application of
12 U.S.C. 5519(a) as described in 12
U.S.C. 5519(b).
Fifth, the proposal excludes a person
from the definition of ‘‘covered
nonbank’’ if the person qualifies as a
covered person based solely on conduct
that is the subject of, and that is not
otherwise exempted from, an exclusion
from the Bureau’s rulemaking authority
under 12 U.S.C. 5517.145 This provision
would clarify that persons whose
activities are wholly excluded from the
rulemaking authority of the Bureau
under one or more of the provisions of
section 1027 of the CFPA are not
‘‘covered nonbanks.’’ However, where
the CFPA provides that any of the
activities engaged in by such persons
are subject to the Bureau’s rulemaking
authority, this limitation would not
exclude the person from qualifying as a
‘‘covered nonbank.’’ For example, CFPA
section 1027(l)(1) provides an exclusion
from the Bureau’s rulemaking authority
for certain persons engaging in certain
activities relating to charitable
contributions.146 Under the proposal, a
covered person would not be deemed a
‘‘covered person’’ if it qualifies for this
statutory exclusion and is not otherwise
exempt from it. But CFPA section
1027(l)(2) exempts certain activities
from this statutory exclusion by
providing that ‘‘the exclusion in [CFPA
section 1027(l)(1)] does not apply to any
activities not described in [CFPA
section 1027(l)(1)] that are the offering
or provision of any consumer financial
product or service, or are otherwise
U.S.C. 5519 (‘‘Exclusion for Auto Dealers’’).
U.S.C. 5517.
146 12 U.S.C. 5517(l)(1) (‘‘Exclusion for Activities
Relating to Charitable Contributions’’).
subject to any enumerated consumer
law or any law for which authorities are
transferred under subtitle F or H.’’ 147 As
proposed, persons described in CFPA
section 1027(l)(1) engaging in the
activities described therein would
qualify as ‘‘covered nonbanks’’ so long
as they engage in any of the activities
described in CFPA section 1027(l)(2),
and they would thus be subject to all of
the information-collection requirements
of the rule applicable to ‘‘covered
nonbanks,’’ regardless of whether the
applicable ‘‘covered order’’ addressed
the conduct subject to the statutory
exclusion.
The Bureau is also considering
whether it should adopt an alternative
approach that would limit all of the
proposal’s registration requirements to
covered persons that are subject to the
Bureau’s supervision and examination
authority under CFPA section
1024(a).148 The Bureau believes this
approach would significantly narrow
the number of entities that would be
required to register under proposed
subpart B, and therefore would also
limit the information provided to the
NBR system. However, this alternative
approach would nevertheless provide
significant benefits to the Bureau and
other users of the system. The Bureau
would be able to use the information
provided to identify risk to consumers,
to prioritize its supervisory activities,
and to support its other functions as
described in this proposal. In addition,
the Bureau has a particular interest in
those supervised entities due to its
exclusive Federal supervisory and
enforcement authority, with certain
exceptions as described in the CFPA.149
The Bureau seeks comment on this
alternative approach, including whether
the proposed scope of the approach is
appropriate and why or why not.
More generally, the Bureau seeks
comment regarding the overall scope of
the proposed definition of ‘‘covered
nonbank,’’ including whether the
definition should be expanded or
limited in light of the purposes and
objectives of subpart B. The Bureau
further seeks comment on whether a
more limited or expanded approach to
the registration of covered persons
would be appropriate instead of the
proposed requirements, whether it
should consider any other modifications
to the scope of the rule, and how such
modifications would match the Bureau’s
policy goals.
6109
201(e) Covered Order
The Bureau proposes to add proposed
§ 1092.201(e) to define the term
‘‘covered order.’’ The proposal would
define the term to include only orders
that are both public and final. The term
‘‘public’’ is defined at proposed
§ 1092.201(k). The proposed term
‘‘covered order’’ is intended to cover
only final settlement or consent orders,
or final agency or court orders resulting
from litigation or adjudicated agency
proceedings. By ‘‘final’’ order, the
proposal means to exclude such orders
as preliminary injunctions, temporary
restraining orders, orders partially
granting and partially denying motions
to dismiss or summary-judgment
motions, and other interlocutory
orders.150 The proposed term would
also exclude temporary cease-and-desist
orders that come into effect pending the
resolution of an underlying contested
matter but would include a related final
cease-and-desist or other order resolving
the matter. The proposed term would
also exclude notices of charges,
accusations, or complaints that are part
of disciplinary or enforcement
proceedings but do not constitute a final
order. The Bureau proposes to include
orders that are final by their own terms
or under applicable law, even where
Federal, State, or local law allows for
the appeal of such orders. Proposed
§ 1092.201(f), defining the term
‘‘effective date,’’ addresses situations
where an order is subject to a stay
following issuance. The Bureau seeks
comment on whether the term ‘‘final’’
should be further defined in the
regulatory text. The Bureau also seeks
comment on whether certain types of
non-final orders should be included in
the proposed definition of ‘‘covered
order,’’ or whether the Bureau should
consider expressly excluding other
types of orders.
The proposed definition includes
orders issued by either an agency or a
court. The proposal would clarify that
the definition would include an
otherwise covered order whether or not
issued upon consent. Accordingly,
‘‘covered orders’’ may be issued upon
consent or settlement. They may also be
issued after the filing of a lawsuit or
complaint and a process of litigation or
adjudication. The proposed term would
not include corporate resolutions
adopted by an entity and not issued by
an agency or court. Nor would the
proposed term generally include
licenses, including conditional licenses;
but the term would include an order
144 12
145 12
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U.S.C. 5517(l)(2).
U.S.C. 5514(a).
149 See 12 U.S.C. 5514(c)(1), (d).
148 12
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150 See, e.g., Gelboim v. Bank of Am. Corp., 574
U.S. 405, 408–09 (2015) (discussing the meaning of
‘‘final decision’’ under 28 U.S.C. 1291).
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suspending, conditioning, or revoking a
license based on a violation of law. Nor
would the proposed term include
related stipulations or consents, where
those documents are not incorporated
into or otherwise made part of the order.
The Bureau seeks comment on whether
certain types of orders should be
categorically excluded from registration.
Proposed § 1092.201(e)(1) would also
include, as a component of the
definition of the term ‘‘covered order’’
for a given covered nonbank, a
requirement that the order identify the
covered nonbank by name as a party
subject to the order. Thus, for example,
orders that indirectly refer to a covered
nonbank as an ‘‘affiliate’’ of a named
party, but do not name the covered
nonbank as itself a party subject to the
order, would not be covered orders
under proposed § 1092.201(e) with
respect to the covered nonbank. Nor
would orders that apply to a covered
nonbank only as a ‘‘successor and
assign’’ of a named party, where the
order does not expressly identify the
covered nonbank by name as a party
subject to the order. The proposal would
include in the definition a covered
nonbank that is listed by name as a
party somewhere within the body of the
order, even if the covered nonbank is
not listed in the order’s title or caption.
In other words, to fall within the
proposed § 1092.201(e) definition, it
would be sufficient that the order
identifies the covered nonbank by name
as a party subject to the order even if the
covered nonbank is not listed in the title
or caption of the order, or as the primary
respondent, defendant, or subject of the
order. A covered nonbank may satisfy
the proposed definition even if the
issuing agency or court does not list the
covered nonbank as a party in related
press releases or internet links. The
Bureau seeks comment on the scope of
proposed § 1092.201(e)(1)’s limitation of
the definition of ‘‘covered order,’’ and
whether proposed § 1092.201(e)(1)
should also include affiliates, successors
and assigns, or other methods of
identifying entities subject to orders,
even though they are not expressly
named in the order.
Proposed § 1092.201(e)(2) would
include, as a component of the
definition of the term ‘‘covered order,’’
a requirement that the order have been
issued at least in part in any action or
proceeding brought by any Federal
agency, State agency, or local agency.
The Bureau believes that limiting the
registration requirement to orders
involving such agencies will provide
sufficient information to support Bureau
functions. This proposed requirement
would include orders issued by the
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Bureau itself, the ‘‘prudential
regulators,’’ as that term is defined at
CFPA section 1002(24),151 and any
‘‘Executive agency,’’ as that term is
defined at 5 U.S.C. 105. The proposed
requirement would also include orders
issued by ‘‘State agencies’’ as defined at
proposed § 1092.201(n) and ‘‘local
agencies’’ as defined at proposed
§ 1092.201(i). An order issued by a local
agency would satisfy this proposed
requirement, but such an order would
not satisfy the requirement set forth in
proposed § 1092.201(e)(4) (described
below) unless the order imposes the
obligations described in proposed
§ 1092.201(e)(3) on the covered nonbank
based on one or more violations of a
covered law. While certain Federal and
State laws are included in the
§ 1092.201(c) definition of the term
covered law, local laws are not. The
Bureau seeks comment on its use and
descriptions of the terms ‘‘Federal
agency,’’ ‘‘State agency,’’ and ‘‘local
agency’’ and whether the Bureau should
consider excluding any agencies as
defined or, conversely, broadening these
terms to include other relevant agencies
or entities.
Proposed § 1092.201(e)(3) further
would include, as a component of the
definition of the term ‘‘covered order,’’
a requirement that the order contain
public provisions that impose
obligations on the covered nonbank to
take certain actions or to refrain from
taking certain actions. Such obligations
may include, for example, injunctions
or other obligations to cease and desist
from violations of the law; to pay civil
money penalties, refunds, restitution,
disgorgement, or other money; to amend
certain policies and procedures,
including but not limited to instances
where the order requires submission of
the proposed amendments to policies
and procedures for nonobjection; to
maintain records or to provide them
upon request; or to take or to refrain
from taking other actions. An order
suspending, conditioning, or revoking a
license based on a violation of law
would meet this requirement. An order
that lacks any public provision
imposing such an obligation on the
covered nonbank would not meet the
requirement in proposed
§ 1092.201(e)(3). An example of the type
of orders that might not satisfy this
requirement would be a declaratory
judgment order finding that an entity
has violated the law, but not imposing
any remedial obligations. Other
examples might include orders whose
only public provisions are releases and
general contractual terms frequently
151 12
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contained in consent orders, such as
severability and counterpart signature
provisions, but only to the extent these
provisions do not impose any other
obligations described by proposed
§ 1092.201(e)(3).
The proposed § 1092.201(e)(3)
requirement would exclude order
provisions that are not ‘‘public’’ as that
term is defined in proposed
§ 1092.201(k). For example, obligations
imposed by non-public provisions that
constitute confidential supervisory
information of another agency would
not be considered when determining
whether a particular order satisfies this
proposed requirement. Proposed
§ 1092.201(e)(3) would also exclude
orders that lack any public provision
imposing an obligation on the covered
nonbank to take certain actions or to
refrain from taking certain actions. For
example, an order that describes
unlawful conduct but does not contain
any such public provisions imposing
obligations described at proposed
§ 1092.201(e)(3) would not satisfy this
requirement. The Bureau proposes to
exclude from the rule’s informationcollection requirements nonpublic
orders and portions of orders in order to
help protect the confidential processes
of other agencies, including their
supervisory processes. The Bureau is
concerned that requiring registration of
confidential supervisory information
might interfere with the functions and
missions of other agencies and does not
believe that requiring such registration
is necessary to accomplish the purposes
of the proposed rule. To the extent that
the Bureau has a need to review
nonpublic orders or nonpublic portions
of orders, it may seek access to relevant
information through inter-agency
information sharing that protects
applicable privileges and
confidentiality. In addition, as
discussed below in the section-bysection discussion of proposed
§ 1092.201(k), the Bureau believes that
publication of nonpublic information,
including but not limited to confidential
supervisory information of the Bureau
or other agencies, would be
inappropriate. The Bureau requests
comment on its proposed exclusion
from the registry of nonpublic orders
and nonpublic portions of orders,
including whether these provisions
would sufficiently protect confidential
information of other agencies, and
whether covered nonbanks would have
sufficient information to comply with
these provisions.
Proposed § 1092.201(e)(4) would also
include, as a component of the
definition of the term covered order, a
requirement that the order impose one
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or more of the obligations described in
proposed § 1092.201(e)(3) on the
covered nonbank based on an alleged
violation of a covered law. A covered
order need not include an admission of
liability or any particular factual
predicate. The Bureau anticipates that
agency and court orders will vary
widely in form and content, depending
in part on such matters as the relevant
individual laws being enforced, the
historical practices of the various
enforcement agencies, and the
negotiations and facts and
circumstances underlying specific
orders. Because of these expected
variations in form and content in the
orders that the Bureau would expect to
be registered under the proposal, the
Bureau believes that requiring
registration only of orders that contain
an admission of liability, or a statement
setting forth certain types of findings or
other factual predicates underlying the
order, would omit relevant orders. The
Bureau believes that an order that
contains neither an admission of
liability nor a statement setting forth the
factual predicate underlying the order
may nevertheless be probative of risks to
consumers of the type that the Bureau
is obligated to monitor.
For purposes of this proposed
definition, an obligation would be
‘‘based on’’ an alleged violation where
the order identifies the covered law in
question, asserts or otherwise indicates
that the covered nonbank has violated
it, and imposes the obligation on the
covered nonbank at least in part as a
result of the alleged violation.152 This
would include, for example, obligations
imposed as ‘‘fencing-in’’ or injunctive
relief, so long as those obligations were
imposed at least in part as a result of the
entity’s violation of a covered law. This
element of the definition would also be
satisfied, for example, by any obligation
imposed as part of other legal or
equitable relief granted with respect to
the violation, as well as by any
obligation imposed in order to prevent,
remedy, or otherwise address a violation
of a covered law, or the conditions
resulting from the violation. However,
an order that does not identify a covered
law as at least one of the legal bases for
the obligations it imposes on a covered
bank would not satisfy the requirement
set forth at proposed § 1092.201(e)(4).
An order may identify a covered law as
152 An obligation imposed based on multiple
violations, some of covered laws and some of other
laws, would qualify as an ‘‘obligation[ ] . . . based
on an alleged violation of a covered law’’ within the
meaning of proposed § 1092.201(e)(4), even if the
violations of the non-covered laws would
themselves have sufficed to warrant the imposition
of the obligation.
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a legal basis for the obligations imposed
by referencing another document, such
as a written opinion, stipulation, or
complaint, that shows that a covered
law served as the legal basis for the
obligations imposed in the order. But
the requirements of proposed
§ 1092.201(e)(4) would not be satisfied
where the legal basis for the obligations
imposed is specified only in extrinsic
documents not referenced in the order
at issue, such as a press release or blog
post.
The Bureau seeks comment on
whether the requirement articulated in
proposed § 1092.201(e)(4) is
appropriate, and whether it should be
expanded or restricted. The Bureau also
seeks comment on whether this
requirement would exclude a material
number of otherwise applicable orders
from the scope of proposed subpart B or
would exclude otherwise applicable
orders because of a particular agency or
court drafting practice.
The § 1092.201(e)(4) requirement
would include an order issued by an
agency exercising any powers conferred
on such agency by applicable law to
enforce a covered law, so long as the
order imposes one or more of the
obligations described in proposed
§ 1092.201(e)(4) on the covered nonbank
based on an alleged violation of a
covered law. For example, certain
Federal agencies may issue an order
predicated on violation of a Federal
consumer financial law under the
authority of another enabling
enforcement or licensing statute. Among
other examples, an appropriate Federal
banking agency may issue orders in
connection with certain violations of
Federal consumer financial law under
section 8 of the Federal Deposit
Insurance Act (12 U.S.C. 1818), the
Administrator of the National Credit
Union Administration may issue such
orders under the Federal Credit Union
Act (12 U.S.C. 1751 et seq.), and the
Securities and Exchange Commission
may issue such orders under the Federal
securities laws. Such an order issued in
connection with violations of Federal
consumer financial law would satisfy
the requirement set forth in proposed
§ 1092.201(e)(4) in cases where the
order imposes the obligations described
in proposed § 1092.201(e)(3) on the
covered nonbank based on one or more
violations of Federal consumer financial
law (or another covered law).
Other agencies also may rely upon
their enforcement authorities under
other laws in issuing orders in
connection with violations of FTC Act
section 5 (and rules and orders issued
thereunder). For example, an
appropriate Federal banking agency may
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issue orders in connection with
violations of FTC Act section 5 by
relying on its enforcement authorities
under section 8 of the Federal Deposit
Insurance Act (12 U.S.C. 1818). Such an
appropriate Federal banking agency
order would satisfy the requirement set
forth in proposed § 1092.201(e)(4) in
cases where the order imposes the
obligations described in proposed
§ 1092.201(e)(3) on the covered nonbank
based on one or more violations of the
prohibition on unfair or deceptive acts
or practices under FTC Act section 5 (or
a rule or order issued for the purpose of
implementing that prohibition) or
another covered law. The order would
satisfy the requirement provided in
proposed § 1092.201(e)(4) even though
the FTC Act does not expressly
authorize the federal banking agencies
to enforce FTC Act section 5.
Similarly, an obligation is ‘‘based on’’
an alleged violation of a covered law
where: (i) a State agency issues an order
pursuant to certain State statutes that
treat violations of Federal or State laws
as violations of the State statute; 153 and
(ii) the order (or, as discussed above, an
extrinsic document referenced in the
order) states that one or more violations
of a covered law (e.g., a Federal
consumer financial law) served as the
legal basis for imposing the obligations
under such statute. In such cases, while
the majority of these State laws do not
themselves qualify as covered laws
under proposed subpart B—and
therefore are not captured in appendix
A—the underlying law violation does so
qualify. The Bureau believes including
such instances is important, as it
understands that State agencies
sometimes issue orders in connection
with violations of Federal consumer
financial law relying on their authorities
under these State licensing and other
statutes that do not themselves satisfy
the definition of covered law.
Importantly, however, such an order
would not meet the proposed definition
of ‘‘covered order’’ unless the order
itself (or, as discussed above, an
extrinsic document referenced in the
order) states that a covered law served
as the legal basis for the obligations
imposed in the order. A State order that
relied upon such a statute, but that did
not identify a covered law as the legal
basis for the obligations imposed
thereunder, would not satisfy the
requirement set forth in proposed
§ 1092.201(e)(4).154 Nor would an order
153 See, e.g., Wash. Rev. Code sec.
19.146.0201(11).
154 The obligations imposed in an order issued or
obtained by a State agency under a State law that
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that imposed obligations solely based on
violations of other laws, even laws that
are analogous to covered laws but do
not themselves qualify as covered laws
under proposed subpart B. This
requirement is intended to capture only
orders that impose obligations based
upon an agency’s or court’s
determination that the applicable
covered nonbank has actually violated
the covered law itself.
The Bureau seeks comment on this
aspect of the term ‘‘covered order,’’
including the interaction between
covered laws and related statutes
providing for administrative
enforcement, and whether these
definitions should be modified to serve
the identified purposes of the proposed
rule. The Bureau also seeks comment on
whether there may be alternative
methods of identifying whether
obligations contained in an order are
‘‘based on’’ a violation of a covered law.
Under proposed § 1092.201(e)(5), the
proposal would also define ‘‘covered
order’’ to mean an order that has an
effective date on or later than January 1,
2017. The Bureau believes that limiting
the registration requirement to orders
with more recent effective dates will
provide sufficient information to
support Bureau functions. Many orders
issued by Federal, State, and local
agencies do not have expiration dates or
do not expire until after the passage of
many years. While the Bureau believes
that many earlier-in-time orders remain
highly probative of ongoing risks to
consumers and could assist the Bureau
in carrying out its market monitoring
obligations—as well as assist the Bureau
in assembling an effective nonbank
registry—the Bureau preliminarily
concludes that considerations of
administrative efficiency favor focusing
on orders issued within approximately
the first several years preceding any
final rule. The Bureau seeks comment
on this proposed approach.
Finally, proposed § 1092.201(e) would
provide that the term ‘‘covered order’’
would not include an order issued to a
motor vehicle dealer that is
predominantly engaged in the sale and
servicing of motor vehicles, the leasing
and servicing of motor vehicles, or both,
within the meaning of CFPA section
1029(a),155 except to the extent such
order is in connection with the
incorporates Federal law may be ‘‘based on’’ an
alleged violation of Federal consumer financial law
under proposed § 1092.201(e)(4), even if the Federal
consumer financial law itself does not expressly
authorize that State agency to enforce it. So long as
the State agency states that the relevant order
provisions are based on one or more violations of
the Federal consumer financial law, it would be a
covered order under the proposed definition.
155 12 U.S.C. 5519(a).
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functions that are excepted from the
application of CFPA section 1029(a) as
described in CFPA section 1029(b).156
This provision would exclude certain
orders issued to motor vehicle dealers
that are described in CFPA section
1029(a), and would incorporate the
definitions provided at CFPA section
1029(f).157 CFPA 1029(a) establishes a
statutory exclusion from the Bureau’s
authority; CFPA section 1029(b) excepts
certain functions of motor vehicle
dealers from that exclusion.158 An order
that is issued to a motor vehicle dealer
that relates to the functions described in
section 1029(a)—that is, the sale and
servicing of motor vehicles, the leasing
and servicing of motor vehicles, or
both—generally would not be a
‘‘covered order’’ under this proposed
definition. However, if the order related
at least in part to a function excepted
from the application of CFPA section
1029(a) as described in CFPA section
1029(b), this limitation would not
apply, and the order would qualify as a
‘‘covered order.’’ The functions
described in 1029(b) include:
‘‘provid[ing] consumers with any
services related to residential or
commercial mortgages or self-financing
transactions involving real property;’’
‘‘operat[ing] a line of business—(A) that
involves the extension of retail credit or
retail leases involving motor vehicles;
and (B) in which—(i) the extension of
retail credit or retail leases are provided
directly to consumers; and (ii) the
contract governing such extension of
retail credit or retail leases is not
routinely assigned to an unaffiliated
third party finance or leasing source;’’
and ‘‘offer[ing] or provid[ing] a
consumer financial product or service
not involving or related to the sale,
financing, leasing, rental, repair,
refurbishment, maintenance, or other
servicing of motor vehicles, motor
vehicle parts, or any related or ancillary
product or service.’’ 159
Whereas the Bureau is confident that
orders issued to nonbank covered
persons involving conduct that is the
subject of a CFPA section 1027
exclusion generally will be probative of
risks to consumers in connection with
conduct by such person that is not
excluded under section 1027, the
Bureau is less certain that the same is
true with respect to orders issued to
persons identified in section CFPA
section 1029(a) involving conduct
beyond the functions described in
section 1029(b). To be sure, orders
156 12
U.S.C. 5519(b).
U.S.C. 5519(f).
158 12 U.S.C. 5519(a), (b).
159 12 U.S.C. 5519(b).
157 12
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issued solely in connection with section
1029(a) conduct may nevertheless
reflect upon a motor vehicle dealer’s
compliance systems and procedures and
otherwise indicate potential risk to
consumers that the Bureau might
address through its authority as
provided in 1029(b). But the Bureau is
less certain that this is generally the
case, given the nature and scope of the
section 1029(a) exclusion relative to its
exemptions under 1029(b).
Notwithstanding this limitation, the
Bureau is proposing to collect
information regarding orders that relate
to the functions conducted by motor
vehicle dealers that are within the
Bureau’s jurisdiction under section
1029(b). The Bureau seeks comment on
this limitation in the proposed
definition of ‘‘covered order,’’ including
any reasons why orders issued to motor
vehicle dealers should or should not be
covered.
201(f) Effective Date
The proposal would define the term
‘‘effective date’’ to mean, in connection
with a covered order, the effective date
as identified in the covered order;
however, if no other effective date is
specified, then the date on which the
covered order was issued would be
treated as the effective date for purposes
of subpart B. The Bureau anticipates
that the effective date for many covered
orders will be evident from the face of
the order, and in nearly all cases should
be relatively easy to identify. The
Bureau seeks comment on whether this
definition would be sufficient to
identify effective dates for covered
orders.
Proposed § 1092.201(f) would also
provide that if the issuing agency or a
court stays or otherwise suspends the
effectiveness of the covered order, the
effective date shall be delayed until
such time as the stay or suspension of
effectiveness is lifted. Thus, the
registration obligations under proposed
subpart B would also be delayed
accordingly. The Bureau anticipates that
such situations would be rare and seeks
comment on whether this proposal
would adequately address them.
201(g) Identifying Information
Proposed § 1092.201(g) would define
the term ‘‘identifying information.’’ This
term would describe the scope of
identifying information a covered
nonbank may be required to submit
pursuant to proposed § 1092.202(c).
Proposed § 1092.201(g) would limit this
information to information that is
already available to the covered
nonbank, and which uniquely identifies
the covered nonbank. As described in
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proposed § 1092.201(g), this information
would include, to the extent already
available to the covered nonbank, legal
name, State of incorporation or
organization, principal place of business
address, and any unique identifiers
issued by a government agency or
standards organization. Examples of the
latter identifiers that entities might be
required to provide under proposed
§ 1092.202(c) would include an NMLS
identifier, a Home Mortgage Disclosure
Act (HMDA) Reporter’s Identification
Number, the Legal Entity Identifier (LEI)
issued by a utility endorsed by the LEI
Regulatory Oversight Committee or
endorsed or otherwise governed by the
Global LEI Foundation (GLEIF, or any
successor of the GLEIF),160 and a
Federal Tax Identification number.
This information will help the Bureau
identify covered nonbanks with
specificity, including ensuring that the
Bureau can identify covered nonbanks’
submissions to other registries and
databases where applicable, such as the
NMLS, and HMDA submissions.
Furthermore, upon publication, this
information will facilitate the ability of
consumers to identify covered persons
that are registered with the Bureau. The
proposal would not require the entity to
obtain an identifier. Thus, for example,
if the NBR system were to ask about a
particular type of identifier and that
type of identifier had not been assigned
to the covered nonbank, then under the
proposal, the covered nonbank would
be able to indicate the identifier is not
applicable. The Bureau seeks comment
on these proposed types of identifying
information, and other types of
identifying information that the NBR
system might collect and publish.
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201(h) Insured Depository Institution
The proposal would define the term
‘‘insured depository institution’’ to have
the same meaning as in 12 U.S.C.
5301(18)(A). Section 5301(18)(A), in
turn, incorporates the meaning of
‘‘insured depository institution’’
provided in section 3 of the Federal
Deposit Insurance Act, 12 U.S.C.
1813.161
201(i) Local Agency
The proposal would define the term
‘‘local agency’’ to mean a regulatory or
enforcement agency or authority of a
county, city (whether general law or
chartered), city and county, municipal
160 See 12 CFR 1003.4(a)(1)(i)(A) (addressing
LEIs).
161 See 12 U.S.C. 1813(c)(2) (defining ‘‘insured
depository institution’’ as ‘‘any bank or savings
association the deposits of which are insured by the
[Federal Deposit Insurance] Corporation pursuant to
this chapter’’).
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corporation, district, or other political
subdivision of a State, other than a State
agency. The term would not include
State agencies.
The Bureau proposes to require
registration in connection with
applicable orders issued or obtained by
local agencies. The Bureau understands
that local agencies do issue or obtain
public orders under covered laws.162
For the reasons described above with
respect to orders issued by Federal and
State agencies, the Bureau believes that
such orders may indicate risk to
consumers, and that obtaining
information about these orders will
support Bureau functions. The Bureau
seeks comment on including local
agency orders in the proposal and
whether any aspects of local agency
orders may require adjustments or
tailoring of the registration
requirements.
201(j) Order
The proposal would define the term
‘‘order’’ to include any written order or
judgment issued by an agency or court
in an investigation, matter, or
proceeding. The term would include
orders or judgments issued after trials or
agency hearings. It would also include
default judgments or orders issued after
an entity fails to properly respond to
charges or claims made against it. In
addition, it would include orders or
judgments issued to resolve matters
without the need for further litigation,
including stipulated or consent orders,
decrees, or judgments, as well as
settlements, multistate settlements, or
assurances of discontinuances
embodied in orders or judgments issued
by agencies or courts. Furthermore, the
term would include cease-and-desist
orders and orders suspending,
conditioning, or revoking a license
based on a violation of law. The
proposed definition would also include
legally enforceable written agreements
under sections 8 and 50 of the Federal
Deposit Insurance Act 163 or any State
counterparts. The Bureau seeks
comment on this definition, including
whether any of these types of orders do
not merit registration, and whether any
other types of orders should be included
in the definition.
The proposed definition of the term
‘‘order’’ would include an order or
judgment issued by one agency or a
single order or judgment jointly issued
by multiple agencies. However, where
more than one agency issues a distinct
162 See, e.g., Cal. Bus. & Prof. Code sec. 17204
(authorizing enforcement of Cal. Bus. & Prof. Code
sec. 17200 by certain county counsel and city
attorneys).
163 12 U.S.C. 1818, 1831aa.
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6113
order under its own authority, or a court
issues distinct orders with respect to the
different parties in connection with
various actions or proceedings, even
where the orders involve the same
subject matter or laws, each order would
be considered to be a separate order
under the proposed definition. The
Bureau seeks comment on whether
additional detail would be useful in
applying the proposed definition.
201(k) Public
The proposal would define the term
‘‘public’’ to mean, with respect to a
covered order or any portion thereof,
published by the issuing agency or
court, or required by any provision of
Federal or State law, rule, or order to be
published by the issuing agency or
court. The proposal would clarify that
the term ‘‘public’’ does not include
orders or portions of orders that
constitute confidential supervisory
information of any Federal or State
agency.
The proposed term would include
orders that are actually published by the
issuing agency or court, as well as
orders that are required by any
provision of Federal or State law, rule,
or order to be published by the issuing
agency or court. For example, section
8(u) of the Federal Deposit Insurance
Act 164 requires the publication of
certain types of Federal banking agency
orders. The proposed definition is
intended to include those orders, as
well as those required to be published
by any other similar Federal or State
law.
Under the proposal, an order would
only be ‘‘public’’ if it has been released
or disseminated (or is required to be
released or disseminated) in a manner
such that the order is accessible by the
general public—for example, by posting
the order on a publicly accessible
website or by publishing it in a written
format generally available to members of
the public. The proposed term,
however, would not include documents
that are not made generally available but
are disclosed to specific persons, such
as in response to Federal or State
Freedom of Information Act or open
records law requests or as part of
litigation discovery proceedings. Under
the proposal, an order also would only
qualify as ‘‘public’’ if it is published (or
required to be published) ‘‘by the
issuing agency or court.’’ Therefore,
independent publication by a third
party, such as publication that may
occur in connection with a covered
person’s securities disclosures, would
not make an order ‘‘public’’ within the
164 12
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meaning of the proposal.165 The Bureau
does not anticipate that requiring
registration of orders disclosed only
through such methods as freedom-ofinformation requests or securities
disclosures would materially improve
the quantity and quality of the
information provided to the NBR
system. To the contrary, the Bureau
anticipates that third-party disclosures
in the securities context, or pursuant to
freedom-of-information requests, may
sometimes fail to capture all significant
aspects of an order. The Bureau is also
concerned that if such types of
disclosures were included in the final
rule, subpart B’s registration
requirements might affect an entity’s
decisions regarding securities or
litigation disclosures in a manner not
intended by the Bureau.
The Bureau seeks comment as to
whether the term ‘‘public’’ should also
include other types of disclosures, in
addition to those proposed.
The proposed term would exclude
orders or portions of orders that
constitute confidential supervisory
information of any Federal or State
agency. The Bureau is concerned that
requiring registration and disclosure of
confidential supervisory information
might interfere with the functions and
missions of other agencies and does not
believe that requiring such registration
and disclosure is necessary to
accomplish the purposes of the
proposed rule. Such agencies may rely
on confidential communications with
covered nonbanks in order to, for
example, foster full cooperation
between those institutions and their
regulators and to protect those
institutions and the public from harm
that could result from the disclosure of
agency concerns regarding the integrity
and security of these institutions.166 The
proposed definition would therefore
expressly exclude confidential
supervisory information. Where an
order is not clearly marked or otherwise
designated by the regulator as
165 By contrast, an order would qualify as
‘‘public’’ where the issuing agency or court makes
the order available to a third-party printing service
or reporter for the purpose of publishing the order
in a publicly available format.
166 The Bureau has considered requiring covered
nonbanks to submit to the Bureau portions of orders
that constitute confidential supervisory information
under proposed § 1092.202, but then exempting
those confidential portions from publication under
proposed § 1092.204. The Bureau, however, has
preliminarily concluded that the administrative
burden associated with implementing such an
approach likely outweighs the advantage of
collecting such confidential portions of orders
under the proposed rule. The Bureau notes that it
can use other mechanisms to obtain confidential
supervisory information from other regulators in
appropriate cases.
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confidential supervisory information,
the Bureau would expect the entity to
have confirmed the confidential
supervisory information status of any
order or portion of an order with its
regulator before relying on that status in
connection with subpart B’s registration
requirements.
201(l) Registered Entity
The proposal would define the term
‘‘registered entity’’ to mean any person
registered or required to be registered
under proposed subpart B. Entities that
fail to comply with a requirement to
register under proposed subpart B
would nonetheless still be subject to all
of the requirements applicable to
registered entities under proposed
subpart B. If such an entity would be a
supervised registered entity, it would
also be subject to the requirements
applicable to a supervised registered
entity under proposed subpart B.
201(m) Remain(s) In Effect
The proposal would define the terms
‘‘remain in effect’’ and ‘‘remains in
effect’’ to mean, with respect to any
covered order, that the covered nonbank
remains subject to public provisions
that impose obligations on the covered
nonbank to take certain actions or to
refrain from taking certain actions based
on an alleged violation of a covered law.
Proposed § 1092.202(a) would use this
proposed term in defining the scope of
proposed section 202’s registration
requirement. Proposed § 1092.202(f)
would use this proposed term in
specifying when a covered nonbank
would be required to submit a final
filing to the NBR system and would be
permitted to cease updating its
registration information and filing
written statements with respect to a
covered order.
201(n) State Agency
The proposal would define the term
‘‘State agency’’ to mean the attorney
general (or the equivalent thereof) of any
State and any other State regulatory or
enforcement agency or authority. The
Bureau intends this definition to
encompass all State government
officials and regulators authorized to
bring actions to enforce any covered
law, including actions to enforce the
CFPA’s provisions or regulations issued
under the CFPA pursuant to CFPA
section 1042(a)(1).167 The Bureau seeks
comment regarding whether its
proposed definition is sufficiently
expansive to accomplish this objective.
The term would also include regulatory
or enforcement agencies of certain tribal
167 12
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governments that are included in the
CFPA’s definition of the term
‘‘State.’’ 168
The Bureau also seeks comment on
whether and to what extent (if any) the
proposed definition should be limited.
201(o) Supervised Registered Entity
The proposal would define the term
‘‘supervised registered entity’’ to mean a
registered entity that is subject to
supervision and examination by the
Bureau pursuant to CFPA section
1024(a),169 with certain exceptions.170
The CFPA authorizes the Bureau to
require reports and conduct
examinations of certain persons, as
described in CFPA section
1024(a)(1)(A)–(E); the proposed term
would refer to a registered entity that is
subject to supervision and examination
by the Bureau pursuant to any of those
provisions.171
For purposes of proposed
§ 1092.201(o), the proposal would
clarify that the term ‘‘subject to
supervision and examination by the
Bureau pursuant to CFPA section
1024(a)’’ would include an entity that
qualifies as a larger participant of a
market for consumer financial products
or services under any rule issued by the
Bureau pursuant to CFPA section
1024(a)(1)(B) and (a)(2) (providing
Bureau supervisory authority over larger
participants in certain markets as
defined by Bureau rule), or that is
subject to an order issued by the Bureau
pursuant to CFPA section 1024(a)(1)(C)
(providing Bureau supervisory authority
over certain nonbank covered persons
based on risk determination). The
Bureau is proposing this language in
1092.201(o)(2) only to clarify and make
express that such persons would be
included in the proposed definition of
the term supervised registered entity.
The Bureau is not proposing by means
of this language to limit the scope of the
term ‘‘supervised registered entity.’’
Under the proposed definition of
‘‘supervised registered entity,’’ the
168 See 12 U.S.C. 5481(27) (defining ‘‘State’’ to
include ‘‘any federally recognized Indian tribe, as
defined by the Secretary of the Interior under’’ 25
U.S.C. 5131(a)).
169 12 U.S.C. 5514(a).
170 An affiliate of an insured depository
institution that is subject to examination and
supervision by the Bureau under 12 U.S.C. 5515(a)
would not be included in the proposed definition
of supervised registered entity, where the affiliate
is not subject to examination and supervision by the
Bureau under 12 U.S.C. 5514(a). See 12 U.S.C.
5514(a)(3)(A) (providing that 12 U.S.C. 5514 shall
not apply to persons described in 12 U.S.C. 5515(a)
or 5516(a)).
171 The proposal would not increase the number
of entities subject to Bureau examinations or
otherwise modify the scope of the Bureau’s
supervisory jurisdiction.
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Bureau need not have previously
exercised its authority to require reports
from, or conduct examinations of, a
particular registered entity for that
entity to qualify as a supervised
registered entity. A registered entity
would qualify as a supervised registered
entity if the Bureau could require
reports from, or conduct examinations
of, that entity because it is a person
described in CFPA section 1024(a)(1).
Such an entity would be ‘‘subject to
supervision and examination’’ within
the meaning of the proposal even if the
Bureau has never previously exercised
its authority to require reports or
conduct examinations with respect to
that entity.
Persons would be subject to the
proposal’s requirements applicable to
‘‘supervised registered entities’’ so long
as they satisfy the proposed definition
of that term. The Bureau recognizes that
certain entities may, in certain
circumstances, satisfy the definition
only for a limited period of time. For
example, an entity’s activity levels may
change in such a manner as to cause the
entity to cease to qualify as a larger
participant of a market for consumer
financial products and services as
defined by CFPA section 1024(a)(1)(B)
and 12 CFR part 1090,172 or an entity
may cease to be a person subject to
Bureau supervision under CFPA section
1024(a)(1)(C) and 12 CFR part 1091.173
An entity would be required to comply
with the proposal’s requirements
applicable to ‘‘supervised registered
entities’’ so long as it qualifies as such
an entity, but not once it ceases to so
qualify. Thus, for example, depending
upon the timing of events, a supervised
registered entity might be required to
register with, and submit information to,
the NBR system under proposed
§ 1092.202 but not subsequently submit
a written statement under proposed
§ 1092.203 if it ceases to qualify as a
supervised registered entity before
§ 1092.203(d)’s submission deadline.
The Bureau believes that applying
proposed § 1092.203’s requirements to
supervised registered entities so long as
they satisfy the proposed definition of
that term, even if they do so for limited
periods of time, would serve its goals in
imposing such requirements, as
172 Such a determination would be made under
the provisions of 12 CFR part 1090. See, e.g., 12
CFR 1090.102 (providing that ‘‘[a] person qualifying
as a larger participant under subpart B of [12 CFR
part 1090] shall not cease to be a larger participant
under [12 CFR part 1090] until two years from the
first day of the tax year in which the person last
met the applicable test under subpart B’’).
173 Such a determination would be made under
the provisions of 12 CFR part 1091. See, e.g., 12
CFR 1091.113 (regarding petitions for termination
of an order issued under 12 CFR 1091.109).
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described above in section IV(D). The
Bureau does not believe that it should
exempt, or otherwise distinguish for
purposes of the proposal, entities that
are subject to supervision under CFPA
section 1024(a) for limited periods of
time. The Bureau believes that it is
important to obtain reports from such
supervised registered entities under
proposed § 1092.203 for the reasons
discussed above in section IV(D),
including to ensure they are legitimate
entities and able to perform their
obligations to consumers, to detect and
assess risks to consumers related to
entities subject to Bureau supervision,
and to facilitate its assessments in
connection with its risk-based
supervisory program under CFPA
section 1024(b)(2). In addition, requiring
regular submission of written statements
from such entities would assist the
Bureau in determining whether the
entity should continue to be subject to
Bureau supervision under CFPA section
1024(a)(1)(C), for example. However, the
Bureau preliminarily concludes that
obtaining such written statements from
entities that are no longer subject to the
Bureau’s supervision and examination
authority under CFPA section 1024(a) is
not necessary to serve these purposes.
The Bureau seeks comment on its
approach to persons whose supervisory
status may vary over time. In particular,
the Bureau seeks comment on whether
to finalize an alternative arrangement
whereby a qualifying entity would be
deemed a supervised registered entity
for purposes of the proposed rule for
some set period of time—for example,
for the remainder of the calendar year
following a change in supervised entity
status. The Bureau also seeks comment
on an alternative arrangement that
would permit individual entities to
petition the Bureau for individualized
treatment, or that would provide for
specific and individual consideration
regarding subjecting such entities to the
proposal’s reporting requirements.
The Bureau’s proposed approach to
applying the term ‘‘supervised
registered entity’’ would also extend to
the recordkeeping requirements
proposed in § 1092.203(e). Proposed
§ 1092.203(e) would require a
supervised registered entity to maintain
certain documents and other records for
five years after the submission of a
written statement is required, and to
make such documents and other records
available to the Bureau upon request.
Once a supervised registered entity
ceases to qualify as a supervised
registered entity under proposed
§ 1092.201(o), it would no longer be
subject to § 1092.203(e)’s requirement to
maintain and provide such records.
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6115
(The entity may nevertheless be subject
to other requirements to maintain and
provide such records, where such
requirements are imposed by Federal
consumer financial law or other
applicable law.) If, because of a change
in circumstances, the entity later once
again qualifies as a supervised
registered entity, the entity would once
again become subject to proposed
§ 1092.203(e)’s recordkeeping
requirement, but only as to conduct
undertaken to comply with § 1092.203
that occurs after the entity requalifies as
a supervised registered entity. The
Bureau seeks comment on the proposed
recordkeeping requirements for such
entities.
The proposal would provide that the
term ‘‘supervised registered entity’’
would not include a service provider
that is subject to Bureau examination
and supervision solely in its capacity as
a service provider and that is not
otherwise subject to Bureau supervision
and examination. CFPA section 1024(e)
authorizes the Bureau to exercise
supervisory authority with respect to a
service provider to a person described
in CFPA section 1024(a)(1).174 CFPA
sections 1025(d) and 1026(e) authorize
the Bureau to exercise supervisory
authority with respect to certain other
service providers.175 This provision of
the proposed definition clarifies that the
term ‘‘supervised registered entity’’
would not include a registered entity
that is subject to Bureau examination
and supervision solely in its capacity as
a service provider under any of these
provisions. However, the term
supervised registered entity would
include a registered entity if the
registered entity is otherwise subject to
Bureau supervision and examination
under CFPA section 1024(a)—i.e., if the
registered entity is a person that is
described in CFPA section 1024(a)(1)—
even if the registered entity is also a
service provider for some purposes
under the CFPA.176 The Bureau
preliminarily concludes that, at least in
the first instance, the requirements set
forth in proposed § 1092.203 are best
directed at persons described in CFPA
section 1024(a). The Bureau believes
that it can achieve the anticipated
benefits described above without
extending its coverage to service
providers subject to supervision under
CFPA section 1024.
Proposed § 1092.201(o)(2) would
provide that the term ‘‘supervised
174 12
U.S.C. 5514(e).
U.S.C. 5515(d), 5516(e).
176 As discussed above, entities that are service
providers may nevertheless also be covered persons
under the CFPA.
175 12
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registered entity’’ would not include a
motor vehicle dealer that is
predominantly engaged in the sale and
servicing of motor vehicles, the leasing
and servicing of motor vehicles, or both,
within the meaning of 12 U.S.C. 5519(a),
except to the extent such a person
engages in functions that are excepted
from the application of CFPA section
1029(a) as described in CFPA
1029(b).177 Proposed § 1092.201(e),
discussed above, would further provide
that the only orders issued to such
motor vehicle dealers that would subject
the dealer to the requirements of
proposed §§ 1092.202 and 1092.203
would be those issued in connection
with the functions that are excepted
from the application of CFPA section
1029(a) as described in CFPA 1029(b).
The Bureau generally seeks comment on
this proposed limitation.
Proposed § 1092.201(o)(3) would
provide that the term ‘‘supervised
registered entity’’ would not include a
person that qualifies as a covered person
based solely on conduct that is the
subject of, and that is not otherwise
exempted from, an exclusion from the
Bureau’s supervisory authority under
CFPA section 1027.178 This proposed
component of the term ‘‘supervised
registered entity’’ would be similar to a
component in the proposed definition of
the term ‘‘covered nonbank,’’ as
discussed in more detail in the sectionby-section discussion of proposed
§ 1092.201(d), above. However, while
proposed § 1092.201(d) would describe
exclusions from the Bureau’s
rulemaking authority, proposed
§ 1092.201(o)(3) would describe
exclusions from the Bureau’s
supervisory authority. This provision
would clarify that persons excluded
from the supervisory authority of the
Bureau under one or more of the
provisions of section 1027 of the CFPA
would not be ‘‘supervised registered
entities.’’ However, where the CFPA
provides that any of the activities
engaged in by such persons are subject
to the Bureau’s supervisory authority,
this limitation would not exclude the
177 12 U.S.C. 5519 (‘‘Exclusion for Auto Dealers’’).
Also, as with other supervised registered entities,
the motor vehicle dealer would only qualify as a
‘‘supervised registered entity’’ if it were subject to
the Bureau’s supervisory jurisdiction under 12
U.S.C. 5514(a). Technically, the exclusion in
proposed § 1092.201(o)(2) should be unnecessary
because it is identical to the proposed exclusion
from the definition of ‘‘covered nonbank’’ in
proposed § 1092.201(d)(4), and only covered
nonbanks can qualify as supervised registered
entities. Nevertheless, the Bureau has proposed
§ 1092.201(o)(2) to reiterate that the exclusion
described in proposed § 1092.201(d)(4) also limits
which entities qualify as ‘‘supervised registered
entities.’’
178 12 U.S.C. 5517.
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person from qualifying as a ‘‘supervised
registered entity.’’ For example, CFPA
section 1027(l)(1) provides an exclusion
from the Bureau’s supervisory authority
for certain persons engaging in certain
activities relating to charitable
contributions.179 Under the proposal, a
person would not be deemed a
‘‘supervised registered entity’’ if it
qualifies for this statutory exclusion and
is not otherwise exempt from it. But
CFPA section 1027(l)(2) exempts certain
activities from this statutory exclusion
by providing that ‘‘the exclusion in
[CFPA section 1027(l)(1)] does not apply
to any activities not described in [CFPA
section 1027(l)(1)] that are the offering
or provision of any consumer financial
product or service, or are otherwise
subject to any enumerated consumer
law or any law for which authorities are
transferred under subtitle F or H.’’ 180
Under proposed § 1092.201(o), an entity
described in CFPA section 1027(l)(1)
engaging in the activities described
therein would qualify as a ‘‘supervised
registered entity’’ so long as it also
engages in any of the activities
described in CFPA section 1027(l)(2).
And, as a ‘‘supervised registered entity’’
under the proposed § 1092.201(o), such
entity would be subject to all of
proposed § 1092.203’s requirements
applicable to ‘‘supervised registered
entities’’ with respect to any ‘‘covered
order,’’ regardless of whether the
applicable ‘‘covered order’’ addressed
conduct subject to the statutory
exclusion in CFPA section 1027(l)(1).
The Bureau generally seeks comment on
this proposed limitation.
Finally, proposed § 1092.201(o)(4)
would provide that the term
‘‘supervised registered entity’’ would
not include a person with less than $1
million in annual receipts. The
exclusion would be based on the
receipts resulting from offering or
providing all consumer financial
products and services described in
CFPA section 1024(a).181 The Bureau
proposes to define the term ‘‘annual
receipts’’ to have the same meaning as
it has in § 104(a) at part 1090 of the
Bureau’s regulations, including the
provisions of that definition at
§ 104(a)(i) regarding receipts, § 104(a)(ii)
regarding period of measurement, and
§ 104(a)(iii) regarding annual receipts of
affiliated companies.182 The Bureau is
proposing the exclusion in proposed
§ 1092.201(o) for two reasons. First,
providers of consumer financial
179 12 U.S.C. 5517(l)(1) (‘‘Exclusion for Activities
Relating to Charitable Contributions’’).
180 12 U.S.C. 5517(l)(2).
181 12 U.S.C. 5514(a).
182 12 CFR 1090.104(a).
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products and services with significantly
lower levels of receipts generally pose
lower risks because they engage with
fewer consumers, obtain less money
from those consumers, or both. Second,
the information collection burdens on
entities with receipts of $1 million or
less, on a relative basis, generally would
be higher than for larger entities.
The proposed exclusion from the
definition of ‘‘supervised registered
entity’’ based on volume of annual
receipts would also be consistent with
the CFPA’s requirement that the Bureau
take entity size into account as part of
its risk-based supervision program.183
Accordingly, the Bureau is proposing to
exclude persons with less than $1
million in annual receipts from the
proposed annual reporting requirements
applicable to supervised registered
entities under proposed § 1092.203.
However, the Bureau is not proposing
to exclude such smaller entities from
the information-collection requirements
provided in proposed § 1092.202. The
Bureau believes that the limited burden
that would be imposed on such entities
due to such information-collection
requirements would be warranted in
light of the market-monitoring benefits
to the Bureau and other users of the
NBR system, as discussed elsewhere in
this proposal. The Bureau could
evaluate the need for additional
supervisory attention related to a
smaller supervised nonbank based on its
submissions under proposed § 1092.202
and any additional information at its
disposal. As discussed above in section
IV and the section-by-section discussion
of proposed § 1092.202, those
submissions would provide additional
information relevant to the Bureau’s
183 See 12 U.S.C. 5514(b)(2)(A), (B) (requiring the
Bureau to take into consideration ‘‘the asset size of
the covered person’’ and ‘‘the volume of
transactions involving consumer financial products
or services in which the covered person engages’’).
Furthermore, while the Bureau does not believe that
it needs to rely on its authority under 12 U.S.C.
5512(b)(3) to exempt classes of covered persons
from rules in proposing this small-entity exclusion,
the Bureau believes that the exclusion would be
warranted as an exercise of its section 1022(b)(3)
exemption authority, to the extent that provision
was applicable. See 12 U.S.C. 5512(b)(3). As under
12 U.S.C. 5514(b)(2), an entity-size-based exclusion
accords with 12 U.S.C. 5512(b)(3)(B)(i) and (ii),
which instruct the Bureau to consider ‘‘the total
assets of the class of covered persons’’ and ‘‘the
volume of transactions . . . in which the class of
covered persons engage’’ in issuing exemptions. 12
U.S.C. 5512(b)(3)(B)(i)–(ii). In addition, given the
relatively limited scope of the harm to consumers
that entities with annual receipts not exceeding $1
million would generally be able to cause, the
Bureau does not believe that the factor articulated
in 12 U.S.C. 5512(b)(3)(B)(iii) (‘‘existing provisions
of law which are applicable to the consumer
financial product or service and the extent to which
such provisions provide consumers with adequate
protection’’) weighs against adopting the proposed
small-entity exclusion.
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assessments of risk in connection with
its prioritization efforts under CFPA
section 1024(b)(2).184
The Bureau seeks comment on the
scope of the proposed definition,
including the proposed exclusions.
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Section 1092.202 Registration and
Submission of Information Regarding
Covered Orders
Proposed § 1092.202 would require
covered nonbanks to register with the
NBR system by timely submitting
information to the NBR system
regarding covered orders. The proposed
section would establish requirements
regarding the timing and content of
information to be submitted.
The Bureau believes that requiring
covered nonbanks to register with the
NBR system would further the
objectives of proposed subpart B even in
the event the Bureau were not to finalize
proposed requirements that supervised
registered entities submit written
statements as described in proposed
§ 1092.203. Proposed § 1092.202 would
apply to a broader set of entities than
would proposed § 1092.203, and the
Bureau believes that requiring
registration of entities under proposed
§ 1092.202 would provide independent
benefit to the Bureau and to consumers.
202(a) Scope of Registration
Requirement
Proposed § 1092.202(a) defines the
scope of the registration requirement. To
maximize the value of subpart B’s
registration requirements, while taking
into consideration administrative costs
to the Bureau and covered nonbanks in
keeping the registry updated, the Bureau
proposes to limit § 1092.202 to covered
orders (as that term is defined at
proposed § 1092.201(e)) that have an
effective date (as that term is defined at
proposed § 1092.201(f)) on or after the
effective date of subpart B, or that
remain in effect (as that term is defined
at proposed § 1092.201(m)) as of the
effective date of subpart B. The Bureau
preliminarily concludes that this
limitation of the registration
requirement’s scope would help ensure
that the most relevant orders are
submitted into the NBR system. The
Bureau recognizes that there is potential
value in requiring registration with
respect to older orders that no longer
remain in effect. Among other things,
such registration would help inform the
Bureau and consumers regarding older
orders and help to identify an even
larger number of repeat offenders than
could be identified through the
registration requirement as proposed in
184 12
U.S.C. 5514(b)(2).
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§ 1092.202. On the other hand, requiring
covered nonbanks to identify and
register older orders to which they were
once subject, but that no longer impose
any present obligations, may be
burdensome. In addition, extending the
registration requirement to older orders
would impose additional administrative
costs on the Bureau. The Bureau
believes that limiting the registration
requirement to covered orders with an
effective date on or after the effective
date of subpart B, or that remain in
effect as of subpart B’s effective date,
strikes the appropriate balance in terms
of establishing an informative and
useful registry without imposing undue
burdens on either industry or the
Bureau. To maximize the value of
subpart B’s registration requirements,
while taking into consideration
administrative costs to the Bureau and
covered nonbanks in keeping the
registry updated, the Bureau therefore
proposes to limit § 1092.202 to covered
orders (as that term is defined at
proposed § 1092.201(e)) that have an
effective date (as that term is defined at
proposed § 1092.201(f)) on or after the
effective date of subpart B, or that
remain in effect (as that term is defined
at proposed § 1092.201(m)) as of the
effective date of subpart B. However, the
Bureau seeks comment as to whether
the registration requirement should be
modified to include registration of older
orders.
202(b) Requirement To Register and
Submit Information Regarding Covered
Orders
Proposed § 1092.202(b) would
establish subpart B’s requirements for
covered nonbanks to register with the
NBR system and to provide and
maintain certain registration
information.
Proposed § 1092.202(b)(1) would
provide that each covered nonbank that
is identified by name as a party subject
to a covered order described in
paragraph (a) shall register as a
registered entity with the NBR system in
accordance with proposed § 1092.202(b)
if it is not already so registered, and
shall provide or update, as applicable,
the information described in subpart B
in the form and manner specified by the
Bureau. As discussed in connection
with proposed § 1092.201(e)(1), a
covered nonbank that is identified by
name as a party subject to the order
would be required to register under this
paragraph even if the covered nonbank
is not listed in the title or caption of the
order, or as the primary respondent,
defendant, or subject of the order. A
covered nonbank may be subject to the
requirements of proposed § 1092.202
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even if the issuing agency or court does
not list the covered nonbank as a party
in related press releases or Internet
links.
The Bureau considered but is not
proposing alternative approaches,
including applying the requirements of
this section to any covered nonbank
alleged or found in a covered order to
have violated a covered law, even if
such party were not expressly named.
This alternative would capture
circumstances where, for instance, a
covered order applies to a category of
entities, such as all affiliates of a
particular named covered nonbank, but
the order does not specifically name all
of the entities that fall within that
category (e.g., does not specifically list
the names of all of the affiliates of the
named covered nonbank). While this
alternative would potentially widen the
scope of information the Bureau would
obtain relevant to its market monitoring
objectives, it preliminarily concludes
that the proposed approach would
effectively achieve those objectives with
greater administrative ease. The Bureau
seeks comment on the scope of the
proposed requirement, including this
alternative approach and whether other
means of identifying applicable covered
nonbanks with respect to particular
covered orders should be adopted.
As provided at § 1092.102(a), the
Bureau proposes to specify the form and
manner for electronic filings and
submissions to the NBR system that are
required or made voluntarily under part
1092, including §§ 1092.202 and
1092.204. The Bureau would issue
specific guidance for filings and
submissions.
Proposed § 1092.202(b)(2)(i) would
require each covered nonbank that is
required to register under proposed
§ 1092.202 to submit a filing containing
the information described in proposed
§§ 1092.202(c) and 1092.202(d) to the
NBR system within the later of 90 days
after the applicable NBR system
implementation date or 90 days after the
effective date of any applicable covered
order. Thus, a covered nonbank would
not be required under proposed subpart
B to register any covered orders to
which it may be subject until 90 days
after the NBR system implementation
date for this provision. For covered
orders with effective dates after the NBR
system implementation date, an
applicable covered nonbank would be
required to register the covered order
within 90 days after the covered order’s
effective date, as that term is defined at
proposed § 1092.201(f). The Bureau
believes the 90-day period would give
sufficient time for a covered nonbank to
collect and submit the applicable
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information to the NBR system and
would also generally permit a sufficient
length of time for any relevant agency or
court stays to take effect. The Bureau
seeks comment on the length of the 90day period, including whether the filing
deadline should be tied to the effective
date of the order or some other date, and
whether the Bureau should consider
taking other measures to address agency
or court stays. The Bureau also seeks
comment on whether other issues may
arise in connection with orders that
would indicate a reason not to require
registration under proposed
§ 1092.202(b) within the 90-day period.
As discussed above regarding
proposed § 1092.101(e), the Bureau
currently estimates that the NBR
implementation date for proposed
§§ 1092.202 and 1092.203 will be no
earlier than January 2024 and may be
substantially later. The exact NBR
implementation date will depend upon,
among other things, the comments
received to this proposal and the
Bureau’s ability to launch the
registration system.
Proposed § 1092.202(b)(2)(ii) would
require each covered nonbank that is
required to register under proposed
§ 1092.202 to submit a revised filing
amending any information described in
paragraphs (c) and (d) to the NBR
system within 90 days after any
amendments are made to the covered
order or any of the information
described in paragraphs (c) or (d)
changes. The Bureau believes that
requiring entities to maintain up-to-date
information with the NBR system will
significantly enhance the usefulness of
the NBR system for the Bureau,
consumers, and other users of the NBR
system.
The Bureau requests comment on the
general requirements of proposed
§ 1092.202(b), including the
requirement to register and update
registration information within the
specified timeframes. The Bureau
requests comment on whether
registration and registration updates
should be required more or less often,
and if so, why and in what
circumstances.
202(c) Required Identifying Information
and Administrative Information
Proposed § 1092.202(c) would require
a registered entity to provide all
identifying information and
administrative information required by
the NBR system. In filing instructions,
the Bureau would issue under proposed
§ 1092.102(a), the Bureau would specify
the types of identifying information and
administrative information registered
entities would be required to submit.
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Proposed § 1092.201(a) would define
the term ‘‘administrative information,’’
and proposed § 1092.201(g) would
define the term ‘‘identifying
information.’’ Proposed § 1092.202(c)
also would clarify that the Bureau’s
filing instructions may require joint or
combined submissions to the NBR
system by covered nonbanks that are
affiliates as defined in proposed
§ 1092.101(a).
The Bureau requests comment on the
general requirements of proposed
§ 1092.202(c), including the requirement
to register and update identifying
information and administrative
information within the timeframes
described in proposed § 1092.202(b).
The Bureau requests comment on
whether registration of updates with
respect to this information should be
required more or less often, and if so,
why and in what circumstances. The
Bureau also seeks comment on the
proposed distinctions between
identifying information and
administrative information, and
whether collection of other types of
information would help in the
administration of the NBR system or
benefit its users.
202(d) Information Regarding Covered
Orders
Proposed § 1092.202(d) would require
a registered entity to provide additional
types of information more specifically
related to each covered order subject to
proposed § 1092.202. First, proposed
§ 1092.202(d)(1) would require a
registered entity to provide a fully
executed, accurate, and complete copy
of the covered order, in a format
specified by the Bureau. This
information would help the Bureau
more clearly identify the covered orders
to which the registered entity is subject,
as well as the terms of those orders, and
would provide access to updated copies
of those orders. The information would
provide similar benefits to other
regulators, consumers, and other users
of the NBR system upon publication.
This proposed section would also
provide that any portions of a covered
order that are not public must not be
submitted. These nonpublic portions
would be required to be clearly marked
on the copy submitted, to promote ease
of use. For example, a nonpublic section
could be redacted and marked as
nonpublic. As discussed above
regarding proposed §§ 1092.201(e)(3)
and 1092.201(k), the Bureau is
concerned that requiring registration
and disclosure of confidential
supervisory information or other
nonpublic information might interfere
with the functions and missions of other
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agencies and does not believe that
requiring such registration and
disclosure is necessary to accomplish
the purposes of the proposed rule. The
Bureau seeks comment on this aspect of
the proposed rule. The Bureau also
seeks comment on whether the Bureau
should permit covered nonbanks to
submit only select portions of covered
orders, and if so, what portions of such
orders should be submitted, and which
should be excluded from the submission
requirement.
Proposed § 1092.202(d)(2) would
require a registered entity to provide
five additional types of data regarding
each covered order subject to
§ 1092.202. The Bureau believes all of
the described data fields would be
useful to the Bureau in locating,
understanding, organizing, and using
the information submitted. Upon
publication, the data fields will be
similarly useful to other users of the
NBR system as well. In addition,
requiring covered nonbanks to identify
and submit these fields will help ensure
accuracy and lower administrative costs
for the Bureau.
First, proposed § 1092.202(d)(2)(i)
would require a registered entity to
identify the government entity that
issued the covered order. Second,
proposed § 1092.202(d)(2)(ii) would
require a registered entity to provide the
covered order’s effective date, as that
term is defined at proposed
§ 1092.201(f). Third, proposed
§ 1092.202(d)(2)(iii) would require a
registered entity to provide the date of
expiration, if any, of the covered order,
or a statement that there is none. Thus,
for example, where a covered order
expires by its own terms after perhaps
five or some other term of years, the
registered entity would be required to
provide that information. The Bureau
requests comment on whether the date
of expiration of covered orders would be
sufficiently clear to comply with this
provision or whether additional
specification on this point from the
Bureau would be useful. Fourth,
proposed § 1092.202(d)(2)(iv) would
require a registered entity to identify all
covered laws found to have been
violated or, for orders issued upon the
parties’ consent, alleged to have been
violated, in the covered order. The
Bureau would expect that registered
entities would satisfy this requirement
by providing accurate Federal or State
citations for the applicable covered
laws. The Bureau believes this
information would increase the
usefulness of the NBR system. It would
better enable the Bureau to identify and
assess any risks to consumers relating to
the violations, and once published
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would also enable users of the system to
more easily search and review filings.
Fifth, proposed § 1092.202(d)(2)(v)
would require a registered entity to
provide the names of any of the
registered entity’s affiliates registered
under subpart B with respect to the
same covered order. The Bureau
anticipates that this information would
be useful in identifying affiliate
relationships between registered entities
that are registered with the NBR system,
which might not otherwise be obvious
or apparent. Proposed § 1092.101(a)
would define the term ‘‘affiliate’’ to
have the meaning given to that term in
the CFPA, which would include any
person that controls, is controlled by, or
is under common control with another
person.185
Proposed § 1092.202(d)(3) would
require a registered entity, if the
registered entity is a supervised
registered entity, also to file the name
and title of its attesting executive for
purposes of proposed § 1092.203 with
respect to the covered order. The
benefits of designating an attesting
executive are discussed in detail above
in section IV(D). In addition, the Bureau
believes that its collection (and ultimate
publication) in the registry of the name
and title of a supervised registered
entity’s attesting executive would be
important to the Bureau and other users
of the NBR system. Requiring the entity
to identify the name and title of the
attesting executive designated in
connection with each covered order will
assist the Bureau in administering the
requirements in proposed § 1092.203
regarding annual written statements. In
addition, as discussed below regarding
proposed § 1092.203(b), collecting
information regarding the name and title
of the attesting executive for a given
covered order will provide the Bureau
with insight into the entity’s
organization, business conduct, and
activities, and will inform the Bureau’s
supervisory work, including its riskbased prioritization process. Publishing
this information will also provide
benefits to the public and other users of
the proposed NBR system, as discussed
further below in connection with
proposed § 1092.204(a).
The Bureau would rely on two
separate statutory grants of authority in
collecting the attesting executive’s name
and title, each of which would provide
an independent statutory basis for
proposed § 1092.202(d)(3). The Bureau
would collect this information under its
market-monitoring authority under
CFPA section 1022(c)(1) and (4) to
‘‘gather information regarding the
185 See
12 U.S.C. 5481(1).
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organization, business conduct, markets,
and activities’’ of supervised registered
entities.186 The Bureau would also
collect this information under its CFPA
section 1024(b)(7) authority to prescribe
rules regarding registration,
recordkeeping, and other requirements
for covered persons subject to Bureau
supervision under CFPA section
1024.187
The Bureau requests comment on
whether proposed § 1092.202(d) should
identify additional or different
categories of information collected by
the NBR system, including but not
limited to information regarding
covered orders or the registered entity.
202(e) Expiration of Covered Order
Status
Proposed § 1092.202(e) would provide
for an outer limit on the time period
during which the existence of a covered
order would subject a registered entity
to the requirements of proposed subpart
B. In circumstances where a covered
order terminates (or otherwise ceases to
remain in effect) within ten years after
the order’s effective date, the registered
entity’s obligations to update its filing
under proposed § 1092.202 or to file
written statements with respect to the
covered order under proposed
§ 1092.203 would cease after its final
filing under proposed
§ 1092.202(f)(1).188 The Bureau,
however, recognizes that some covered
orders may not terminate (or otherwise
cease to remain in effect) within ten
years of the orders’ effective dates. In
such circumstances, proposed
§ 1092.202(e) would provide that a
covered order shall cease to be a
covered order for purposes of subpart B
as of the later of: (1) ten years after its
effective date; or (2) if the covered order
expressly provides for a termination
date more than ten years after its
effective date, the expressly provided
termination date.
The Bureau preliminarily concludes
that, in most cases, it may be less likely
to obtain meaningful information in
connection with existing orders after ten
years have passed since their effective
dates. The Bureau also preliminarily
concludes that maintaining the
proposal’s registration and writtenstatement requirements for at least ten
years after the effective date of covered
orders that remain in effect would
provide useful information to the
Bureau and other uses of the system, as
described in this proposal. Among other
186 12
U.S.C. 5512(c)(1), (4).
U.S.C. 5514(b)(7).
188 See the discussion of proposed § 1092.202(f)
below.
187 12
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things, maintaining the obligation to
update registration information for ten
years would better enable the Bureau to
identify covered nonbanks in the event
a subsequent covered order requires
additional registration. Limiting
registration obligations to more recent
orders should also help limit the burden
imposed by proposed subpart B’s
requirements on covered nonbanks.
However, where a covered order
expressly provides for a later
termination date, the Bureau believes
that it should continue to collect and
publish information on the order under
the provisions of proposed § 1092.202
through 204. The Bureau seeks
comment on all aspects of proposed
§ 1092.202(e). In particular, the Bureau
seeks comment on whether to adopt a
different approach to setting and
determining the sunset period for
orders, and on whether the proposed
baseline ten-year period should be
longer or shorter. The Bureau also seeks
comment on whether registered entities
would benefit from additional guidance
in determining whether a covered order
expressly provides for a termination
date more than ten years after its
effective date, and what constitutes the
expressly provided termination date of
such a covered order.
The Bureau also seeks comment on
whether the applicable sunset period
should depend upon the content of the
order. For example, the Bureau
considered whether the sunset period
for a covered order should be shorter
where the only obligations based on
alleged violations of covered laws and
imposed in the public provisions of
such order were to pay money (such as
payment of a civil money penalty or
fine, or payment of refunds, restitution,
or disgorgement). Under this alternative
approach, for such covered orders
without express termination dates, the
orders would have ceased being covered
orders for purposes of subpart B after
some period shorter than the ten-year
sunset proposed here. The Bureau is not
proposing this approach for reasons of
simplicity and administrative efficiency,
and because the Bureau believes that the
sunset provision in proposed
§ 1092.202(e) would generally be
preferable for most such covered orders.
However, the Bureau seeks comment on
this proposed alternative and, more
generally, on whether and why it should
adopt a shorter sunset period for these
orders. The Bureau also seeks comment
on other approaches that would
establish different sunset periods
depending on the content of the order,
and other types of orders that might
have different sunset periods.
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The Bureau further considered
requiring registered entities to continue
treating an order that would otherwise
sunset under the proposal as a covered
order for purposes of this proposed rule
if the Bureau determined, after
providing the entity notice and an
opportunity to respond, that continuing
to do so was necessary for the Bureau
to fulfill its monitoring or supervisory
responsibilities. For example, based on
information supplied by another agency
or otherwise in its possession, the
Bureau may have cause to believe that
the nonbank continued to be in
violation of the order. For such cases,
the Bureau considered requiring
continued compliance with the
requirements of subpart B beyond the
expiration period if the Bureau
ultimately concluded doing so was
necessary for the Bureau to fulfill its
monitoring or supervisory
responsibilities. The Bureau is not
proposing this approach for reasons of
simplicity and administrative efficiency,
and because the Bureau believes that the
proposed sunset provision would be
likely to provide sufficient information
regarding most covered orders.
However, the Bureau seeks comment on
whether it should include this
additional requirement in the final rule
and whether any additions or
subtractions to it would better achieve
its intended purpose. The Bureau also
seeks comment on whether, if it
included this additional requirement in
a final rule, it should specify any
alternative or additional criteria that the
Bureau might consider in reaching its
determination whether a particular
covered order should remain subject to
the requirements of subpart B.
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202(f) Requirement To Submit Revised
and Final Filings With Respect to
Certain Covered Orders
Proposed § 1092.202(f) would address
situations where a covered order is
terminated, modified, or abrogated
(whether by its own terms, by action of
the applicable agency, or by a court). It
would also address situations where an
order ceases to be a covered order for
purposes of subpart B by operation of
proposed § 1092.202(e). In all such
cases, proposed § 1092.202(f)(1) would
require the registered entity to submit a
revised filing to the NBR system within
90 days after the effective date of the
order’s termination, modification, or
abrogation, or after the date the order
ceases to be a covered order. This
requirement will help in administering
the registry, and it will support the
Bureau’s monitoring work by ensuring
that the registry is up to date.
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Proposed § 1092.202(f)(2) would
address situations where a covered
order no longer remains in effect or no
longer qualifies as a covered order due
to the covered order’s termination,
modification, or abrogation, or the
application of § 1092.202(e). In such
cases, proposed § 1092.202(f)(2) would
clarify that following its final filing
under paragraph (1) with respect to the
covered order, the registered entity
would have no further obligation to
update its filing or to file written
statements with respect to such covered
order under proposed subpart B.
However, the Bureau would expect to
make historical information publicly
available via the NBR registration
system. As provided at proposed
§ 1092.201(m), the proposal would
define the term ‘‘remains in effect’’ to
mean that the covered nonbank remains
subject to public provisions of the order
that impose obligations on the covered
nonbank to take certain actions or to
refrain from taking certain actions based
on an alleged violation of a covered law.
Once a covered nonbank no longer
remains subject to such public
provisions, proposed § 1092.202(f)(2)
would permit the covered nonbank to
cease updating its registration
information and filing written
statements with respect to the order.
The Bureau seeks comment on all
aspects of proposed § 1092.202(f).
202(g) Notification by Certain Persons of
Non-Registration Under This Section
Proposed § 1092.202(g) would provide
that a person may submit a notice to the
NBR system stating that it is not
registering pursuant to this section
because it has a good faith basis to
believe that it is not a covered nonbank
or that an order in question does not
qualify as a covered order. Such a filing
may be combined with any similar filing
under proposed § 1092.203(f).189
Proposed § 1092.202(g) would also
require the person to promptly comply
with § 1092.202 upon becoming aware
of facts or circumstances that would not
permit it to continue representing that it
has a good faith basis to believe that it
is not a covered nonbank or that an
order in question does not qualify as a
covered order. The Bureau is proposing
to treat information submitted under
this paragraph as ‘‘administrative
information’’ as defined by proposed
§ 1092.201(a).
While the Bureau believes the
reporting and registration requirements
under proposed § 1092.202 impose very
189 See also the section-by-section discussion of
proposed § 1092.203(f), which would provide a
similar option with respect to proposed § 1092.203.
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minimal burden on nonbank covered
persons, and that determining an
entity’s status as a covered nonbank (or
an order’s status as a covered order)
should be a straightforward task for the
vast majority of relevant persons, the
Bureau is proposing § 1092.202(g) as an
additional means of providing flexibility
to those few entities where uncertainty
in some respect raises good faith
concerns that they do not meet the
definition of a covered nonbank (or an
order does not meet the definition of a
covered order). Under the proposal,
such persons could elect to file a notice
under proposed § 1092.202(g). When a
person makes a non-frivolous filing
under proposed § 1092.202(g) stating
that it has a good faith basis to believe
that it is not a covered nonbank (or that
an order is not a covered order), the
Bureau would not bring an enforcement
action against that person based on the
person’s failure to comply with
proposed § 1092.202 unless the Bureau
has first notified the person that the
Bureau believes the person does in fact
qualify as a covered nonbank (or that an
order does qualify as a covered order)
and has subsequently provided the
person with a reasonable opportunity to
comply with proposed § 1092.202.
Among other things, the Bureau
would permit entities to file
notifications under proposed
§ 1092.202(g) when they have a good
faith basis to believe that they do not
qualify as a ‘‘covered nonbank’’ because
they constitute part of a ‘‘State,’’ as that
term is defined in CFPA section
1001(27).190 Under proposed
§ 1092.102(c), the filing of such a
notification would not affect the entity’s
ability to dispute more generally that it
qualifies as a person subject to Bureau
authority.191
The Bureau anticipates that, in most
cases, it would not respond to
§ 1092.202(g) notices with the Bureau’s
views on whether filers in fact qualify
as covered nonbanks (or whether orders
in fact qualify as covered orders). The
Bureau also emphasizes that a nonresponse from the Bureau should not be
misapprehended as Bureau
acquiescence in the filer’s assertions in
the notice (or in the legitimacy of the
filer’s assertion of good faith). The
190 12 U.S.C. 5481(27). As discussed above,
proposed § 1092.201(d)(2) would exclude States
from the definition of ‘‘covered nonbank.’’
191 As an alternative to filing a notification under
proposed § 1092.202(g), an entity could simply
choose to register under the proposal, even though
it has a good faith basis for believing that it does
not qualify as a covered nonbank (or that its order
does not qualify as a covered order). Under
proposed § 1092.102(c), such registration would not
prejudice the entity’s ability to dispute the Bureau’s
authority over it.
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Bureau, however, preliminarily
concludes that obtaining these
notifications may assist the Bureau in
better understanding how potentially
regulated entities interpret the scope of
proposed § 1092.202.
The Bureau considered alternatives to
§ 1092.202(g), including an alternative
whereby entities would not file a notice
of non-registration with the Bureau, but
could avoid penalties for nonregistration if in fact they could
establish a good faith belief that they
did not qualify as covered nonbanks
subject to § 1092.202 (or their orders did
not qualify as covered orders). Under
this alternative, entities would maintain
such good faith belief so long as the
Bureau had not made clear that
§ 1092.202 would apply to them (or
their orders). Although the Bureau
preliminarily concludes that this
alternative is not preferable to requiring
entities to actually file a notice of nonregistration, the Bureau seeks comment
on whether it should finalize this
alternative instead. It also seeks
comment on whether, if it finalized this
alternative, entities would require
additional guidance on the
circumstances pursuant to which an
entity could no longer legitimately
assert a good faith belief that § 1092.202
would not apply to its conduct. While
the Bureau anticipates that such
circumstances would certainly include
entity-specific notice from the Bureau
that § 1092.202 applies, the Bureau does
not believe such notice should be
required to terminate a good faith
defense to registration. Among other
circumstances, the Bureau anticipates
that at least formal Bureau
interpretations of (for example) the
definition of a ‘‘covered person’’ under
the CFPA, or published Bureau
interpretations specific to the scope of
the proposed registration requirements,
would generally suffice to terminate
such belief.
Finally, as the Bureau does not
believe proposed § 1092.202’s reporting
and registration requirements impose
significant burdens on covered
nonbanks, the Bureau also seeks
comment on whether it should not
finalize proposed § 1092.202(g).
Section 1092.203 Annual Reporting
Requirements for Supervised Registered
Entities
203(a) Scope of Annual Reporting
Requirements
Proposed § 1092.203(a) would provide
that the proposed section would apply
only with respect to covered orders with
an effective date (as that term is defined
at proposed § 1092.201(f)) on or after the
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NBR system implementation date for
proposed § 1092.203.
This section would apply only to
certain larger supervised entities.192 The
Bureau preliminarily concludes that the
reporting requirements set forth in this
section—which focus specifically on
larger supervised entities’ compliance
with the orders registered pursuant to
§ 1092.202—should apply only
prospectively to those covered orders
with an effective date on or after the
NBR implementation date for proposed
§ 1092.203. The prospective application
of § 1092.203 would ensure that entities
faced with enforcement actions that
might result in covered orders could
take § 1092.203’s requirements into
account in their decisionmaking. While
the Bureau does not believe that
compliance with § 1092.203’s
requirements would materially affect an
entity’s decisionmaking about how to
respond to a prospective enforcement
action—as discussed in further detail in
section VII, for the vast majority of
entities, the Bureau generally does not
anticipate any of the proposed rule’s
reporting and publication requirements
imposing meaningful burden either
operationally or on their bottom line—
the Bureau proposes this provision out
of an abundance of caution. In addition,
this limitation would help ensure that
supervised registered entities would be
required to submit reports only after the
NBR system implementation date. The
Bureau seeks comment on whether
§ 1092.203(a)’s proposed limitation of
§ 1092.203’s scope is warranted. The
Bureau also seeks comment on whether
any further limitation of or adjustments
to § 1092.203’s scope may be
appropriate, and whether the Bureau
should consider excluding any
additional persons, orders, laws, or
other matters from proposed
§ 1092.203’s reporting requirements.
203(b) Requirement To Designate
Attesting Executive
Proposed § 1092.203(b) would require
a supervised registered entity subject to
an applicable covered order to designate
as its attesting executive for purposes of
subpart B its highest-ranking duly
appointed senior executive officer (or, if
the supervised registered entity does not
have any duly appointed officers, the
highest-ranking individual charged with
managerial or oversight responsibility
for the supervised registered entity)
192 As discussed above in the section-by-section
discussion of proposed § 1092.201(o)(4), the
proposal would exclude from the term ‘‘supervised
registered entity’’ persons with less than $1 million
in annual receipts resulting from offering or
providing all consumer financial products and
services described in 12 U.S.C. 5514(a).
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whose assigned duties include ensuring
the supervised registered entity’s
compliance with Federal consumer
financial law, who has knowledge of the
entity’s systems and procedures for
achieving compliance with the covered
order, and who has control over the
entity’s efforts to comply with the
covered order. The supervised
registered entity would be required
annually to designate one attesting
executive for each covered order to
which it is subject and for all
submissions and other purposes related
to that covered order under subpart B.
The supervised registered entity would
also be required to authorize the
attesting executive to perform the duties
of an attesting executive on behalf of the
supervised registered entity with respect
to the covered order as required in
proposed § 1092.203, including
submitting the written statement
described in § 1092.203(d).
Criteria That an Attesting Executive
Must Satisfy
For the reasons described above in
section IV(D), proposed § 1092.203(b)
would provide that a supervised
registered entity subject to a covered
order described in § 1092.203(a) would
generally be required to designate as its
attesting executive for purposes of
subpart B its highest-ranking duly
appointed senior executive officer (i)
whose assigned duties include ensuring
the supervised registered entity’s
compliance with Federal consumer
financial law, (ii) who has knowledge of
the entity’s systems and procedures for
achieving compliance with the covered
order, and (iii) who has control over the
entity’s efforts to comply with the
covered order. If the supervised
registered entity has no duly appointed
officers, proposed § 1092.203(b) would
require the entity to designate as its
attesting executive the highest-ranking
individual charged with managerial or
oversight responsibility for the
supervised registered entity who meets
those three criteria.
As explained below in the discussion
of proposed § 1092.203(d), the Bureau is
proposing that the attesting executive
would attest to and sign a written
statement submitted by the supervised
registered entity regarding the entity’s
compliance with covered orders. That
proposal would have the benefit of
ensuring that the supervised registered
entity’s reporting obligations under
proposed § 1092.203 have received
attention from the highest applicable
level of a supervised registered entity’s
management. The Bureau is proposing
this requirement in proposed
§ 1092.203(b) in order to ensure that the
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person who attests and signs the written
statement has sufficient authority and
access to all the relevant company
stakeholders to ensure that the report is
as complete and accurate as possible.
The Bureau believes that the language of
proposed § 1092.203(b) would ensure
that the supervised registered entity
designates an appropriately highranking employee as its attesting
executive. Such a person will be in the
best position to know all relevant
information with respect to the order,
and to provide a reliable attestation in
the written statement regarding the
entity’s compliance with the covered
order.
The Bureau anticipates that this
individual will in most cases likely be
a top senior executive of the entity. For
entities that are not organized as
corporations, and thus may not have
duly appointed officers, the proposed
§ 1092.203(b) clarifies that the attesting
executive may be another individual
who is charged with managerial or
oversight responsibility for the
supervised registered entity. The Bureau
anticipates that this individual will in
most cases serve in a capacity
equivalent to a high-ranking senior
executive at a corporation. For example,
a supervised registered entity organized
as a limited liability company that is
run by an individual managing member
and lacks executive officers may
designate the managing member as its
‘‘attesting executive,’’ where the
managing member’s assigned duties
include ensuring the supervised
registered entity’s compliance with
Federal consumer financial law and the
managing member has the requisite
knowledge and control as described in
proposed § 1092.203(b). Likewise, a
supervised registered entity organized
as a general or limited partnership may
designate an individual partner who
otherwise satisfies the requirements set
forth in proposed § 1092.203(b). The use
of the term ‘‘executive’’ is not intended
to preclude the designation of such
persons as ‘‘attesting executives’’ where
the supervised registered entity
otherwise lacks a senior executive
officer who satisfies proposed
§ 1092.203(b)’s requirements.
The Bureau anticipates that entities
would take appropriate steps to ensure
compliance with the proposed rule in
the event that an executive leaves
employment or changes duties, or a
higher-ranking executive is put in place.
For example, a supervised registered
entity might consider designating an
alternate attesting executive for each
covered order to address such
possibilities, including by ensuring that
they have sufficient knowledge of the
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entity’s systems and procedures for
achieving compliance with the
applicable covered order(s) and control
over the entity’s efforts to comply with
the covered order(s).
The proposal would also require that
the supervised registered entity
designate as its attesting executive for a
covered order a person who has
knowledge of the entity’s systems and
procedures for achieving compliance
with the covered order. The Bureau
anticipates that this requirement would
help ensure that the annual written
statement is completed by an individual
with sufficient knowledge of the entity’s
systems and procedures for achieving
compliance to make the written
statement required by proposed
§ 1092.203(d). The Bureau expects that
an executive who lacked knowledge of
those compliance systems and
procedures would not be in the best
position to identify violations of the
order. Therefore, without the proposed
knowledge requirement, the attestation
proposed at § 1092.203(d)(2) would lose
much of its usefulness.
Proposed § 1092.202(b) would also
require that the attesting executive be
required to have control over the
entity’s efforts to comply with the
covered order. By this requirement, the
Bureau means to require that the
executive have the ability, under the
entity’s existing compliance systems
and procedures, to direct and supervise
the entity’s efforts to comply with the
applicable covered order. This proposed
requirement would complement the
knowledge requirement discussed
above, since the Bureau believes an
executive with control over the entity’s
efforts to comply with the covered order
will be more likely also to have (and to
demand) the requisite knowledge
regarding the entity’s related
compliance systems and procedures. It
is possible that an executive with
knowledge of an entity’s related
compliance systems and procedures, but
who does not have control over the
entity’s efforts to comply with an
applicable covered order, would not be
fully informed regarding violations of
the order. The Bureau would also be
able to use information regarding which
executives have control of the entity’s
efforts to comply with specific covered
orders in connection with its
supervisory reviews of the entity’s
compliance systems and procedures,
compliance with Federal consumer
financial law, and risks to consumers
and markets.
In addition, the Bureau expects that
the proposal’s requirements to designate
an attesting executive who has
knowledge of the entity’s systems and
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procedures for achieving compliance
with its covered orders, and who has
control over the entity’s efforts to
comply with its covered orders, would
create an additional incentive for certain
entities to comply with their obligations
to consumers. The Bureau believes that
most supervised registered entities
would comply with covered orders even
without the proposal. However, these
requirements would motivate additional
compliance efforts at certain entities
that have failed to take adequate steps
to comply with the order. The Bureau
also believes that if a particular
executive is identified to the Bureau as
the person ultimately accountable for
ensuring compliance with a covered
order, the clear delineation of that
executive’s responsibility will prompt
the executive to focus greater attention
on ensuring compliance, which in turn
will increase the likelihood of
compliance.
In addition, the Bureau anticipates
that obtaining information about which
senior executive officer(s) at a
supervised registered entity have
knowledge of the entity’s systems and
procedures for achieving compliance
with specific covered orders, and who
have control over the entity’s efforts to
comply with those covered orders,
would facilitate the Bureau’s ability to
identify situations in which individual
executives have recklessly disregarded,
or have actual knowledge of, the entity’s
violations of covered orders. The Bureau
believes that this information would
better enable the Bureau to identify risks
to consumers related to such orders and
the entity’s compliance systems and
procedures, and to take steps to address
such risks through its supervisory or
other authorities. Where the applicable
covered order is a Bureau order, such
information will also facilitate the
Bureau’s efforts to assess compliance
with the order and to make
determinations regarding any potential
related Bureau supervisory or
enforcement actions. For example,
where information obtained under
proposed § 1092.203 indicates that a
high-ranking executive has knowledge
of (or has recklessly disregarded)
violations of legal obligations falling
within the scope of the Bureau’s
jurisdiction, and has authority to control
the violative conduct, the Bureau could
use that information in assessing
whether an enforcement action should
be brought not only against the nonbank
covered person, but also against the
individual executive.
In developing this proposal, the
Bureau considered various options other
than requiring entities to designate a
senior executive officer as an attesting
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executive. The Bureau considered
permitting entities to designate lower
ranking individuals whose assigned
duties include ensuring the supervised
registered entity’s compliance with
Federal consumer financial law and
who possessed sufficient knowledge
and control to provide a written
statement under proposed § 1092.203.
However, the Bureau believes that
requiring entities to designate their
highest-ranking executive officer would
better help ensure that all relevant
information was considered when
submitting the written statement. In
addition, because the attestation that
would be provided under proposed
§ 1092.203(d)(2) would be subject to the
knowledge of the attesting executive,
the Bureau believes this requirement
would help enhance the reliability of
that attestation, and thus the accuracy of
the written statement. Lower-ranking
managers at the entity might not be
aware of all relevant facts. Also, the
Bureau believes that the designation
requirement will provide an important
piece of information regarding the
organizational structure of an entity’s
compliance management system—
namely, the identity of the entity’s
highest-ranking executive whose
assigned duties include ensuring the
supervised registered entity’s
compliance with Federal consumer
financial law, and who has the requisite
level of knowledge and control. This
information will be valuable to the
Bureau’s understanding of the
supervised registered entity’s
compliance systems and procedures and
its organization, business conduct, and
activities subject to the covered order.
Such information would inform the
Bureau’s functions, including its use of
its supervisory and enforcement
authorities.
As another alternative to imposing
this requirement, the Bureau might
instead require the entity to appoint an
individual with a given title—for
example, the entity’s Chief Compliance
Officer (CCO), or equivalent. However,
the Bureau does not have
comprehensive information regarding
the organizational structures of the
entities it supervises, and the Bureau
expects that many supervised registered
entities may have organizational
structures that do not provide for a CCO
or other officer title. The proposed
requirement to designate the entity’s
highest-ranking executive who satisfies
the specified criteria would help ensure
that an appropriately high-level
individual was designated but would
retain flexibility to accommodate a
range of entity organizational structures.
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And as discussed above, the Bureau
believes that requiring the entity to
designate its attesting executive for each
covered order would provide the Bureau
with information regarding the entity,
including its compliance systems and
procedures and its organization,
business conduct, and activities subject
to the covered order.
As another alternative to the approach
proposed in § 1092.203(b), the Bureau
might require supervised registered
entities to obtain a review or audit by
an independent third-party consultant
of the entities’ written statements and
the facts underlying the written
statements. However, the Bureau
believes this alternative would impose
costs on the entity that would largely be
avoided by the proposal’s requirement
to designate an attesting executive
already providing services to the entity
and would require the Bureau to impose
controls on such reviews in order to
ensure their usefulness. In addition, this
alternative would not provide the
Bureau with the information regarding
the entity described above.
The Bureau requests comment on all
aspect of proposed § 1092.203(b),
including any additions or alterations of
the proposed requirement, as well as
comment on each of the alternative
approaches discussed above. The
Bureau seeks comment as well on
whether this provision provides
sufficient guidance to supervised
registered entities regarding which
individuals may be designated as
‘‘attesting executives.’’ The Bureau also
seeks comment on whether additional
clarification should be provided with
respect to supervised registered entities
that are organized as entities other than
corporations. The Bureau further seeks
comment on whether the definition
identifies an appropriate individual at
the supervised registered entity for
purposes of fulfilling the obligations set
forth in proposed § 1092.203.
Requirement To Designate an Attesting
Executive for Each Covered Order on an
Annual Basis
Proposed § 1092.203(b) would require
a supervised registered entity to
annually designate one attesting
executive for each applicable covered
order to which it is subject and for all
submissions and other purposes related
to that covered order under proposed
subpart B. The Bureau believes that
requiring a supervised registered entity
to designate an attesting executive for
each covered order will facilitate the
Bureau’s supervision of the supervised
registered entity by, among other things,
facilitating the Bureau’s supervisory
communications with the supervised
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6123
registered entity regarding the covered
order, including any related supervisory
concerns. The Bureau would also be
able to contact the attesting executive
with questions and to understand how
the executive’s responsibilities relate to
the entity’s obligations under its
covered orders. The Bureau thus
believes that this proposed designation
requirement would help ensure
compliance with the proposed rule,
facilitate the Bureau’s supervision of the
supervised registered entity, help the
Bureau assess and detect risks to
consumers, and help ensure that the
entity is legitimate and able to perform
its obligations to consumers.
The Bureau expects that under most
circumstances, a supervised registered
entity would designate one single
individual as its attesting executive for
all of the covered orders to which it is
subject. However, there may be
situations in which there is no one
senior executive officer with the
requisite knowledge of the entity’s
systems and procedures for achieving
compliance with all of the covered
orders to which the entity is subject,
and who has control over the entity’s
efforts to comply with those orders. In
such a case, the entity could designate
different attesting executives for the
covered orders. By requiring a
supervised registered entity to designate
one attesting executive for each covered
order described in proposed
§ 1092.203(a) to which it is subject,
proposed § 1092.203(b) would enable
the Bureau to better identify such
situations. The Bureau seeks comment
on this approach, including whether it
adequately ensures the submission of
informed, accurate, and meaningful
written statements under proposed
§ 1092.203, and whether supervised
registered entities should be required to
designate one single executive to submit
a written statement with respect to all
of the covered orders to which the
supervised registered entity is subject.
The Bureau also seeks comment on
whether supervised registered entities
are likely to be organized in such a way
as to make this provision useful, or
whether under the proposed
requirements an entity would likely be
required to designate a single attesting
executive in nearly all cases.
The Bureau also believes that by
requiring the entity to designate its
attesting executive(s) on an annual
basis, the proposal would better enable
the Bureau to understand the reporting
relationships within the entity and the
entity’s compliance systems and
procedures. The Bureau seeks comment
on the requirement to designate
attesting executives on an annual basis.
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203(c) Requirement To Provide Attesting
Executive(s) With Access to Documents
and Information
Proposed § 1092.203(c) would require
a supervised registered entity subject to
proposed § 1092.203 to provide its
attesting executive(s) with prompt
access to all documents and information
related to the supervised registered
entity’s compliance with all applicable
covered order(s) as necessary to make
the written statement(s) required in
proposed § 1092.203(d).
The Bureau believes that this
proposed requirement would help
ensure that the attesting executive for an
applicable covered order has timely
access to the documents and
information needed to submit an
informed and accurate written statement
under proposed § 1092.203(d). A
supervised registered entity would not
be permitted to refuse or deny to its
attesting executive access to documents
or information related to the supervised
registered entity’s compliance with the
covered order. Under the proposed
requirement, the Bureau would expect
the attesting executive to have prompt
access to all such documents and
information, notwithstanding, for
example, any privileges that may apply
to the documents and information, or
where or how the documents and
information are stored.
The Bureau believes that this
requirement would enhance the
accuracy and usefulness of the written
statement, which in turn would enhance
the Bureau’s ability to supervise the
entity effectively, assess and detect risks
to consumers, and ensure the entity is
legitimate and able to perform its
obligations to consumers. The Bureau
requests comment on the need for this
requirement and whether other
requirements, modifications, or
amendments to proposed § 1092.203(c)
should be considered in order to ensure
the accuracy and usefulness of the
written statement.
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203(d) Annual Requirement To Submit
Written Statement to the Bureau for
Each Covered Order
Proposed § 1092.203(d) would
require, on or before March 31 of each
calendar year, that the supervised
registered entity submit to the NBR
system, in the form and manner
specified by the Bureau, a written
statement with respect to each covered
order described in proposed
§ 1092.203(a). In the written statement,
the attesting executive would be
required to provide a summary
description of the executive’s efforts to
review and oversee compliance with the
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applicable order, and to attest regarding
the entity’s compliance with the order.
Proposed § 1092.203(d) would require
the written statement to be signed by the
supervised registered entity’s attesting
executive for the reasons discussed
above.
Proposed § 1092.203(d)(1) would
require the written statement to contain
a general summary description of the
steps, if any, the attesting executive has
undertaken to review and oversee the
supervised registered entity’s activities
subject to the applicable covered order
for the preceding calendar year. This
proposal is intended to provide
information to the Bureau regarding the
compliance monitoring efforts that have
been undertaken by the executive
during the applicable time period in
connection with the order. The
proposed rule would not establish any
minimum procedures or otherwise
specify the steps the executive must
take in order to review and oversee the
entity’s activities. Instead, the rule
would require only that the executive
provide the Bureau with a general
description of the steps the executive
has already taken in this regard. The
Bureau believes that this information
would enhance the usefulness of the
written statement by providing valuable
context regarding the basis of the
attesting executive’s knowledge and by
assisting the Bureau with determining
the degree to which the Bureau may rely
on the written statement. The Bureau
believes that this information would be
useful because the proposal would not
by itself establish minimum
requirements regarding the attesting
executive’s review and oversight of the
entity’s activities.
Proposed § 1092.203(d)(2) would
require the attesting executive to attest
whether, to the attesting executive’s
knowledge, the supervised registered
entity during the preceding calendar
year identified any violations or other
instances of noncompliance with any
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
attestation would be provided subject to
the attesting executive’s knowledge. As
discussed above with respect to
proposed § 1092.203(b) and proposed
§ 1092.203(c), the Bureau anticipates
that the attesting executive would have
adequate knowledge of the entity’s
systems and procedures for achieving
compliance with the covered order to
provide a useful attestation. The Bureau
seeks comment as to whether the
proposed rule contains sufficient
safeguards to achieve this desired
outcome.
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The written statement described in
the proposal would address violations
and other instances of noncompliance
with obligations that are ‘‘based on’’ a
violation of a covered law. Consistent
with the discussion above in the
section-by-section discussion of the
definition of ‘‘covered order’’ at
proposed § 1092.201(e)(4), for purposes
of this proposed requirement, an
obligation would be ‘‘based on’’ an
alleged violation where the order
identifies the covered law in question,
asserts or otherwise indicates that the
covered nonbank has violated it, and
imposes the obligation on the covered
nonbank as a result of the alleged
violation.193 This would include, for
example, obligations imposed as
‘‘fencing-in’’ or injunctive relief, so long
as those obligations were imposed at
least in part as a result of the entity’s
violation of a covered law. The
proposed written statement would also
need to address, for example, any
obligation imposed as part of other legal
or equitable relief granted with respect
to the violation of a covered law, as well
as any obligation imposed in order to
prevent, remedy, or otherwise address a
violation of a covered law, or the
conditions resulting from such
violation. As discussed above, an order
may identify a covered law as the legal
basis for the obligations imposed by
referencing another document, such as a
written opinion, stipulation, or
complaint, that shows that a covered
law served as the legal basis for the
obligations imposed in the order. The
Bureau is proposing this approach
because an order may satisfy the
proposed definition of ‘‘covered order’’
but nonetheless contain provisions that
are entirely unrelated to covered laws.
This element of the requirement in
proposed § 1092.203(d)(2) is intended to
exclude such provisions that are
entirely unrelated to violations of
covered laws. The Bureau seeks
comment on this proposed approach.
The supervised registered entity
would be required to state whether it
has or has not identified instances of
noncompliance with respect to each
covered order. If no such instances of
noncompliance have been identified,
the supervised registered entity would
be required to so state. The proposed
rule would not establish any minimum
procedures or otherwise impose or
193 As in the context of proposed § 1092.201(e)(4),
an obligation imposed based on multiple violations,
some of covered laws and some of other laws,
would qualify as an ‘‘obligation[ ] . . . based on an
alleged violation of a covered law’’ within the
meaning of § 1092.203(d)(1), even if the violations
of the non-covered laws would themselves have
sufficed to warrant the imposition of the obligation.
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specify steps a supervised registered
entity must take in order to review or
monitor compliance with each covered
order.194 Instead, the proposed rule
would merely require supervised
registered entities to report violations
and noncompliance that they have
already identified in the course of their
own compliance reviews and
assessments. The Bureau believes that
supervised registered entities likely
already conduct reviews to determine
their compliance with covered orders,
and those reviews would assist in
completing the required written
statements. The Bureau would not
expect the proposal to amend or affect
any review, reporting, or recordkeeping
requirement contained in any covered
order or other provision of law. The
Bureau, however, seeks comment on
whether the proposed rule should
prescribe minimum requirements for
supervised registered entities’ review of
their compliance with the covered
orders to which they are subject. The
Bureau also seeks comment on whether
the proposal should include other
requirements for the written statement
to provide related information.
While proposed § 1092.203(d) would
require the written statement to be
signed by the supervised registered
entity’s attesting executive, it would not
require the attesting executive to submit
a statement subject to the penalty of
perjury. Nevertheless, knowingly and
willfully filing a false attestation or
report with the Bureau may be subject
to criminal penalties.195 The Bureau
believes that the signature requirement,
and the consequent potential for
criminal liability where a knowingly
false attestation is made, would be
likely to deter attesting executives from
submitting written statements that are
incorrect or based on incomplete or
otherwise inadequate information. This
requirement should significantly
enhance the accuracy and usefulness of
the written statement. The Bureau seeks
comment on its proposal to require the
attesting executive’s signature on the
statement but not to require a statement
subject to the penalty of perjury.
The Bureau relies on its rulemaking
authority under CFPA section
1024(b)(7)(A)–(C) in requiring
supervised registered entities to submit
written statements.196 Each of those
paragraphs provides independent
authority for the requirement to submit
written statements. First, CFPA section
194 As discussed above in section IV(D), the
Bureau expects that some supervised registered
entities may bolster their compliance efforts in
response to the proposal.
195 See 18 U.S.C. 1001.
196 12 U.S.C. 5514(b)(7)(A)–(C).
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1024(b)(7)(A) and (B) authorize these
written-statement requirements because
the statements would facilitate the
Bureau’s supervision efforts and its
assessment and detection of risks to
consumers.197 As discussed in more
detail above in section IV(D), the Bureau
believes the proposed written statement
would facilitate the Bureau’s
supervision efforts, including by
providing the Bureau with important
additional information regarding risks to
consumers that may be associated with
the covered order; informing the
Bureau’s risk-based prioritization of its
supervisory activities under CFPA
section 1024(b); and improving the
Bureau’s ability to conduct its
supervisory and examination activities
with respect to the supervised nonbank,
when it does choose to exercise its
supervisory authority. Submission of a
written statement that identifies
noncompliance with reported orders
would provide the Bureau with
important information regarding risks to
consumers that may be associated with
the order. Such orders themselves
frequently contain provisions aimed at
ensuring an entity’s future legal
compliance with the covered laws
violated. An entity’s compliance with
such provisions may mitigate the
continuing risks to consumers presented
by the entity and thus the potential need
for current supervisory activities. By
contrast, evidence of noncompliance
with an order requiring registration
under the proposal would be probative
of a potential need for supervisory
examination of the supervised nonbank
and would be a relevant factor for the
Bureau to consider in conducting its
risk-based prioritization of its
supervisory program under CFPA
section 1024(b)(2), including (b)(2)(C),
(D), and (E). Likewise, in cases where
the Bureau determines to exercise its
supervisory authorities with respect to a
supervised nonbank required to submit
written statements under the proposal,
the Bureau would expect those written
statements to provide important
information relevant to conducting
examination work. For example, the
Bureau may use the written statements
in determining what information to
require from a supervised nonbank, in
determining the content of supervisory
communications and recommendations,
197 As explained in the ‘‘legal authority’’ section
above, 12 U.S.C. 5514(b)(7)(A) and (B) provide
independent sources of rulemaking authority. Also,
for the reasons explained in the ‘‘legal authority’’
section, 12 U.S.C. 5514(b)(7)(B) authorizes the
Bureau to require supervised registered entities to
‘‘generate’’—i.e., create—the written statement and
then ‘‘provide’’ it to the Bureau.
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or in making other decisions regarding
the use of its supervisory authority.198
Second, the Bureau has authority to
require preparation of the written
statements under CFPA section
1024(b)(7)(C) because the written
statements will help ensure that
supervised registered entities ‘‘are
legitimate entities and are able to
perform their obligations to
consumers.’’ 199 As explained above in
section III(C), the Bureau interprets
CFPA section 1024(b)(7)(C) as
authorizing it to prescribe substantive
rules to ensure that supervised entities
are willing and able to comply with
their legal obligations to consumers,
including those imposed by Federal
consumer financial law. As discussed in
more detail above in section IV(D), the
Bureau believes that the proposed
requirement to submit an annual written
statement will help ensure that the
supervised registered entity takes its
legal duties seriously, and that it is not
treating the risk of enforcement actions
for violations of legal obligations as a
mere cost of doing business. If an entity
reports under proposed § 1092.203(d)(2)
that it has violated its obligations under
covered orders, that may indicate that
the entity lacks the willingness or
ability more generally to comply with
its legal obligations, including its
obligations under the Federal consumer
financial laws that the Bureau enforces.
That would especially be the case if an
entity reports violations under proposed
§ 1092.203(d)(2) in multiple years or
with respect to multiple covered orders,
or if the violation amounts to a repeat
of the conduct that initially gave rise to
the covered order. Under CFPA section
1024(b)(2),200 the Bureau may prioritize
such an entity for supervisory
examination to determine whether the
entity has worked in good faith to
maintain protocols aimed at ensuring
compliance with its legal obligations
and detecting and appropriately
addressing any legal violations that the
entity may commit. In this way, the
written statement required by
§ 1092.203(d)(2) would assist the Bureau
in ensuring that supervised registered
entities are legitimate entities and are
able to perform their obligations to
consumers.
198 The Bureau would anticipate that the
proposed requirements in § 1092.203 would
promote these objectives with respect to entities
subject to Bureau supervision even in the event the
Bureau did not require registration and publication
of identifying information regarding covered
nonbanks as described in proposed §§ 1092.202 and
1092.204.
199 12 U.S.C. 5514(b)(7)(C).
200 12 U.S.C. 5514(b)(2).
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The Bureau seeks comment on all
aspects of proposed § 1092.203(d),
including whether to provide for
increased frequency of reporting in the
event of certain violations or other
instances of noncompliance, such as
instances of noncompliance that the
Bureau believes may have resulted in
more significant harm to consumers.
The Bureau also seeks comment on
whether the proposal should include
other requirements for a supervised
registered entity to submit information
related to its compliance with covered
orders. The Bureau considered
proposing additional requirements that
would require a supervised registered
entity to submit more detailed
information regarding compliance with
each covered order. In particular, the
Bureau considered adopting a
requirement that the written statement
contain a written description of the
instances of noncompliance that have
been identified. This information would
enable the Bureau to identify and assess
the nature and extent of such
noncompliance and related risks to
consumers as part of its risk-based
supervision program.
The Bureau is also considering
adopting a requirement that the written
statement contain a short description of
the entity’s compliance systems and
procedures relating to the covered order,
including a description of the processes
for notifying the attesting executive
regarding violations or other instances
of noncompliance with the order. The
Bureau expects that many executives
may choose to provide such information
in the summary narrative portion of the
written statement required in proposed
§ 1092.203(d)(1), as part of describing
the steps that the attesting executive has
undertaken to review and oversee the
supervised registered entity’s activities
subject to the applicable covered order,
but seeks comment on whether to
expressly require submission of such
information in the final rule. The
Bureau is also considering adopting a
requirement that the attesting executive
attest that, in the executive’s
professional judgment, the entity’s
compliance systems and procedures are
reasonably designed to detect violations
of the applicable covered order and
ensure that such violations are reported
to the attesting executive. Such a
requirement would provide the Bureau
with information regarding the
adequacy of the entity’s compliance
management system and would enable
the Bureau to better assess the reliability
of the written statement.
Like the requirements in proposed
§ 1092.203(d) previously discussed,
these additional requirements would
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help ensure that the entity has
reasonable measures in place to inform
the attesting executive about violations
of covered orders and would thus help
ensure that the written statement is
useful to the Bureau. These
requirements would also provide an
incentive for those entities that do not
take their legal obligations seriously to
take additional steps to enhance
compliance. Notwithstanding these
benefits, the Bureau has not included
these additional requirements in the
current proposal because it
preliminarily concludes that the
proposed written statement should
provide sufficient information to permit
the Bureau to determine on a case-bycase basis whether to request such
additional information from filers. That
is, rather than automatically requiring
submission of such information by all
supervised registered entities, the
Bureau anticipates that the proposed
written statement will position the
Bureau to inquire further about such
submissions to the registry as needed on
a case-by-case basis in the normal
course of its supervision of supervised
registered entities. However, the Bureau
seeks comment on whether it should
adopt any of these additional
requirements for the written statement
in the ordinary course.
203(e) Requirement To Maintain and
Make Available Related Records
Proposed § 1092.203(e) would impose
recordkeeping requirements with
respect to the preparation of the written
statement. These requirements are
designed to promote effective and
efficient enforcement and supervision of
proposed § 1092.203. The Bureau would
rely on its rulemaking authorities under
CFPA section 1024(b)(7)(A)–(C) in
imposing proposed § 1092.203(e)’s
recordkeeping requirements.
Proposed § 1092.203(e) would require
a supervised registered entity to
maintain documents and other records
sufficient to document the entity’s
preparation of the written statement, to
provide reasonable support for the
written statement, and to otherwise
demonstrate compliance with the
requirements of proposed § 1092.203
with respect to any submission under
that section. The proposed section
would require the supervised registered
entity to maintain those documents and
records for five years after such
submission is required. The proposal
would also require the supervised
registered entity to make such
documents and other records available
to the Bureau upon the Bureau’s
request. The purpose of this
requirement would be to enable the
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Bureau to assess, as part of its normal
supervisory process, the supervised
registered entity’s compliance with
proposed § 1092.203. The Bureau would
expect such documents and other
records to be in a form sufficient to
enable the Bureau to conduct this
assessment. The Bureau believes that
the five-year time period would
appropriately facilitate the Bureau’s
examination and enforcement
capabilities with respect to compliance
with proposed § 1092.203’s
requirements.
The Bureau requests comment on all
aspects of proposed § 1092.203(e). In
particular, the Bureau requests comment
as to whether the proposed
recordkeeping requirements ensure
adequate support for the written
statement and whether the Bureau
should impose additional or alternative
recordkeeping requirements—for
example, by specifying additional
requirements for the records’ contents or
requiring that the records be
memorialized in written memoranda or
reports. The Bureau also seeks comment
on whether it should consider requiring
records to be maintained for a different
period of time.
203(f) Notification of Entity’s Good
Faith Belief That Requirements Do Not
Apply
Proposed § 1092.203(f) would provide
that a person may submit a notice to the
NBR system stating that it is neither
designating an attesting executive nor
submitting a written statement pursuant
to § 1092.203 because it has a good faith
basis to believe that it is not a
supervised registered entity or that an
order in question is not a covered order.
Such a filing may be combined with any
similar filing under proposed
§ 1092.202(g).201 Proposed § 1092.203(f)
would also require the person to
promptly comply with § 1092.203 upon
becoming aware of facts or
circumstances that would not permit it
to continue representing that it has a
good faith basis to believe that it is not
a supervised registered entity or that an
order in question is not a covered order.
The Bureau is proposing to treat
information submitted under
§ 1092.203(f) as ‘‘administrative
information’’ as defined by proposed
§ 1092.201(a).
The Bureau is proposing § 1092.203(f)
for several reasons. First, while
determining whether a company
qualifies as a ‘‘supervised registered
entity’’ (or whether an order is a covered
201 See also the section-by-section discussion of
proposed § 1092.202(g), which would provide a
similar option with respect to proposed § 1092.202.
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order) should be straightforward in most
cases, some persons may be uncertain
about whether they are a supervised
registered entity (or whether an order is
a covered order). Even when they have
a good faith basis to believe they are not
a supervised registered entity (or an
order is not a covered order), they could
annually designate an attesting
executive and file annual written
statements if they did not want to incur
the risk of violating the requirements of
proposed § 1092.203. But that approach
could impose burden on persons who
ultimately are not supervised registered
entities (or whose orders are not covered
orders). The Bureau therefore proposes
an alternative option for these persons.
Rather than facing the burden of
designating an attesting executive and
filing written statements, such an entity
could elect to file a notice under
proposed § 1092.203(f). When a person
makes a non-frivolous filing under
proposed § 1092.203(f) stating that it has
a good faith basis to believe that it is not
a supervised registered entity (or an
order is not a covered order), the Bureau
would not bring an enforcement action
against that person based on the
person’s failure to comply with
proposed § 1092.203 unless the Bureau
has first notified the person that the
Bureau believes the person does in fact
qualify as a supervised registered entity
(or the order in question qualifies as a
covered order) and has subsequently
provided the person with a reasonable
opportunity to comply with proposed
§ 1092.203.202
The Bureau also believes that filings
under proposed § 1092.203(f) may
reduce uncertainty by the Bureau about
why certain entities are not designating
an attesting executive or providing a
written statement under proposed
§ 1092.203. These notifications also may
provide the Bureau with information
about how market participants are
interpreting the scope of proposed
§ 1092.203, about the potential need for
the Bureau to instruct certain persons to
designate an attesting executive and
provide written statements, and about
the potential need for guidance or
rulemaking clarifying the scope of
proposed § 1092.203.
As in the case of proposed
§ 1092.202(g), the Bureau has
considered an alternative to proposed
§ 1092.203(f) under which entities
would not file a notice with the Bureau,
but they could avoid penalties for noncompliance with § 1092.203 if in fact
202 Under proposed § 1092.102(c), the filing of a
notification under § 1092.203(f) would not affect the
entity’s ability to dispute more generally that it
qualifies as a person subject to Bureau authority.
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they could establish a good faith belief
that they did not qualify as supervised
registered entities subject to § 1092.203
(or their order was not a covered order).
Under this alternative, entities would
maintain such good faith belief so long
as the Bureau had not made clear that
§ 1092.203 would apply to them.
Although the Bureau preliminarily
concludes that this alternative is not
preferable to requiring entities to
actually file notices under proposed
§ 1092.203(f), the Bureau seeks
comment on whether it should finalize
this alternative instead. It also seeks
comment on whether, if it finalized this
alternative, entities would require
additional guidance on the
circumstances pursuant to which an
entity could no longer legitimately
assert a good faith belief that § 1092.203
would not apply to its conduct. While
the Bureau anticipates that such
circumstances would certainly include
entity-specific notice from the Bureau
that § 1092.203 applies, the Bureau does
not believe such notice should be
required to terminate a good faith
defense to registration. Among other
circumstances, the Bureau anticipates
that at least formal Bureau
interpretations of (for example) the
provisions of CFPA section 1024(a)(1)
would generally suffice to terminate
such belief.203
The Bureau also seeks comment on
whether it should not finalize proposed
§ 1092.203(f) or the potential alternative
to that provision.
Section 1092.204 Publication and
Correction of Registration Information
204(a) Internet Posting of Registration
Information
Proposed § 1092.204(a) would require
the Bureau to make available to the
public the information submitted to it
by persons pursuant to proposed
§ 1092.202, except that the Bureau may
choose not to publish certain
administrative information or other
information that the Bureau determines
may be inaccurate, not required to be
submitted under subpart B, or otherwise
not in compliance with part 1092 and
any accompanying guidance. Proposed
§ 1092.204(a) would further provide that
the Bureau may make registration
information available to the public by
means that include publishing it on the
Bureau’s publicly available Internet site
within a timeframe determined by the
Bureau in its discretion. However, as
discussed below regarding proposed
§ 1092.204(b), the proposal would
specifically provide that the Bureau
203 12
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would not disclose the written
statement submitted under proposed
§ 1092.203.
Publication of registered entities’
identifying information would facilitate
the ability of consumers to identify
covered persons that are registered with
the Bureau.204 And the Bureau believes
that publication of additional
information about registered entities
and covered orders would be in the
public interest.205 Namely, as discussed
in more detail in section IV(E) above,
proposed § 1092.204(a) would provide
information of use to consumers, other
regulators, industry, nongovernment
organizations, and the general public.
Proposed § 1092.204(a) also would
formally align the proposed NBR system
with Federal government emphasis on
making government data available to
and usable by the public, by default, to
the greatest extent possible.206
As discussed in more detail in section
IV(E) above, making the data collected
publicly available would further the
rationale of the proposal—that is,
enhancing oversight and awareness of
covered orders and the covered
nonbanks that are subject to them.
Regulators and other agencies at all
levels of government (not just the
Bureau) could use the information the
Bureau makes publicly available to set
priorities. The Bureau believes
publication is also in the public interest
because researchers could analyze the
information the Bureau makes publicly
available to gain valuable insight into
the issues addressed in the nonbank
registry system. For example, they could
produce reports that may inform
consumers and the public more broadly
of potential risks related to covered
orders, or otherwise use the public data
to promote private innovation.
Organizations representing consumer
interests could also use the information
to assist with their consumer protection
efforts. Publication can also help inform
the public, including industry actors,
about how regulators are enforcing
Federal consumer financial laws and
other similar laws. For example,
industry actors could use the registry as
a convenient source of information
regarding regulator actions and trends
across jurisdictions, helping them to
better understand legal risks and
compliance obligations. At least in
204 12
U.S.C. 5512(c)(7)(B).
U.S.C. 5512(c)(3)(B).
206 See, e.g., Open, Public, Electronic, and
Necessary Government Data Act, in title II of Public
Law 115–435 (Jan. 14, 2019); Office of Management
and Budget, M–19–18, Federal Data Strategy—A
Framework for Consistency (June 4, 2019), https://
www.whitehouse.gov/wp-content/uploads/2019/06/
M-19-18.pdf.
205 12
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certain cases, consumers may be able to
use the information in the registry to
make informed choices regarding
consumer financial products and
services, including potentially using the
information to assist with the assertion
of private rights of action that might be
available under the Federal consumer
financial laws. Finally, publication
would help promote Bureau
accountability by helping the public
better see and understand the results of
the nonbank registry initiative, and to
help the public gain greater insight into
Bureau decision-making. As discussed
above in section IV(E), the Bureau
believes that identifying the executive
who has knowledge and control of the
supervised entity’s efforts to comply
with the covered order would provide
particular benefits to the Bureau, the
public, and other users of the system.
The Bureau seeks comment on
potential costs and benefits of making
data from the nonbank registry system
publicly available. In particular, the
Bureau seeks comment on whether it
should decline to finalize the provisions
in proposed § 1092.204, and whether it
should not publicize some of the
information collected pursuant to
proposed § 1092.202. The Bureau
appreciates that there may be some risk
that publication would deter some
entities from consenting to agency and
court orders that they might otherwise
agree to, due to the potential for
additional attention created by the
registry, any additional burden that may
be imposed by the requirement to
submit annual written statements, and
any other deleterious effects that the
entities may perceive related to
registration requirements. This effect in
turn may impact the Bureau’s
enforcement efforts and those of other
Federal, State, and local agencies. The
Bureau seeks comment on such
potential effects, on how those effects
might weigh against the benefits of
publication, and on whether the Bureau
might adopt any mechanisms to help
prevent or minimize any concerns
relating to the enforcement activities of
the Bureau or other agencies.
In addition, there may be some
uncertainty over the degree to which
consumers would use the publicized
information and, when they do, over
how consumers could interpret such
information. For example, consumers
may misunderstand registration to mean
that registered entities are ‘‘legitimate,’’
that registration itself serves as an
endorsement by the Bureau, or that all
registered entities are supervised, or
regularly supervised, by the Bureau.
Registration would not in and of itself
establish the entity’s legitimacy or serve
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as a Bureau endorsement in any way.
Moreover, proposed subpart B would
not constitute a licensing system or an
authorization by the Bureau for covered
nonbanks to engage in offering or
providing consumer financial products
or services. For these reasons, the
Bureau continues to evaluate the
possibility that publishing information
collected under subpart B has the
potential to create confusion, which, to
the extent it occurs, is unlikely to serve
the public interest. If the Bureau
finalizes proposed § 1092.204, it would
consider options for publishing the
information in a manner that mitigates
this risk.
Proposed § 1092.204(a) would provide
that the Bureau may choose not to
publish certain administrative
information or other information that
the Bureau determines may be
inaccurate, not required to be submitted
under subpart B, or otherwise not in
compliance with part 1092 and any
accompanying guidance. The Bureau
proposes to exclude administrative
information, as defined at proposed
§ 1092.201(a), from the proposed
publication requirement because it
believes the publication of such
information may not in all instances be
especially useful to external users of the
system. Administrative information is
likely to include information such as
time and date stamps, contact
information, and administrative
questions. The Bureau anticipates that it
may need such information to work
with personnel at nonbanks and in
order to administer the NBR system.
The Bureau believes that publishing
such information would not be in the
public interest because publication
would be unnecessary and likely would
be counterproductive to the goals of
ensuring compliance with the proposal
and publishing usable information.
The Bureau would also reserve the
right not to publish any information that
it determines may be inaccurate, not
required to be submitted under subpart
B, or otherwise not in compliance with
part 1092 and any accompanying
guidance. For example, persons may
submit unauthorized or inadvertent
filings, or filings regarding orders that
would not require registration under the
proposal, or other inaccurate or
inappropriate filings. The Bureau
believes it would require flexibility not
to publish such information in order to
maintain the accuracy and integrity of
the NBR system and the data that would
be published by the Bureau. And
publication of information that the
Bureau determines is, or may be,
inaccurate, not required to be submitted
under subpart B, or that is otherwise not
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appropriately submitted under the
proposal and accompanying guidance,
would not further the goals of the
proposal. The Bureau seeks comment on
this approach and whether it should
provide any additional flexibility, or
add any restrictions, with respect to the
publication required by this section.
Furthermore, consistent with CFPA
section 1022(c)(8),207 the Bureau would
not publish information protected from
public disclosure under 5 U.S.C. 552(b)
or 552a of title 5, United States Code, or
any other provision of law. The Bureau,
however, does not believe that any of
the information proposed to be collected
under proposed § 1092.202 would be
protected from public disclosure by law.
The Bureau requests comments on this
question, and whether any other steps
should be taken to protect this
information from public disclosure.
The Bureau recognizes that by relying
in part on its supervisory authority in
section 1024 of the CFPA to require
submission of information to the
nonbank registry, registry information
could be construed to be ‘‘confidential
supervisory information’’ as defined in
the Bureau’s confidentiality rules at 12
CFR 1070.2(i). Public release of
information pursuant to § 1092.204(a)
would be authorized by the Bureau’s
confidentiality rules at 12 CFR
1070.45(a)(7), which permits the Bureau
to disclose confidential information
‘‘[a]s required under any other
applicable law.’’ The Bureau does not
believe that the information proposed to
be published under § 1092.204(a) would
raise the concerns generally addressed
by the Bureau’s restrictions on
disclosure of confidential supervisory
information. For example, the Bureau
anticipates that the information
collected pursuant to § 1092.202 would
otherwise be subject to disclosure under
the Freedom of Information Act and
would not be particularly sensitive to
financial institutions or compromise
any substantial privacy interest; that
disclosure of the information would not
impede the confidential supervisory
process; and that disclosure would not
present risks to the financial system writ
large.
204(b) Exclusion of Written Statement
Proposed § 1092.204(b) would
provide that the publication described
207 12 U.S.C. 5512(c)(8) (‘‘In . . . publicly
releasing information held by the Bureau, or
requiring covered persons to publicly report
information, the Bureau shall take steps to ensure
that proprietary, personal, or confidential consumer
information that is protected from public disclosure
under [the FOIA] or [the Privacy Act of 1974, 5
U.S.C. 552a,] or any other provision of law, is not
made public under [the CFPA].’’).
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in proposed § 1092.204(a) would not
include the written statement submitted
under proposed § 1092.203, and that
such information would be treated as
confidential supervisory information
subject to the provisions of part 1070.
The Bureau proposes to require the
submission of the written statement
pursuant to CFPA section 1024(b)(7),
which authorizes the Bureau to
prescribe rules regarding registration,
recordkeeping, and other requirements
for covered persons subject to its
supervisory authority under CFPA
section 1024. The Bureau believes that
treating the written statements that it
receives under proposed § 1092.203 as
confidential, and not publishing them
under proposed § 1092.204, would
facilitate the Bureau’s supervision of
supervised registered entities by
enabling the Bureau to obtain frank and
candid assessments and other
information from supervised registered
entities regarding violations and
noncompliance in connection with
covered orders. This information in turn
would better enable the Bureau to spot
emerging risks, focus its supervisory
efforts, and address underlying issues
regarding noncompliance, compliance
systems and processes, and risks to
consumers.
There may be some benefit to other
users of the NBR system from
publishing the written statements that it
receives under proposed § 1092.203,
including enhancing the ability of other
agencies and affected consumers to
monitor compliance. However, the
Bureau believes that these potential
benefits are likely to be outweighed by
increased candor and compliance with
proposed § 1092.203. The Bureau’s
supervision program depends upon the
full and frank exchange of information
with the institutions it supervises.
Consistent with the policies of the
prudential regulators, the Bureau’s
policy is to treat information obtained in
the supervisory process as confidential
and privileged.208 For example, the
Bureau will treat all such information as
208 See CFPB Compliance Bulletin 2015–01 (Jan.
27, 2015), https://files.consumerfinance.gov/f/
201501_cfpb_compliance-bulletin_treatment-ofconfidential-supervisory-information.pdf; CFPB
Bulletin 2012–01 (Jan. 4, 2012), https://
files.consumerfinance.gov/f/2012/01/GC_bulletin_
12-01.pdf. Also consistent with the policies of the
prudential regulators, the Bureau recognizes that
the sharing of confidential supervisory information
with other government agencies may in some
circumstances be appropriate, and in some cases,
required. See id. For example, in accordance with
the scheme of coordinated supervision established
by Congress, the Bureau’s policy is to share
confidential supervisory information with the
prudential regulators and State regulators that share
supervisory jurisdiction over an institution
supervised by the Bureau. See id.
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exempt from disclosure under
exemption 8 of the Freedom of
Information Act.209 The Bureau believes
that these considerations would also
underlie supervisory communications
with supervised registered entities
under proposed § 1092.203, and that the
proposed approach would enhance the
usefulness of submissions under
proposed § 1092.203, increase the
Bureau’s ability to detect and assess
potential noncompliance and emerging
risks to consumers, and promote
compliance with the law.210
The Bureau seeks comment on the
proposed approach, whether treatment
of such submissions as Bureau
confidential supervisory information is
warranted, and whether the Bureau
should consider taking other steps to
facilitate the submission of written
statements.
204(c) Other Publications of Information
Proposed § 1092.204(c) would provide
that the Bureau may, at its discretion,
compile and aggregate data submitted
by persons under proposed subpart B
and may publish such compilations or
aggregations (in addition to any other
publication under proposed
§ 1092.204(a)). Any such publication
that relates to annual written statements
submitted under proposed § 1092.203
would be in a form that is consistent
with the Bureau’s treatment of those
annual written statements as Bureau
confidential supervisory information.211
204(d) Correction of Submissions to the
NBR System
Proposed § 1092.204(d) would clarify
that a covered nonbank must correct an
information submission within 30 days
of when it becomes aware or has reason
to know the submitted information was
and remains inaccurate. Proposed
§ 1092.204(d) would clarify that the
process for making corrections will be
described in the filing instructions the
Bureau issues pursuant to proposed
§ 1092.102(a). Proposed § 1092.204(d)
also would clarify that the Bureau may
209 See
5 U.S.C. 552(b)(8).
§ 1092.102(c) would provide that
proposed part 1092 would not alter applicable
processes whereby a person may dispute that it
qualifies as a person subject to Bureau authority.
The Bureau believes written statements submitted
to the NBR system under proposed § 1092.204
would constitute Bureau confidential supervisory
information under the regulatory definition of that
term even if the submitter later disputes that it
qualifies as a person subject to the Bureau’s
supervisory authority. See 12 CFR 1070.2(i)
(defining Bureau confidential supervisory
information), (q) (‘‘Supervised financial institution
means a financial institution that is or that may
become subject to the Bureau’s supervisory
authority.’’).
211 See, e.g., 12 CFR 1070.41(c).
210 Proposed
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6129
direct a covered nonbank to correct
errors or other non-compliant
submissions to the NBR system. Under
proposed § 1092.204(d), the Bureau
could direct corrections at any time and
in its sole discretion.
Subpart C—Reserved
Subpart C of part 1092 would be
reserved for rules that may be proposed
in a separate notice of proposed
rulemaking.
VI. Proposed Effective Date of Final
Rule
The Administrative Procedure Act
generally requires that rules be
published not less than 30 days before
their effective dates.212 The Bureau
proposes that, once issued, the final rule
for this proposal would be effective 30
days after it is published in the Federal
Register. However, as described in more
detail in the section-by-section
discussion of proposed §§ 1092.202(b)
and 1092.203(a), registrants will only
need to submit information once the
Bureau launches and announces a
registration system, which is likely to be
no earlier than January 2024.
VII. Dodd-Frank Act Section 1022(b)(2)
Analysis
A. Overview
In developing the proposed rule, the
Bureau has considered the proposed
rule’s potential benefits, costs, and
impacts.213 The Bureau requests
comment on the preliminary analysis
presented below, as well as submissions
of additional data that could inform the
Bureau’s analysis of the benefits, costs,
and impacts. In developing the
proposed rule, the Bureau has consulted
with, or offered to consult with, the
appropriate prudential regulators and
other Federal agencies, including
regarding consistency with any
prudential, market, or systemic
objectives administered by such
agencies. Under CFPA sections
1022(c)(7)(C) and 1024(b)(7)(D), the
Bureau has also consulted with State
agencies regarding the proposed rule’s
requirements and registration system.214
The Bureau is issuing this proposal to
require nonbanks to report certain
212 5
U.S.C. 553(d).
section 1022(b)(2)(A) of the CFPA
requires the Bureau to consider the potential
benefits and costs of the regulation to consumers
and covered persons, including the potential
reduction of access by consumers to consumer
financial products and services; the impact of the
proposed rule on insured depository institutions
and insured credit unions with $10 billion or less
in total assets as described in section 1026 of the
CFPA; and the impact on consumers in rural areas.
12 U.S.C. 5512(b)(2)(A).
214 12 U.S.C. 5512(c)(7)(C), 5514(b)(7)(D).
213 Specifically,
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public agency and court orders
imposing obligations based on
violations of consumer protection laws
because the Bureau believes that the
Bureau would benefit from the creation
and maintenance of a central repository
for information regarding such public
orders that have been imposed upon
nonbank covered persons. The Bureau
also believes that consumers, the public,
and other potential users of the
proposed registration system would
benefit from publication of certain
information in the registry. In addition,
the Bureau would also benefit from
receiving annual supervisory reports
from its supervised nonbanks regarding
their compliance with such orders.
The proposed rule has three
provisions, which are separately
analyzed below. The first proposed
provision (hereinafter referred to as the
‘‘Registration Provision’’) would require
nonbank covered persons that are
subject to certain public orders to
register with the Bureau and to submit
copies of each such public order to the
Bureau. The second proposed provision
(hereinafter referred to as the
‘‘Supervisory Reports Provision’’) would
require nonbank covered persons that
are subject to supervision and
examination by the Bureau to prepare
and submit an annual written statement,
signed by a designated individual,
regarding compliance with each covered
public order. The third proposed
provision (hereinafter referred to as the
‘‘Publication Provision’’) describes the
registration information the Bureau
would make publicly available.
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B. Data Limitations and Quantification
of Benefits, Costs, and Impacts
The discussion below relies in part on
information that the Bureau has
obtained from other regulatory agencies
and publicly available sources. The
Bureau has performed outreach with
other regulatory agencies on many of the
issues addressed by the proposed rule.
However, as discussed further below,
the data are generally limited with
which to quantify the potential costs,
benefits, and impacts of the proposed
provisions. In light of these data
limitations, the analysis below generally
provides a qualitative discussion of the
benefits, costs, and impacts of the
proposed provisions. General economic
principles and the Bureau’s experience
and expertise in consumer financial
markets, together with the limited data
that are available, provide insight into
these benefits, costs, and impacts. The
Bureau requests additional data or
studies that could help quantify the
benefits and costs to consumers and
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covered persons of the proposed
provisions.
C. Baseline for Analysis
In evaluating the potential benefits,
costs, and impacts of the proposed rule,
the Bureau takes as a baseline the
current legal framework regarding
orders that would be covered under the
proposed rule. Therefore, the baseline
for the analysis of the proposed rule is
that nonbank covered persons are not
required to register with the Bureau,
nonbank covered persons subject to
Bureau supervision and examination
generally are not required to prepare
and submit annual reports regarding
compliance with public orders
enforcing the law, and information on
the nonbank covered persons and most
corresponding covered orders is
generally not published by the Bureau
in the manner contemplated by the
proposed rule.
If finalized as proposed, the rule
should affect the market as described
below for as long as it is in effect.
However, the costs, benefits, and
impacts of any rule are difficult to
predict far into the future. Therefore, the
analysis below of the benefits, costs, and
impacts of the proposed rule is most
likely to be accurate for the first several
years following implementation of the
proposed rule.
D. Potential Benefits and Costs of the
Proposed Rule to Consumers and
Covered Persons
With certain exceptions, the proposed
rule would apply to covered persons as
defined in the CFPA, including persons
that engage in offering or providing a
consumer financial product or
service.215 Among others,216 these
products and services would generally
include those listed below, at least to
the extent they are offered or provided
for use by consumers primarily for
personal, family, or household
purposes:
• Extending credit and servicing
loans;
• Extending or brokering certain
leases of personal or real property;
• Providing real estate settlement
services;
• Engaging in deposit-taking
activities, transmitting or exchanging
funds, or otherwise acting as a
custodian of funds;
• Selling, providing, or issuing stored
value or payment instruments;
• Providing check cashing, check
collection, or check guaranty services;
215 For the full scope of the term ‘‘covered
person,’’ see 12 U.S.C. 5481(6).
216 For the full scope of the term ‘‘consumer
financial product or service,’’ see 12 U.S.C. 5481(5).
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• Providing payments or other
financial data processing products or
services to a consumer by any
technological means;
• Providing financial advisory
services;
• Collecting, analyzing, maintaining,
or providing consumer report
information or certain other account
information; and
• Collecting debt related to any
consumer financial product or
service.217
The Registration and Publication
Provisions would affect such covered
persons (as that term is defined in 12
U.S.C. 5481(6)) that (1) are not insured
depository institutions, insured credit
unions, or related persons (as that term
is defined in 12 U.S.C. 5481(25)), and
(2) have had covered orders issued
against them, unless such covered
persons are subject to certain
exclusions. The Supervisory Reports
Provision would affect such covered
persons that (1) are subject to
supervision and examination by the
Bureau pursuant to CFPA section
1024(a),218 (2) have had covered orders
issued against them, and (3) are at or
above the $1 million annual receipt
threshold, unless such covered persons
are subject to certain exclusions.
A major benefit of the proposed rule
would be that it would give the Bureau
higher-quality data on the number and
type of covered orders. Currently, the
Bureau does not have high-quality data
on the number of covered orders, nor
does it have high-quality data on the
number of nonbank covered persons
that are subject to covered orders.
To derive an estimate of the number
of affected entities under the proposed
rule using publicly available data, the
Bureau used data from the most recent
Economic Census. Table 1 below
presents entity counts for the North
American Industry Classification
System (NAICS) codes that generally
align with the financial services and
products listed above. The markets
defined by NAICS codes in some cases
include entities that would not qualify
as covered nonbanks under the
proposed rule. It is also possible that
some covered nonbanks may not be
counted in the table below, because,
e.g., the financial services they provide
are not their primary line of business.
The Bureau seeks comment on NAICS
codes not included in Table 1 that
include a significant number of entities
that could be affected by the proposed
rule.
217 See 12 U.S.C. 5481(15) (defining term
’’financial product or service’’).
218 12 U.S.C. 5514(a).
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NAICS code(s)
Number of
NAICS entities
Nondepository Credit Intermediation .......................................................................................................................
Activities Related to Credit Intermediation ..............................................................................................................
Portfolio Management ..............................................................................................................................................
Investment Advice ...................................................................................................................................................
Passenger Car Leasing ...........................................................................................................................................
Truck, Utility Trailer, and Recreational Vehicle Rental and Leasing ......................................................................
Activities Related to Real Estate .............................................................................................................................
Consumer Reporting ................................................................................................................................................
Debt Collection ........................................................................................................................................................
5222
5223
523920
523930
532112
532120
5313
561450
561440
14,330
13,618
24,430
17,510
449
1,612
79,563
307
3,224
Total ..................................................................................................................................................................
........................
155,043
NAICS name(s)
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Therefore, for purposes of its analysis
of the proposed rule, the Bureau
estimates that there are roughly 155,043
covered nonbanks. As noted above,
covered nonbanks would only be
affected by the rule if they are subject
to covered orders. Based on its
experience and expertise, the Bureau
estimates that perhaps one percent, and
at most five percent, of covered
nonbanks are subject to covered orders.
Therefore, the Bureau estimates that the
rule would likely affect between 1,550
and 7,752 covered nonbanks.
The Bureau seeks comment and
submissions of data concerning the
number and characteristics (such as
annual revenues, number of employees,
and main area of business) of covered
nonbanks subject to covered orders. In
light of the currently limited data
available to the Bureau on the number
of covered nonbanks subject to covered
orders, the analysis below focuses on
the potential benefits and costs of the
proposed rule for affected consumers
and covered nonbanks.
1. Registration Provision
Under this proposed provision,
affected entities would have to provide:
(1) identifying information and
administrative information and (2)
information regarding covered orders.
The Bureau believes this information
should be readily available to affected
firms. Therefore, the cost of complying
with the Registration Provision for most
affected firms should be on the order of
a few hours of an employee’s time. The
cost may be higher for firms with
several covered orders, or with covered
orders that are frequently modified.
Some firms may be unsure whether
they are covered persons not otherwise
excluded from the rule, or whether they
are subject to covered orders. For firms
unsure of their obligations under the
proposed provision, one option would
be to hire outside legal counsel to advise
them on these issues, which could be
costly for small firms. However, another
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option for such firms would be to
register using the NBR system, even if
doing so is not legally required. As
explained above, the cost associated
with registering an order is likely
minimal—a few hours of an employee’s
time. In addition, if firms have a good
faith basis to believe they are not
covered nonbanks (or that their orders
are not covered orders), they may
submit a notice to the nonbank
registration system stating as such under
proposed § 1092.202(g). Preparing and
submitting such notices would take at
most a few hours of an employee’s time.
The Bureau further notes that the mere
act of registering an order or submitting
a § 1092.202(g) notice is unlikely to
have significant indirect costs because
proposed § 1092.102(c) would provide
that the rule ‘‘does not alter any
applicable process whereby a person
may dispute that it qualifies as a person
subject to Bureau authority.’’ Firms
should generally choose the lowest cost
option available to them, and low-cost
options—either registering under the
NBR system or filing a notice under
proposed § 1092.202(g)—are options
available to firms.
To obtain a quantitative estimate of
the cost of this proposed provision, the
Bureau assesses the average hourly base
wage rate for the reporting requirement
at $43.60 per hour. This is the mean
hourly wage for employees in four major
occupational groups assessed to be most
likely responsible for the registration
process: Management ($59.31/hr); Legal
Occupations ($54.38/hr); Business and
Financial Operations ($39.82/hr); and
Office and Administrative Support
($20.88/hr).219 We multiply the average
hourly wage of $43.60 by the private
industry benefits factor of 1.42 to get a
fully loaded wage rate of $61.90/hr.220
219 See U.S. Bureau of Labor Statistics, National
Occupational Employment and Wage Estimates
United States (May 2021), https://www.bls.gov/oes/
current/oes_nat.htm.
220 As of March 2022, the ratio between total
compensation and wages for private industry
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The Bureau includes these four
occupational groups in order to account
for the mix of specialized employees
that may assist in the registration
process. The Bureau assesses that the
registration process will generally be
completed by office and administrative
support employees that are generally
responsible for the registrant’s
paperwork and other administrative
tasks. Employees specialized in
business and financial operations or in
legal occupations are likely to provide
information and assistance with the
registration process. Senior officers and
other managers are likely to review the
registration information before it is
submitted and may provide additional
information. The Bureau requests any
information that would inform its
estimate of the average hourly
compensation of employees required to
register under the proposed rule.
Assuming as outlined above a fully
loaded wage rate of roughly $60, and
that complying with this proposed
provision would take around five hours
of employees’ time, yields a cost impact
of around $300 per firm. Therefore, the
impact of this proposed provision on
affected firms would be limited.
This proposed provision would likely
not provide any benefits for affected
firms.
This proposed provision would give
the CFPB high-quality information on
outstanding covered orders and the
entities subject to those orders. That
information would assist the Bureau in
monitoring for risks to consumers in the
offering or provision of consumer
financial products or services. The
proposed registry would allow the
Bureau to more effectively monitor for
potential risks to consumers arising
from both individual violations of
consumer protection laws and broader
workers is 1.42. See U.S. Bureau of Labor Statistics,
Employer Costs for Employee Compensation:
Private industry dataset (March 2022), https://
www.bls.gov/web/ecec/ecec-private-dataset.xlsx.
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patterns in such violations and
enforcement actions intended to address
them. Such monitoring, in turn, would
help inform the Bureau’s exercise of its
other authorities. It would assist the
Bureau in determining whether to
prioritize certain entities for risk-based
supervision, or to investigate whether
certain entities have committed
violations that warrant Bureau
enforcement actions. The Bureau also
anticipates that the Registration
Provision would give it more
information on important gaps in
existing consumer financial protection
laws and would therefore improve
future Bureau regulations. In addition,
by providing the Bureau with more
information on consumer harms in
various markets, the Registration
Provision would improve the Bureau’s
consumer education efforts. All of these
effects would benefit consumers. The
Bureau does not have any data to
quantify these benefits.
This proposed provision would likely
not impose any significant costs on
consumers. As noted above, this
proposed provision could impose some
costs on some firms, and it is possible
that those firms would respond to these
increased costs by increasing prices for
consumers. But as discussed above, the
costs of this proposed provision would
be limited, so any price increases
caused by the rule would also be
limited. Moreover, many firms would
not be affected at all by this proposed
provision and so would not raise prices
because of this proposed provision.
2. Supervisory Reports Provision
This proposed provision would only
affect covered nonbanks subject to
Bureau supervision and examination.
Therefore, it would affect fewer covered
nonbanks and fewer consumers than the
first provision analyzed above.
Some firms may be unsure whether
they are supervised covered persons not
otherwise excluded from the rule, or
whether they are subject to covered
orders, so they may be unsure whether
they would have to comply with this
proposed provision. The Bureau notes
that complying with this proposed
provision if it is legally unnecessary is
unlikely to have greater costs than if it
is legally necessary, because proposed
§ 1092.102(c) would provide that the
rule does not alter applicable processes
whereby a person may dispute that it
qualifies as a person subject to Bureau
authority. Also, under proposed
§ 1092.203(f), if a firm has a good faith
basis to believe that it is not a
supervised registered entity subject to
the Supervisory Reports Provision (or
that its order is not a covered order), it
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may submit a notice to the nonbank
registration system stating as such.
Preparing and submitting such a notice
would take at most a few hours of an
employee’s time. Firms should generally
choose the lowest cost option available
to them. Therefore, firms are unlikely to
spend more to determine whether they
need to comply with the Supervisory
Reports Provision than the cost to the
firm of complying with the provision or,
for firms with a good faith basis to
believe they are not supervised
registered entities, of filing a
§ 1092.203(f) notice.
This provision would require that
affected supervised entities designate an
attesting executive. The attesting
executive would be a duly appointed
senior executive officer (or, if no such
officer exists, the highest-ranking
individual at the entity charged with
managerial or oversight responsibilities)
(i) whose assigned duties include
ensuring the supervised registered
entity’s compliance with Federal
consumer financial law, (ii) who
possesses knowledge of the supervised
entity’s systems and procedures for
achieving compliance with the covered
order, and (iii) who has control over the
supervised entity’s efforts to comply
with the covered order. The Bureau
believes that, even under the baseline
scenario, most supervised entities
would be taking active steps to comply
with covered orders, and therefore
would already have such an officer or
individual in place to oversee the
entity’s compliance with its obligations
under the covered order. Therefore, the
Bureau anticipates that this designation
requirement would impose little or no
additional cost on most supervised
registered entities. The Bureau notes
that the cost may be higher for
supervised entities that lack a highranking officer or other employee with
the requisite qualifications to serve as
an attesting executive. But the Bureau
believes that there would be few such
entities. The Bureau seeks comment on
whether proposed § 1092.203(b)’s
designation requirement is likely to
impose material additional costs on
supervised registered entities, beyond
the costs those entities are already likely
to incur as part of fulfilling their
obligations under the covered orders to
which they are subject.
The Supervisory Reports Provision
would also require that the supervised
registered entity submit a written
statement signed by the applicable
attesting executive for each covered
order to which it is subject. In the
written statement, the attesting
executive would: (i) generally describe
the steps that the attesting executive has
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undertaken to review and oversee the
supervised registered entity’s activities
subject to the applicable covered order
for the preceding calendar year; and (ii)
attest whether, to the attesting
executive’s knowledge, the supervised
registered entity during the preceding
calendar year identified any violations
or other instances of noncompliance
with any 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 Bureau cannot precisely quantify
the impact of the written-statement
requirement on impacted firms, but
based on its experience and expertise,
the Bureau believes that most entities
subject to covered orders endeavor in
good faith to comply with them and will
already have in place some manner of
systems and procedures to help achieve
such compliance. For these entities, the
proposed written-statement requirement
would require little more than
submitting a written statement from the
attesting executive that describes the
steps the executive took consistent with
the established systems and procedures
to reach conclusions regarding entity
compliance with the orders. Thus,
relative to the baseline, the writtenstatement requirement should impose
only modest costs on most covered
entities, related primarily to the time
and effort needed to (i) memorialize the
attesting executive’s existing oversight
of compliance and (ii) determine
whether the supervised registered entity
during the preceding calendar year
identified any violations or other
instances of noncompliance with any
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. While the
attesting executive would sign the
written statement, the Bureau expects
that other employees in other major
occupational groups (Legal
Occupations, Business and Financial
Operations, and Office and
Administrative Support) would support
the attesting executive in preparing the
statement. Assuming that satisfying the
written-statement requirement would
take twenty hours of employees’ time,
and that the average cost to entities of
an employee’s time is roughly $60 an
hour as discussed above, yields an
estimate that the cost of this
requirement on covered entities would
be roughly $1200 per firm.
The Bureau acknowledges that, under
the baseline, some supervised registered
entities may not have in place systems
and procedures to allow them to
confidently identify violations or other
instances of noncompliance with any
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obligations that were imposed in a
public provision of the covered order.
As discussed elsewhere in this
preamble, the Supervisory Reports
Provision would likely prompt some
such entities to adopt new or additional
compliance systems and procedures,
imposing a greater cost on them.
However, as noted above, based on its
experience and expertise, the Bureau
believes that most entities subject to
covered orders endeavor in good faith to
comply with them and will already have
in place some manner of systems and
procedures to help achieve such
compliance. Therefore, the Bureau
believes that the number of supervised
registered entities that would put in
place significant new compliance
systems and procedures as a result of
the rule would be relatively small.
In addition, the Supervisory Reports
Provision would require entities to
maintain records related to the written
statement for five years. Conservatively
assuming that ensuring the necessary
documents are properly stored also
requires ten hours of employee time
adds $600 to the costs to affected
entities of this proposed provision.
Note that, for the purposes of this
proposed rule, the term ‘‘supervised
registered entity’’ excludes persons with
less than $1 million in annual receipts
resulting from offering or providing
consumer financial products and
services described in CFPA section
1024(a).221 Therefore, the combined
costs of around $1800 imposed by the
Supervisory Reports Provision on the
majority of affected entities should be
roughly 0.2 percent or less of annual
receipts. The costs may be higher at
larger entities because identifying
instances of noncompliance with
obligations imposed in a public
provision of a covered order may be
more complex at larger entities. The
costs would also likely be higher at
entities with multiple instances of
noncompliance with public provisions
of covered orders, or with multiple
covered orders.
As explained in greater detail in
section V(D) above, the Supervisory
Reports Provision would facilitate the
Bureau’s risk-based supervision efforts,
including its efforts to assess
compliance with the requirements of
Federal consumer financial law, obtain
information about the supervised
entities’ activities and compliance
systems or procedures, and detect and
assess risks to consumers and to markets
for consumer financial products and
services. All of these effects would
benefit consumers. Moreover, while as
221 12
U.S.C. 5514(a).
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noted above the Bureau believes that
most entities subject to covered orders
endeavor in good faith to comply with
them and will already have in place
some manner of systems and procedures
to help achieve such compliance, it is
also likely that this proposed provision
would cause a few entities without such
systems and procedures to develop
them. This would also benefit
consumers. The Bureau does not have
any data to quantify this benefit. The
Bureau requests comments and
information on ways to quantify these
benefits.
6133
For affected covered nonbanks, the
main effect of this provision would be
that (1) their identifying information
and administrative information, (2)
information regarding covered orders
that they provide to the Bureau, and (3)
for supervised registered entities, the
name and title of the attesting executive,
could be posted on the Internet by the
Bureau. Much of this information would
be public even under the baseline, so
the additional direct effect of this
information being posted on the
Bureau’s website should be small.
However, because covered nonbanks
would provide this information only if
they are subject to covered orders,
consumers might interpret the presence
of a covered nonbank on the Bureau’s
website as negative information about
that covered nonbank. Therefore, this
proposed provision may have negative
reputational costs for the covered
nonbank whose information is
published on the Bureau website. Yet,
covered orders would be public
information even under the baseline
with no rule. Therefore, this proposed
provision would not make public any
non-public orders. This would limit the
likely costs on covered nonbanks of the
proposed provision.
This proposed provision would allow
information related to covered orders
that is already available to the general
public to be centralized on the Bureau’s
website. This could make the
information more readily accessible
than it would otherwise be. A large
body of research has studied the
circumstances under which providing
consumers better access to information
does, and does not, improve consumer
outcomes.222 One consensus from this
research is that well-designed
information disclosures can be effective
at directing consumer attention. For
example, one study found that
providing payday loan borrowers with
information about the costs of payday
loans reduced payday loan
borrowing.223 However, another
consensus from this research is that
information disclosures do not always
materially affect consumer decisionmaking, and that the impact of
information disclosures on consumer
decision-making depends on their
design and implementation. Impactful
information disclosures are typically
more direct (e.g., disclosing the costs of
payday loans to payday loan borrowers)
and more timely (e.g., disclosed to
payday loan borrowers at the time they
are obtaining a payday loan) than the
information that would be centralized
and published under this proposed
provision. Therefore, the Bureau
believes that most consumers would not
change their behavior due to this
proposed provision, so the impact of
this proposed provision on most
affected entities would likely not be
significant. The Bureau acknowledges
that the issues disclosed by a few
covered orders may be so controversial
among consumers that their publication
on the Bureau website could impose a
substantial impact on the firms affected
by those orders. However, as noted
above, covered orders would be public
information even under the baseline
with no rule. Therefore, covered orders
that disclose particularly controversial
practices would likely be well-known
among consumers even under the
baseline.
This proposed provision could benefit
firms in affected markets, even those
without covered orders, by centralizing
information on covered orders. This
could give firms a clearer picture of how
consumer financial protection laws are
enforced across agencies and
jurisdictions, and could reduce costs for
firms that would conduct research into
this question under the baseline. The
Bureau does not have any data with
which to quantify these benefits.
For consumers, one effect of the
proposed provision would be improved
access to information about covered
nonbanks with covered orders.
However, as noted above, this
information would be public even under
the baseline. Moreover, as discussed in
more detail above, impactful
information disclosures are typically
more direct and more timely than the
information that would be centralized
and published under this proposed
222 For one review of this research, see Thomas
A. Durkin and Gregory Elliehausen, Truth in
Lending: Theory, History, and a Way Forward
(2011).
223 See Marianne Bertrand and Adair Morse,
Information Disclosure, Cognitive Biases, and
Payday Borrowing, 66 The Journal of Finance 1865,
1865–93 (2011).
3. Publication Provision
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provision. Therefore, the Bureau
believes that most consumers would not
change their behavior due to this
proposed provision. The Bureau
acknowledges that the issues disclosed
by a few covered orders may be so
controversial among consumers that
their publication on the Bureau website
could impose a substantial impact on
the firms affected by those orders.
However, as noted above, covered
orders would be public information
even under the baseline with no rule.
Therefore, covered orders that disclose
particularly controversial practices
would likely be well-known among
consumers even under the baseline.
By centralizing information on
covered orders, another effect of the
proposed provision would be to
improve the ability of regulatory
agencies besides the Bureau to conduct
their activities, including supervision,
enforcement, regulation, market
monitoring, research, and consumer
education. This would benefit
consumers. The Bureau does not have
any data to quantify this benefit.
This proposed provision would likely
not impose any significant costs on
consumers. As noted above, this
proposed provision could impose some
costs on some firms, and it is possible
that those firms would respond to these
increased costs by increasing prices for
consumers. But as discussed above, the
costs of this proposed provision on
affected firms would be limited, so any
cost increases caused by the rule would
be limited at affected firms. Moreover,
many firms would not be affected at all
by this proposed provision and so
would not raise prices because of this
proposed provision.
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E. Potential Specific Impacts of the
Proposed Rule
1. Depository Institutions and Credit
Unions With $10 Billion or Less in Total
Assets, As Described in Section 1026
This proposed rule would only apply
to nonbanks. Therefore, it would have
no direct impacts on any insured
depository institutions or insured credit
unions. The rule might have some
indirect effects on some insured
depository institutions and insured
credit unions with $10 billion or less in
total assets. For example, insured
depository institutions and insured
credit unions that are affiliated with
affected entities might experience
indirect costs, because the proposed
rule could impose some costs on their
nonbank affiliates. Insured depository
institutions and insured credit unions
that compete with affected entities
might experience indirect benefits
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because of the proposed rule, because
the proposed rule would impose some
costs on their competitors. But as noted
above, even for nonbanks that are
directly affected by the proposed rule,
the Bureau does not anticipate that the
rule’s impact will be significant in most
cases. Therefore, the Bureau anticipates
that any indirect effects on insured
depository institutions or insured credit
unions with $10 billion or less in total
assets would be even less significant.
2. Impact of the Proposed Rule on
Access to Consumer Financial Products
and Services and on Consumers in Rural
Areas
By imposing some costs on affected
covered nonbanks, the proposed rule
could cause affected covered nonbanks
to provide fewer financial products and
services (or financial products and
services at higher cost) to consumers.
However, as noted above, the proposed
rule would likely impose only limited
costs on a limited number of covered
nonbanks. Therefore, the impact of the
proposed rule on consumer access to
financial products and services would
be limited even at affected covered
nonbanks. Moreover, bank and nonbank
entities that would not be directly
affected by the proposed rule could
provide financial products and services
to consumers that would otherwise
obtain these financial products and
services from affected covered
nonbanks. Therefore, the negative
impact of the proposed rule on
consumer access to financial products
and services would be limited. By
improving the ability of the CFPB to
conduct its activities, including
supervision, enforcement, regulation,
market monitoring, and consumer
education, the proposed rule would
likely improve the functioning of the
broader market and so may also have
positive effects on consumer access to
consumer financial products or services
provided in conformity with applicable
legal obligations designed to protect
consumers.
Broadly, the Bureau believes that the
analysis above of the impact of the
proposed rule on consumers in general
provides an accurate analysis of the
impact of the proposed rule on
consumers in rural areas. The impact of
the proposed rule on consumers in rural
areas would likely be relatively smaller
if the proposed rule would affect fewer
entities in rural areas. High-quality data
on the rural market share of entities that
would be affected by the proposed rule
does not exist, so the Bureau cannot
judge with certainty the relative impact
of the rule on rural areas. However, for
certain large and well-studied markets,
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there is evidence that nonbanks have
larger market shares in urban areas and
smaller market shares in rural areas.224
Based on this limited evidence, the
Bureau expects that the impact of the
proposed rule would be smaller in rural
areas.
VIII. Regulatory Flexibility Act
Analysis
A. Overview
The Regulatory Flexibility Act (RFA)
generally requires an agency to conduct
an initial regulatory flexibility analysis
(IRFA) and a final regulatory flexibility
analysis of any rule subject to noticeand-comment rulemaking requirements,
unless the agency certifies that the rule
will not have a significant economic
impact on a substantial number of small
entities.225 The Bureau also is subject to
certain additional procedures under the
RFA involving the convening of a panel
to consult with small business
representatives before proposing a rule
for which an IRFA is required.226
An IRFA is not required for this
proposed rule because for the reasons
explained below the proposed rule, if
adopted, would not have a significant
economic impact on a substantial
number of small entities.
B. Impact of Proposed Provisions on
Small Entities
The proposed rule has three
provisions, which are separately
analyzed below. The first proposed
provision (hereinafter referred to as the
‘‘Registration Provision’’) would require
nonbank covered persons that are
subject to certain public agency and
court orders enforcing the law to register
with the Bureau and to submit copies of
such public orders to the Bureau. The
second proposed provision (hereinafter
referred to as the ‘‘Supervisory Reports
Provision’’) would require nonbank
covered persons that are supervised by
the Bureau to prepare and submit an
annual written statement, signed by a
designated individual, regarding
compliance with each covered public
order. The third proposed provision
(hereinafter referred to as the
‘‘Publication Provision’’) describes the
registration information the Bureau
would make publicly available.
224 For evidence on the mortgage market, see
Julapa Jagtiani, Lauren Lambie-Hanson, and
Timothy Lambie-Hanson, Fintech Lending and
Mortgage Credit Access, 1 The Journal of FinTech
(2021). For evidence on the auto loan market, see
Donghoon Lee, Michael Lee, and Reed Orchinik,
Market Structure and the Availability of Credit:
Evidence from Auto Credit, MIT Sloan Research
Paper (2022), https://papers.ssrn.com/sol3/papers.
cfm?abstract_id=3966710.
225 5 U.S.C. 601 et seq.
226 5 U.S.C. 609.
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The analysis below evaluates the
potential economic impact of the
proposed provisions on small entities as
defined by the RFA.227 The RFA’s
definition of ‘‘small’’ varies by type of
entity.228
With certain exceptions, the proposed
rule would apply to covered persons as
defined in the CFPA, including persons
that engage in offering or providing a
consumer financial product or
service.229 Among others,230 these
products and services would generally
include those listed below, at least to
the extent they are offered or provided
for use by consumers primarily for
personal, family, or household
purposes.
• Extending credit and servicing
loans;
• Extending or brokering certain
leases of personal or real property;
• Providing real estate settlement
services;
• Engaging in deposit-taking
activities, transmitting or exchanging
funds, or otherwise acting as a
custodian of funds;
• Selling, providing, or issuing stored
value or payment instruments;
• Providing check cashing, check
collection, or check guaranty services;
• Providing payments or other
financial data processing products or
services to a consumer by any
technological means;
• Providing financial advisory
services;
• Collecting, analyzing, maintaining,
or providing consumer report
information or certain other account
information; and
227 For purposes of assessing the impacts of the
proposed rule on small entities, ‘‘small entities’’ is
defined in the RFA to include small businesses,
small not-for-profit organizations, and small
government jurisdictions. 5 U.S.C. 601(6). A ‘‘small
business’’ is determined by application of Small
Business Administration regulations and reference
to the North American Industry Classification
System (NAICS) classifications and size standards.
5 U.S.C. 601(3). A ‘‘small organization’’ is any ‘‘notfor-profit enterprise which is independently owned
and operated and is not dominant in its field.’’ 5
U.S.C. 601(4). A ‘‘small governmental jurisdiction’’
is the government of a city, county, town, township,
village, school district, or special district with a
population of less than 50,000. 5 U.S.C. 601(5).
228 U. S. Small Bus. Admin., Table of Small
Business Size Standards Matched to North
American Industry Classification System Codes,
https://www.sba.gov/sites/default/files/2022-09/
Table%20of%20Size%20Standards_
NAICS%202022%20Final%20Rule_
Effective%20October%201%2C%202022.pdf
(current SBA size standards).
229 For the full scope of the term ‘‘covered
person,’’ see 12 U.S.C. 5481(6).
230 For the full scope of the term ‘‘consumer
financial product or service,’’ see 12 U.S.C. 5481(5).
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• Collecting debt related to any
consumer financial product or
service.231
The Registration and Publication
Provisions would affect such covered
persons (as that term is defined in 12
U.S.C. 5481(6)) that (1) are not insured
depository institutions, insured credit
unions, or related persons (as that term
is defined in 12 U.S.C. 5481(25)), and
(2) have had covered orders issued
against them, unless such covered
persons are subject to certain
exclusions. The Supervisory Reports
Provision would affect such covered
persons that (1) are subject to
supervision and examination by the
Bureau pursuant to CFPA section
1024(a), 232 (2) have had covered orders
issued against them, and (3) are at or
above the $1 million annual receipt
threshold, unless such covered persons
are subject to certain exclusions.
A major benefit of the proposed rule
would be that it would give the Bureau
higher-quality data on covered orders.
Currently, the Bureau does not have
high-quality data on the number of
covered orders, nor does it have reliable
information on the number of small,
covered firms that are subject to covered
orders. Therefore, the Bureau cannot
reliably estimate the number of small
entities that would be impacted by the
proposed rule.
($20.88/hr).233 We multiply the average
hourly wage of $43.60 by the private
industry benefits factor of 1.42 to get a
fully loaded wage rate of $61.90/hr.234
The Bureau includes these four
occupational groups in order to account
for the mix of specialized employees
that may assist in the registration
process. The Bureau assesses that the
registration process will generally be
completed by office and administrative
support employees that are generally
responsible for the registrant’s
paperwork and other administrative
tasks. Employees specialized in
business and financial operations or in
legal occupations are likely to provide
information and assistance with the
registration process. Senior officers and
other managers are likely to review the
registration information before it is
submitted and may provide additional
information. The Bureau requests any
information that would inform its
estimate of the average hourly
compensation of employees required to
register under the proposed rule.
Assuming as outlined above a fully
loaded wage rate of roughly $60, and
that complying with this proposed
provision would take around five hours
of employees’ time, yields a cost impact
of around $300 per firm. Therefore, the
impact of this proposed provision on
affected firms would be limited.
1. Registration Provision
2. Supervisory Reports Provision
The first proposed provision would
require covered firms to register using
the NBR system and submit certain
required information. Required
information includes identifying and
administrative information, as well as
information regarding covered orders.
This information should be readily
accessible to almost all entities affected
and providing it through the NBR
system should be straightforward. Firms
would not have to purchase new
hardware or software, or train
specialized personnel, to comply with
this proposed provision.
To obtain a quantitative estimate of
the cost of this proposed provision, the
Bureau assesses the average hourly base
wage rate for the reporting requirement
at $43.60 per hour. This is the mean
hourly wage for employees in four major
occupational groups assessed to be most
likely responsible for the registration
process: Management ($59.31/hr); Legal
Occupations ($54.38/hr); Business and
Financial Operations ($39.82/hr); and
Office and Administrative Support
This second provision would require
that affected supervised entities
designate an attesting executive. The
attesting executive would be a duly
appointed senior executive officer (or, if
no such officer exists, the highestranking individual at the entity charged
with managerial or oversight
responsibilities) (i) whose assigned
duties include ensuring the supervised
registered entity’s compliance with
Federal consumer financial law, (ii) who
possesses knowledge of the supervised
entity’s systems and procedures for
achieving compliance with the covered
order, and (iii) who has control over the
supervised entity’s efforts to comply
with the covered order. The Bureau
believes that, even under the baseline
scenario, most supervised entities
would be taking active steps to comply
with covered orders, and therefore
231 See 12 U.S.C. 5481(15) (defining term
‘‘financial product or service’’).
232 12 U.S.C. 5514(a).
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233 See U.S. Bureau of Labor Statistics, National
Occupational Employment and Wage Estimates
Statistics for May 2021, https://www.bls.gov/oes/
current/oes_nat.htm.
234 As of March 2022, the ratio between total
compensation and wages for private industry
workers is 1.42. See U.S. Bureau of Labor Statistics,
Employer Costs for Employee Compensation:
Private industry dataset (March 2022), https://
www.bls.gov/web/ecec/ecec-private-dataset.xlsx.
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would already have such an officer or
individual in place to oversee the
entity’s compliance with its obligations
under the covered order. Therefore, the
Bureau anticipates that this designation
requirement would impose little or no
additional impact on most supervised
registered entities. The Bureau notes
that the impacts may be higher for
supervised entities that lack a highranking officer or other employee with
the requisite qualifications to serve as
an attesting executive, but the Bureau
believes that there would be few such
entities. The Bureau seeks comment on
whether proposed section 203(b)’s
designation requirement is likely to
impose material additional impacts on
supervised registered entities, beyond
the impacts those entities are already
likely to incur as part of fulfilling their
obligations under the covered orders to
which they are subject.
The Supervisory Reports Provision
would also require that the supervised
registered entity submit a written
statement signed by the applicable
attesting executive for each covered
order to which it is subject. In the
written statement, the attesting
executive would: (i) generally describe
the steps that the attesting executive has
undertaken to review and oversee the
supervised registered entity’s activities
subject to the applicable covered order
for the preceding calendar year; and (ii)
attest whether, to the attesting
executive’s knowledge, the supervised
registered entity during the preceding
calendar year identified any violations
or other instances of noncompliance
with any 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 Bureau cannot precisely quantify
the impact of the written-statement
requirement on impacted firms but
based on its experience and expertise,
the Bureau believes that most entities
subject to covered orders endeavor in
good faith to comply with them and will
already have in place some manner of
systems and procedures to help achieve
such compliance. For these entities, the
proposed written-statement requirement
would require little more than
submitting a written statement from the
attesting executive that describes the
steps the executive took consistent with
the established systems and procedures
to reach conclusions regarding entity
compliance with the orders. Thus,
relative to the baseline, the writtenstatement requirement should impose
only modest costs on most covered
entities, related primarily to the time
and effort needed to (i) memorialize the
attesting executive’s existing oversight
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of compliance and (ii) determine
whether the supervised registered entity
during the preceding calendar year
identified any violations or other
instances of noncompliance with any
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. While the
attesting executive would sign the
written statement, the Bureau expects
that other employees in other major
occupational groups (Legal
Occupations, Business and Financial
Operations, and Office and
Administrative Support) would support
the attesting executive in preparing the
statement. Assuming that satisfying the
written-statement requirement would
take twenty hours of employees’ time,
and that the average cost to entities of
an employee’s time is roughly $60 an
hour as discussed above, yields an
estimate that the cost of this
requirement on covered entities would
be roughly $1200 per entity.
The Bureau acknowledges that, under
the baseline, some supervised registered
entities firms may not have in place
systems and procedures to allow them
to confidently identify violations or
other instances of noncompliance with
any obligations that were imposed in a
public provision of the covered order.
As discussed elsewhere in this
preamble, the Supervisory Reports
Provision would likely prompt some
such entities to adopt new or additional
compliance systems and procedures,
imposing a greater cost on them.
However, as noted above, based on its
experience and expertise, the Bureau
believes that most entities subject to
covered orders endeavor in good faith to
comply with them and will already have
in place some manner of systems and
procedures to help achieve such
compliance. Therefore, the Bureau
believes that the number of supervised
registered entities that would put in
place significant new compliance
systems and procedures as a result of
the rule would be relatively small.
In addition, the Supervisory Reports
Provision would require entities to
maintain records related to the written
statement for five years. Conservatively
assuming that ensuring the necessary
documents are properly stored also
requires ten hours of employee time
adds $600 to the costs to affected
entities of this proposed provision.
Note that, for the purposes of this
proposed rule, the term ‘‘supervised
registered entity’’ excludes persons with
less than $1 million in annual receipts
resulting from offering or providing
consumer financial products and
services described in CFPA section
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1024(a). Therefore, the combined costs
of around $1800 imposed by the
Supervisory Reports Provision on the
majority of affected entities should be
roughly 0.2 percent of annual receipts.
Therefore, the impact of this proposed
provision on most affected small entities
would be limited. The costs may be
higher at larger entities because
identifying instances of noncompliance
with obligations imposed in a public
provision of a covered order may be
more complex at larger entities. The
costs would also likely be higher at
entities with multiple instances of
noncompliance with public provisions
of covered orders, or with multiple
covered orders.
3. Publication Provision
For affected covered nonbanks, the
main effect of the third proposed
provision would be that (1) their
identifying information and
administrative information, (2)
information regarding covered orders
that they provide to the Bureau, and (3)
for supervised registered entities, the
name and title of the attesting executive,
could be posted on the Internet by the
Bureau. Much of this information would
be public even under the baseline, so
the additional direct effect of this
information being posted on the
Bureau’s website should be small.
However, because covered nonbanks
would provide this information only if
they are subject to covered orders,
consumers might interpret the presence
of a covered nonbank on the Bureau’s
website as negative information about
that covered nonbank. Therefore, this
proposed provision may have negative
reputational costs for the covered
nonbanks whose information is
published on the Bureau’s website. Yet
covered orders would be public
information even under the baseline
with no rule. Therefore, this proposed
provision would not make public any
non-public orders. This would limit the
likely costs on covered nonbanks of the
proposed provision.
This proposed provision would allow
information related to covered orders
that is already available to the general
public to be centralized on the Bureau’s
website. This could make the
information more readily accessible
than it would otherwise be. A large
body of research has studied the
circumstances under which providing
consumers better access to information
does, and does not, improve consumer
outcomes.235 One consensus from this
235 For one review of this research, see Thomas
A. Durkin and Gregory Elliehausen, Truth in
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research is that well-designed
information disclosures can be effective
at directing consumer attention. For
example, one study found that
providing payday loan borrowers with
information about the costs of payday
loans reduced payday loan
borrowing.236 However, another
consensus from this research is that
information disclosures do not always
materially affect consumer decisionmaking, and that the impact of
information disclosures on consumer
decision-making depends on their
design and implementation. Impactful
information disclosures are typically
more direct (e.g., disclosing the costs of
payday loans to payday loan borrowers)
and more timely (e.g., disclosed to
payday loan borrowers at the time they
are obtaining a payday loan) than the
information that would be centralized
and published under this proposed
provision. Therefore, the Bureau
believes that most consumers would not
change their behavior due to this
proposed provision, so the impact of
this proposed provision on most
affected entities would likely not be
significant. The Bureau acknowledges
that the issues disclosed by a few
covered orders may be so controversial
among consumers that their publication
on the Bureau website could impose a
substantial impact on the firms affected
by those orders. However, as noted
above, covered orders would be public
information even under the baseline
with no rule. Therefore, covered orders
that disclose particularly controversial
practices would likely be well-known
among consumers even under the
baseline. As a result, the Bureau
believes that this proposed provision is
unlikely to have a significant economic
impact on a substantial number of small
entities.
For the reasons described above, the
Bureau believes that no provision of the
proposed rule would have a significant
economic impact on a substantial
number of small entities. Moreover, the
impact of each provision is sufficiently
small that the three provisions together
would not have a significant economic
impact on a substantial number of small
entities.
Accordingly, the Director hereby
certifies that this proposed rule, if
adopted, would not have a significant
economic impact on a substantial
number of small entities. Thus, neither
an IRFA nor a small business review
Lending: Theory, History, and a Way Forward
(2011).
236 See Marianne Bertrand and Adair Morse,
Information Disclosure, Cognitive Biases, and
Payday Borrowing, 66 The Journal of Finance 1865,
1865–93 (2011).
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panel is required for this proposal. The
Bureau requests comment on the
analysis above and requests any relevant
data.
IX. Paperwork Reduction Act
Under the Paperwork Reduction Act
of 1995 (PRA), 44 U.S.C. 3501 et seq.,
Federal agencies are generally required
to seek approval from the Office of
Management and Budget (OMB) for
information collection requirements
prior to implementation. Under the
PRA, the Bureau may not conduct nor
sponsor, and, notwithstanding any other
provision of law, a person is not
required to respond to, an information
collection unless the information
collection displays a valid control
number assigned by OMB. The
information collection requirements in
this proposed rule would be mandatory.
Certain information collected under this
requirement would not be made
available to the public, in accordance
with applicable law.
The collections of information
contained in this proposed rule, and
identified as such, have been submitted
to OMB for review under section
3507(d) of the PRA. A complete
description of the information collection
requirements (including the burden
estimate methods) is provided in the
information collection request (ICR) that
the Bureau has submitted to OMB under
the requirements of the PRA. Please
send your comments to the Office of
Information and Regulatory Affairs,
OMB, Attention: Desk Officer for the
Bureau of Consumer Financial
Protection. Send these comments by
email to oira_submission@omb.eop.gov
or by fax to 202–395–6974. If you wish
to share your comments with the
Bureau, please send a copy of these
comments as described in the
ADDRESSES section above. The ICR
submitted to OMB requesting approval
under the PRA for the information
collection requirements contained
herein is available at
www.regulations.gov as well as on
OMB’s public-facing docket at
www.reginfo.gov.
Title of Collection: Nonbank
Registration—Agency and Court Orders
Registration.
OMB Control Number: 3170–00XX.
Type of Review: Request for approval
of a new information collection.
Affected Public: Private sector.
Estimated Number of Respondents:
7,752.
Estimated Total Annual Burden
Hours: 35 hours.
Comments are invited on: (a) Whether
the collection of information is
necessary for the proper performance of
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6137
the functions of the Bureau, including
whether the information will have
practical utility; (b) the accuracy of the
Bureau’s estimate of the burden of the
collection of information, including the
validity of the methods and the
assumptions used; (c) ways to enhance
the quality, utility, and clarity of the
information to be collected; and (d)
ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Comments submitted in response to this
proposal will be summarized and/or
included in the request for OMB
approval. All comments will become a
matter of public record.
If applicable, the notice of final rule
will display the control number
assigned by OMB to any information
collection requirements proposed herein
and adopted in the final rule.
List of Subjects
Administrative practice and
procedure, Consumer protection, Credit,
Intergovernmental relations, Law
enforcement, Nonbank registration,
Registration, Reporting and
recordkeeping requirements, Trade
practices.
Authority and Issuance
For the reasons set forth above, the
Bureau proposes to add part 1092 to
chapter X in title 12 of the Code of
Federal Regulations, to read as follows.
■
PART 1092—NONBANK
REGISTRATION
Subpart A—General
Sec.
1092.100 Authority and purpose.
1092.101 General definitions.
1092.102 Submission and use of
registration information.
1092.103 Severability.
Subpart B—Registry of Nonbank Covered
Persons Subject to Certain Agency and
Court Orders
1092.200 Scope and purpose.
1092.201 Definitions.
1092.202 Registration and submission of
information regarding covered orders.
1092.203 Annual reporting requirements for
supervised registered entities.
1092.204 Publication and correction of
registration information.
Subpart C—[Reserved]
Appendix A to Part 1092—List of State
Covered Laws
Authority: 12 U.S.C. 5512(b) and (c); 12
U.S.C. 5514(b).
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Subpart A—General
§ 1092.100
Authority and purpose.
(a) Authority. The regulation in this
part is issued by the Bureau pursuant to
section 1022(b) and (c) and section
1024(b) of the Consumer Financial
Protection Act of 2010 (CFPA), codified
at 12 U.S.C. 5512(b) and (c), and 12
U.S.C. 5514(b).
(b) Purpose. The purpose of this part
is to prescribe rules governing the
registration of nonbanks, and the
collection and submission of
registration information by such
persons, and for public release of the
collected information as appropriate.
(1) Subpart A contains general
provisions and definitions used in this
part.
(2) Subpart B sets forth requirements
regarding the registration of nonbanks
subject to certain agency and court
orders.
(3) Subpart C is reserved.
§ 1092.101
§ 1092.103
General definitions.
For the purposes of this part, unless
the context indicates otherwise, the
following definitions apply:
(a) Affiliate, consumer, consumer
financial product or service, covered
person, Federal consumer financial law,
insured credit union, person, related
person, service provider, and State have
the same meanings as in 12 U.S.C. 5481.
(b) Bureau means the Consumer
Financial Protection Bureau.
(c) Include, includes, and including
mean that the items named may not
encompass all possible items that are
covered, whether like or unlike the
items named.
(d) Nonbank registration system
means the Bureau’s electronic
registration system identified and
maintained by the Bureau for the
purposes of this part.
(e) Nonbank registration system
implementation date means, for a given
requirement or subpart of this part, the
date(s) determined by the Bureau to
commence the operations of the
nonbank registration system in
connection with that requirement or
subpart.
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§ 1092.102 Submission and use of
registration information.
(a) Filing instructions. The Bureau
shall specify the form and manner for
electronic filings and submissions to the
nonbank registration system that are
required or made voluntarily under this
part. The Bureau also may provide for
extensions of deadlines or time periods
prescribed by this part for persons
affected by declared disasters or other
emergency situations.
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(b) Coordination or combination of
systems. In administering the nonbank
registration system, the Bureau may rely
on information a person previously
submitted to the nonbank registration
system under this part and may
coordinate or combine systems in
consultation with State agencies as
described in 12 U.S.C. 5512(c)(7)(C) and
12 U.S.C. 5514(b)(7)(D).
(c) Bureau use of registration
information. The Bureau may use the
information submitted to the nonbank
registration system under this part to
support its objectives and functions,
including in determining when to
exercise its authority under 12 U.S.C.
5514 to conduct examinations and when
to exercise its enforcement powers
under subtitle E of the CFPA. However,
this part does not alter any applicable
process whereby a person may dispute
that it qualifies as a person subject to
Bureau authority.
Severability.
The provisions of this part are
separate and severable from one
another. If any provision is stayed or
determined to be invalid, the remaining
provisions shall continue in effect.
Subpart B—Registry of Nonbank
Covered Persons Subject to Certain
Agency and Court Orders
§ 1092.200
Scope and purpose.
(a) Scope. This subpart requires
nonbank covered persons that are
subject to certain public agency and
court orders to register with the Bureau
and to submit a copy of each such
public order to the Bureau. This subpart
also requires certain nonbank covered
persons that are supervised by the
Bureau to prepare and submit an annual
written statement, signed by a
designated individual, regarding
compliance with each such public
order. Finally, this subpart also
describes the registration information
the Bureau will make publicly available.
(b) Purpose. The purposes of the
information collection requirements
contained in this subpart are:
(1) To support Bureau functions by
monitoring for risks to consumers in the
offering or provision of consumer
financial products or services, including
developments in markets for such
products or services, pursuant to 12
U.S.C. 5512(c)(1);
(2) To prescribe rules regarding
registration requirements applicable to
nonbank covered persons, pursuant to
12 U.S.C. 5512(c)(7);
(3) To facilitate the supervision of
persons described in 12 U.S.C.
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5514(a)(1), pursuant to 12 U.S.C.
5514(b);
(4) To assess and detect risks to
consumers, pursuant to 12 U.S.C.
5514(b); and
(5) To ensure that persons described
in 12 U.S.C. 5514(a)(1) are legitimate
entities and are able to perform their
obligations to consumers, pursuant to 12
U.S.C. 5514(b).
§ 1092.201
Definitions.
For the purposes of this subpart,
unless the context indicates otherwise,
the following definitions apply:
(a) Administrative information means
contact information regarding persons
subject to this subpart and other
information submitted or collected to
facilitate the administration of the
nonbank registration system.
(b) Attesting executive means, with
respect to any covered order regarding
a supervised registered entity, the
individual designated by the supervised
registered entity to perform the
supervised registered entity’s duties
with respect to the covered order under
§ 203 of this part.
(c) Covered law means a law listed in
paragraphs (1) through (6) of this
paragraph (c), to the extent 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:
(1) A Federal consumer financial law;
(2) Any other law as to which the
Bureau may exercise enforcement
authority;
(3) The prohibition on unfair or
deceptive acts or practices under section
5 of the Federal Trade Commission Act
(FTC Act), 15 U.S.C. 45, or any rule or
order issued for the purpose of
implementing that prohibition;
(4) A State law prohibiting unfair,
deceptive, or abusive acts or practices
that is identified in appendix A to this
part;
(5) A State law amending or otherwise
succeeding a law identified in appendix
A to this part, to the extent that such
law is materially similar to its
predecessor; or
(6) A rule or order issued by a State
agency for the purpose of implementing
a prohibition on unfair, deceptive, or
abusive acts or practices contained in a
State law described in paragraph (4) or
(5) of this paragraph (c).
(d) Covered nonbank means a covered
person that is not any of the following:
(1) An insured depository institution,
insured credit union, or related person;
(2) A State;
(3) A natural person;
(4) A motor vehicle dealer that is
predominantly engaged in the sale and
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servicing of motor vehicles, the leasing
and servicing of motor vehicles, or both,
within the meaning of 12 U.S.C. 5519(a),
except to the extent such a person
engages in functions that are excepted
from the application of 12 U.S.C.
5519(a) as described in 12 U.S.C.
5519(b); or
(5) A person that qualifies as a
covered person based solely on conduct
that is the subject of, and that is not
otherwise exempted from, an exclusion
from the Bureau’s rulemaking authority
under 12 U.S.C. 5517.
(e) Covered order means a final,
public order issued by an agency or
court, whether or not issued upon
consent, that:
(1) Identifies a covered nonbank by
name as a party subject to the order;
(2) Was issued at least in part in any
action or proceeding brought by any
Federal agency, State agency, or local
agency;
(3) Contains public provisions that
impose obligations on the covered
nonbank to take certain actions or to
refrain from taking certain actions;
(4) Imposes such obligations on the
covered nonbank based on an alleged
violation of a covered law; and
(5) Has an effective date on or later
than January 1, 2017.
The term ‘‘covered order’’ does not
include an order issued to a motor
vehicle dealer that is predominantly
engaged in the sale and servicing of
motor vehicles, the leasing and
servicing of motor vehicles, or both,
within the meaning of 12 U.S.C. 5519(a),
except to the extent such order is in
connection with the functions that are
excepted from the application of 12
U.S.C. 5519(a) as described in 12 U.S.C.
5519(b).
(f) Effective date means, in connection
with a covered order, the effective date
as identified in the covered order;
provided that if no other effective date
is specified, then the date on which the
covered order was issued shall be
treated as the effective date for purposes
of this subpart. If the issuing agency or
a court stays or otherwise suspends the
effectiveness of the covered order, the
effective date shall be delayed until
such time as the stay or suspension of
effectiveness is lifted.
(g) Identifying information means
existing information available to the
covered nonbank that uniquely
identifies the covered nonbank,
including the entity’s legal name, State
of incorporation or organization,
principal place of business address, and
any unique identifiers issued by a
government agency or standards
organization.
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(h) Insured depository institution has
the same meaning as in 12 U.S.C.
5301(18)(A).
(i) Local agency means a regulatory or
enforcement agency or authority of a
county, city (whether general law or
chartered), city and county, municipal
corporation, district, or other political
subdivision of a State, other than a State
agency.
(j) Order includes any written order or
judgment issued by an agency or court
in an investigation, matter, or
proceeding.
(k) Public means, with respect to a
covered order or any portion thereof,
published by the issuing agency or
court, or required by any provision of
Federal or State law, rule, or order to be
published by the issuing agency or
court. The term does not include orders
or portions of orders that constitute
confidential supervisory information of
any Federal or State agency.
(l) Registered entity means any person
registered or required to be registered
under this subpart.
(m) Remain(s) in effect means, with
respect to any covered order, that the
covered nonbank remains subject to
public provisions that impose
obligations on the covered nonbank to
take certain actions or to refrain from
taking certain actions based on an
alleged violation of a covered law.
(n) State agency means the attorney
general (or the equivalent thereof) of any
State and any other State regulatory or
enforcement agency or authority.
(o) Supervised registered entity means
a registered entity that is subject to
supervision and examination by the
Bureau pursuant to 12 U.S.C. 5514(a)
except as provided in paragraphs (o)(1)
through (4) of this section. For purposes
of this definition, the term ‘‘subject to
supervision and examination by the
Bureau pursuant to 12 U.S.C. 5514(a)’’
includes an entity that qualifies as a
larger participant of a market for
consumer financial products or services
under any rule issued by the Bureau
pursuant to 12 U.S.C. 5514(a)(1)(B) and
(a)(2), or that is subject to an order
issued by the Bureau pursuant to 12
U.S.C. 5514(a)(1)(C). The term
‘‘supervised registered entity’’ does not
include:
(1) A service provider that is subject
to Bureau examination and supervision
solely in its capacity as a service
provider and that is not otherwise
subject to Bureau supervision and
examination;
(2) A motor vehicle dealer that is
predominantly engaged in the sale and
servicing of motor vehicles, the leasing
and servicing of motor vehicles, or both,
within the meaning of 12 U.S.C. 5519(a),
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6139
except to the extent such a person
engages in functions that are excepted
from the application of 12 U.S.C.
5519(a) as described in 12 U.S.C.
5519(b);
(3) A person that qualifies as a
covered person based solely on conduct
that is the subject of, and that is not
otherwise exempted from, an exclusion
from the Bureau’s supervisory authority
under 12 U.S.C. 5517; or
(4) A person with less than $1 million
in annual receipts resulting from
offering or providing all consumer
financial products and services
described in 12 U.S.C. 5514(a). For
purposes of this exclusion, the term
‘‘annual receipts’’ has the same meaning
as that term has in 12 CFR 1090.104(a),
including 12 CFR 1090.104(a)(i) through
(iii).
§ 1092.202 Registration and submission of
information regarding covered orders.
(a) Scope of registration requirement.
This section shall apply only with
respect to covered orders with an
effective date on or after the effective
date of this subpart, or that remain in
effect as of the effective date of this
subpart.
(b) Requirement to register and submit
information regarding covered orders.
(1) Each covered nonbank that is
identified by name as a party subject to
a covered order described in paragraph
(a) of this section shall register as a
registered entity with the nonbank
registration system in accordance with
this section if it is not already so
registered, and shall provide or update,
as applicable, the information described
in this subpart in the form and manner
specified by the Bureau.
(2) Each covered nonbank required to
register under this section shall:
(i) Submit a filing containing the
information described in paragraphs (c)
and (d) of this section to the nonbank
registration system within the later of 90
days after the applicable nonbank
registration system implementation date
or 90 days after the effective date of any
applicable covered order; and
(ii) Submit a revised filing amending
any information described in paragraphs
(c) and (d) of this section to the nonbank
registration system within 90 days after
any amendments are made to the
covered order or any of the information
described in paragraph (c) or (d) of this
section changes.
(c) Required identifying information
and administrative information. A
registered entity shall provide all
identifying information and
administrative information required by
the nonbank registration system. In
filing instructions issued pursuant to
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§ 1092.102(a), the Bureau may require
that covered nonbanks that are affiliates
make joint or combined submissions
under this section.
(d) Information regarding covered
orders. A registered entity shall provide
the following information for each
covered order subject to this section:
(1) A fully executed, accurate, and
complete copy of the covered order, in
a format specified by the Bureau;
provided that any portions of a covered
order that are not public shall not be
submitted, and these portions shall be
clearly marked on the copy submitted;
(2) In connection with each applicable
covered order, information identifying:
(i) The government entity that issued
the covered order;
(ii) The effective date of the covered
order;
(iii) The date of expiration, if any, of
the covered order, or a statement that
there is none;
(iv) All covered laws found to have
been violated or, for orders issued upon
the parties’ consent, alleged to have
been violated; and
(v) The names of any of the registered
entity’s affiliates registered under this
subpart with respect to the same
covered order; and
(3) If the registered entity is a
supervised registered entity, the name
and title of its attesting executive for
purposes of § 1092.203 with respect to
the covered order.
(e) Expiration of covered order status.
A covered order shall cease to be a
covered order for purposes of this
subpart as of the later of:
(1) Ten years after its effective date; or
(2) If the covered order expressly
provides for a termination date more
than ten years after its effective date, the
expressly provided termination date.
(f) Requirement to submit revised and
final filings with respect to certain
covered orders.
(1) If a covered order is terminated,
modified, or abrogated (whether by its
own terms, by action of the applicable
agency, or by a court), or if an order
ceases to be a covered order for
purposes of this subpart by operation of
paragraph (e) of this section, the
registered entity shall submit a revised
filing to the nonbank registration system
within 90 days after the effective date of
such termination, modification, or
abrogation, or the date such order ceases
to be a covered order.
(2) If, due to such termination,
modification, or abrogation of a covered
order, or due to the application of
paragraph (e) of this section, the order
no longer remains in effect or is no
longer a covered order, then, following
its final filing under paragraph (f)(1) of
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this section with respect to such
covered order, the registered entity will
have no further obligation to update its
filing or to file written statements with
respect to such covered order under this
subpart.
(g) Notification by certain persons of
non-registration under this section. A
person may submit a notice to the
nonbank registration system stating that
it is not registering pursuant to this
section because it has a good faith basis
to believe that it is not a covered
nonbank or that an order in question
does not qualify as a covered order.
Such person shall promptly comply
with this section upon becoming aware
of facts or circumstances that would not
permit it to continue representing that it
has a good faith basis to believe that it
is not a covered nonbank or that an
order in question does not qualify as a
covered order.
§ 1092.203 Annual reporting requirements
for supervised registered entities.
(a) Scope of annual reporting
requirements. This section shall apply
only with respect to covered orders with
an effective date on or after the nonbank
registration system implementation date
for this section.
(b) Requirement to designate attesting
executive. A supervised registered entity
subject to a covered order described in
paragraph (a) of this section shall
designate as its attesting executive for
purposes of this subpart its highestranking duly appointed senior executive
officer (or, if the supervised registered
entity does not have any duly appointed
officers, the highest-ranking individual
charged with managerial or oversight
responsibility for the supervised
registered entity) whose assigned duties
include ensuring the supervised
registered entity’s compliance with
Federal consumer financial law, who
has knowledge of the entity’s systems
and procedures for achieving
compliance with the covered order, and
who has control over the entity’s efforts
to comply with the covered order. The
supervised registered entity shall
annually designate one attesting
executive for each such covered order to
which it is subject and for all
submissions and other purposes related
to that covered order under this subpart.
The supervised registered entity shall
authorize the attesting executive to
perform the duties of an attesting
executive on behalf of the supervised
registered entity with respect to the
covered order as required in this
section, including submitting the
written statement described in
paragraph (d) of this section.
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(c) Requirement to provide attesting
executive(s) with access to documents
and information. A supervised
registered entity subject to this section
shall provide its attesting executive(s)
with prompt access to all documents
and information related to the
supervised registered entity’s
compliance with all applicable covered
order(s) as necessary to make the
written statement(s) required in
paragraph (d) of this section.
(d) Annual requirement to submit
written statement to the Bureau for each
covered order. On or before March 31 of
each calendar year, the supervised
registered entity shall, in the form and
manner specified by the Bureau, submit
to the nonbank registration system a
written statement with respect to each
covered order described in paragraph (a)
of this section. The written statement
shall be signed by the attesting
executive on behalf of the supervised
registered entity. In the written
statement, the attesting executive shall:
(1) Generally describe the steps that
the attesting executive has undertaken
to review and oversee the supervised
registered entity’s activities subject to
the applicable covered order for the
preceding calendar year; and
(2) Attest whether, to the attesting
executive’s knowledge, the supervised
registered entity during the preceding
calendar year identified any violations
or other instances of noncompliance
with any 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.
(e) Requirement to maintain and
make available related records. A
supervised registered entity shall
maintain documents and other records
sufficient to provide reasonable support
for its written statement under
paragraph (d) of this section and to
otherwise demonstrate compliance with
the requirements of this section with
respect to any submission under this
section, for five years after such
submission is required. The supervised
registered entity shall make such
documents and other records available
to the Bureau upon request.
(f) Notification of entity’s good faith
belief that requirements do not apply. A
person may submit a notice to the
nonbank registration system stating that
it is neither designating an attesting
executive nor submitting a written
statement pursuant to this section
because it has a good faith basis to
believe that it is not a supervised
registered entity or that an order in
question is not a covered order. Such
person shall promptly comply with this
section upon becoming aware of facts or
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circumstances that would not permit it
to continue representing that it has a
good faith basis to believe that it is not
a supervised registered entity or that an
order in question is not a covered order.
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§ 1092.204 Publication and correction of
registration information.
(a) Internet posting of registration
information. The Bureau shall make
available to the public the information
submitted to the nonbank registration
system pursuant to § 1092.202, except
that the Bureau may choose not to
publish certain administrative
information or other information that
the Bureau determines may be
inaccurate, not required to be submitted
under this subpart, or otherwise not in
compliance with this part and any
accompanying guidance. The Bureau
may make registration information
available to the public by means that
include publishing it on the Bureau’s
publicly available Internet site within a
timeframe determined by the Bureau in
its discretion.
(b) Exclusion of written statement.
The publication described in paragraph
(a) of this section will not include the
written statement submitted under
§ 1092.203. Such information will be
treated as Bureau confidential
supervisory information subject to the
provisions of part 1070 of this chapter.
(c) Other publications of information.
In addition to the publication described
in paragraph (a) of this section, the
Bureau may, at its discretion, compile
and aggregate information submitted by
persons pursuant to this subpart and
make any compilations or aggregations
of such information publicly available
as the Bureau deems appropriate.
(d) Correction of submissions to the
nonbank registration system. If any
information submitted to the nonbank
registration system under this subpart
was inaccurate when submitted and
remains inaccurate, the covered
nonbank shall file a corrected report in
the form and manner specified by the
Bureau within 30 calendar days after the
date on which such covered nonbank
becomes aware or has reason to know of
the inaccuracy. In addition, the Bureau
may at any time and in its sole
discretion direct a covered nonbank to
correct errors or other non-compliant
submissions to the nonbank registration
system made under this subpart.
• Haw. Rev. Stat. sec. 480J–45(7), (10).
• Haw. Rev. Stat. sec. 481A–3.
• Haw. Rev. Stat. sec. 489D–23(2), (4).
Alaska
• Alaska Stat. sec. 06.20.200.
• Alaska Stat. sec. 06.40.090.
• Alaska Stat. sec. 06.60.320.
• Alaska Stat. sec. 06.60.340.
• Alaska Stat. sec. 45.50.471.
Arizona
• Ariz. Rev. Stat. sec. 6–611.
• Ariz. Rev. Stat. sec. 6–710(8).
• Ariz. Rev. Stat. sec. 6–909(C).
• Ariz. Rev. Stat. sec. 6–947(D).
• Ariz. Rev. Stat. sec. 6–984(D).
• Ariz. Rev. Stat. sec. 6–1309(A).
• Ariz. Rev. Stat. sec. 44–1522(A).
• Ariz. Rev. Stat. sec. 44–1703(4).
Arkansas
• Ark. Code Ann. sec. 4–88–107.
• Ark. Code Ann. sec. 4–88–108(a)(1).
• Ark. Code Ann. sec. 4–90–705.
• Ark. Code Ann. sec. 4–107–203.
• Ark. Code Ann. sec. 4–115–102.
• Ark. Code Ann. sec. 23–39–405.
California
• Cal. Bus. & Prof. Code sec. 17200 to
17209.
• Cal. Bus. & Prof. Code sec. 17500.
• Cal. Civ. Code sec. 1770.
• Cal. Civ. Code sec. 1788.101(a), (b)(1),
(7), (8), (9), (10).
• Cal. Fin. Code sec. 4995.3(b).
• Cal. Fin. Code sec. 22755(b), (i).
• Cal. Fin. Code sec. 90003.
Colorado
• Colo. Rev. Stat. sec. 5–3.1–121.
• Colo. Rev. Stat. sec. 5–20–109(b).
• Colo. Rev. Stat. sec. 6–1-105.
Connecticut
• Conn. Gen. Stat. sec. 36a–498(g)(2).
• Conn. Gen. Stat. sec. 36a–539(d)(2), (6).
• Conn. Gen. Stat. sec. 36a–561(3), (4).
• Conn. Gen. Stat. sec. 36a–586(d)(2), (5);
(e)(2).
• Conn. Gen. Stat. sec. 36a–607(c)(2)(5).
• Conn. Gen. Stat. sec. 42–110b.
Delaware
• Del. Code Ann. tit. 5, sec. 2114.
• Del. Code Ann. tit. 5, sec. 2209(a)(3).
• Del. Code Ann. tit. 5, sec. 2315(a)(3).
• Del. Code Ann. tit. 5, sec. 2418(2), (9).
• Del. Code Ann. tit. 5, sec. 2904(a)(3).
• Del. Code Ann. tit. 6, sec. 2513.
• Del. Code Ann. tit. 6, sec. 2532, 2533.
District of Columbia
• D.C. Code sec. 26–1114(d)(2), (9).
• D.C. Code sec. 28–3904.
Florida
• Fla. Stat. sec. 501.204.
• Fla. Stat. sec. 560.114(1)(d).
• Fla. Stat. sec. 560.309(10).
• Fla. Stat. sec. 687.141(2), (3).
Appendix A to Part 1092 —List of State
Covered laws
Georgia
• Ga. Code Ann. sec. 7–7–2(1), (3), (4).
• Ga. Code Ann. sec. 10–1–372.
• Ga. Code Ann. sec. 10–1–393.
Alabama
• Ala. Code sec. 5–18A–13(j).
• Ala. Code sec. 8–19–5.
Hawaii
• Haw. Rev. Stat. sec. 454F–17(2), (9), (14).
• Haw. Rev. Stat. sec. 480–2.
Subpart C—[Reserved]
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Idaho
• Idaho Code sec. 26–31–317(2), (9).
• Idaho Code sec. 26–2505(2).
• Idaho Code sec. 28–46–413(8).
• Idaho Code sec. 48–603.
• Idaho Code sec. 48–603A.
Illinois
• 815 Ill. Comp. Stat. sec. 122/4–5(3), (8).
• 815 Ill. Comp. Stat. sec. 505/2 to 505/
2AAAA.
• 815 Ill. Comp. Stat. sec. 510/2.
• 815 Ill. Comp. Stat. sec. 635/7–13(2), (9).
Indiana
• Ind. Code sec. 24–4.4–3–104.6(b), (i).
• Ind. Code sec. 24–4.5–7–410(c), (g).
• Ind. Code sec. 24–5–0.5–3.
• Ind. Code sec. 24–5–0.5–10.
Iowa
• Iowa Code sec. 535D.17(2), (9).
• Iowa Code sec. 537.3209(1).
• Iowa Code sec. 538A.3(4).
• Iowa Code sec. 714.16(2)(a).
• Iowa Code sec. 714H.3.
Kansas
• Kan. Stat. Ann. sec. 50–626.
• Kan. Stat. Ann. sec. 50–1017(2), (3).
Kentucky
• Ky. Rev. Stat. Ann. sec. 286.9–100(7).
• Ky. Rev. Stat. Ann. sec. 286.11–039(f).
• Ky. Rev. Stat. Ann. sec. 286.12–
110(1)(a)(4).
• Ky. Rev. Stat. Ann. sec. 367.170.
Louisiana
• La. Rev. Stat. Ann. sec. 6:1092(D)(2), (9).
• La. Rev. Stat. Ann. sec. 6:1393(3)(b).
• La. Rev. Stat. Ann. sec. 6:1412(2).
• La. Rev. Stat. Ann. sec. 9:3574.3(2), (3).
• La. Rev. Stat. Ann. sec. 51:1405.
• La. Rev. Stat. Ann. sec. 51:1915.
Maine
• Me. Rev. Stat. tit. 5, sec. 207.
• Me. Rev. Stat. tit. 9–A, sec. 5–118(2), (3),
(4).
• Me. Rev. Stat. tit. 10, sec. 1212.
• Me. Rev. Stat. tit. 32, sec. 6155(1).
• Me. Rev. Stat. tit. 32, sec. 6198(5).
Maryland
• Md. Code Ann., Com. Law sec. 12–
1208(2).
• Md. Code Ann., Com. Law sec. 13–303.
• Md. Code Ann., Com. Law sec. 14–
1302(b).
• Md. Code Ann., Com. Law sec. 14–1323.
• Md. Code Ann., Com. Law sec. 14–3807.
• Md. Code Ann., Educ. sec. 26–602(a)(2).
Massachusetts
• Mass. Gen. Laws ch. 93A, sec. 2.
• Mass. Gen. Laws ch. 93L, sec. 8.
Michigan
• Mich. Comp. Laws sec. 445.903.
• Mich. Comp. Laws sec. 445.1823(e).
Minnesota
• Minn. Stat. sec. 58B.07(2).
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• N.C. Gen. Stat. sec. 75–1.1.
Minn. Stat. sec. 325D.09.
Minn. Stat. sec. 325D.44.
Minn. Stat. sec. 325F.67.
Minn. Stat. sec. 325F.69.
Minn. Stat. sec. 332A.02–332A.19.
North Dakota
• N.D. Cent. Code sec. 51–15–02.
• N.D. Cent. Code sec. 51–15–02.3.
• N.D. Cent. Code sec. 13–04.1–09(4), (10).
• N.D. Cent. Code sec. 13–09–25(4), (8).
• N.D. Cent. Code sec. 13–10–17(2).
• N.D. Cent. Code sec. 13–11–23(1)(p).
Mississippi
• Miss. Code Ann. sec. 75–24–5.
• Miss. Code Ann. sec. 75–67–109.
• Miss. Code Ann. sec. 75–67–445.
• Miss. Code Ann. sec. 75–67–516.
• Miss. Code Ann. sec. 75–67–617.
• Miss. Code Ann. sec. 81–18–27(h).
• Miss. Code Ann. sec. 81–19–23(b)(i).
Missouri
• Mo. Rev. Stat. sec. 407.020.
• Mo. Rev. Stat. sec. 443.737(2), (9).
Montana
• Mont. Code Ann. sec. 30–14–103.
• Mont. Code Ann. sec. 30–14–2001 to
–15.
• Mont. Code Ann. sec. 31–1–723(5), (7),
(18).
• Mont. Code Ann. sec. 31–1–724(2).
Nebraska
• Neb. Rev. Stat. sec. 45–804(5).
• Neb. Rev. Stat. sec. 45–812.
• Neb. Rev. Stat. sec. 59–1602.
• Neb. Rev. Stat. sec. 87–302.
Nevada
• Nev. Rev. Stat. sec. 598.746(5).
• Nev. Rev. Stat. sec. 598.787.
• Nev. Rev. Stat. sec. 598.0915 to .0925.
• Nev. Rev. Stat. sec. 604A.5021(5), (6).
• Nev. Rev. Stat. sec. 604A.5049(5), (6).
• Nev. Rev. Stat. sec. 604A.5072(5), (6).
• Nev. Rev. Stat. sec. 604A.582.
• Nev. Rev. Stat. sec. 604A.592.
• Nev. Rev. Stat. sec. 675.280.
New Hampshire
• N.H. Rev. Stat. Ann. sec. 358–A:2.
• N.H. Rev. Stat. Ann. sec. 397–A:14(g),
(n).
• N.H. Rev. Stat. Ann. sec. 399–F:4(III).
New Jersey
• N.J. Stat. Ann. sec. 17:11C–41(g).
• N.J. Stat. Ann. sec. 17:16F–39(b).
• N.J. Stat. Ann. sec. 17:16ZZ–9(b).
• N.J. Stat. Ann. sec. 56:8–2.
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New Mexico
• N.M. Stat. Ann. sec. 57–12–3.
• N.M. Stat. Ann. sec. 58–21–21.
• N.M. Stat. Ann. sec. 58–21A–12.
• N.M. Stat. Ann. sec. 58–21B–13(C)(2),
(9).
New York
• N.Y. Banking Law sec. 719(2), (9).
• N.Y. Exec. Law sec. 63(12).
• N.Y. Fin. Serv. sec. 702(i).
• N.Y. Gen. Bus. Law sec. 349.
• N.Y. Gen. Bus. Law sec. 458–e.
• N.Y. Gen. Bus. Law sec. 458–h.
• N.Y. Gen. Bus. Law sec. 521–d.
• N.Y. Gen. Bus. Law sec. 741.
• N.Y. Real Prop. Law sec. 280–b(2).
North Carolina
• N.C. Gen. Stat. sec. 53–270(4).
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Ohio
• Ohio Rev. Code Ann. sec. 1321.11.
• Ohio Rev. Code Ann. sec. 1321.41.
• Ohio Rev. Code Ann. sec. 1321.44.
• Ohio Rev. Code Ann. sec. 1321.60(A).
• Ohio Rev. Code Ann. sec. 1321.651(B).
• Ohio Rev. Code Ann. sec. 1322.40(I).
• Ohio Rev. Code Ann. sec. 1345.02.
• Ohio Rev. Code Ann. sec. 4165.02.
Oklahoma
• Okla. Stat. Ann. tit. 15, sec. 753(20), (28).
• Okla. Stat. Ann. tit. 59, sec. 2095.18(2),
(9).
• Okla. Stat. Ann. tit. 78, sec. 53.
Oregon
• Or. Rev. Stat. sec. 646.607.
• Or. Rev. Stat. sec. 86A.163.
• Or. Rev. Stat. sec. 86A.236(3), (5), (13).
• Or. Rev. Stat. sec. 646.608(1)(d), (u).
• Or. Rev. Stat. sec. 646A.720(10).
• Or. Rev. Stat. sec. 725.060.
• Or. Rev. Stat. sec. 725A.058.
Pennsylvania
• 7 PA. Cons. Stat. sec. 6123(a)(3).
• 73 PA. Cons. Stat. sec. 201–3.
• 73 PA. Cons. Stat. sec. 2183(4).
• 73 PA. Cons. Stat. sec. 2188(c)(2).
• Tenn. Code Ann. sec. 47–18–1003(4).
• Tenn. Code Ann. sec. 47–18–5402(a)(1).
Texas
•
•
•
•
•
•
Tex. Bus. & Com. Code Ann. sec. 17.46.
Tex. Fin. Code Ann. sec. 180.153(2), (11).
Tex. Fin. Code Ann. sec. 308.002.
Tex. Fin. Code Ann. sec. 341.403.
Tex. Fin. Code Ann. sec. 394.207.
Tex. Fin. Code Ann. sec. 394.212(9).
Utah
•
•
•
•
Utah Code Ann. sec. 13–11–4.
Utah Code Ann. sec. 13–11–4.1.
Utah Code Ann. sec. 13–11a–4.
Utah Code Ann. sec. 13–21–3(1)(g).
Vermont
•
•
•
•
•
•
(d).
Vt. Stat. Ann. tit. 8, sec. 2121.
Vt. Stat. Ann. tit. 8, sec. 2241(2), (9).
Vt. Stat. Ann. tit. 8, sec. 2760b(b).
Vt. Stat. Ann. tit. 8, sec. 2922.
Vt. Stat. Ann. tit. 9, sec. 2453.
Vt. Stat. Ann. tit. 9, sec. 2481w(b), (c),
Virginia
•
•
•
•
•
•
•
•
•
•
•
Va. Code. Ann. sec. 6.2–1524(B).
Va. Code. Ann. sec. 6.2–1614(8)(a).
Va. Code. Ann. sec. 6.2–1629(A).
Va. Code. Ann. sec. 6.2–1715(A)(1).
Va. Code. Ann. sec. 6.2–1816(26).
Va. Code. Ann. sec. 6.2–1819(A).
Va. Code. Ann. sec. 6.2–2017.
Va. Code. Ann. sec. 6.2–2107(3), (4).
Va. Code. Ann. sec. 6.2–2610(A)(2), (C).
Va. Code. Ann. sec. 59.1–200(A).
Va. Code. Ann. sec. 59.1–335.5(4).
Rhode Island
• R.I. Gen. Laws sec. 5–80–8(5).
• R.I. Gen. Laws sec. 6–13.1–2.
• R.I. Gen. Laws sec. 6–13.1–30.
• R.I. Gen. Laws sec. 19–14–21.
• R.I. Gen. Laws sec. 19–14.3–3.8(8), (9).
• R.I. Gen. Laws sec. 19–14.8–28(a)(16).
• R.I. Gen. Laws sec. 19–14.10–17(2), (9).
• R.I. Gen. Laws sec. 19–14.11–4(2).
• R.I. Gen. Laws sec. 19–33–12(2), (4).
Washington
South Carolina
• S.C. Code Ann. sec. 34–29–120.
• S.C. Code Ann. sec. 34–36–10 to 80.
• S.C. Code Ann. sec. 34–39–200(3), (5).
• S.C. Code Ann. sec. 34–41–80(3), (5).
• S.C. Code Ann. sec. 37–2–304(1).
• S.C. Code Ann. sec. 37–3–304(1).
• S.C. Code Ann. sec. 37–7–116(3), (8),
(10).
• S.C. Code Ann. sec. 39–5–20.
West Virginia
South Dakota
• S.D. Codified Laws sec. 37–24–6.
• S.D. Codified Laws sec. 37–25A–43.
• S.D. Codified Laws sec. 54–4–63.
Tennessee
• Tenn. Code Ann. sec. 45–13–401(8).
• Tenn. Code Ann. sec. 45–17–112(k).
• Tenn. Code Ann. sec. 45–18–121(g).
• Tenn. Code Ann. sec. 47–16–101 to 110.
• Tenn. Code Ann. sec. 47–18–104.
• Tenn. Code Ann. sec. 47–18–120.
PO 00000
Frm 00056
Fmt 4701
Sfmt 9990
•
•
•
•
•
•
(7).
•
•
•
•
•
•
Wash. Rev. Code. sec. 18.28.120(6).
Wash. Rev. Code. sec. 18.44.301(2), (4).
Wash. Rev. Code. sec. 19.86.020.
Wash. Rev. Code. sec. 19.134.020(4).
Wash. Rev. Code. sec. 19.144.080(1)(a).
Wash. Rev. Code. sec. 19.146.0201(2),
Wash. Rev. Code. sec. 19.230.340(2), (4).
Wash. Rev. Code. sec. 19.265.050(3).
W. Va. Code sec. 31–17–10.
W. Va. Code sec. 31–17A–16(2), (9).
W. Va. Code sec. 46A–6–104.
W. Va. Code sec. 46A–6C–3(4).
Wisconsin
•
•
•
•
•
•
Wis. Stat. sec. 100.18.
Wis. Stat. sec. 100.20.
Wis. Stat. sec. 138.14(14)(e).
Wis. Stat. sec. 224.77(1)(b), (c).
Wis. Stat. sec. 422.503(c).
Wis. Stat. sec. 423.301.
Wyoming
• Wyo. Stat. Ann. sec. 40–12–105.
Rohit Chopra,
Director, Consumer Financial Protection
Bureau.
[FR Doc. 2022–27385 Filed 1–27–23; 8:45 am]
BILLING CODE 4810–AM–P
E:\FR\FM\30JAP4.SGM
30JAP4
Agencies
[Federal Register Volume 88, Number 19 (Monday, January 30, 2023)]
[Proposed Rules]
[Pages 6088-6142]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-27385]
[[Page 6087]]
Vol. 88
Monday,
No. 19
January 30, 2023
Part IV
Bureau of Consumer Financial Protection
-----------------------------------------------------------------------
12 CFR Part 1092
Registry of Nonbank Covered Persons Subject to Certain Agency and Court
Orders; Proposed Rule
Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 /
Proposed Rules
[[Page 6088]]
-----------------------------------------------------------------------
BUREAU OF CONSUMER FINANCIAL PROTECTION
12 CFR Part 1092
[Docket No. CFPB-2022-0080]
RIN 3170-AB13
Registry of Nonbank Covered Persons Subject to Certain Agency and
Court Orders
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Proposed rule with request for public comment.
-----------------------------------------------------------------------
SUMMARY: Pursuant to its authorities under the Consumer Financial
Protection Act of 2010 (CFPA), the Consumer Financial Protection Bureau
(Bureau or CFPB) is proposing to require certain nonbank covered person
entities (with exclusions for insured depository institutions, insured
credit unions, related persons, States, certain other entities, and
natural persons) that are under certain final public orders obtained or
issued by a Federal, State, or local agency in connection with the
offering or provision of a consumer financial product or service to
report the existence of such orders to a Bureau registry. The Bureau is
proposing to include all final public written orders and judgments
(including consent and stipulated orders and judgments) obtained or
issued by the Bureau or any government agency (Federal, State, or
local) for violation of certain consumer protection laws. Pursuant to
its authority under the CFPA, the Bureau is also proposing to require
certain supervised nonbanks to submit annual written statements
regarding compliance with each underlying order, signed by an attesting
executive who has knowledge of the entity's relevant systems and
procedures for achieving compliance and control over the entity's
compliance efforts.
DATES: Comments must be received on or before March 31, 2023 to be
assured of consideration.
ADDRESSES: You may submit comments, identified by Docket No. CFPB-2022-
0080 or RIN 3170-AB13, by any of the following methods:
Electronic: https://www.regulations.gov. Follow the
instructions for submitting comments.
Email: [email protected]. Include Docket
No. CFPB-2022-0080 or RIN 3170-AB13 in the subject line of the message.
Mail/Hand Delivery/Courier: Comment Intake--Nonbank
Registration of Certain Agency and Court Orders, c/o Legal Division
Docket Manager, Consumer Financial Protection Bureau, 1700 G Street NW,
Washington, DC 20552. Because paper mail in the Washington, DC area and
at the Bureau is subject to delay, commenters are encouraged to submit
comments electronically.
Instructions: The Bureau encourages the early submission of
comments. All submissions should include the agency name and docket
number or Regulatory Information Number (RIN) for this rulemaking. In
general, all comments received will be posted without change to https://www.regulations.gov.
All comments, including attachments and other supporting materials,
will become part of the public record and are subject to public
disclosure. Proprietary information or sensitive personal information,
such as account numbers or Social Security numbers, or names of other
individuals, should not be included. Comments will not be edited to
remove any identifying or contact information.
FOR FURTHER INFORMATION CONTACT: Clay Coon, Office of Supervision
Policy, at 202-435-7700. If you require this document in an alternative
electronic format, please contact [email protected].
SUPPLEMENTARY INFORMATION:
I. Summary of the Proposed Rule
The Bureau is proposing to establish and maintain a registry that
would collect information about certain public agency and court orders
and facilitate the Bureau's supervision of certain companies. In this
way, the Bureau would more effectively be able to monitor and to reduce
the risks to consumers posed by entities that violate consumer
protection laws. The Bureau also proposes to publish the registry
online for use by the public and other regulators.
The proposed rule would require certain nonbank covered person
entities (with exclusions for insured depository institutions, insured
credit unions, related persons, States, certain other entities, and
natural persons) to register with the Bureau upon becoming subject to a
public written order or judgment imposing obligations based on
violations of certain consumer protection laws. Those entities would be
required to register in a system established by the Bureau, provide
basic identifying information about the company and the order
(including a copy of the order), and periodically update the registry
to ensure its continued accuracy and completeness. The Bureau would
publish this information on its website and potentially in other forms.
The Bureau would also require certain nonbanks subject to the
Bureau's supervisory authority under section 1024(a) of the Consumer
Financial Protection Act of 2010 (CFPA) \1\ annually to identify an
executive (or executives) who is responsible for and knowledgeable of
the firm's efforts to comply with the orders identified in the
registry. The name and title of the executive would also be published
in the registry. The supervised nonbank entity would also be required
to submit on an annual basis a written statement signed by that
executive (or executives) regarding the entity's compliance with each
order in the registry.
---------------------------------------------------------------------------
\1\ 12 U.S.C. 5514(a).
---------------------------------------------------------------------------
Nonbank registrants would have to register in the Bureau system
starting after both the effective date of the final rule and the launch
of a registration system created by the Bureau. Details on how to
register will be provided in the online system through filing
instructions.
II. Background
A. The Bureau and Other Agencies Issue and Obtain Enforcement Actions
Against Nonbanks To Protect Consumers
The Bureau administers and enforces Federal consumer financial laws
against nonbanks in consumer financial markets. In addition to the
Bureau, Congress authorized multiple other Federal and State agencies
to enforce Federal consumer financial law, including the CFPA
prohibition against unfair, deceptive, or abusive acts or practices
(UDAAP) and enumerated statutes including the Truth in Lending Act, the
Electronic Fund Transfer Act, the Fair Credit Reporting Act, the Equal
Credit Opportunity Act, and other statutes.\2\ Several Federal
agencies, most notably the Federal Trade Commission, also enforce
section 5 of the Federal Trade Commission Act (FTC Act), which
similarly prohibits unfair or deceptive acts or practices (UDAP).\3\
The prohibitions against unfair and deceptive acts or practices in the
CFPA were modeled after the same prohibitions in the FTC Act.
Furthermore, States across the country began codifying State UDAP
statutes modeled after the FTC Act starting in the 1960s and 1970s.\4\
These laws differ
[[Page 6089]]
in many respects from each other, but generally they hail from a common
consumer protection tradition originating with the FTC Act, similar to
the CFPA's prohibition on UDAAP.
---------------------------------------------------------------------------
\2\ See 12 U.S.C. 5481(12), 5552; 12 CFR part 1082; Bureau
Interpretive Rule, Authority of States to Enforce the Consumer
Financial Protection Act of 2010, 87 FR 31940 (May 26, 2022).
\3\ 15 U.S.C. 45.
\4\ Dee Pridgen, The Dynamic Duo of Consumer Protection: State
and Private Enforcement of Unfair and Deceptive Trade Practices
Laws, 81 Antitrust L.J. 911, 912 (2017).
---------------------------------------------------------------------------
The Bureau was created in the wake of the 2008 financial crisis,
which was caused by a variety of overlapping factors including systemic
malfeasance in the mortgage industry.\5\ Since passage of the CFPA, the
Bureau has brought more than 250 enforcement actions against nonbanks.
When the Bureau issues an order against a covered person (often, but
not always, as a consent order), the Bureau often follows up with
supervisory or enforcement action to ensure the company's compliance
with the order. On numerous occasions, the Bureau has uncovered
companies that failed to comply with consent orders that the companies
entered into with the Bureau voluntarily.\6\
---------------------------------------------------------------------------
\5\ See U.S. Fin. Crisis Inquiry Comm'n, The Financial Crisis
Inquiry Report, at 104-11, 113-18 (2011), https://www.govinfo.gov/content/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf; see also S. Rep. No. 111-176,
at 11 (2010) (``Th[e] financial crisis was precipitated by the
proliferation of poorly underwritten mortgages with abusive terms,
followed by a broad fall in housing prices as those mortgages went
into default and led to increasing foreclosures.'').
\6\ See, e.g., Bureau of Consumer Fin. Prot. v. Encore Capital
Grp., No. 3:20-cv-01750-GPC-KSC (S.D. Cal. Oct. 16, 2020); Sec.
Nat'l Automotive Acceptance Co., CFPB No. 2017-CFPB-0013 (Apr. 26,
2017); Military Credit Servs., LLC., CFPB No. 2016-CFPB-0029 (Dec.
20, 2016).
---------------------------------------------------------------------------
B. Congress Instructed the Bureau To Monitor Markets for Consumer
Financial Products and Services
Congress established the Bureau to regulate (among other things)
the offering and provision of consumer financial products and services
under the Federal consumer financial laws, and it granted the Bureau
authority to ensure that the Bureau could achieve that mission.\7\ But
it also understood that the Bureau could not fully and effectively
achieve that mission unless it developed a clear window into the
markets for and persons involved in offering and providing such
products and services. To that end, Congress mandated that the Bureau
``shall monitor for risks to consumers in the offering or provision of
consumer financial products or services, including developments in
markets for such products or services.'' \8\
---------------------------------------------------------------------------
\7\ See 12 U.S.C. 5511.
\8\ See 12 U.S.C. 5512(c)(1).
---------------------------------------------------------------------------
Notably, Congress directed the Bureau to engage in such monitoring
``to support its rulemaking and other functions,'' \9\ instructing the
Bureau to use monitoring to inform all of its work. Congress separately
described the Bureau's ``primary functions'' as ``conducting financial
education programs''; ``collecting, investigating, and responding to
consumer complaints''; ``collecting, researching, monitoring, and
publishing information relevant to the functioning of markets for
consumer financial products and services to identify risks to consumers
and the proper functioning of such markets''; ``supervising covered
persons for compliance with Federal consumer financial law, and taking
appropriate enforcement action to address violations of Federal
consumer financial law''; ``issuing rules, orders, and guidance
implementing Federal consumer financial law''; and ``performing such
support activities as may be necessary or useful to facilitate the
other functions of the Bureau.'' \10\ Put simply, Congress envisioned
that the Bureau would use its market monitoring work to inform its
activities, all with the express purpose of ``ensuring that all
consumers have access to markets for consumer financial products and
services and that markets for consumer financial products and services
are fair, transparent, and competitive.'' \11\
---------------------------------------------------------------------------
\9\ Id. (emphasis added).
\10\ 12 U.S.C. 5511(c).
\11\ 12 U.S.C. 5511(a).
---------------------------------------------------------------------------
To achieve these ends, Congress took care to ensure that the Bureau
had the tools necessary to effectively monitor for risks in the markets
for consumer financial products and services. It granted the Bureau
authority ``to gather information from time to time regarding the
organization, business conduct, markets, and activities of covered
persons and service providers.'' \12\ In particular, Congress
authorized the Bureau to ``require covered persons and service
providers participating in consumer financial services markets to file
with the Bureau, under oath or otherwise, in such form and within such
reasonable period of time as the Bureau may prescribe by rule or order,
annual or special reports, or answers in writing to specific
questions,'' that would furnish the Bureau with such information ``as
necessary for the Bureau to fulfill the monitoring . . .
responsibilities imposed by Congress.'' \13\
---------------------------------------------------------------------------
\12\ 12 U.S.C. 5512(c)(4)(A).
\13\ 12 U.S.C. 5512(c)(4)(B)(ii).
---------------------------------------------------------------------------
To assist the Bureau in allocating resources to perform its
monitoring, Congress also identified a non-exhaustive list of factors
that the Bureau may consider, including ``likely risks and costs to
consumers associated with buying or using a type of consumer financial
product or service''; \14\ ``understanding by consumers of the risks of
a type of consumer financial product or service''; \15\ ``the legal
protections applicable to the offering or provision of a consumer
financial product or service, including the extent to which the law is
likely to adequately protect consumers''; \16\ ``the extent, if any, to
which the risks of a consumer financial product or service may
disproportionately affect traditionally underserved consumers''; \17\
and ``the types, number, and other pertinent characteristics of covered
persons that offer or provide the consumer financial product or
service.'' \18\
---------------------------------------------------------------------------
\14\ 12 U.S.C. 5512(c)(2)(A).
\15\ 12 U.S.C. 5512(c)(2)(B).
\16\ 12 U.S.C. 5512(c)(2)(C).
\17\ 12 U.S.C. 5512(c)(2)(E).
\18\ 12 U.S.C. 5512(c)(2)(F).
---------------------------------------------------------------------------
Congress also anticipated that the insights the Bureau would gain
from such market monitoring should at times become available to a wider
audience than just Bureau employees. Not only did Congress mandate that
the Bureau ``publish not fewer than 1 report of significant findings of
its monitoring . . . in each calendar year,'' but it also instructed
that the Bureau may make non-confidential information available to the
public ``as is in the public interest.'' \19\ Congress gave the Bureau
discretion to determine the format of publication, authorizing the
Bureau to make the information available ``through aggregated reports
or other appropriate formats designed to protect confidential
information in accordance with [specified protections in this
section].'' \20\ These instructions regarding public release of market
monitoring information align with one of the Bureau's ``primary
functions'' mentioned above--to ``publish[ ] information relevant to
the functioning of markets for consumer financial products and services
to identify risks to consumers and the proper functioning of such
markets.'' \21\
---------------------------------------------------------------------------
\19\ 12 U.S.C. 5512(c)(3).
\20\ 12 U.S.C. 5512(c)(3)(B).
\21\ 12 U.S.C. 5511(c)(3).
---------------------------------------------------------------------------
The Bureau takes its market monitoring obligations seriously, and
it has incorporated valuable insights gained to date from such
monitoring in conducting the multiple functions assigned to it under
the CFPA, including its supervisory and enforcement efforts, as well as
its rulemaking, consumer education, and other functions.\22\ As
discussed in
[[Page 6090]]
further detail below, this proposed rule seeks to continue and build
upon that commitment by creating an order registry to accomplish a
number of goals, with a particular focus on monitoring for risks to
consumers related to repeat offenders of consumer protection law. A
public registry of agency and court orders issued or obtained in
connection with violations of law would help the Bureau and the broader
public monitor trends concerning corporate recidivism relating to
consumer protection law, including areas where prior violations of law
are indicia of risk to consumers.
---------------------------------------------------------------------------
\22\ See, e.g., CFPB Semiannual Regulatory Agenda, 87 FR 5326,
5328 (Jan. 31, 2022) (``The Bureau's market monitoring work assists
in identifying issues for potential future rulemaking work.'');
Payday, Vehicle, and Certain High-Cost Installment Loans, 82 FR
54472, 54475, 54488, 54498 (Nov. 17, 2017) (citing information
obtained through Bureau market monitoring efforts); Arbitration
Agreements, 82 FR 33210, 33220 (July 19, 2017) (same). See also,
e.g., Consumer Fin. Prot. Bureau, Buy Now, Pay Later: Market trends
and consumer impacts (Sept. 2022), https://files.consumerfinance.gov/f/documents/cfpb_buy-now-pay-later-market-trends-consumer-impacts_report_2022-09.pdf (publishing information
obtained through Bureau market monitoring efforts); Consumer Fin.
Prot. Bureau, Consumer Credit Trends: Credit Card Line Decreases
(June 2022), https://files.consumerfinance.gov/f/documents/cfpb_credit-card-line-decreases_report_2022-06.pdf (same); Consumer
Fin. Prot. Bureau, Data Point: Checking Account Overdraft at
Financial Institutions Served by Core Processors (Dec. 2021),
https://files.consumerfinance.gov/f/documents/cfpb_overdraft-core-processors_report_2021-12.pdf (same).
---------------------------------------------------------------------------
More generally, entities subject to such public orders relating to
the offering or provision of consumer financial products and services
may pose ongoing risks to consumers in the markets for those products
and services. A comprehensive collection of such public orders would
shed light on how laws are being enforced across consumer protection
laws, jurisdictions, and markets, and help identify trends and
potential gaps in enforcement. Both heightened enforcement and the
absence of enforcement could possibly provide information regarding
risks to consumers--the former as evidence that government agencies
with various jurisdictions have identified the need to enforce consumer
protection laws, and the latter as potential evidence of less risk to
consumers, or perhaps of inattention by regulatory agencies. A
centralized, up-to-date repository of such public orders would provide
valuable market-based insight that the Bureau could use both to
identify concerning trends in these markets that it otherwise might
miss and to decide which of several different policy tools would best
address the consumer risks presented by these trends. In short, the
information sought would significantly increase the Bureau's ability to
identify, understand, and ultimately prevent harm in the markets for
consumer financial products and services. These and other core goals of
the information the Bureau proposes to collect are discussed further
below at section IV.
C. Congress Authorized the Bureau To Supervise Certain Nonbank Covered
Persons
One of the Bureau's key responsibilities under the CFPA is the
supervision of very large banks, thrifts, and credit unions, and their
affiliates, and certain nonbank covered persons. Congress has
authorized the Bureau to supervise certain categories of nonbank
covered persons under CFPA section 1024.\23\ Congress provided that the
Bureau ``shall require reports and conduct examinations on a periodic
basis'' of nonbank covered persons subject to its supervisory authority
for purposes of ``assessing compliance with the requirements of Federal
consumer financial law''; ``obtaining information about the activities
and compliance systems or procedures of such person[s]''; and
``detecting and assessing risks to consumers and to markets for
consumer financial products and services.'' \24\ Pursuant to the CFPA,
the Bureau implements a risk-based supervision program under which it
prioritizes nonbank covered persons for supervision in accordance with
its assessment of risks posed to consumers.\25\ In making
prioritization determinations, the Bureau considers several factors,
including ``the asset size of the covered person,'' \26\ ``the volume
of transactions involving consumer financial products or services in
which the covered person engages,'' \27\ ``the risks to consumers
created by the provision of such consumer financial products or
services,'' \28\ ``the extent to which such institutions are subject to
oversight by State authorities for consumer protection,'' \29\ and
``any other factors that the Bureau determines to be relevant to a
class of covered persons.'' \30\ CFPA section 1024(b)(7)(A)-(C) further
authorizes the Bureau to prescribe rules to facilitate supervision and
assessing and detecting risks to consumers, as well as to ensure that
supervised nonbanks ``are legitimate entities and are able to perform
their obligations to consumers.'' \31\
---------------------------------------------------------------------------
\23\ 12 U.S.C. 5514.
\24\ 12 U.S.C. 5514(b)(1).
\25\ 12 U.S.C. 5514(b)(2).
\26\ 12 U.S.C. 5514(b)(2)(A).
\27\ 12 U.S.C. 5514(b)(2)(B).
\28\ 12 U.S.C. 5514(b)(2)(C).
\29\ 12 U.S.C. 5514(b)(2)(D).
\30\ 12 U.S.C. 5514(b)(2)(E).
\31\ 12 U.S.C. 5514(b)(7)(A)-(C).
---------------------------------------------------------------------------
Under those authorities, the Bureau is proposing to require that
certain supervised nonbanks annually submit a written statement
regarding the company's compliance with any outstanding registered
orders. The statement would be signed by a designated senior executive.
In the written statement, the attesting executive would generally
describe the steps the executive has undertaken to review and oversee
the company's activities subject to the applicable order for the
preceding calendar year. The executive would then provide an
attestation regarding the company's compliance with the order.
The Bureau believes that the proposed written statement would
assist it in achieving each of the statutory objectives listed in CFPA
section 1024(b)(7)(A)-(C). Therefore, each of those objectives would
provide a distinct, independently sufficient basis for the proposed
written-statement requirements.\32\
---------------------------------------------------------------------------
\32\ For a more extended discussion of these matters, see
section IV(D) below.
---------------------------------------------------------------------------
First, requiring submission of an annual written statement would
facilitate Bureau supervision and the Bureau's assessment and detection
of risks to consumers. In particular, as part of the Bureau's risk-
based supervision program, the Bureau considers supervised nonbanks'
compliance record regarding consumer protection law when prioritizing
supervisory resources. The requirement would also provide valuable
information in connection with other aspects of the Bureau's
supervisory work and would assist the Bureau's monitoring efforts. For
example, the Bureau recently announced that it is increasing its
supervisory focus on repeat offenders, particularly those who violate
agency or court orders.\33\ As part of that focus, it created a Repeat
Offender Unit within its supervision program focused on: (i) reviewing
and monitoring the activities of repeat offenders; (ii) identifying the
root cause of recurring violations; (iii) pursuing and recommending
solutions and remedies that hold entities accountable for failing to
consistently comply with Federal consumer financial law; and (iv)
designing a model for order review and monitoring that reduces the
occurrences of repeat offenses.\34\ The Repeat Offender Unit is
[[Page 6091]]
tasked more generally with enhancing detection of repeat offenses,
developing processes for rapid review and response designed to address
root causes of violations, and recommending corrective actions designed
to stop recidivist behavior.\35\ The Bureau anticipates that the
proposed annual written statement would greatly facilitate that work,
among other things.
---------------------------------------------------------------------------
\33\ See Consumer Fin. Prot. Bureau, Supervisory Highlights:
Issue 28, Fall 2022, at 2-3 (Nov. 2022), https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-28_2022-11.pdf.
\34\ Id.
\35\ Id. at 3.
---------------------------------------------------------------------------
Second, the proposed written statement requirements would help
ensure the company providing the statement is a legitimate entity and
is able to perform its obligations to consumers. Information regarding
a company's compliance with outstanding orders is probative of whether
the company is willing and able to satisfy its legal obligations and of
whether the company treats potential sanctions for repeat violations of
relevant consumer protection laws as a mere cost of doing business. The
Bureau also believes that the written-statement requirement would
provide an incentive for supervised nonbanks to perform their
obligations to consumers by requiring supervised nonbanks to specify
which individual executives are responsible for achieving compliance
with particular orders. Publication of the identity of this executive
would enhance the incentive.
D. Consultation With Other Agencies in Exercising the Authorities
Relied Upon in the Proposal
One of the authorities cited as a proposed basis for components of
the Bureau's proposed rule is CFPA section 1022(c)(7), which provides
that the ``Bureau may prescribe rules regarding registration
requirements applicable to a covered person, other than an insured
depository institution, insured credit union, or related person.'' \36\
Congress provided that ``[i]n developing and implementing registration
requirements under [section 1022(c)(7)], the Bureau shall consult with
State agencies regarding requirements or systems (including coordinated
or combined systems for registration), where appropriate.'' \37\ CFPA
section 1024(b)(7)--the proposed statutory basis for the written-
statement requirement--includes a similar consultation provision.\38\
---------------------------------------------------------------------------
\36\ 12 U.S.C. 5512(c)(7)(A).
\37\ 12 U.S.C. 5512(c)(7)(C).
\38\ 12 U.S.C. 5514(b)(7)(D) (``In developing and implementing
requirements under this paragraph, the Bureau shall consult with
State agencies regarding requirements or systems (including
coordinated or combined systems for registration), where
appropriate.'').
---------------------------------------------------------------------------
Accordingly, the Bureau has consulted with State agencies,
including State agencies involved in supervision of nonbanks and State
agencies charged with law enforcement, in crafting the proposed
registration requirements and system. In developing this proposal, the
Bureau considered the input it received from State agencies, including
concerns expressed regarding possible duplication between any
registration system the Bureau might build and existing registration
systems.
In addition, before proposing a rule under the Federal consumer
financial laws, including CFPA sections 1022(b)-(c) and 1024(b), the
Bureau must consult with appropriate prudential regulators or other
Federal agencies regarding consistency with prudential, market, or
systemic objectives administered by such agencies.\39\ In developing
this proposal, the Bureau consulted with prudential regulators and
other Federal agencies and considered the input it received.
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\39\ 12 U.S.C. 5512(b)(2)(B) (``In prescribing a rule under the
Federal consumer financial laws . . . the Bureau shall consult with
the appropriate prudential regulators or other Federal agencies
prior to proposing a rule and during the comment process regarding
consistency with prudential, market, or systemic objectives
administered by such agencies . . . .'').
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The Bureau also consulted with tribal governments regarding this
rulemaking pursuant to CFPA sections 1022(c)(7)(C) and
1024(b)(7)(D).\40\ Also, during the rulemaking process for issuing
rules under the Federal consumer financial laws, Bureau policy is to
consult with appropriate tribal governments.\41\ In developing this
proposal, the Bureau considered the input of tribal governments,
including concerns tribal governments expressed regarding maintaining
tribal sovereignty.
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\40\ See 12 U.S.C. 5512(c)(7)(C), 5514(b)(7)(D) (requiring
consultation with ``State agencies''); see also 12 U.S.C. 5481(27)
(term ``State'' includes ``any federally recognized Indian tribe, as
defined by the Secretary of the Interior under'' 25 U.S.C. 5131(a)).
\41\ See Consumer Fin. Prot. Bureau, Policy for Consultation
with Tribal Governments, https://files.consumerfinance.gov/f/201304_cfpb_consultations.pdf.
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III. Legal Authority
The Bureau is issuing this proposal pursuant to its authority under
the CFPA. This section includes a general discussion of several CFPA
provisions on which the Bureau relies in this rulemaking. Additional
description of these authorities, and the proposal's reliance on them,
is also contained in section IV below and in the section-by-section
analysis.
A. CFPA Section 1022(b)
CFPA section 1022(b)(1) authorizes the Bureau to prescribe rules
``as may be necessary or appropriate to enable the Bureau to administer
and carry out the purposes and objectives of the Federal consumer
financial laws, and to prevent evasions thereof.'' \42\ Among other
statutes, the CFPA--i.e., title X of the Dodd-Frank Wall Street Reform
and Consumer Protection Act (Dodd-Frank Act)--is a Federal consumer
financial law.\43\ Accordingly, in issuing the proposed rule, the
Bureau would be exercising its authority under CFPA section 1022(b) to
prescribe rules that carry out the purposes and objectives of the CFPA
and prevent evasions thereof. CFPA section 1022(b)(2) prescribes
certain standards for rulemaking that the Bureau must follow in
exercising its authority under section 1022(b)(1).\44\ For a discussion
of the Bureau's standards for rulemaking under CFPA section 1022(b)(2),
see section VII below.
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\42\ 12 U.S.C. 5512(b)(1).
\43\ See 12 U.S.C. 5481(14) (defining ``Federal consumer
financial law'' to include the provisions of title X of the Dodd-
Frank Act).
\44\ See 12 U.S.C. 5512(b)(2).
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B. CFPA Section 1022(c)(1)-(4) and (7)
The CFPB's proposals to (1) require nonbank covered persons to
inform the CFPB that they have an applicable order entered against
them, (2) provide basic identifying and administrative information and
information regarding the orders (including copies of the orders), and
(3) publish this information, are authorized under CFPA sections
1022(c)(1) through (4) and 1022(c)(7), as well as CFPA section
1022(b).\45\
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\45\ 12 U.S.C. 5512(b), (c)(1)-(4).
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CFPA sections 1022(c)(1)-(4) authorize the CFPB to prescribe rules
to collect information from covered persons for purposes of monitoring
for risks to consumers in the offering or provision of consumer
financial products or services. The CFPB is collecting this information
to monitor, on an ongoing basis, both individual and market-wide
compliance with consumer protection laws and orders for alleged
violations of those laws. The CFPB considers violations of consumer
protection laws probative of ``risks to consumers in the offering and
provision of consumer financial products or services.'' \46\ In
particular, the CFPB believes that entities subject to public orders
enforcing the law relating to the offering or provision of consumer
financial products and services may
[[Page 6092]]
pose heightened and ongoing risks to consumers in the markets for those
products and services. It further anticipates that monitoring for such
orders would allow the CFPB to track specific instances of, and more
general developments regarding, potential corporate recidivism, which
presents special risks to consumers for reasons discussed in greater
detail below. The Bureau also believes that enforcement trends, as
shown by public orders enforcing the law across consumer protection
laws, jurisdictions, and markets, would potentially shed light on risks
to consumers in the offering or provision of consumer financial
products or services. Heightened enforcement could indicate areas where
numerous regulators have identified risk of harm to consumers.
Conversely, the absence of enforcement in other areas could indicate
less risk to consumers, or perhaps a lack of attention by regulators
that shows a need for further monitoring.
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\46\ 12 U.S.C. 5512(c)(1).
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More specifically, section 1022(c)(1) of the CFPA requires the
Bureau to support its rulemaking and other functions by monitoring for
risks to consumers in the offering or provision of consumer financial
products or services, including developments in the markets for such
products or services.\47\ As discussed further below at section IV(B),
section 1022(c)(2) of the CFPA authorizes the Bureau to allocate
resources to perform the monitoring required by section 1022 by
considering ``likely risks and costs to consumers associated with
buying or using a type of consumer financial product or service,''
``understanding by consumers of the risks of a type of consumer
financial product or service,'' ``the legal protections applicable to
the offering or provision of a consumer financial product or service,
including the extent to which the law is likely to adequately protect
consumers,'' ``rates of growth in the offering or provision of a
consumer financial product or service,'' ``the extent, if any, to which
the risks of a consumer financial product or service may
disproportionately affect traditionally underserved consumers,'' and
``the types, number, and other pertinent characteristics of covered
persons that offer or provide the consumer financial product or
service.'' \48\ Section 1022(c)(4)(A) of the CFPA authorizes the Bureau
to conduct the monitoring required by section 1022 by ``gather[ing]
information from time to time regarding the organization, business
conduct, markets, and activities of covered persons and service
providers.'' \49\ The Bureau is authorized to gather this information
by, among other things, requiring covered persons participating in
consumer financial services markets to file annual or special reports,
or answers in writing to specific questions, that furnish information
``as necessary for the Bureau to fulfill the monitoring . . .
responsibilities imposed by Congress.'' \50\ The Bureau may require
such information to be filed ``in such form and within such reasonable
period of time as the Bureau may prescribe by rule or order.'' \51\
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\47\ 12 U.S.C. 5512(c)(1) (``In order to support its rulemaking
and other functions, the Bureau shall monitor for risks to consumers
in the offering or provision of consumer financial products or
services, including developments in markets for such products or
services.'').
\48\ 12 U.S.C. 5512(c)(2)(A)-(F).
\49\ 12 U.S.C. 5512(c)(4)(A).
\50\ 12 U.S.C. 5512(c)(4)(B)(ii) (``In order to gather
information described in subparagraph (A), the Bureau may . . .
require covered persons and service providers participating in
consumer financial services markets to file with the Bureau, under
oath or otherwise, in such form and within such reasonable period of
time as the Bureau may prescribe by rule or order, annual or special
reports, or answers in writing to specific questions, furnishing
information described in paragraph (4), as necessary for the Bureau
to fulfill the monitoring, assessment, and reporting
responsibilities imposed by Congress.'').
\51\ 12 U.S.C. 5512(c)(4)(B)(ii).
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Section 1022(c)(7)(A) of the CFPA further authorizes the Bureau to
``prescribe rules regarding registration requirements applicable to a
covered person, other than an insured depository institution, insured
credit union, or related person.'' \52\ Section 1022(c)(7)(B) provides
that, ``[s]ubject to rules prescribed by the Bureau, the Bureau may
publicly disclose registration information to facilitate the ability of
consumers to identify covered persons that are registered with the
Bureau.'' \53\ The Bureau interprets section 1022(c)(7)(B) as
authorizing it to publish registration information required by Bureau
rule under section 1022(c)(7)(A) so that consumers may identify the
nonbank covered persons on which the Bureau has imposed registration
requirements.
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\52\ 12 U.S.C. 5512(c)(7)(A).
\53\ 12 U.S.C. 5512(c)(7)(B).
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Finally, CFPA section 1022(c)(3) authorizes the Bureau to publicly
release information obtained pursuant to CFPA section 1022, subject to
limitations specified therein.\54\ Specifically, section 1022(c)(3)
states that the Bureau ``may make public such information obtained by
the Bureau under [section 1022] as is in the public interest, through
aggregated reports or other appropriate formats designed to protect
confidential information in accordance with [specified protections in
section 1022].'' \55\ Information submitted to the Bureau's registry is
protected by, among other things, CFPA section 1022(c)(8), which states
that ``[i]n collecting information from any person, publicly releasing
information held by the Bureau, or requiring covered persons to
publicly report information, the Bureau shall take steps to ensure that
proprietary, personal, or confidential consumer information that is
protected from public disclosure under [the Freedom of Information Act,
5 U.S.C. 552(b)] or [the Privacy Act of 1974, 5 U.S.C. 552a,] or any
other provision of law, is not made public under [the CFPA].'' \56\ The
CFPB's registry is designed to not collect any proprietary, personal,
or confidential consumer information, and thus, the CFPB will not
publish, or require public reporting of, any protected information.
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\54\ See 12 U.S.C. 5512(c)(3)(B).
\55\ 12 U.S.C. 5512(c)(3)(B).
\56\ 12 U.S.C. 5512(c)(8).
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C. CFPA Section 1024(b)
As explained above, section 1024(b) of the CFPA authorizes the
Bureau to exercise supervisory authority over certain nonbank covered
persons.\57\ Section 1024(b)(1) requires the Bureau to periodically
require reports and conduct examinations of persons subject to its
supervisory authority to assess compliance with Federal consumer
financial law, obtain information about the activities and compliance
systems or procedures of persons subject to its supervisory authority,
and detect and assess risks to consumers and to markets for consumer
financial products and services.\58\ Section 1024(b)(2) requires that
the Bureau exercise its supervisory authority over nonbank covered
persons based on its assessment of risks posed
[[Page 6093]]
to consumers in the relevant product markets and geographic markets,
and taking into consideration, as applicable: ``(A) the asset size of
the covered person; (B) the volume of transactions involving consumer
financial products or services in which the covered person engages; (C)
the risks to consumers created by the provision of such consumer
financial products or services; (D) the extent to which such
institutions are subject to oversight by State authorities for consumer
protection; and (E) any other factors that the Bureau determines to be
relevant to a class of covered persons.'' \59\
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\57\ The nonbank covered persons over which the Bureau has
supervisory authority are listed in section 1024(a)(1) of the CFPA.
They include covered persons that: offer or provide origination,
brokerage, or servicing of loans secured by real estate for use by
consumers primarily for personal, family, or household purposes, or
loan modification or foreclosure relief services in connection with
such loans; are larger participants of a market for consumer
financial products or services, as defined by Bureau rule; the
Bureau has reasonable cause to determine, by order, that the covered
person is engaging, or has engaged, in conduct that poses risks to
consumers with regard to the offering or provision of consumer
financial products or services; offer or provide private education
loans; or offer or provide payday loans. 12 U.S.C. 5514(a)(1).
\58\ 12 U.S.C. 5514(b)(1) provides: ``The Bureau shall require
reports and conduct examinations on a periodic basis of persons
described in subsection (a)(1) for purposes of--(A) assessing
compliance with the requirements of Federal consumer financial law;
(B) obtaining information about the activities and compliance
systems or procedures of such person; and (C) detecting and
assessing risks to consumers and to markets for consumer financial
products and services.''
\59\ 12 U.S.C. 5514(b)(2).
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Section 1024(b)(7) of the CFPA in turn identifies three independent
sources of Bureau rulemaking authority. First, section 1024(b)(7)(A)
requires the Bureau to prescribe rules to facilitate the supervision of
nonbank covered persons subject to the Bureau's supervisory authority
and assessment and detection of risks to consumers.\60\ Second, section
1024(b)(7)(B) authorizes the Bureau to require nonbank covered persons
subject to its supervisory authority to ``generate, provide, or retain
records for the purposes of facilitating supervision of such persons
and assessing and detecting risks to consumers.'' \61\ This section
authorizes the Bureau to require nonbank covered persons subject to its
supervisory authority to create reports regarding their activities for
submission to the Bureau. ``Records'' is a broad term encompassing any
``[i]nformation that is inscribed on a tangible medium or that, having
been stored in an electronic or other medium, is retrievable in
perceivable form,'' or any ``documentary account of past events.'' \62\
Section 1024(b)(7)(B) thus authorizes the Bureau to require nonbank
covered persons subject to its supervisory authority to ``generate''--
i.e., create \63\--reports regarding their activities and then
``provide'' them to the Bureau.\64\
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\60\ 12 U.S.C. 5514(b)(7)(A) (``The Bureau shall prescribe rules
to facilitate supervision of persons described in subsection (a)(1)
and assessment and detection of risks to consumers.'').
\61\ 12 U.S.C. 5514(b)(7)(B) (``The Bureau may require a person
described in subsection (a)(1), to generate, provide, or retain
records for the purposes of facilitating supervision of such persons
and assessing and detecting risks to consumers.'').
\62\ Record, Black's Law Dictionary (11th ed. 2019); accord,
e.g., Andrews v. Sirius XM Radio Inc., 932 F.3d 1253, 1259 (9th Cir.
2019) (citing Black's Law Dictionary and Webster's Third New
International Dictionary definitions of ``record'').
\63\ See Generate, Merriam-Webster Online Dictionary, https://www.merriam-webster.com/dictionary/generate (defining ``generate''
as ``to bring into existence'').
\64\ The Bureau's authority under section 1024(b)(7)(B) to
require generation of records complements its authority under
section 1024(b)(1) to ``require reports . . . on a periodic basis''
from nonbank covered persons subject to its supervisory authority.
12 U.S.C. 5514(b)(1).
---------------------------------------------------------------------------
The third source of authority, CFPA section 1024(b)(7)(C),
authorizes the Bureau to prescribe rules regarding nonbank covered
persons subject to its supervisory authority ``to ensure that such
persons are legitimate entities and are able to perform their
obligations to consumers.'' \65\ Under this section, the Bureau may
prescribe substantive rules to ensure that supervised entities are
willing and able to comply with their legal, financial, and other
obligations to consumers, including those imposed by Federal consumer
financial law. The term ``obligations'' encompasses ``anything that a
person is bound to do or forbear from doing,'' including duties
``imposed by law, contract, [or] promise.'' \66\ The Bureau construes
the phrase ``legitimate entities'' as encompassing an inquiry into
whether an entity takes seriously its duty to ``[c]omply[ ] with the
law.'' \67\ Legitimate entities do not treat the risk of enforcement
actions for violations of legal obligations as a mere cost of doing
business. Instead, legitimate entities work in good faith to have
protocols in place aimed at ensuring compliance with their legal
obligations and detecting and appropriately addressing any legal
violations that the entity may commit.
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\65\ 12 U.S.C. 5514(b)(7)(C) (``The Bureau may prescribe rules
regarding a person described in subsection (a)(1), to ensure that
such persons are legitimate entities and are able to perform their
obligations to consumers. Such requirements may include background
checks for principals, officers, directors, or key personnel and
bonding or other appropriate financial requirements.'').
\66\ Obligation, Black's Law Dictionary (11th ed. 2019).
\67\ Legitimate, Black's Law Dictionary (11th ed. 2019)
(defining ``legitimate'' as ``[c]omplying with the law; lawful'');
see also Legitimate, Webster's Second New International Dictionary
(1934) (defining ``legitimate'' as ``[a]ccordant with law or with
established legal forms and requirements; lawful''); Legitimate,
Merriam-Webster Online Dictionary, https://www.merriam-webster.com/dictionary/legitimate (defining ``legitimate'' as ``accordant with
law or with established legal forms and requirements'').
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While each of the three subparagraphs of section 1024(b)(7)
discussed above operates as independent sources of rulemaking
authority, the subparagraphs also overlap in several respects, such
that a particular rule may be (and, in the case of this proposal, is)
authorized by more than one of the subparagraphs. For example, rules
requiring the generation, provision, or retention of records generally
will be authorized under both subparagraphs 1024(b)(7)(A) and (B). That
is so because subparagraph 1024(b)(7)(B) makes clear that the Bureau's
authority under subparagraph 1024(b)(7)(A) to prescribe rules to
facilitate supervision and assessment and detection of risks to
consumers extends to requiring covered persons subject to the Bureau's
supervisory authority ``to generate, provide or retain records for the
purposes of facilitating supervision of such persons and assessing and
detecting risks to consumers.'' \68\
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\68\ 12 U.S.C. 5514(b)(7)(B); see also, e.g., Barton v. Barr,
140 S. Ct. 1442, 1453 (2020) (``redundancies . . . in statutory
drafting'' may reflect ``a congressional effort to be doubly
sure''); Atlantic Richfield Co. v. Christian, 140 S. Ct. 1335, 1350
n.5 (2020) (concluding that ``Congress employed a belt and
suspenders approach'' in statute); Marx v. Gen. Revenue Corp., 568
U.S. 371, 383-85 (2013) (statutory language is ``not . . .
superfluous if Congress included it to remove doubt'' about an
issue).
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IV. Why the Bureau Is Issuing This Proposal
A. Overview
The Bureau is issuing this proposal to require nonbanks to report
certain public agency and court orders because the Bureau believes that
not only the Bureau, but also consumers, the public, and other
potential users of the proposed registration system would benefit from
the creation and maintenance of a central public repository for
information regarding certain public orders that have been imposed upon
nonbank covered persons.
Agency and court orders are not suggestions. They are legally
binding orders intended to prevent and remedy violations of the law.
When an agency issues such an order, or seeks a court order, it
typically has determined that the problems at the applicable entity are
sufficiently serious to merit the expenditure of that agency's limited
resources and perhaps the attention of the courts.
By establishing an effective system for collecting public orders
enforcing the law across different sectors of entity misconduct, the
proposed rule would allow the Bureau to more effectively monitor for
potential risks to consumers arising from both individual instances and
broader patterns of recidivism. Persons that are subject to one or more
orders that would require registration under the proposal may pose
greater risks to consumers than others. And the existence of multiple
orders may serve as a particular ``red flag'' with respect to risks to
consumers and as a signal of potential recidivism. The existence of
multiple orders may also indicate broader problems at the entity that
pose related risks to consumers--including lack of sufficient controls
related to the
[[Page 6094]]
offering and provision of consumer financial products and services,
inadequate compliance management systems and processes, and an
unwillingness or inability of senior management to comply with laws
subject to the Bureau's jurisdiction.
The Bureau also believes that a comprehensive collection of public
agency and court orders enforcing the law would help it identify
broader trends related to risks to consumers in the offering and
provision of consumer financial products and services. Notably, by
studying how laws are being enforced across consumer protection laws,
jurisdictions, and markets, the Bureau believes it will be able to
identify indications of risks to consumers. For example, the existence
of enforcement activity in multiple jurisdictions among certain
products, services, or features, or related to certain legal
requirements, or concerning certain consumer risks, could indicate
areas of heightened consumer risk that warrant further attention by
regulators. By contrast, the absence of enforcement activity in certain
areas could potentially indicate less risk to consumers or could be
evidence of less attention by regulators and a need to increase
monitoring activities. The Bureau thus believes that obtaining
information regarding such orders will enable it to better monitor
risks to consumers in the offering or provision of consumer financial
products and services, including developments in the markets for such
products and services, under its authority at CFPA section 1022(c).\69\
---------------------------------------------------------------------------
\69\ 12 U.S.C. 5512(c).
---------------------------------------------------------------------------
The Bureau further anticipates that making a registry of these
orders publicly available would, among other things, allow other
regulators at the Federal, State, and local level tasked with
protecting consumers to realize the same market monitoring benefits
that the Bureau anticipates obtaining from this rule. Publication would
also facilitate the ability of consumers to identify the covered
persons that are registered with the Bureau. In addition, publication
would enhance the ability of consumer advocacy organizations,
researchers, firms conducting due diligence, and the media to locate,
review, and monitor orders enforcing the law.
The Bureau believes that the proposal also will assist its
supervisory work by collecting additional information in the form of a
written statement from certain entities that are subject to the
Bureau's supervision and examination authority. As explained in greater
detail below, requiring certain supervised entities to designate a
senior executive officer with knowledge of, and control over, the
entity's efforts to comply with each relevant order, and requiring that
executive to submit the information required to be contained in the
proposed written statement, would facilitate Bureau supervision efforts
by providing important information about the entity, helping to
prioritize the Bureau's supervisory activities, and otherwise assisting
the Bureau's supervisory work. These requirements would also help
ensure that the relevant entities are ``legitimate'' and ``are able to
perform their obligations to consumers'' under CFPA section
1024(b)(7)(C), in part by incentivizing entities who might otherwise
not take seriously their obligations to instead endeavor to comply with
consumer protection laws and by highlighting the designated senior
executive's personal responsibility for such compliance.\70\
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\70\ 12 U.S.C. 5514(b)(7)(C).
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B. Why the Bureau Is Interested in Issuing a Rule To Monitor for Risks
Associated With Certain Agency and Court Orders
The Bureau believes that requiring registration and submissions
regarding certain agency and court orders as proposed would assist the
Bureau in monitoring for risks to consumers in the offering or
provision of consumer financial products or services, in accordance
with CFPA section 1022(c).\71\ The proposal's requirements to submit
and update information regarding such agency and court orders related
to the provision or offering of consumer financial products or services
would provide important support for a variety of Bureau functions.
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\71\ 12 U.S.C. 5512(c).
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As the principal Federal regulator responsible for administering
the Federal consumer financial laws, the Bureau's ability to
effectively identify and monitor for potential risks to consumers
arising out of apparent violations of core Federal and State consumer
laws is vital to the Bureau achieving its statutory purposes and
objectives. Such information will help the Bureau satisfy its statutory
obligation to monitor for risks to consumers in the markets for
consumer financial products and services.\72\ For example, the system
would enable the Bureau to better identify an increase in the number of
orders in a particular product market, in a particular geographic
market, addressing similar consumer risks, or with other common
features. The Bureau would be able to use this information to identify
areas of heightened consumer risk that warrant further attention, thus
helping to inform and prioritize its other market monitoring efforts,
including research regarding particular markets and the risks to
consumers presented in such markets.\73\ By contrast, the absence of
enforcement activity in certain areas could indicate less risk to
consumers, or it potentially could be evidence of less attention by
regulators and a need to increase monitoring and other supervisory or
regulatory activities.
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\72\ See 12 U.S.C. 5512(c)(1).
\73\ See 12 U.S.C. 5511(c)(3) (identifying as one of the
``primary functions of the Bureau . . . collecting, researching,
monitoring, and publishing information relevant to the functioning
of markets for consumer financial products and services to identify
risks to consumers and the proper functioning of such markets'').
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Likewise, the Bureau's rulemaking efforts would benefit from
information about such orders, so that the Bureau might, for example,
consider drafting rules to address identified consumer risks.\74\ The
Bureau's consumer response function would be informed by increased
monitoring of risks and trends, as the Bureau could direct resources or
investigate risks in a certain area or on a certain topic.\75\ And the
Bureau may choose to direct its consumer education efforts toward
educating consumers about risks identified via the proposed
registry.\76\
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\74\ See 12 U.S.C. 5511(c)(5) (identifying as one of the
``primary functions of the Bureau . . . issuing rules, orders, and
guidance implementing Federal consumer financial law'').
\75\ See 12 U.S.C. 5511(c)(2) (identifying as one of the
``primary functions of the Bureau . . . collecting, investigating,
and responding to consumer complaints''); see also Consumer Fin.
Prot. Bureau, Consumer Response Annual Report: January 1--December
31, 2021, at 5-8 (Mar. 2022), https://files.consumerfinance.gov/f/documents/cfpb_2021-consumer-response-annual-report_2022-03.pdf
(describing the Bureau's consumer-complaint process and how the
Bureau uses complaint information).
\76\ See 12 U.S.C. 5511(c)(1) (identifying as one of the
``primary functions of the Bureau . . . conducting financial
education programs'').
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The information that the Bureau would obtain under the proposed
rule would also be valuable to the Bureau in exercising its supervisory
and enforcement functions.\77\ Among other things, the information may
be informative when the Bureau makes determinations whether a covered
person is engaging, or has engaged, in
[[Page 6095]]
conduct that poses risk to consumers with regard to the offering or
provision of consumer financial products or services under CFPA section
1024(a)(1)(C), such that the Bureau may determine to subject the
covered person to Bureau supervision under that provision.\78\ The
information contained in the proposed registry may also be relevant in
assessing civil penalties for violations of Federal consumer financial
laws, given that Congress has provided that such penalties should take
into account an entity's ``history of previous violations'' and ``such
other matters as justice may require.'' \79\
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\77\ See 12 U.S.C. 5511(c)(4) (identifying as one of the
``primary functions of the Bureau . . . supervising covered persons
for compliance with Federal consumer financial law, and taking
appropriate enforcement action to address violations of Federal
consumer financial law''). Section IV(D) below, and the section-by-
section discussion of proposed Sec. 1092.203, contain additional
discussion of how the proposed rule would facilitate the Bureau's
supervisory efforts.
\78\ See 12 U.S.C. 5514(a)(1)(C) (authorizing Bureau orders
subjecting nonbanks to supervision based upon consumer complaints
``or information from other sources''); 12 CFR part 1091 (Bureau
procedural rule to establish supervisory authority over certain
nonbank covered persons based on risk determination).
\79\ See 12 U.S.C. 5555(c)(3)(D), (E). The Bureau may consider
certain matters identified in previous enforcement actions published
in the proposed registry to be relevant under these provisions.
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Furthermore, there is a heightened likelihood that entities that
are subject to public orders enforcing the law and relating to the
offering or provision of consumer financial products and services may
pose risks to consumers in the markets for those products and services,
and risk of consumer harm is a significant factor that weighs heavily
in the Bureau's decisions regarding the general allocation of its
resources. Knowledge of whether a covered person has engaged in
previous violations of consumer financial protection laws is valuable
information that the Bureau considers when evaluating the risk of
consumer harm. In the Bureau's experience, entities that have
previously been subject to enforcement actions, including those brought
by local, State, and other Federal authorities, present an increased
risk of committing violations of laws subject to the Bureau's
jurisdiction, and thus causing the additional consumer harm associated
with such violations. Prior enforcement actions are also likely to be a
good indication of continuing risks to consumers present in a
particular market for consumer financial products or services. Because
the orders that would be covered by the proposed rule are regularly
issued, modified, and terminated, the Bureau needs to collect this
information regularly and on a timely basis in order to stay abreast of
developments.
Although referrals from and other information provided by other
agencies have been valuable to the Bureau's work, the Bureau currently
often relies on other agencies to take proactive steps to contact it.
Having access to a centralized list of all relevant orders entered
against nonbanks would significantly increase the Bureau's ability to
monitor the market so that the Bureau can identify, better understand,
and ultimately, prevent further consumer harm, particularly from repeat
offenders. Recidivism--whether in the form of a company that repeatedly
violates the law and as a result becomes subject to multiple orders, or
in the form of a company that violates the orders to which it is
subject--poses particular risks to consumers. Companies that repeatedly
violate the law do more than just deprive consumers of protections in
the marketplace. They may also charge their customers more in order to
cover the costs of any fines or other costs resulting from the
company's legal violations. In other words, consumers may end up
subsidizing corporate malfeasance. When government orders fail to deter
future misconduct by a company, that company's operations are more
likely to present risk to consumers. Thus, the existence of multiple
orders may be highly probative of heightened risks to consumers in the
markets for consumer financial products and services, including the
risk of noncompliance with laws subject to the Bureau's jurisdiction.
The Bureau believes that collecting information about such public
orders across markets and agencies as proposed will improve the
Bureau's efforts to determine where entities, either as a group or
individually, are repeatedly violating the law. The Bureau particularly
needs to be made aware of entities that become subject to multiple
orders, or that are found to be out of compliance with existing orders,
as well as of trends in such developments. Systematic or repeat
violations of the law may indicate broader problems within a market for
consumer financial products and services. Such problems might include
lack of sufficient controls related to the offering and provision of
certain consumer financial products and services, inadequate compliance
management systems and processes within a set of market participants,
and an unwillingness or inability of senior management at certain
entities to comply with Federal consumer financial laws. The proposed
registry would provide a valuable mechanism to help ensure that the
Bureau is rapidly made aware of such repeat offenders across a range of
markets and enforcement agencies.
The Bureau believes that the proposed registry would be especially
useful with respect to the particular nonbank markets that are subject
to the Bureau's supervision and examination authority under CFPA
section 1024(a). In those markets, the Bureau would be able to take
account of risks identified through the proposed registry in conducting
its risk-based supervisory prioritization and enforcement work. The
Bureau believes that the existence of an order that would require
registration under the proposal is probative of a potential need for
supervisory examination, to the extent that the nonbank is subject to
the Bureau's supervision and examination authorities. Under CFPA
section 1024(b)(2), the Bureau is required to exercise its supervisory
authority in a manner designed to ensure that such exercise, with
respect to persons described in CFPA section 1024(a), is based on the
assessment by the Bureau of the risks posed to consumers in the
relevant product markets and geographic markets and taking into
consideration the factors enumerated at CFPA section 1024(b)(2)(A)-
(E).\80\
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\80\ 12 U.S.C. 5514(a), (b)(2).
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Depending upon the circumstances, the Bureau may consider the
existence of an order requiring registration under the proposal to be a
risk factor under these provisions for covered persons subject to the
proposed rule. CFPA section 1024(b)(2)(C) refers to ``the risks to
consumers created by the provision of such consumer financial products
or services.'' \81\ The Bureau believes that the existence of an order
that would require registration under the proposal would be probative
of such risks to consumers. CFPA section 1024(b)(2)(D) provides that
the Bureau shall also take into account ``the extent to which such
institutions are subject to oversight by State authorities for consumer
protection.'' \82\ The Bureau believes that the existence of one or
more orders issued or obtained by the types of State agencies described
in the proposal in connection with violations of law would provide
important and directly relevant information regarding the extent to
which nonbanks are subject to oversight by State authorities for
consumer protection. CFPA section 1024(b)(2)(E) provides that the
Bureau shall also take into account ``any other factors that the Bureau
determines to be relevant to a class of covered persons.'' \83\ For the
classes of covered persons subject to the proposal, the Bureau believes
that the existence of an order that would require registration under
the proposal would be a relevant factor under this statutory provision
for the Bureau to take into consideration when exercising its
supervisory authorities under CFPA
[[Page 6096]]
section 1024. Thus, knowledge of such orders would be relevant
information in prioritizing and scoping the Bureau's supervisory
activities under CFPA section 1024(b) with respect to the markets
subject to that provision. In exercising its authorities under section
1024(b), the Bureau may take into account any risks that it identifies
in connection with a covered person's registration with the nonbank
registration (NBR) system and any information submitted under the
proposed rule.
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\81\ 12 U.S.C. 5514(b)(2)(C).
\82\ 12 U.S.C. 5514(b)(2)(D).
\83\ 12 U.S.C. 5514(b)(2)(E).
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In crafting the proposed requirements to register and submit
certain agency and court orders, the Bureau has considered (among
others) the factors listed at CFPA section 1022(c)(2), to the extent
relevant here to the proposed allocation of Bureau resources to perform
market monitoring. For example, the Bureau considered the ``likely
risks and costs to consumers associated with buying or using a type of
consumer financial product or service.'' \84\ As discussed above, the
Bureau believes companies that violate the law, especially repeatedly,
generally pose more risk to consumers. The proposal will assist the
Bureau in identifying and evaluating such risks--and their associated
costs--across companies, industries, products, and regions.
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\84\ 12 U.S.C. 5512(c)(2)(A).
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The Bureau also considered the ``understanding by consumers of the
risks of a type of consumer financial product or service.'' \85\ The
Bureau is concerned that consumers currently may not adequately
understand risks posed by certain institutions, including risks arising
from recidivism. With a clear window into nationwide trends and gaps in
nonbank covered persons' compliance with consumer protection laws, the
Bureau can target its various functions--including consumer education--
to ensure that consumers understand the risks and associated costs of
such conduct on their use of certain consumer financial products or
services.
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\85\ 12 U.S.C. 5512(c)(2)(B).
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The Bureau further considered ``the legal protections applicable to
the offering or provision of a consumer financial product or service,
including the extent to which the law is likely to adequately protect
consumers.'' \86\ The Bureau believes that the proposal would enhance
the Bureau's ability to effectively assess whether and to what extent
the orders themselves, as well as other relevant laws, in practice
adequately protect consumers. Information collected in connection with
this proposal would aid the Bureau in better understanding how
effectively the nation's consumer protection laws operate in practice,
which should assist the Bureau in determining (among other things) how
best to allocate its resources to ensure consumers are adequately
protected from bad actors.
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\86\ 12 U.S.C. 5512(c)(2)(C).
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The Bureau also considered ``the extent . . . to which the risks of
a consumer financial product or service may disproportionately affect
traditionally underserved consumers.'' \87\ The Bureau generally is
concerned that traditionally underserved communities may be
disproportionately the target of consumer protection violations--
particularly, unfair, deceptive, or abusive acts or practices--in the
offering or provision of consumer financial products or services. The
information collected should provide the Bureau with robust nationwide
data to identify and evaluate the extent to which this is the case.
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\87\ 12 U.S.C. 5512(c)(2)(E).
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Finally, the Bureau considered ``the types, number, and other
pertinent characteristics of covered persons that offer or provide the
consumer financial product or service.'' \88\ For the reasons
discussed, law violator status--but especially repeat law violator
status--is a highly pertinent characteristic. The Bureau believes that
risks to consumers posed by law violators warrants market monitoring.
In particular, it would provide greater visibility into nonbank covered
persons' compliance with consumer protection laws in the offering or
provision of consumer financial products and services, in addition to
more generally aiding the Bureau's overall understanding of nonbank
covered persons and the products or services they provide.
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\88\ 12 U.S.C. 5512(c)(2)(F).
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The Bureau has considered alternative means of collecting the
information subject to the proposed rule, including requesting the
information on an ad hoc basis from entities that are subject to
relevant orders through a Bureau order issued pursuant to CFPA section
1022(c)(4)(B)(ii).\89\ However, the Bureau believes this alternative
would be inadequate. There is no existing comprehensive list of covered
persons subject to Bureau regulation or supervision, so the Bureau
would be unable to issue a standing order to such entities to produce
information. It is not clear how the Bureau would obtain this
information without issuing a rule. Also, the Bureau wishes to collect
information that changes over time--for example, information regarding
new orders and changes to orders, as well as with respect to changes in
registration information. An order that required submission of
information at a single point in time--assuming that the Bureau could
identify the entities to which such an order should be addressed--would
be inadequate to capture such changes in information. While the Bureau
might issue frequently recurring orders under its market-monitoring
authority, such an approach would be less reliable and predictable for
all parties than a rule-based approach.
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\89\ 12 U.S.C. 5512(c)(4)(B)(ii).
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The Bureau further considered using its supervisory and examination
authority to obtain information solely from entities that are subject
to that authority. While the Bureau believes that approach would
certainly provide the Bureau with invaluable information, it
preliminarily concludes that collecting information from a wider range
of covered persons is appropriate to achieve its market monitoring
objectives.
The Bureau seeks comment on its preliminary conclusion that
collecting and registering public agency and court orders imposing
obligations based upon violations of consumer law would assist with
monitoring for risks to consumers in the offering or provision of
consumer financial products and services. The Bureau seeks comment on
whether the types of orders described in the proposal, and the types of
information that would be collected about those orders and covered
nonbanks under the proposal, would provide useful information to the
Bureau. The Bureau also seeks comment on any other risks that might be
identified through collecting the information described in the
proposal. Finally, the Bureau seeks comment on whether it should
consider collecting any other information in order to identify risks to
consumers associated with orders.
C. Why the Bureau Has Identified Orders Issued Under the Types of Laws
Described in the Proposal as Posing Particular Risk
The proposal would prescribe registration requirements with
reference to certain types of ``covered laws'' that served as the basis
for an applicable order. As discussed herein, the Bureau believes that
orders issued under the types of covered laws described in the proposal
are likely to be probative of risks to consumers in the offering or
provision of consumer financial products or services, including
[[Page 6097]]
developments in markets for such products or services.\90\
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\90\ See also the discussion of the definition of the term
``covered law'' in the section-by-section discussion of proposed
Sec. 1092.201(c) below.
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First, the Bureau is proposing to require registration in
connection with orders issued under the Federal consumer financial
laws, to the extent 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. As explained above, numerous
Federal and State agencies besides the Bureau have authority to enforce
Federal consumer financial laws. In matters where an agency other than
the Bureau has issued or obtained a final, public order concluding that
a covered person has violated Federal consumer financial law, the
Bureau also will generally have jurisdiction over the conduct that
resulted in that order. Requiring registration of such orders will
facilitate effective market monitoring by providing the Bureau a tool
to identify and understand the nature of the risks to consumers
presented by the conduct addressed in those orders, including the risk
that the conduct might continue unabated outside of the particular
jurisdiction that issued the order. For example, such information may
inform the Bureau's supervisory or enforcement activities, as the
Bureau may consider bringing its own action in connection with the same
or related conduct. Or the conduct may be probative of a more systemic
problem with one or more entities' overall willingness or capacity to
comply with Federal consumer financial law across different product
lines or aspects of their operations. Likewise, requiring registration
of orders involving Federal consumer financial law will facilitate
effective market monitoring by ensuring that the Bureau can quickly and
effectively identify patterns of similar conduct across multiple
nonbank covered persons. The identification of such patterns may
indicate a problem that the Bureau could best address by engaging in
rulemaking to clarify or expand available consumer protections to
address emerging consumer risk trends. It may also prompt the Bureau to
use other tools, such as consumer education, to address the identified
risks.
Second, the Bureau is proposing to require registration of orders
in connection with a violation of any other law as to which the Bureau
may exercise enforcement authority, to the extent such violation arises
out of conduct in connection with the offering or provision of a
consumer financial product or service. The Bureau may enforce certain
laws other than Federal consumer financial laws, as that term is
defined in CFPA section 1002(14).\91\ The Bureau believes that the
proposed registry should collect information regarding orders issued
under any law that the Bureau may enforce, where 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. By definition,
the conduct addressed in such orders will generally fall within the
scope of the Bureau's enforcement authority. More generally, the Bureau
believes that evidence of such conduct could be probative of a broader
risk that the entity has engaged or will engage in conduct that may
violate Federal consumer financial law. For example, violations of the
Military Lending Act, as to which the Bureau has enforcement authority,
may overlap with, or be closely associated with, violations of the
CFPA's UDAAP prohibitions \92\ or the Truth in Lending Act,\93\ among
other Federal consumer financial laws. In addition, in the Bureau's
experience, a violation of one law within the Bureau's enforcement
authority may be indicative of broader inadequacies in an entity's
compliance systems that are resulting or could result in other legal
violations, including violations of Federal consumer financial laws.
Furthermore, including in the registry orders issued under any law that
the Bureau may enforce (where 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) would further the Bureau's
objective of creating a registry that could serve as a single,
consolidated reference tool for use in monitoring for risks to
consumers, thereby increasing the Bureau's ability to use the registry
to monitor for patterns of risky conduct of nonbank covered persons
across entities, industries, and product offerings.
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\91\ See, e.g., 10 U.S.C. 987(f)(6) (authorizing Bureau
enforcement of the Military Lending Act). As the Bureau has
explained in a recent interpretive rule, it also has authority to
supervise nonbanks subject to its supervision regarding risks to
consumers arising from conduct that violates the Military Lending
Act. See Bureau Interpretive Rule, Examinations for Risks to Active-
Duty Servicemembers and Their Covered Dependents, 86 FR 32723 (June
23, 2021). In this proposed rulemaking, however, the Bureau does not
need to rely on the authority described in that interpretive rule.
Instead, to the extent that the Bureau's proposal would collect
information regarding orders issued under laws described in proposed
Sec. 1092.201(c)(2) for the purpose of facilitating the Bureau's
supervisory activities, the Bureau would do so because the Bureau
believes such orders may be probative of a broader risk that an
entity has engaged or will engage in conduct that may violate
Federal consumer financial law.
\92\ 15 U.S.C. 5531, 5536(a)(1)(B).
\93\ 15 U.S.C. 1601 et seq.
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Third, the Bureau is proposing to require registration in
connection with orders issued under the prohibition on unfair or
deceptive acts or practices under section 5 of the FTC Act, 15 U.S.C.
45, or any rule or order issued for purpose of implementing that
prohibition, to the extent 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. In matters where a government
agency has reached a determination that an entity has violated section
5 of the FTC Act in connection with the offering or provision of a
consumer financial product or service, the Bureau has reason to be
concerned that the entity poses unusual risks to consumers in financial
markets. For one thing, the conduct resulting in the order well might
have violated Federal consumer financial law. CFPA section 1031, for
example, authorizes the Bureau to take action ``to prevent a covered
person or service provider from committing or engaging in an unfair,
deceptive, or abusive act or practice under Federal law in connection
with any transaction with a consumer for a consumer financial product
or service, or the offering of a consumer financial product or
service.'' \94\ And CFPA section 1036(a)(1)(B) provides that ``[i]t
shall be unlawful'' for a covered person ``to engage in any unfair,
deceptive, or abusive act or practice.'' \95\ Congress modeled the
CFPA's prohibition of unfair or deceptive acts or practices after the
similar prohibition in section 5 of the FTC Act.\96\ Therefore,
violations of FTC Act section 5 in connection with the provision or
offering of a consumer financial product or service is highly probative
of a heightened risk that UDAAP violations subject to the Bureau's
jurisdiction have occurred or are occurring.
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\94\ 12 U.S.C. 5531(a).
\95\ 12 U.S.C. 5536(a)(1)(B).
\96\ See 15 U.S.C. 45; see also, e.g., Consumer Fin. Prot.
Bureau v. ITT Educ. Servs., Inc., 219 F. Supp. 3d 878, 902-04 (S.D.
Ind. 2015).
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Moreover, the high probative value of such orders is not simply a
function of the likelihood that underlying conduct could violate
Federal consumer financial law. The Bureau believes that, where an
entity has engaged in conduct prohibited under FTC Act section 5 in
connection with offering or providing a consumer financial product or
service, there is a significant risk that upon
[[Page 6098]]
closer inspection of the entity's activities it has engaged in other
acts or omissions that either violate Federal consumer financial law or
otherwise present risks to consumers in the consumer financial markets.
For example, inadequacies in compliance systems are not likely limited
to a particular Federal or State consumer protection law, and
compliance-system inadequacies that result in FTC Act section 5
violations indicate a heightened risk of similar inadequacies related
to the prevention of violations of Federal consumer financial laws.
And, as described above, a registry of orders is particularly useful
because a core purpose of the Bureau's monitoring efforts is to analyze
patterns of risky conduct across entities, industries, product
offerings, and jurisdictions. Such patterns would help the Bureau
identify risks to consumers that warrant further action, such as more
monitoring, increased supervisory attention in the case of supervised
persons, regulation, or consumer education.
Fourth, the Bureau proposes to require registration in connection
with orders issued under State laws prohibiting unfair, deceptive, or
abusive acts or practices that are identified in proposed appendix A of
part 1092, to the extent 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. State UDAP/UDAAP laws are
generally modeled after--or otherwise prohibit conduct similar to that
prohibited by--FTC Act section 5 or CFPA sections 1031 and
1036(a)(1)(B).\97\ Therefore, violations of State UDAP/UDAAP law in
connection with the provision or offering of a consumer financial
product or service are similarly highly probative of a heightened risk
that UDAAP violations subject to the Bureau's jurisdiction have
occurred or are occurring. In addition, violations of State UDAP/UDAAP
law may be probative of the existence of violations of other laws
within the Bureau's jurisdiction.\98\
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\97\ 15 U.S.C. 45; 12 U.S.C. 5531. See, e.g., Request for
Information on Payday Loans, Vehicle Title Loans, Installment Loans,
and Open-End Lines of Credit, 81 FR 47781, 47783 (July 22, 2016)
(``In the 1960s, States began passing their own consumer protection
statutes modeled on the [Federal Trade Commission] Act to prohibit
unfair and deceptive practices.'').
\98\ To take just one example, UDAAP violations in connection
with debt-collection efforts may also violate the Fair Debt
Collection Practices Act's prohibition against unfair, deceptive, or
abusive debt-collection practices. See 15 U.S.C. 1692d-1692f.
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Obtaining a better understanding of entities' compliance with State
UDAP/UDAAP laws will assist the Bureau in the assessment and detection
of risks for the same general reasons described with respect to alleged
or found violations of FTC Act section 5--namely, that (i) conduct that
violates State UDAP/UDAAP prohibitions commonly also violates laws
under the Bureau's jurisdiction; and (ii) the Bureau believes that
evidence of such conduct may be highly probative of a broader risk that
the entity has engaged or will engage in similar conduct that may
violate laws within the Bureau's jurisdiction, either as a result of a
willingness to violate such laws or a lack of sufficient protections in
place to prevent violations. Registration of State UDAP/UDAAP orders
will facilitate effective market monitoring by ensuring that the Bureau
can quickly and effectively identify patterns of risky conduct across
entities, industries, consumer financial product or service offerings,
and jurisdictions. The Bureau could then decide which Bureau functions
are best suited to address the consumer risks raised by the orders.\99\
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\99\ For discussion of the proposal's requirements with respect
to State laws amending or otherwise succeeding a law identified in
appendix A, and rules or orders issued by State agencies for the
purpose of implementing State UDAP/UDAAP laws, see the section-by-
section discussion of proposed Sec. 1092.201(c) below.
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The Bureau seeks comment on its preliminary conclusion that these
categories of public orders would assist with monitoring for risks to
consumers in the offering or provision of consumer financial products
and services, including any information regarding whether and how the
categories of orders described in the proposal correlate with
additional risk to consumers, or conversely, any information indicating
that these types of orders are overinclusive and do not correlate with
additional risk to consumers.
D. Why the Bureau Is Proposing To Require Supervised Nonbanks To
Designate Attesting Executives and Submit Written Statements
The proposal would also require entities above a certain size that
are subject to the Bureau's supervision and examination authority to
annually submit a written statement signed by a designated attesting
executive regarding each covered order to which they are subject. In
the written statement, the attesting executive would (i) generally
describe the steps that the executive has undertaken to review and
oversee the entity's activities subject to the applicable covered order
for the preceding calendar year, and (ii) attest whether, to the
executive's knowledge, 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 proposed rule would further require that the entity
designate as the attesting executive for each covered order its
highest-ranking duly appointed senior executive officer (or, if the
entity does not have any duly appointed officers, the highest-ranking
individual charged with managerial or oversight responsibility for the
entity) whose assigned duties include ensuring the entity's compliance
with Federal consumer financial law, who has knowledge of the entity's
systems and procedures for achieving compliance with the covered order,
and who has control over the entity's efforts to comply with the
covered order. The Bureau would publish the name and title of that
executive in the proposed public registry.
The Bureau believes these requirements would serve two sets of
distinct purposes relating to its exercise of its supervisory and
examination authorities under CFPA section 1024.
First, the Bureau believes the proposed requirements that certain
supervised entities (which are referred to in the proposed rule as
``supervised registered entities'') designate attesting executives and
provide written statements would facilitate the Bureau's supervision
efforts, including its efforts to assess compliance with the
requirements of Federal consumer financial law, obtain information
about supervised entities' activities and compliance systems or
procedures, and detect and assess risks to consumers and to markets for
consumer financial products and services.\100\ As discussed, the
existence of one or more covered orders involving a supervised
registered entity already raises red flags regarding the entity's
compliance with Federal consumer financial law and the overall risk
posed by such entity to consumers in the offering or provision of
consumer financial products and services. Submission of a written
statement indicating an absence of good faith efforts to comply with
the law or
[[Page 6099]]
identifying problematic instances of noncompliance with reported orders
would provide the Bureau with important additional information
regarding risks to consumers that may be associated with the orders.
Such orders frequently contain provisions aimed at ensuring an entity's
future legal compliance, such as reporting requirements, recordkeeping
requirements, and provisions requiring the entity to obtain the issuing
agency's nonobjection before adopting or amending relevant policies and
procedures. An entity's sustained compliance with such provisions may
mitigate the continuing risks to consumers presented by the entity and
thus reduce the potential need for current supervisory activities. By
contrast, an entity's noncompliance with the terms of an order may
indicate a heightened need for current supervisory activities. And if
an entity is committing significant or repeated violations of a covered
order, or it is failing to take appropriate steps to address such
violations and prevent their recurrence, that may indicate that the
entity lacks the protocols and institutional commitment necessary to
ensure compliance with legal obligations aimed at protecting consumers
and ultimately with the Federal consumer financial laws. The Bureau
believes that entities that fail to comply with orders enforcing the
law may be at greater risk of violating one or more laws within the
Bureau's jurisdiction. Submission of the proposed written statements
would enable the Bureau to conduct additional supervisory reviews or to
otherwise investigate the matter in order to identify any such
violations and related risks.
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\100\ See 12 U.S.C. 5514(b)(1), (7)(A)-(B). As explained in the
``legal authority'' section, 12 U.S.C. 5514(b)(7)(A) authorizes the
Bureau to prescribe rules to facilitate Bureau supervision and the
assessment and detection of risks to consumers, and 12 U.S.C.
5514(b)(7)(B) authorizes the Bureau to require supervised registered
entities to ``generate''--i.e., create--reports regarding their
activities (including the proposed written statements) and then
``provide'' them to the Bureau.
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As a result, the proposed written statements would be particularly
relevant when prioritizing the Bureau's supervisory activities under
CFPA section 1024(b). As discussed above at sections III and IV(B),
CFPA section 1024(b)(2) requires that the Bureau exercise its authority
under CFPA section 1024(a) in a manner designed to ensure that such
exercise, with respect to persons described in section 1024(a), is
based on the assessment by the Bureau of certain identified risks.\101\
For the reasons discussed above, the proposed written statements would
help inform the Bureau's risk-based prioritization of its supervisory
program under CFPA section 1024(b)(2). The Bureau anticipates that the
written statements would be particularly helpful in assessing, among
other things, ``the risks to consumers created by the provision of . .
. consumer financial products or services'' and ``the extent to which
such institutions are subject to oversight by State authorities for
consumer protection.'' \102\
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\101\ 12 U.S.C. 5514(a), (b)(2).
\102\ 12 U.S.C. 5514(b)(2)(C)-(D). See additional discussion of
the factors for risk-based supervisory prioritization in section
IV(B) above.
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The proposed written-statement requirement also would improve the
Bureau's ability to conduct its supervisory and examination activities
with respect to the supervised nonbank, when it does choose to exercise
its supervisory authority. The Bureau exercises its supervisory
authority with respect to supervised nonbanks for certain purposes,
including assessing compliance with the requirements of Federal
consumer financial law, obtaining information about the activities and
compliance systems or procedures of supervised nonbanks, and detecting
and assessing risks to consumers and markets for consumer financial
products and services.\103\ The Bureau expects a supervised nonbank's
written statements as required under the proposal to provide important
information relevant to all of these statutory purposes. As explained
below, a supervised nonbank's failure to comply with a relevant order
under a covered law could indicate that the entity more generally lacks
the will or ability to comply with its legal obligations, including its
obligations under Federal consumer financial law. Such noncompliance
may also indicate that the entity generally lacks adequate compliance
systems or procedures, which in turn would create risks to consumers
and to the markets for consumer financial products and services that
the entity participates in. Thus, in cases where the Bureau determines
to exercise its supervisory authorities with respect to a supervised
nonbank required to submit written statements under the proposal, the
Bureau would expect those written statements to be of value in
conducting its examination work. For example, the Bureau may use the
written statements in determining what information to require from a
supervised nonbank, in determining the content of supervisory
communications and recommendations, or in making other decisions
regarding the use of its supervisory authority.\104\
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\103\ 12 U.S.C. 5514(b)(1).
\104\ As explained below in the section-by-section discussion of
proposed Sec. 1092.203(e), the Bureau is proposing to require
supervised registered entities to maintain records to support their
written statements. That recordkeeping requirement will further
facilitate the Bureau's supervisory and examination activities
because it will ensure the availability of records for the Bureau to
review regarding the matters addressed in the written statements.
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Second, the proposed written-statement requirements would help
ensure that supervised registered entities ``are legitimate entities
and are able to perform their obligations to consumers.'' \105\ As
discussed in section VII below, the Bureau believes that most
supervised registered entities subject to covered orders endeavor in
good faith to comply with consumer protection laws and, accordingly,
have put in place some manner of systems and procedures to help achieve
such compliance. But the Bureau also expects that other supervised
registered entities will not take their legal obligations seriously,
including their obligations under Federal consumer financial law.\106\
The proposed written statement would provide information that would
help the Bureau assess in which category a particular entity falls. If,
after reviewing a written statement, the Bureau concludes that an
entity is not working in good faith to comply with its legal
obligations, that conclusion might provide grounds for prioritizing the
entity for supervisory examinations to assess its compliance with
Federal consumer financial law. The Bureau expects that the risk of
such increased supervisory scrutiny will provide an incentive for some
entities to improve their compliance efforts so that they can submit a
written statement that is less likely to result in increased scrutiny
from the Bureau. Thus, by making it more difficult to quietly disregard
the law, the Bureau anticipates that the written-statement requirement
would likely motivate at least a few supervised entities with
substandard compliance practices to enhance their compliance efforts
and comply with their legal obligations, including their obligations
under Federal consumer financial law. The Bureau likewise believes that
the proposed requirement to designate an attesting executive with
knowledge of the entity's systems and procedures for achieving
compliance with the covered order and with control over the efforts to
comply with the covered order would likely provide an incentive to pay
more attention to the entity's legal obligations.
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\105\ 12 U.S.C. 5514(b)(7)(C). As explained in the ``legal
authority'' section above, 12 U.S.C. 5514(b)(7)(A), (B), and (C)
provide independent sources of rulemaking authority.
\106\ In several cases, the Bureau has found that entities have
violated prior orders that the Bureau has issued or obtained. See,
e.g., Discover Bank, CFPB No. 2020-BCFP-0026 (Dec. 22, 2020); CFPB
v. Encore Capital Grp., No. 20-cv-01750-GPC-KSC (S.D. Cal. Oct. 16,
2020); Military Credit Servs., LLC, CFPB No. 2016-CFPB-0029 (Dec.
20, 2016).
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[[Page 6100]]
To be clear, the proposed rule would not establish any minimum
procedures or otherwise specify the steps the attesting executive must
take in order to review and oversee the supervised registered entity's
activities. Nor would the proposal establish any minimum level of
compliance management or expectation for compliance systems and
procedures at such entities. However, as explained above, the Bureau
expects that most supervised registered entities will be at least
somewhat hesitant to repeatedly report the absence of good faith
efforts to comply with covered orders. Also, the rule would require
supervised registered entities to identify a central point of contact
and responsibility regarding an entity's efforts to comply with a
covered order.
The Bureau seeks comment on all aspects of the proposed written-
statement requirement, including its preliminary findings that
requiring supervised nonbanks to designate attesting executives and to
submit certain written statements relating to compliance with reported
orders will facilitate the Bureau's supervisory efforts and better
ensure that supervised registered entities are legitimate entities and
are able to perform their obligations to consumers. Among other things,
the Bureau seeks comment on whether the proposed requirements would
help ensure such entities are legitimate and are able to perform their
obligations to consumers, and whether they would facilitate supervision
of such entities and assessment and detection of risks to consumers.
The Bureau also seeks comment on whether the proposed eligibility
requirements regarding which individuals may be designated as attesting
executives are too broad or too narrow. The Bureau also seeks comment
on whether supervised registered entities should submit additional or
different information to the Bureau.\107\
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\107\ See additional discussion about other information that the
Bureau might seek to collect in the section-by-section discussion of
proposed Sec. 1092.203(d) below.
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E. Why the Bureau Is Proposing To Publish the Information Collected
Under the Proposed Registration Requirements
The Bureau is proposing to publish the information collected under
the proposed registration requirements (except for the written
statement submitted under Sec. 1092.203, which would be treated as
confidential supervisory information). While the orders that would be
published under the proposal would already be public, they may not all
be readily accessible in a comprehensive and collected manner, and some
of the additional information submitted to the registry may not be
readily available to the public. The Bureau is proposing to publish
this information because it believes publication would provide benefits
to the general public, other regulators, and to consumers, and would be
consistent with Federal government efforts to make government data
assets publicly available.\108\ The Bureau has authority to publish the
registration information under CFPA section 1022(c)(3)(B), which
authorizes it to publish information obtained under section 1022 ``as
is in the public interest,'' \109\ and under CFPA section
1022(c)(7)(B), which authorizes the Bureau to ``publicly disclose
registration information to facilitate the ability of consumers to
identify covered persons that are registered with the Bureau.'' \110\
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\108\ See also the discussion of these issues in the section-by-
section discussion of proposed Sec. 1092.204 below.
\109\ 12 U.S.C. 5512(c)(3)(B).
\110\ 12 U.S.C. 5512(c)(7)(B).
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A variety of Federal regulators, including the prudential
regulators, as well as State attorneys general and other State
agencies, all have authority to issue orders to address legal
violations in the provision or offering of consumer financial products
or services. Consequently, similar conduct may be addressed through
separate orders, by separate regulators, or across separate lines of
business. Again, the orders that would be published under the proposal
would already be public. But such orders, while public, are currently
subject to distinct publication regimes. The distinct enforcement and
publication regimes for the various agencies with authority over
nonbank covered persons make it more difficult for the Bureau,
consumers, and other interested parties to identify entities that
engage in misconduct and repeatedly violate the law. The proposed rule
would address that issue by creating such a single, consolidated
registry of orders that enforce applicable law.
The Bureau recognizes that much public information about such
orders already exists. The applicable Federal and State regulators
generally each publish their own orders enforcing consumer financial
law; thus, potential users may be able to access some of this
information by means of the various websites and other databases
maintained by individual agencies. Some information is also available
to potential users through certain multiagency websites such as the
Nationwide Multistate Licensing System & Registry (NMLS) owned and
operated by the State Regulatory Registry LLC, which is owned and
operated by the Conference of State Bank Supervisors. And still other
information is published and maintained by private actors.
However, there appears to be limited collective information
regarding all of the orders that have been issued by multiple
regulators to particular entities across multiple product markets and
geographic markets related to consumer financial products and services.
To the Bureau's knowledge, there is currently no public government
system at the Federal or State level for the collection of information
about such orders across the entities subject to the Bureau's
jurisdiction (though privately maintained databases may exist). No
government agency appears to maintain a publicly available repository
of such orders and other related information with respect to particular
entities as they relate to consumer financial products and services.
Furthermore, while certain State regulators publish certain public
enforcement actions to the NMLS, such publication does not extend to
all of the orders and all of the agencies that are addressed by the
proposal, including orders issued by Federal agencies. It is also
limited to only certain industry sectors. The Bureau believes that
consumers would benefit from a registration system that is maintained
by the Federal government for the purpose of providing comprehensive
information regarding such orders, including copies of the orders.
The Bureau believes that there would be significant value in
creating a single public repository of information related to public
agency and court orders that impose obligations based on violations of
consumer protection laws, and the nonbanks that are subject to
them.\111\ The Bureau believes that publication of certain data
collected pursuant to this rule is in the public interest in a variety
of ways. By improving public transparency, the Bureau intends to
mitigate recidivism and more effectively deter unlawful behavior.
Providing better tools to monitor repeat law violators and corporate
recidivism is in the public interest. Researchers would be able to use
published information to better understand the markets regulated by the
Bureau and the participants in those markets, and their efforts may
result in more thorough understanding and promote compliance with the
law. Non-government entities would
[[Page 6101]]
likewise be able to use published information in conducting their work
and in identifying potential issues and risks affecting consumers in
the markets for consumer financial protection and services. Industry
could use the registry as a convenient source of information regarding
regulator actions and trends across jurisdictions, helping industry
actors to better understand legal risks and compliance obligations.
Potential investors, contractual partners, financial firms, and others
that are conducting due diligence on a registered nonbank would have a
consolidated and updated source of accurate information regarding
public orders. Establishing a source for reliable and public data on
entity lawbreaking and recidivism will likely promote tracking and
awareness of such matters by consumer groups, trade associations, firms
conducting due diligence, the media, and other parties.
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\111\ See also the discussion of these issues in the section-by-
section discussions of proposed Sec. Sec. 1092.202(b) and
1092.204(a) below.
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Government agencies--including, but not limited to, the Bureau--
would also benefit from the proposed public registry. While the orders
that would be published under the proposal would already be public,
every Federal, State, and local agency with jurisdiction over a covered
nonbank will benefit from access to a regularly maintained database
providing up-to-date information on relevant public orders that have
been issued against such entities. Such information will help agencies
to detect risks to consumers, and to coordinate and maintain
consistency with the Bureau and other agencies in their enforcement
strategies and approaches. Agencies might use the published information
to better identify registered nonbanks and determine their legal
structure and organization, since the registry would require registered
nonbanks to submit and maintain up-to-date identifying information,
including legal name and principal place of business. The Bureau also
believes that the publication of registration information and
information regarding orders will assist other agencies in assessing
the potential risks to consumers that may be posed by registered
nonbanks and in making their own determinations regarding whether to
conduct examinations or investigations, bring enforcement actions
against nonbanks, or engage in other regulatory activities. For
example, a State regulator attempting to improve its assessments of
consumer risk trends among nonbank payday lenders in its State should
be able to use the registry to identify what other regulators of the
same or similar nonbank providers or products have recently identified
in terms of such risks. In addition, the Bureau believes that many
agencies would find the published information useful in making other
determinations regarding the nonbanks registered under the proposal.
For example, an agency may be able to use this information when making
determinations regarding an application or license, or to ask relevant
questions regarding the information that is published. Thus, the Bureau
believes that, with access to a single, public registry of these
orders, those similarly tasked with protecting consumers in the markets
for consumer financial products and services would obtain many of the
same powerful market monitoring benefits that the Bureau anticipates
obtaining from this rule.
In developing the proposal, the Bureau considered whether it might
be better to use confidential channels, or perhaps a private electronic
portal, to exchange this information with other government agencies.
However, the Bureau believes that such an approach would be
impractical. Not every agency that would be able to use the information
would be aware of the need to request access to the information from
the Bureau or would necessarily be able to expend the resources to
maintain access. The Bureau would need to expend its own resources to
establish and maintain such channels. And the Bureau believes that such
a system would not achieve the benefits of disclosure to consumers and
the public discussed in this section. Publication also would formally
align the proposed registration system with Federal government
standards calling for publishing information online as open data.\112\
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\112\ See, e.g., Open, Public, Electronic, and Necessary
Government Data Act, in title II of Public Law No. 115-435 (Jan. 14,
2019).
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Consumers may also benefit from the collection and publication of
the information collected by the system, including information about
orders that are already public. The Bureau believes that, at least in
certain cases, publishing information about the entity and its
applicable orders in a public registry would potentially help certain
consumers make informed decisions regarding their choice of consumer
financial products or services. As discussed at section VII below
regarding the Bureau's analysis of this proposal under CFPA section
1022(b),\113\ the Bureau does not necessarily expect a wide group of
consumers to rely routinely on the proposed registry when selecting
consumer financial products or services. However, the Bureau believes
that the registry would benefit certain consumers if the information in
the registry is recirculated, compiled, or analyzed by other users such
as consumer advocacy organizations, researchers, or the media. For
example, media outlets could use the registry to report which entities
have the most government orders enforcing the law against them, which
could inform consumers about the most egregious repeat offenders.
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\113\ 12 U.S.C. 5512(b).
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The proposed registry may also facilitate private enforcement of
the Federal consumer financial laws by consumers, to the extent those
laws provide private rights of action, where consumers have been harmed
by a registered nonbank. The information that would be published under
the proposal might be useful in helping consumers understand the
identity of a company that has offered or provided a particular
consumer financial product or service, and in determining whether to
file suit or otherwise make choices regarding how to assert their legal
rights. And availability of this information may lead consumers and
other persons to report to the Bureau instances of similar conduct for
the Bureau to investigate.
Under the proposal, the Bureau would not publish the written
statement submitted by a supervised registered entity but would instead
treat the written statement as Bureau confidential supervisory
information subject to the provisions of its rule on the disclosure of
records and information at 12 CFR part 1070. The Bureau does propose to
publish the name and title of the attesting executive(s) submitted by
the supervised registered entity. The Bureau proposes to disclose this
name and title information because it believes publication of this
information would be in the public interest--namely, it would help
ensure accountability at the entity for noncompliance. The Bureau
believes that the publication of the executive's name and title would
provide an incentive to pay more attention to covered orders. The
Bureau believes that designating an executive as ultimately accountable
for ensuring compliance with a covered order will prompt the executive
to focus greater attention on ensuring the entity's compliance, and in
turn increase the likelihood of compliance. The Bureau believes that
publication of this designation will increase the likelihood of these
effects. Publication of the designation will identify for other
regulators (and the general public) the person at the supervised
registered entity who is ultimately responsible for compliance with the
covered order, as
[[Page 6102]]
well as more general efforts to comply with Federal consumer financial
law. Just as the possibility of Bureau scrutiny of the attesting
executive's conduct is likely to motivate the executive to devote
greater attention to compliance efforts, the additional scrutiny from
others outside the Bureau will further promote compliance. Publishing
the attesting executive's name and title thus dovetails with the
supervisory goals discussed above in section IV(D).
The Bureau also believes that publishing the name and title of the
executive who has knowledge and control of the supervised entity's
efforts to comply with the covered order would benefit users of the
system in other ways. Such information would enable employee
whistleblowers, or other consumers who have knowledge and information
about violations of the applicable order, to ensure that such
information gets to the person who is in charge of such compliance. The
Bureau also believes that the public would benefit from understanding
the names and titles of the highest-ranking executive who is
responsible for compliance with a public order enforcing the law, as
this information could help consumers better understand and monitor the
conduct of the entities with whom they do business. It would also
inform consumers of a person to whom they could direct escalated
complaints. Other regulators, especially those that have issued covered
orders regarding the supervised entity, would likely benefit from
understanding which executive(s) have been tasked with ensuring
compliance with their orders. Finally, disclosure of this information
would increase transparency regarding how the Bureau processes and
verifies information submitted as part of the registration system. The
Bureau requests comment on this provision, including whether this
requirement would assist users of the NBR system and whether it would
unduly interfere with the privacy interests of the attesting executive
or other interests of the supervised registered entity.
The Bureau seeks comment on the proposed publication requirements
and the above-stated rationales for them. Among other things, the
Bureau seeks information on the current state of published information
in existing systems or databases about the types of orders addressed in
this proposed rule. The Bureau also seeks comment on whether the Bureau
should publish less information in the proposed registry, or retain
discretion to do so, and whether publication of the names and titles of
attesting executives will have the desired effects.
V. Section-by-Section Analysis
Part 1092
Subpart A--General
Section 1092.100 Authority and Purpose
100(a) Authority
Proposed Sec. 1092.100(a) would set forth the legal authority for
proposed 12 CFR part 1092, including all subparts. Proposed Sec.
1092.100 would refer to CFPA section 1022(b) and (c) and section
1024(b),\114\ which are discussed in section III of the proposal above.
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\114\ 12 U.S.C. 5512(b), (c); 12 U.S.C. 5514(b).
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100(b) Purpose
Proposed Sec. 1092.100(b) would explain that the purpose of part
1092 is to prescribe rules regarding NBR requirements, to prescribe
rules concerning the collection of information from registered
entities, and to provide for public release of that information as
appropriate.
Section 1092.101 General Definitions
Proposed Sec. 1092.101 would define terms that are utilized
elsewhere in proposed part 1092 of the rules. Proposed Sec.
1092.101(a) would define the terms ``affiliate,'' ``consumer,''
``consumer financial product or service,'' ``covered person,''
``Federal consumer financial law,'' ``insured credit union,''
``person,'' ``related person,'' ``service provider,'' and ``State'' as
having the meanings set forth in the CFPA, 12 U.S.C. 5481. Some of
these terms would be used only in subpart B.
Proposed Sec. 1092.101(b) would define the term ``Bureau'' as a
reference to the Consumer Financial Protection Bureau.
Proposed Sec. 1092.101(c) would clarify that the terms
``include,'' ``includes,'' and ``including'' throughout part 1092 would
denote non-exhaustive examples covered by the relevant provision.\115\
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\115\ See, e.g., Christopher v. SmithKline Beecham Corp., 567
U.S. 142, 162 (2012) (use of ``includes'' indicates that ``the
examples enumerated in the text are intended to be illustrative, not
exhaustive'').
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Proposed Sec. 1092.101(d) would define the term ``nonbank
registration system'' to mean the Bureau's electronic registration
system identified and maintained by the Bureau for the purposes of part
1092. Proposed Sec. 1092.101(e) would define the term ``nonbank
registration system implementation date'' to mean, for a given
requirement or subpart of part 1092, the date(s) determined by the
Bureau to commence the operations of the NBR system in connection with
that requirement or subpart. The Bureau seeks comment on how much time
entities would need to comply with the requirements of part 1092 and to
register with the NBR system. The Bureau currently anticipates that the
NBR system implementation date with respect to subpart B would occur
sometime after the effective date of the proposed rule, and no earlier
than January 2024. The actual NBR system implementation date would
depend upon the Bureau's ability to develop and launch the required
technical systems that will support the submission and review of
applicable filings, and on feedback provided by commenters regarding
the time registrants would need to implement this part's requirements.
The Bureau would provide advance public notice regarding the NBR system
implementation date with respect to subpart B to enable entities
subject to subpart B to prepare and submit timely filings to the NBR
system.
Section 1092.102 Submission and Use of Registration Information
102(a) Filing Instructions
Proposed Sec. 1092.102(a) would provide that the Bureau shall
specify the form and manner for electronic filings and submissions to
the NBR system that are required or made voluntarily under part 1092.
The Bureau would issue specific guidance for filings and submissions.
The Bureau anticipates that its filing instructions may, among other
things, specify information that filers must submit to verify that they
have authority to act on behalf of the entities for which they are
purporting to register. The Bureau proposes to accept electronic
filings and submissions to the NBR system only and does not propose to
accept paper filings or submissions.
Proposed Sec. 1092.102(a) also would state that the Bureau may
provide for extensions of deadlines or time periods prescribed by the
proposed rule for persons affected by declared disasters or other
emergency situations. Such situations could include natural disasters
such as hurricanes, fires, or pandemics, and also could include other
emergency situations or undue hardships, including technical problems
involving the NBR system. For example, the Bureau could defer deadlines
during a presidentially declared emergency or major disaster under the
Robert T. Stafford Disaster Relief and Emergency Assistance Act (42
U.S.C. 5121 et seq.) or a presidentially declared pandemic-related
national emergency under the National Emergencies Act (50 U.S.C. 1601
et seq.). The Bureau would issue guidance regarding such situations.
The Bureau seeks comment on the types of
[[Page 6103]]
situations that may arise in this context, and about appropriate
mechanisms for addressing them.
102(b) Coordination or Combination of Systems
Proposed Sec. 1092.102(b) would provide that in administering the
NBR system, the Bureau may rely on information a person previously
submitted to the NBR system under part 1092 and may coordinate or
combine systems with State agencies as described in CFPA sections
1022(c)(7)(C) and 1024(b)(7)(D). Those statutory provisions provide
that the Bureau shall consult with State agencies regarding
requirements or systems (including coordinated or combined systems for
registration), where appropriate. This proposed section would clarify
that the Bureau may develop or rely on such systems as part of
maintaining the NBR system and may also rely on previously submitted
information. The Bureau seeks comment on the types of coordinated or
combined systems that would be appropriate and the types of information
that could be obtained from or provided to State agencies.
102(c) Bureau Use of Registration Information
Proposed Sec. 1092.102(c) would provide that the Bureau may use
the information submitted to the NBR system under this part to support
its objectives and functions, including in determining when to exercise
its authority under CFPA section 1024 to conduct examinations and when
to exercise its enforcement powers under subtitle E of the CFPA.
The Bureau proposes to establish the NBR system under its
registration and market-monitoring rulemaking authorities under CFPA
section 1022(b)(1), (c)(1)-(4), and (c)(7), and under its supervisory
rulemaking authorities under CFPA section 1024(b)(7)(A), (B), and (C).
As discussed in greater detail elsewhere in this preamble, the Bureau
intends to use the information submitted under the NBR system to
monitor for risks to consumers in the offering or provision of consumer
financial products or services, and to support all of its functions as
appropriate, including its supervisory, rulemaking, enforcement, and
other functions.
Proposed Sec. 1092.102(c) also would provide that part 1092, and
registration under that part, would not alter any applicable process
whereby a person may dispute that it qualifies as a person subject to
Bureau authority. For example, 12 CFR 1090.103 establishes a Bureau
administrative process for assessing a person's status as a larger
participant under CFPA section 1024(a)(1)(B) and 1024(a)(2) and 12 CFR
part 1090. As specified in 12 CFR 1090.103(a), if a person receives a
written communication from the Bureau initiating a supervisory activity
pursuant to CFPA section 1024, such person may respond by asserting
that the person does not meet the definition of a larger participant of
a market covered by 12 CFR part 1090 within 45 days of the date of the
communication. 12 CFR 1090.103 establishes a process for review and
determination by a Bureau official regarding the person's larger
participant status. 12 CFR 1090.103(c) provides that, in reaching that
determination, the Bureau official shall review the person's affidavit
and related information, as well as any other information the official
deems relevant.
Under proposed Sec. 1092.102(c), a person may submit such an
assertion regarding the person's status as a larger participant under
12 CFR 1090.103 notwithstanding any registration or information
submitted to the NBR system under part 1092, including any submission
of identifying information or a written statement, or any designation
of attesting executive(s) for purposes of proposed subpart B.
Submission of such assertions regarding larger participant status to
the Bureau under 12 CFR 1090.103, including the Bureau's processes
regarding the treatment of such assertions and the effect of any
determinations regarding the person's supervised status, would be
governed by the provisions of 12 CFR part 1090. The Bureau may use the
information provided to the NBR system in connection with making any
determination regarding a person's supervised status under 12 CFR
1090.103, along with the affidavit submitted by the person and other
information as provided in that section. However, the submission of
information to the NBR system would not prevent a person from also
submitting other information under 12 CFR 1090.103.
Section 1092.103 Severability
Proposed Sec. 1092.103 would provide that the provisions of the
proposed rule are separate and severable from one another, and that if
any provision is stayed or determined to be invalid, the remaining
provisions shall continue in effect. This is a standard severability
clause of the kind that is included in many regulations to clearly
express agency intent about the course that is preferred if such events
were to occur. The Bureau has carefully considered the requirements of
the proposed rule, both individually and in their totality, including
their potential costs and benefits to covered persons and consumers. In
the event a court were to stay or invalidate one or more provisions of
this rule as finalized, the Bureau would want the remaining portions of
the rule as finalized to remain in full force and legal effect.
Subpart B--Registry of Nonbank Covered Persons Subject to Certain
Agency and Court Orders
Section 1092.200 Scope and Purpose
200(a) Scope
Proposed Sec. 1092.200(a) would describe the scope of proposed
subpart B. Proposed subpart B would require nonbank covered persons
that are subject to certain public agency and court orders enforcing
the law to register with the Bureau and to submit copies of the orders
to the Bureau and would describe the registration information the
Bureau would make publicly available. It would also provide that
proposed subpart B would require certain nonbank covered persons that
are supervised by the Bureau to prepare and submit an annual written
statement. The requirements regarding annual written statements are
described in proposed Sec. 1092.204. The Bureau solicits comment on
this proposed statement of scope.
200(b) Purpose
Proposed Sec. 1092.200(b) would explain that the purposes of the
information collection requirements in proposed subpart B would be to
support Bureau functions by monitoring for risks to consumers in the
offering or provision of consumer financial products or services,
including developments in markets for such products or services,
pursuant to CFPA section 1022(c)(1); to prescribe rules regarding
registration requirements applicable to nonbank covered persons,
pursuant to CFPA section 1022(c)(7); and to facilitate the supervision
of persons described in CFPA section 1024(a)(1), to ensure that such
persons are legitimate entities and are able to perform their
obligations to consumers, and to assess and detect risks to consumers,
pursuant to CFPA section 1024(b).\116\ The Bureau solicits comment on
this proposed statement of purpose.
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\116\ More detailed discussions of how the proposal would
achieve these purposes are contained elsewhere in this preamble.
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Section 1092.201 Definitions
Proposed Sec. 1092.201 would define terms used in proposed subpart
B. These definitions would supplement the general definitions for the
entirety of
[[Page 6104]]
part 1092 that would be provided in proposed Sec. 1092.101. The Bureau
seeks comment on each of the definitions set forth in proposed subpart
B and any suggested clarifications, modifications, or alternatives.
201(a) Administrative Information
Proposed Sec. 1092.201(a) would define the term ``administrative
information'' to mean contact information regarding persons subject to
subpart B and other information submitted or collected to facilitate
the administration of the NBR system. Administrative information would
include information such as date and time stamps of submissions to the
NBR system, contact information for nonbank personnel involved in
making submissions, filer questions and other communications regarding
submissions and submission procedures, reconciliation or correction of
errors, information submitted under proposed Sec. Sec. 1092.202(g) and
1092.203(f),\117\ and other information that would be submitted or
collected to facilitate the administration of the NBR system.
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\117\ See discussion in the section-by-section discussion of
these provisions below.
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Proposed Sec. 1092.204(a) would provide that the Bureau may
determine not to publish such administrative information, as discussed
below in the section-by-section discussion of proposed Sec.
1092.204(a). The Bureau seeks comment whether any other information
that might be collected through the NBR system should also be treated
as administrative information.
201(b) Attesting Executive
Proposed Sec. 1092.201(b) would define the term ``attesting
executive'' to mean, with respect to any covered order regarding a
supervised registered entity, the individual designated by the
supervised registered entity to perform the supervised registered
entity's duties with respect to the covered order under proposed Sec.
1092.203. That section would require a supervised registered entity to
designate as its ``attesting executive'' its highest-ranking duly
appointed senior executive officer (or, if the supervised registered
entity does not have any duly appointed officers, the highest-ranking
individual charged with managerial or oversight responsibility for the
supervised registered entity) whose assigned duties include ensuring
the supervised registered entity's compliance with Federal consumer
financial law, who has knowledge of the entity's systems and procedures
for achieving compliance with the covered order, and who has control
over the entity's efforts to comply with the covered order.
Below, in the section-by-section discussion of proposed Sec.
1092.203, the Bureau proposes requirements regarding attesting
executives.
201(c) Covered Law
Proposed Sec. 1092.201(c) would define the term ``covered law'' to
mean one of several types of laws, as described. The proposed term
``covered law'' would be central to defining which orders and portions
of orders would be subject to the requirements of proposed subpart B.
Proposed Sec. 1092.201(e) would define the term covered order to
include certain orders that impose certain obligations on a covered
nonbank based on an alleged violation of a covered law. Thus, the
proposed term ``covered law'' would help determine the application of
proposed subpart B's registration requirements. The Bureau believes
that requiring registration of covered nonbanks that are subject to
covered orders issued under these laws would further the purposes of
proposed subpart B.
Under the proposal, a law listed in proposed Sec. 1092.201(c)(1)
through (6) would qualify as a covered law only to the extent 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. The Bureau is interested in registering orders that relate to
offering or providing consumer financial products or services. The
Bureau recognizes that the laws listed in proposed Sec. 1092.201(d)(1)
through (6) may apply to a wide range of conduct not involving consumer
financial products or services. While the Bureau believes that
reporting on such violations could still be probative of risks to
consumers in the markets for consumer financial products and services--
as misconduct in one line of business is not necessarily cabined to
that line of business--the Bureau believes that a more limited
definition of covered law strikes the right balance between ensuring
that the Bureau remains adequately informed of risks to consumers in
the offering or provision of consumer financial products and services
and minimizing the potential burden of the reporting requirements on
nonbank covered persons. The Bureau seeks comment on whether this
definition achieves this balance or should be modified to achieve it.
The proposal lists categories of laws that would constitute
``covered laws'' to the extent 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. For the reasons
discussed above in section IV(C), the Bureau believes that orders
issued under the types of covered laws described in the proposal are
likely to be probative of risks to consumers in the offering or
provision of consumer financial products or services, including
developments in markets for such products or services.
First, proposed Sec. 1092.201(c) would define the term covered law
to include a Federal consumer financial law, as that term is defined in
proposed Sec. 1092.101(a) and the CFPA.\118\ The Bureau is charged
with administering, interpreting, and enforcing the Federal consumer
financial laws, which include the CFPA itself, 18 enumerated consumer
laws (such as the Fair Credit Reporting Act and the Truth in Lending
Act),\119\ and the laws for which authorities were transferred to the
Bureau under subtitles F and H of the CFPA, as well as rules and orders
issued by the Bureau under any of these laws.\120\
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\118\ See 12 U.S.C. 5481(14).
\119\ See 12 U.S.C. 5481(12).
\120\ 12 U.S.C. 5481(14).
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The Bureau believes that requiring registration of covered nonbanks
in connection with certain orders issued under Federal consumer
financial laws will further the purposes of proposed subpart B. As
discussed in section IV, ``to support [the Bureau's] rulemaking and
other functions,'' Congress mandated that the Bureau ``shall monitor
for risks to consumers in the offering or provision of consumer
financial products or services, including developments in markets for
such products or services.'' \121\ In matters where an agency other
than the Bureau has issued or obtained a final, public order concluding
that an entity has violated Federal consumer financial law in
connection with the offering or provision of a consumer financial
product or service, the Bureau will generally have jurisdiction over
the conduct that resulted in that order. The Bureau therefore has a
clear interest in identifying and understanding the nature of the risks
to consumers presented by such conduct, including the risk that the
conduct continues outside the particular jurisdiction or in connection
with other consumer financial products or services that are offered or
provided by the covered nonbank. A pattern of similar alleged or found
violations of Federal consumer financial law across multiple nonbank
covered persons may indicate a problem
[[Page 6105]]
that the Bureau can best address by engaging in rulemaking to clarify
or expand available consumer protection to address emerging consumer
risk trends, or by using other tools, such as consumer education, to
address the identified risks. And, depending on the facts and
circumstances, the Bureau may consider bringing its own supervisory or
enforcement action in connection with the same or related conduct.\122\
Thus, the Bureau believes that violations of the Federal consumer
financial laws, and especially repeat violations of such laws, may be
probative of risks to consumers and may indicate more systemic problems
at an entity or in the relevant market related to offering or provision
of consumer financial products or services.
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\121\ 12 U.S.C. 5512(c)(1).
\122\ The Bureau is also proposing to require registration of
orders that the Bureau has obtained or issued for violations of
Federal consumer financial laws. While the Bureau is of course aware
of such orders, collecting all orders for violations of covered
laws--including those obtained or issued by the Bureau--within the
proposed registry would benefit the Bureau, other regulators, and
the general public by providing a single point of reference for such
orders. The Bureau would also benefit from receiving the written
statements required under proposed Sec. 1092.203 with respect to
orders it obtains or issues.
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The Bureau seeks comment on including Federal consumer financial
laws in the definition of ``covered law'' and whether it should
consider any related inclusions, exclusions, or conditions relating to
Federal consumer financial laws.
Second, proposed Sec. 1092.201(c)(2) would define the term
``covered law'' to include any other law as to which the Bureau may
exercise enforcement authority. As explained above in section IV(C),
the Bureau may enforce certain laws other than Federal consumer
financial laws, such as the Military Lending Act.\123\ The Bureau
believes that the proposed registry should collect information
regarding agency and court orders issued under any law that the Bureau
may enforce, where 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. By definition, the conduct addressed in
such orders will generally fall within the scope of the Bureau's
enforcement authority. More generally, in the Bureau's experience,
evidence of such conduct could be highly probative of a broader risk
that the entity has engaged or will engage in conduct that may violate
Federal consumer financial laws. For example, violations of the
Military Lending Act may overlap with, or be closely associated with,
violations of the CFPA's UDAAP prohibitions \124\ or the Truth in
Lending Act,\125\ among other Federal consumer financial laws. In
addition, in the Bureau's experience, a violation of one law within the
Bureau's enforcement authority may be indicative of broader
inadequacies in an entity's compliance systems that are resulting in or
could result in other legal violations, including violations of Federal
consumer financial laws. Furthermore, including in the registry orders
issued under any law that the Bureau may enforce (where 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) would
further the Bureau's objective of creating a registry that could serve
as a single, consolidated reference tool for use in monitoring for
risks to consumers, thereby increasing the Bureau's ability to use the
registry to monitor for patterns of risky conduct of nonbank covered
persons across entities, industries, and product offerings.
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\123\ 10 U.S.C. 987(f)(6) (authorizing Bureau enforcement of the
Military Lending Act).
\124\ 15 U.S.C. 5531, 5536(a)(1)(B).
\125\ 15 U.S.C. 1601 et seq.
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The Bureau seeks comment on whether it should include the laws
described in proposed Sec. 1092.201(c)(2) in the definition of
``covered law.'' The Bureau also seeks comment on whether it should
consider any exclusions from, or revisions to, the description of the
laws captured by proposed Sec. 1092.201(c)(2).
Third, proposed Sec. 1092.201(c)(3) would define the term
``covered law'' to include the prohibition of unfair or deceptive acts
or practices under section 5 of the FTC Act, 15 U.S.C. 45, or any rule
or order issued for the purpose of implementing that prohibition. The
proposal would not include within the definition of ``covered law'' FTC
Act section 5's prohibition of ``[u]nfair methods of competition in or
affecting commerce,'' or rules or orders issued solely pursuant to that
prohibition.\126\ The Bureau expects that entities would be aware in
any specific case whether a provision of an applicable order has been
issued under FTC Act section 5's prohibition of unfair or deceptive
acts or practices (or a rule or order issued for the purpose of
implementing that prohibition), as opposed to section 5's prohibition
of ``[u]nfair methods of competition in or affecting commerce'' (or a
rule or order issued thereunder), and thus whether the order provision
was issued under a ``covered law'' or not. The Bureau understands that
orders issued in connection with violations of FTC Act section 5
routinely distinguish between these two authorities, and that orders
issued under FTC Act section 5's prohibition of ``[u]nfair methods of
competition in or affecting commerce'' rarely, if ever, relate to UDAP
violations involving the offering or provision of a consumer financial
product or service. The Bureau requests comment on whether the proposal
should also require registration of orders issued under FTC Act section
5's prohibition of ``[u]nfair methods of competition in or affecting
commerce,'' or rules or orders issued pursuant to that prohibition. The
Bureau also seeks comment on whether the proposal should include
measures to clarify any matters relating to this proposed distinction
between types of FTC Act section 5 order provisions.
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\126\ 15 U.S.C. 45(a)(1).
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As discussed further in section IV(C) above, the Bureau believes
that an order issued under FTC Act section 5's prohibition of unfair or
deceptive acts or practices may be probative of violations of Federal
consumer financial law, including CFPA sections 1031 and
1036(a)(1)(B).\127\ Because the CFPA's prohibition of unfair or
deceptive acts or practices is modeled after FTC Act section 5's
similar prohibition,\128\ conduct that constitutes a UDAP violation
under FTC Act section 5 also likely violates the CFPA's UDAAP
provisions. The Bureau also believes that FTC Act section 5 unfairness
and deception violations related to the offering or provision of
consumer financial products or services may indicate more systemic
problems at an entity that may impact the offering or provision of
consumer financial products or services other than those issues
specifically identified in the order. The Bureau would need to know
about such findings so that it can assess whether the violation is
indicative of a larger and potentially more systemic problem at the
covered nonbank, or potentially throughout an entire market. And, as
discussed, information about such violations would inform the Bureau's
exercise of its various rulemaking, supervisory, enforcement, consumer
education, and other functions.
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\127\ 12 U.S.C. 5531, 5536(a)(1)(B).
\128\ See, e.g., Consumer Fin. Prot. Bureau v. ITT Educ. Servs.,
219 F. Supp. 3d at 902-04.
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``Covered law'' under the proposal would include not only FTC Act
section 5, but also any rules or orders issued for the purpose of
implementing FTC Act section 5's UDAP prohibition.\129\
[[Page 6106]]
Section 18 of the FTC Act, 15 U.S.C. 57a, authorizes the FTC to
prescribe ``rules which define with specificity acts or practices which
are unfair or deceptive acts or practices in or affecting commerce''
within the meaning of FTC Act section 5(a)(1).\130\ These FTC rules,
which are known as ``trade regulation rules,'' would be covered laws
under the proposed definition to the extent the conduct found or
alleged to violate such rules relates to the offering or provision of a
consumer financial product or service. Violations of these rules
generally constitute violations of FTC Act section 5 itself.\131\ And
the Bureau believes that, like violations of FTC Act section 5 itself,
violations of the rules issued under FTC Act section 5, where they
arise out of conduct in connection with the offering or provision of
consumer financial products or services, would likely be probative of
risks to consumers and warrant attention by the Bureau.
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\129\ In certain circumstances, the Bureau may enforce a rule
prescribed under the FTC Act by the FTC with respect to an unfair or
deceptive act or practice. See 12 U.S.C. 5581(b)(5)(B)(ii). Such an
FTC rule, where issued by the FTC to implement FTC Act section 5,
would be a covered law under the proposed definition.
\130\ 15 U.S.C. 57a(a)(1)(B).
\131\ 15 U.S.C. 57a(d)(3) (``When any rule under subsection
(a)(1)(B) takes effect a subsequent violation thereof shall
constitute an unfair or deceptive act or practice in violation of
section 45(a)(1) of this title, unless the Commission otherwise
expressly provides in such rule.'').
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The proposed definition of ``covered law'' would also include
orders issued by the FTC itself under FTC Act section 5's UDAP
prohibition, as well as by other agencies. The Bureau believes that
violations of such orders present similar risks to consumers as those
presented by violations of FTC Act section 5 and the rules issued
thereunder. The Bureau seeks comment on including the prohibition on
unfair or deceptive acts or practices under FTC Act section 5, and
rules and orders issued for the purpose of implementing that
prohibition, in the definition of ``covered law,'' and whether it
should consider any related inclusions, exclusions, or conditions.
Fourth, proposed Sec. 1092.201(c)(4) would define the term
``covered law'' to include a State law prohibiting unfair, deceptive,
or abusive acts or practices that is identified in appendix A of part
1092. Proposed appendix A provides a list of State statutes that
prohibit unfair, deceptive, or abusive acts or practices and that the
Bureau has reviewed and proposes to define as a covered law under this
provision. As with the other laws described in proposed Sec.
1092.201(c), a State UDAAP law would only qualify as a covered law to
the extent the conduct found or alleged to violate the State UDAAP law
relates to the offering or provision of a consumer financial product or
service. The Bureau has reviewed the State statutes identified in
proposed appendix A and as explained below, it believes that requiring
registration of covered nonbanks that are subject to covered orders
issued under such statutes would likely further the purposes of
proposed subpart B.
Proposed appendix A includes State laws of general applicability
that prohibit unfair, deceptive, or abusive acts or practices and that
might apply to the offering or provision of consumer financial products
or services. Although the scope and content of these State laws may
vary at the margin, the Bureau believes these statutes cover a core
concept of unfairness, deception, or abusiveness that makes violations
of them likely probative of risks to consumers in the offering or
provision of consumer financial products and services. These statutes
may commonly be referred to as ``UDAP'' or ``UDAAP'' statutes, or
``little FTC Acts,'' and are often labeled in State statutes as State
``consumer protection acts'' or as laws addressing ``unfair'' or
``deceptive'' ``trade practices.'' State or local agencies may use
these statutes to bring cases or actions with respect to practices that
injure consumers. While these State statutes may also authorize private
suits by consumers and other persons, the proposal would only require
registration with respect to covered orders issued at least in part in
any action or proceeding brought by any Federal agency, State agency,
or local agency (as described further below in the section-by-section
discussion of proposed Sec. 1092.201(e)(2)).
The Bureau is proposing to list these statutes in appendix A, and
thus to include them in the proposed rule's definition of covered law,
in part because those statutes are generally analogous to CFPA sections
1031 and 1036(a)(1)(B) and FTC Act section 5.\132\ Several of these
State statutes specifically provide that ``it is the intent of the
legislature that in construing [the State statute], the courts will be
guided by the interpretations given by the Federal Trade Commission and
the federal courts to Section 5(a)(1) of the Federal Trade Commission
Act,'' or words to this effect.\133\ Obtaining a better understanding
of entities' compliance with State UDAP/UDAAP laws will assist the
Bureau in the assessment and detection of risks for the same general
reasons described with respect to alleged or found violations of FTC
Act section 5. The Bureau believes that entities that have violated one
of these State statutes, and especially repeat violators of such
statutes, may pose heightened risks to consumers in the offering or
provision of consumer financial products and services, including the
risk that they have engaged, and may continue to engage, in unfair,
deceptive, or abusive acts and practices in violation of CFPA section
1031. And information identifying patterns of such risky conduct across
entities, industries, product offerings, or jurisdictions would be
highly informative to the Bureau's monitoring work. The Bureau has
attempted to identify all of the applicable State UDAP/UDAAP statutes
of general applicability in appendix A, but requests comment on whether
it has comprehensively done so. The Bureau proposes to include in
appendix A all such State statutes and seeks comment on any additions,
subtractions, or modifications to the State UDAP/UDAAP statutes of
general applicability in appendix A.
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\132\ 12 U.S.C. 5531, 5536(a)(1)(B); 15 U.S.C. 45.
\133\ E.g., Mass. Gen. Laws ch. 93A, sec. 2(b); Conn. Gen. Stat.
sec. 42-110b(b).
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The Bureau is also proposing to include in appendix A, and thus to
include in the definition of the term covered law, certain other
industry-specific State statutes that prevent unfair, deceptive, or
abusive conduct in connection with certain specific consumer financial
industries or markets. For example, proposed appendix A would include
New York Banking Law section 719(2), regarding prohibited practices by
student loan servicers. This State statutory provision prohibits
``[e]ngag[ing] in any unfair, deceptive or predatory act or practice
toward any person or misrepresent[ing] or omit[ting] any material
information in connection with the servicing of a student loan.'' \134\
The Bureau is proposing to include this New York State law and others
like it in appendix A, to the extent that the conduct found or alleged
to violate such law relates to the offering or provision of a consumer
financial product or service.
---------------------------------------------------------------------------
\134\ New York Banking Law sec. 719(2).
---------------------------------------------------------------------------
As with State UDAP/UDAAP laws of general applicability, the Bureau
believes that violation of such industry-specific State statutes that
prohibit unfair, deceptive, or abusive acts or practices in connection
with consumer financial industries or markets and in connection with
the offering or provision of consumer financial products or services
would be probative of potential violations of CFPA sections 1031 and
1036, and also of other related risks to consumers within the scope of
[[Page 6107]]
the Bureau's jurisdiction. The Bureau believes that omitting these
industry-specific statutes from the definition of ``covered law'' may
cause the information submitted to the proposed registry to be
incomplete. Among other things, the Bureau understands that many State
agencies typically rely upon such industry-specific statutes to enforce
prohibitions on conduct by covered nonbanks that is similar to that
prohibited under UDAP/UDAAP laws of general applicability. Thus, the
Bureau believes registration of orders issued under such State statutes
would provide information that is probative of the types of risks the
Bureau believes to be associated with orders issued under State UDAP/
UDAAP laws of general applicability. The Bureau has attempted to
identify applicable State UDAP/UDAAP statutes related to applicable
consumer financial industries or markets in appendix A, but requests
comment on whether it has comprehensively done so. The Bureau proposes
to include in appendix A all such State statutes.
The Bureau proposes to require registration of all orders issued
under State laws listed in appendix A, as long as the conduct at issue
relates to the offering or provision of a consumer financial product or
service, and the order satisfies the definition of ``covered order'' in
proposed Sec. 1092.201(e). The Bureau recognizes that some State UDAP/
UDAAP statutes listed in appendix A may prohibit conduct that regulated
entities might argue is not prohibited under CFPA sections 1031 and
1036(a)(1)(B). For example, State UDAP/UDAAP statutes modeled after FTC
Act section 5 may include provisions that, in addition to prohibiting
``unfair'' and ``deceptive'' conduct, also prohibit ``unfair methods of
competition'' in connection with antitrust or anticompetition matters.
While it is possible that such orders might be less probative than
other orders, the Bureau believes that limiting the scope of such
covered laws to those involving the offering or provision of consumer
financial products and services sufficiently assures that most orders
reported will be valuable in effectively monitoring for risks to
consumers in the offering or the provision of such products and
services. Moreover, the Bureau anticipates that it will not always be
the case that an agency or court order will clearly distinguish whether
it is issued under State statutory provisions preventing ``unfair,''
``deceptive,'' or ``abusive'' acts and practices on the one hand, or
``anticompetitive'' acts or practices on the other--especially in cases
where a State statute addresses all of them. Unlike orders issued under
FTC Act section 5, it is not clear to the Bureau that orders issued
under such State laws routinely distinguish between these two types of
authorities. Therefore, attempting to carve out portions of State UDAP/
UDAAP statutes that extend beyond the conduct prohibited by CFPA
sections 1031 and 1036(a)(1)(B) would be impracticable and risk
undermining the effectiveness of the rule. The Bureau thus proposes to
define the term ``covered law'' by listing specific State statutes.
Where a State statute is listed in appendix A and otherwise satisfies
proposed Sec. 1092.201(c), the Bureau would propose to treat it as a
covered law, regardless of whether any specific order issued under that
law expressly refers to the State law's prohibition of ``unfair,''
``deceptive,'' or ``abusive'' acts and practices. In most cases, the
Bureau anticipates that violations of the listed State statutes that
relate to the offering or provision of a consumer financial product or
service will be probative of risks to consumers within the Bureau's
jurisdiction. The Bureau seeks comment on this approach, including
whether it should further clarify the definition of covered law in this
regard, and whether the proposed list at proposed appendix A adequately
identifies such State laws.
The Bureau also seeks specific comment on whether to require
registration, and to list in appendix A, additional State statutes that
prohibit ``unconscionable'' conduct but do not also contain a specific
reference to ``unfair,'' ``deceptive,'' or ``abusive'' conduct.\135\
While the Bureau has not included such State laws in appendix A, the
Bureau believes that such prohibitions on unconscionable conduct often
reach conduct that qualifies as a UDAAP violation subject to the
Bureau's jurisdiction under CFPA sections 1031 and 1036(a)(1)(B).\136\
Therefore, the Bureau seeks comment regarding whether requiring nonbank
covered persons to report violations of such State unconscionability
prohibitions, when they relate to the offering or provision of a
consumer financial product or service, would significantly assist the
Bureau in effectively monitoring for risks to consumers within the
Bureau's jurisdiction, or facilitate the Bureau's exercise of its
rulemaking and other authorities.
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\135\ See, e.g., Kan. Stat. Ann. sec. 50-627.
\136\ Compare, e.g., Kan. Stat. Ann. sec. 50-627(b)(1)
(providing that, in determining whether an act or practice is
unconscionable, a court shall consider whether ``[t]he supplier took
advantage of the inability of the consumer reasonably to protect the
consumer's interests because of the consumer's physical infirmity,
ignorance, illiteracy, inability to understand the language of an
agreement or similar factor''), with 12 U.S.C. 5531(d)(2)(B) (act or
practice is abusive if, among other things, it ``takes unreasonable
advantage of . . . the inability of the consumer to protect the
interests of the consumer in selecting or using a consumer financial
product or service'').
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The Bureau has not included laws of tribal governments in appendix
A. While the Bureau believes that many orders issued under such laws
may be highly probative of risks to consumers and could assist the
Bureau in carrying out its market monitoring obligations--as well as
assist the Bureau in assembling an effective nonbank registry--the
Bureau preliminarily concludes that considerations of administrative
efficiency favor focusing on other orders. The Bureau, however, is
continuing to consider whether to include tribal UDAP/UDAAP laws in
appendix A. The Bureau seeks comment on whether tribal UDAP/UDAAP laws
should be included among the list of ``covered laws,'' and if so, which
specific tribal UDAP/UDAAP laws should be included in the list.
Fifth, proposed Sec. 1092.201(c)(5) would include in the
definition of the term ``covered law'' a State law amending or
otherwise succeeding a law identified in appendix A, to the extent that
such law is materially similar to its predecessor, and the conduct
found or alleged to violate such law relates to the offering or
provision of a consumer financial product or service.
The Bureau is proposing Sec. 1092.201(c)(5) in order to clarify
that appendix A is intended to capture certain future changes made by
States to the State laws listed therein. States may make immaterial
changes from time to time, including renumbering or amending the
statutes listed in appendix A, in a manner that could cause proposed
appendix A to become technically ``incorrect'' or ``obsolete'' in the
view of some regulated entities. Proposed Sec. 1092.201(c)(5) makes
clear that is not the Bureau's intent. To the extent the amended or
otherwise succeeding law is materially similar to its predecessor,
proposed Sec. 1092.201(c)(5) would ensure that it would still qualify
as a ``covered law.'' The definition of covered law thus would capture
a successor to a law listed in appendix A if, for example, the conduct
found or alleged to violate the successor law would have constituted a
violation of the predecessor law were it still in effect. The Bureau
seeks comment on all aspects of proposed Sec. 1092.201(c)(5),
including whether the Bureau should define successor laws covered by
appendix A more broadly or
[[Page 6108]]
narrowly than the approach adopted here, and whether regulated entities
would benefit from any additional guidance in determining whether a
successor law is materially similar to a predecessor law listed in
appendix A.
Finally, proposed Sec. 1092.201(c)(6) would include in the
definition of the term ``covered law'' a rule or order issued by a
State agency for the purpose of implementing a State law described in
proposed Sec. 1092.201(c)(4) or (5), to the extent the conduct found
or alleged to violate such regulation relates to the offering or
provision of a consumer financial product or service. Various State
statutes authorize one or more State agencies to issue regulations
implementing the terms of those statutes, thereby authorizing the State
agency to further define specific unfair, deceptive, or abusive acts or
practices.\137\ Proposed Sec. 1092.201(c)(6) would include such State
agency regulations within the meaning of the term ``covered law.''
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\137\ See, e.g., Cal. Fin. Code sec. 90009(c).
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The Bureau seeks comment on all aspects of proposed section Sec.
1092.201(c), including whether the types of covered laws proposed are
appropriate, whether they may be either overinclusive or underinclusive
in light of the Bureau's objectives in this rulemaking, and whether the
definition of the term ``covered law'' may be clarified or strengthened
to achieve the purposes of proposed subpart B.
201(d) Covered Nonbank
The proposal would define the term ``covered nonbank'' to mean a
covered person \138\ that does not fall into one of five categories.
First, the Bureau proposes to exclude from the definition insured
depository institutions, insured credit unions, or related persons. The
Bureau has considered proposing to collect information about relevant
orders in place against such persons under its authority to issue rules
mandating collection of information set forth in CFPA section
1022(c)(4)(B)(ii). While the Bureau might at some point consider
collecting or publishing the information described in the proposal from
such persons, the Bureau believes that there is currently greater need
to collect this information from the nonbanks under its jurisdiction.
Among other things, the identity and size of all insured depository
institutions and insured credit unions is known to the Bureau due to
registration regimes maintained by the prudential regulators, which
track and make public such information. Also, there are only four
prudential regulators, and they regularly publish their consumer
financial protection orders. In contrast, comprehensive, readily
accessible information is currently lacking about the identity of, and
orders issued against, nonbanks subject either to the Bureau's market
monitoring authority or to its supervisory authority across the various
markets for consumer financial products and services. As a result,
there is a unique need to identify nonbanks subject to orders through
this proposed registration system. In addition, the proposal would
conform with the Bureau's registration authority under CFPA section
1022(c)(7), which states that the Bureau may impose registration
requirements applicable to a covered person, other than an insured
depository institution, insured credit union, or related person.\139\
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\138\ As provided in proposed Sec. 1092.101(a), the proposal
would define the term ``covered person'' to have the same meaning as
in 12 U.S.C. 5481(6). The proposal would not define ``service
providers,'' as defined in 12 U.S.C. 5481(26), as covered nonbanks
per se. Entities that are service providers, however, may
nevertheless also be covered persons under the CFPA. Among other
things, a person that is a service provider shall be deemed to be a
covered person to the extent that such person engages in the
offering or provision of its own consumer financial product or
service. See 12 U.S.C. 5481(26)(C). And a service provider that acts
as a service provider to its covered person affiliate may itself be
deemed to be a covered person as provided in 12 U.S.C. 5481(6)(B).
\139\ An affiliate of an insured depository institution, insured
credit union, or related person could be subject to the proposed
rule if it is not itself an insured depository institution, insured
credit union, or related person.
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Second, the proposal would exclude from the definition of the term
``covered nonbank'' a ``State,'' as defined in CFPA section 1002(27)--a
term that includes ``any federally recognized Indian tribe, as defined
by the Secretary of the Interior'' under section 104(a) of the Federal
Recognized Indian Tribe List Act of 1994, 25 U.S.C. 5131(a).\140\ The
Bureau has other avenues of collaborating with State partners
(including tribal partners) and, out of considerations of comity, does
not seek to subject them to an information collection requirement in
this proposal.
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\140\ 12 U.S.C. 5481(27).
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Third, the proposal excludes natural persons from the definition of
``covered nonbank.'' The Bureau is not proposing to impose subpart B's
registration requirements on natural persons, even though natural
persons may be covered persons and may be subject to the types of
orders described in the proposal. (For example, a sole proprietor not
incorporated as a legal entity could qualify as a covered person.)
Under the proposed exclusion, for example, natural persons subject to
orders issued under FTC Act section 5, removal and prohibition orders
or orders assessing civil money penalties issued by an appropriate
Federal banking agency under section 8 of the Federal Deposit Insurance
Act,\141\ or State licensing orders or orders issued under the S.A.F.E.
Mortgage Licensing Act of 2008 \142\ would not be subject to the
proposal's registration requirements. The ``natural person'' exception
in proposed Sec. 1092.201(c)(3) is intended only to exclude individual
human beings from the definition of ``covered nonbank.'' The definition
of ``covered nonbank'' would include trusts and other entities that
meet the definition of ``covered person'' under CFPA section
1002(6).\143\ The Bureau is primarily interested in obtaining
information regarding orders that apply to entities because it believes
such orders will be most useful in identifying relevant risks to
consumers. The Bureau believes that many of the agency and court orders
enforcing the law issued against individuals are highly specific to the
facts and circumstances relevant to the individual's conduct and are
less likely to implicate broader risks to consumers and markets. In
addition, the Bureau is primarily interested in obtaining and
publishing registration information regarding nonbank entities that are
subject to its jurisdiction, which among other things would enable
consumers to better identify such entities and would provide
information to the public and other regulators. The Bureau is concerned
that, if the Bureau should extend the registration requirement to
natural persons, the information provided would be less relevant to
consumers and the other users of the NBR system. Therefore, the
potential benefit of extending the registration requirement to natural
persons likely would not justify the additional Bureau resources that
would need to be allocated to implement and administer such an
expansion of the Bureau's registration system. The Bureau also believes
that proposed Sec. 1092.203's requirements to designate one or more
attesting executives and submit written statements would not be
appropriate for natural persons. The Bureau requests comment on this
proposed exclusion.
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\141\ 12 U.S.C. 1818.
\142\ 12 U.S.C. 5101 et seq.
\143\ See 12 U.S.C. 5481(6). See also 12 U.S.C. 5481 (defining
the term ``person'' to include, in addition to individuals, any
``partnership, company, corporation, association (incorporated or
unincorporated), trust, estate, cooperative organization, or other
entity'').
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Fourth, the proposal excludes from the definition of ``covered
nonbank'' a motor vehicle dealer that is predominantly engaged in the
sale and
[[Page 6109]]
servicing of motor vehicles, the leasing and servicing of motor
vehicles, or both, within the meaning of 12 U.S.C. 5519(a), except to
the extent such a person engages in functions that are excepted from
the application of 12 U.S.C. 5519(a) as described in 12 U.S.C. 5519(b).
CFPA section 1029 provides an exclusion from the Bureau's rulemaking
authority for certain motor vehicle dealers.\144\ However, CFPA section
1029(b) exempts certain persons from this exclusion. Persons covered by
section 1029(a) would qualify as ``covered nonbanks'' under the
proposal so long as they engage in the functions described in section
1029(b)--in which case they would be ``covered nonbanks.'' Proposed
Sec. 1092.201(e), discussed below, would further provide that the only
orders issued to such motor vehicle dealers that would require
registration would be those issued in connection with the functions
that are excepted from the application of 12 U.S.C. 5519(a) as
described in 12 U.S.C. 5519(b).
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\144\ 12 U.S.C. 5519 (``Exclusion for Auto Dealers'').
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Fifth, the proposal excludes a person from the definition of
``covered nonbank'' if the person qualifies as a covered person based
solely on conduct that is the subject of, and that is not otherwise
exempted from, an exclusion from the Bureau's rulemaking authority
under 12 U.S.C. 5517.\145\ This provision would clarify that persons
whose activities are wholly excluded from the rulemaking authority of
the Bureau under one or more of the provisions of section 1027 of the
CFPA are not ``covered nonbanks.'' However, where the CFPA provides
that any of the activities engaged in by such persons are subject to
the Bureau's rulemaking authority, this limitation would not exclude
the person from qualifying as a ``covered nonbank.'' For example, CFPA
section 1027(l)(1) provides an exclusion from the Bureau's rulemaking
authority for certain persons engaging in certain activities relating
to charitable contributions.\146\ Under the proposal, a covered person
would not be deemed a ``covered person'' if it qualifies for this
statutory exclusion and is not otherwise exempt from it. But CFPA
section 1027(l)(2) exempts certain activities from this statutory
exclusion by providing that ``the exclusion in [CFPA section
1027(l)(1)] does not apply to any activities not described in [CFPA
section 1027(l)(1)] that are the offering or provision of any consumer
financial product or service, or are otherwise subject to any
enumerated consumer law or any law for which authorities are
transferred under subtitle F or H.'' \147\ As proposed, persons
described in CFPA section 1027(l)(1) engaging in the activities
described therein would qualify as ``covered nonbanks'' so long as they
engage in any of the activities described in CFPA section 1027(l)(2),
and they would thus be subject to all of the information-collection
requirements of the rule applicable to ``covered nonbanks,'' regardless
of whether the applicable ``covered order'' addressed the conduct
subject to the statutory exclusion.
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\145\ 12 U.S.C. 5517.
\146\ 12 U.S.C. 5517(l)(1) (``Exclusion for Activities Relating
to Charitable Contributions'').
\147\ 12 U.S.C. 5517(l)(2).
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The Bureau is also considering whether it should adopt an
alternative approach that would limit all of the proposal's
registration requirements to covered persons that are subject to the
Bureau's supervision and examination authority under CFPA section
1024(a).\148\ The Bureau believes this approach would significantly
narrow the number of entities that would be required to register under
proposed subpart B, and therefore would also limit the information
provided to the NBR system. However, this alternative approach would
nevertheless provide significant benefits to the Bureau and other users
of the system. The Bureau would be able to use the information provided
to identify risk to consumers, to prioritize its supervisory
activities, and to support its other functions as described in this
proposal. In addition, the Bureau has a particular interest in those
supervised entities due to its exclusive Federal supervisory and
enforcement authority, with certain exceptions as described in the
CFPA.\149\ The Bureau seeks comment on this alternative approach,
including whether the proposed scope of the approach is appropriate and
why or why not.
---------------------------------------------------------------------------
\148\ 12 U.S.C. 5514(a).
\149\ See 12 U.S.C. 5514(c)(1), (d).
---------------------------------------------------------------------------
More generally, the Bureau seeks comment regarding the overall
scope of the proposed definition of ``covered nonbank,'' including
whether the definition should be expanded or limited in light of the
purposes and objectives of subpart B. The Bureau further seeks comment
on whether a more limited or expanded approach to the registration of
covered persons would be appropriate instead of the proposed
requirements, whether it should consider any other modifications to the
scope of the rule, and how such modifications would match the Bureau's
policy goals.
201(e) Covered Order
The Bureau proposes to add proposed Sec. 1092.201(e) to define the
term ``covered order.'' The proposal would define the term to include
only orders that are both public and final. The term ``public'' is
defined at proposed Sec. 1092.201(k). The proposed term ``covered
order'' is intended to cover only final settlement or consent orders,
or final agency or court orders resulting from litigation or
adjudicated agency proceedings. By ``final'' order, the proposal means
to exclude such orders as preliminary injunctions, temporary
restraining orders, orders partially granting and partially denying
motions to dismiss or summary-judgment motions, and other interlocutory
orders.\150\ The proposed term would also exclude temporary cease-and-
desist orders that come into effect pending the resolution of an
underlying contested matter but would include a related final cease-
and-desist or other order resolving the matter. The proposed term would
also exclude notices of charges, accusations, or complaints that are
part of disciplinary or enforcement proceedings but do not constitute a
final order. The Bureau proposes to include orders that are final by
their own terms or under applicable law, even where Federal, State, or
local law allows for the appeal of such orders. Proposed Sec.
1092.201(f), defining the term ``effective date,'' addresses situations
where an order is subject to a stay following issuance. The Bureau
seeks comment on whether the term ``final'' should be further defined
in the regulatory text. The Bureau also seeks comment on whether
certain types of non-final orders should be included in the proposed
definition of ``covered order,'' or whether the Bureau should consider
expressly excluding other types of orders.
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\150\ See, e.g., Gelboim v. Bank of Am. Corp., 574 U.S. 405,
408-09 (2015) (discussing the meaning of ``final decision'' under 28
U.S.C. 1291).
---------------------------------------------------------------------------
The proposed definition includes orders issued by either an agency
or a court. The proposal would clarify that the definition would
include an otherwise covered order whether or not issued upon consent.
Accordingly, ``covered orders'' may be issued upon consent or
settlement. They may also be issued after the filing of a lawsuit or
complaint and a process of litigation or adjudication. The proposed
term would not include corporate resolutions adopted by an entity and
not issued by an agency or court. Nor would the proposed term generally
include licenses, including conditional licenses; but the term would
include an order
[[Page 6110]]
suspending, conditioning, or revoking a license based on a violation of
law. Nor would the proposed term include related stipulations or
consents, where those documents are not incorporated into or otherwise
made part of the order. The Bureau seeks comment on whether certain
types of orders should be categorically excluded from registration.
Proposed Sec. 1092.201(e)(1) would also include, as a component of
the definition of the term ``covered order'' for a given covered
nonbank, a requirement that the order identify the covered nonbank by
name as a party subject to the order. Thus, for example, orders that
indirectly refer to a covered nonbank as an ``affiliate'' of a named
party, but do not name the covered nonbank as itself a party subject to
the order, would not be covered orders under proposed Sec. 1092.201(e)
with respect to the covered nonbank. Nor would orders that apply to a
covered nonbank only as a ``successor and assign'' of a named party,
where the order does not expressly identify the covered nonbank by name
as a party subject to the order. The proposal would include in the
definition a covered nonbank that is listed by name as a party
somewhere within the body of the order, even if the covered nonbank is
not listed in the order's title or caption. In other words, to fall
within the proposed Sec. 1092.201(e) definition, it would be
sufficient that the order identifies the covered nonbank by name as a
party subject to the order even if the covered nonbank is not listed in
the title or caption of the order, or as the primary respondent,
defendant, or subject of the order. A covered nonbank may satisfy the
proposed definition even if the issuing agency or court does not list
the covered nonbank as a party in related press releases or internet
links. The Bureau seeks comment on the scope of proposed Sec.
1092.201(e)(1)'s limitation of the definition of ``covered order,'' and
whether proposed Sec. 1092.201(e)(1) should also include affiliates,
successors and assigns, or other methods of identifying entities
subject to orders, even though they are not expressly named in the
order.
Proposed Sec. 1092.201(e)(2) would include, as a component of the
definition of the term ``covered order,'' a requirement that the order
have been issued at least in part in any action or proceeding brought
by any Federal agency, State agency, or local agency. The Bureau
believes that limiting the registration requirement to orders involving
such agencies will provide sufficient information to support Bureau
functions. This proposed requirement would include orders issued by the
Bureau itself, the ``prudential regulators,'' as that term is defined
at CFPA section 1002(24),\151\ and any ``Executive agency,'' as that
term is defined at 5 U.S.C. 105. The proposed requirement would also
include orders issued by ``State agencies'' as defined at proposed
Sec. 1092.201(n) and ``local agencies'' as defined at proposed Sec.
1092.201(i). An order issued by a local agency would satisfy this
proposed requirement, but such an order would not satisfy the
requirement set forth in proposed Sec. 1092.201(e)(4) (described
below) unless the order imposes the obligations described in proposed
Sec. 1092.201(e)(3) on the covered nonbank based on one or more
violations of a covered law. While certain Federal and State laws are
included in the Sec. 1092.201(c) definition of the term covered law,
local laws are not. The Bureau seeks comment on its use and
descriptions of the terms ``Federal agency,'' ``State agency,'' and
``local agency'' and whether the Bureau should consider excluding any
agencies as defined or, conversely, broadening these terms to include
other relevant agencies or entities.
---------------------------------------------------------------------------
\151\ 12 U.S.C. 5481(24).
---------------------------------------------------------------------------
Proposed Sec. 1092.201(e)(3) further would include, as a component
of the definition of the term ``covered order,'' a requirement that the
order contain public provisions that impose obligations on the covered
nonbank to take certain actions or to refrain from taking certain
actions. Such obligations may include, for example, injunctions or
other obligations to cease and desist from violations of the law; to
pay civil money penalties, refunds, restitution, disgorgement, or other
money; to amend certain policies and procedures, including but not
limited to instances where the order requires submission of the
proposed amendments to policies and procedures for nonobjection; to
maintain records or to provide them upon request; or to take or to
refrain from taking other actions. An order suspending, conditioning,
or revoking a license based on a violation of law would meet this
requirement. An order that lacks any public provision imposing such an
obligation on the covered nonbank would not meet the requirement in
proposed Sec. 1092.201(e)(3). An example of the type of orders that
might not satisfy this requirement would be a declaratory judgment
order finding that an entity has violated the law, but not imposing any
remedial obligations. Other examples might include orders whose only
public provisions are releases and general contractual terms frequently
contained in consent orders, such as severability and counterpart
signature provisions, but only to the extent these provisions do not
impose any other obligations described by proposed Sec.
1092.201(e)(3).
The proposed Sec. 1092.201(e)(3) requirement would exclude order
provisions that are not ``public'' as that term is defined in proposed
Sec. 1092.201(k). For example, obligations imposed by non-public
provisions that constitute confidential supervisory information of
another agency would not be considered when determining whether a
particular order satisfies this proposed requirement. Proposed Sec.
1092.201(e)(3) would also exclude orders that lack any public provision
imposing an obligation on the covered nonbank to take certain actions
or to refrain from taking certain actions. For example, an order that
describes unlawful conduct but does not contain any such public
provisions imposing obligations described at proposed Sec.
1092.201(e)(3) would not satisfy this requirement. The Bureau proposes
to exclude from the rule's information-collection requirements
nonpublic orders and portions of orders in order to help protect the
confidential processes of other agencies, including their supervisory
processes. The Bureau is concerned that requiring registration of
confidential supervisory information might interfere with the functions
and missions of other agencies and does not believe that requiring such
registration is necessary to accomplish the purposes of the proposed
rule. To the extent that the Bureau has a need to review nonpublic
orders or nonpublic portions of orders, it may seek access to relevant
information through inter-agency information sharing that protects
applicable privileges and confidentiality. In addition, as discussed
below in the section-by-section discussion of proposed Sec.
1092.201(k), the Bureau believes that publication of nonpublic
information, including but not limited to confidential supervisory
information of the Bureau or other agencies, would be inappropriate.
The Bureau requests comment on its proposed exclusion from the registry
of nonpublic orders and nonpublic portions of orders, including whether
these provisions would sufficiently protect confidential information of
other agencies, and whether covered nonbanks would have sufficient
information to comply with these provisions.
Proposed Sec. 1092.201(e)(4) would also include, as a component of
the definition of the term covered order, a requirement that the order
impose one
[[Page 6111]]
or more of the obligations described in proposed Sec. 1092.201(e)(3)
on the covered nonbank based on an alleged violation of a covered law.
A covered order need not include an admission of liability or any
particular factual predicate. The Bureau anticipates that agency and
court orders will vary widely in form and content, depending in part on
such matters as the relevant individual laws being enforced, the
historical practices of the various enforcement agencies, and the
negotiations and facts and circumstances underlying specific orders.
Because of these expected variations in form and content in the orders
that the Bureau would expect to be registered under the proposal, the
Bureau believes that requiring registration only of orders that contain
an admission of liability, or a statement setting forth certain types
of findings or other factual predicates underlying the order, would
omit relevant orders. The Bureau believes that an order that contains
neither an admission of liability nor a statement setting forth the
factual predicate underlying the order may nevertheless be probative of
risks to consumers of the type that the Bureau is obligated to monitor.
For purposes of this proposed definition, an obligation would be
``based on'' an alleged violation where the order identifies the
covered law in question, asserts or otherwise indicates that the
covered nonbank has violated it, and imposes the obligation on the
covered nonbank at least in part as a result of the alleged
violation.\152\ This would include, for example, obligations imposed as
``fencing-in'' or injunctive relief, so long as those obligations were
imposed at least in part as a result of the entity's violation of a
covered law. This element of the definition would also be satisfied,
for example, by any obligation imposed as part of other legal or
equitable relief granted with respect to the violation, as well as by
any obligation imposed in order to prevent, remedy, or otherwise
address a violation of a covered law, or the conditions resulting from
the violation. However, an order that does not identify a covered law
as at least one of the legal bases for the obligations it imposes on a
covered bank would not satisfy the requirement set forth at proposed
Sec. 1092.201(e)(4). An order may identify a covered law as a legal
basis for the obligations imposed by referencing another document, such
as a written opinion, stipulation, or complaint, that shows that a
covered law served as the legal basis for the obligations imposed in
the order. But the requirements of proposed Sec. 1092.201(e)(4) would
not be satisfied where the legal basis for the obligations imposed is
specified only in extrinsic documents not referenced in the order at
issue, such as a press release or blog post.
---------------------------------------------------------------------------
\152\ An obligation imposed based on multiple violations, some
of covered laws and some of other laws, would qualify as an
``obligation[ ] . . . based on an alleged violation of a covered
law'' within the meaning of proposed Sec. 1092.201(e)(4), even if
the violations of the non-covered laws would themselves have
sufficed to warrant the imposition of the obligation.
---------------------------------------------------------------------------
The Bureau seeks comment on whether the requirement articulated in
proposed Sec. 1092.201(e)(4) is appropriate, and whether it should be
expanded or restricted. The Bureau also seeks comment on whether this
requirement would exclude a material number of otherwise applicable
orders from the scope of proposed subpart B or would exclude otherwise
applicable orders because of a particular agency or court drafting
practice.
The Sec. 1092.201(e)(4) requirement would include an order issued
by an agency exercising any powers conferred on such agency by
applicable law to enforce a covered law, so long as the order imposes
one or more of the obligations described in proposed Sec.
1092.201(e)(4) on the covered nonbank based on an alleged violation of
a covered law. For example, certain Federal agencies may issue an order
predicated on violation of a Federal consumer financial law under the
authority of another enabling enforcement or licensing statute. Among
other examples, an appropriate Federal banking agency may issue orders
in connection with certain violations of Federal consumer financial law
under section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818),
the Administrator of the National Credit Union Administration may issue
such orders under the Federal Credit Union Act (12 U.S.C. 1751 et
seq.), and the Securities and Exchange Commission may issue such orders
under the Federal securities laws. Such an order issued in connection
with violations of Federal consumer financial law would satisfy the
requirement set forth in proposed Sec. 1092.201(e)(4) in cases where
the order imposes the obligations described in proposed Sec.
1092.201(e)(3) on the covered nonbank based on one or more violations
of Federal consumer financial law (or another covered law).
Other agencies also may rely upon their enforcement authorities
under other laws in issuing orders in connection with violations of FTC
Act section 5 (and rules and orders issued thereunder). For example, an
appropriate Federal banking agency may issue orders in connection with
violations of FTC Act section 5 by relying on its enforcement
authorities under section 8 of the Federal Deposit Insurance Act (12
U.S.C. 1818). Such an appropriate Federal banking agency order would
satisfy the requirement set forth in proposed Sec. 1092.201(e)(4) in
cases where the order imposes the obligations described in proposed
Sec. 1092.201(e)(3) on the covered nonbank based on one or more
violations of the prohibition on unfair or deceptive acts or practices
under FTC Act section 5 (or a rule or order issued for the purpose of
implementing that prohibition) or another covered law. The order would
satisfy the requirement provided in proposed Sec. 1092.201(e)(4) even
though the FTC Act does not expressly authorize the federal banking
agencies to enforce FTC Act section 5.
Similarly, an obligation is ``based on'' an alleged violation of a
covered law where: (i) a State agency issues an order pursuant to
certain State statutes that treat violations of Federal or State laws
as violations of the State statute; \153\ and (ii) the order (or, as
discussed above, an extrinsic document referenced in the order) states
that one or more violations of a covered law (e.g., a Federal consumer
financial law) served as the legal basis for imposing the obligations
under such statute. In such cases, while the majority of these State
laws do not themselves qualify as covered laws under proposed subpart
B--and therefore are not captured in appendix A--the underlying law
violation does so qualify. The Bureau believes including such instances
is important, as it understands that State agencies sometimes issue
orders in connection with violations of Federal consumer financial law
relying on their authorities under these State licensing and other
statutes that do not themselves satisfy the definition of covered law.
Importantly, however, such an order would not meet the proposed
definition of ``covered order'' unless the order itself (or, as
discussed above, an extrinsic document referenced in the order) states
that a covered law served as the legal basis for the obligations
imposed in the order. A State order that relied upon such a statute,
but that did not identify a covered law as the legal basis for the
obligations imposed thereunder, would not satisfy the requirement set
forth in proposed Sec. 1092.201(e)(4).\154\ Nor would an order
[[Page 6112]]
that imposed obligations solely based on violations of other laws, even
laws that are analogous to covered laws but do not themselves qualify
as covered laws under proposed subpart B. This requirement is intended
to capture only orders that impose obligations based upon an agency's
or court's determination that the applicable covered nonbank has
actually violated the covered law itself.
---------------------------------------------------------------------------
\153\ See, e.g., Wash. Rev. Code sec. 19.146.0201(11).
\154\ The obligations imposed in an order issued or obtained by
a State agency under a State law that incorporates Federal law may
be ``based on'' an alleged violation of Federal consumer financial
law under proposed Sec. 1092.201(e)(4), even if the Federal
consumer financial law itself does not expressly authorize that
State agency to enforce it. So long as the State agency states that
the relevant order provisions are based on one or more violations of
the Federal consumer financial law, it would be a covered order
under the proposed definition.
---------------------------------------------------------------------------
The Bureau seeks comment on this aspect of the term ``covered
order,'' including the interaction between covered laws and related
statutes providing for administrative enforcement, and whether these
definitions should be modified to serve the identified purposes of the
proposed rule. The Bureau also seeks comment on whether there may be
alternative methods of identifying whether obligations contained in an
order are ``based on'' a violation of a covered law.
Under proposed Sec. 1092.201(e)(5), the proposal would also define
``covered order'' to mean an order that has an effective date on or
later than January 1, 2017. The Bureau believes that limiting the
registration requirement to orders with more recent effective dates
will provide sufficient information to support Bureau functions. Many
orders issued by Federal, State, and local agencies do not have
expiration dates or do not expire until after the passage of many
years. While the Bureau believes that many earlier-in-time orders
remain highly probative of ongoing risks to consumers and could assist
the Bureau in carrying out its market monitoring obligations--as well
as assist the Bureau in assembling an effective nonbank registry--the
Bureau preliminarily concludes that considerations of administrative
efficiency favor focusing on orders issued within approximately the
first several years preceding any final rule. The Bureau seeks comment
on this proposed approach.
Finally, proposed Sec. 1092.201(e) would provide that the term
``covered order'' would not include an order issued to a motor vehicle
dealer that is predominantly engaged in the sale and servicing of motor
vehicles, the leasing and servicing of motor vehicles, or both, within
the meaning of CFPA section 1029(a),\155\ except to the extent such
order is in connection with the functions that are excepted from the
application of CFPA section 1029(a) as described in CFPA section
1029(b).\156\ This provision would exclude certain orders issued to
motor vehicle dealers that are described in CFPA section 1029(a), and
would incorporate the definitions provided at CFPA section
1029(f).\157\ CFPA 1029(a) establishes a statutory exclusion from the
Bureau's authority; CFPA section 1029(b) excepts certain functions of
motor vehicle dealers from that exclusion.\158\ An order that is issued
to a motor vehicle dealer that relates to the functions described in
section 1029(a)--that is, the sale and servicing of motor vehicles, the
leasing and servicing of motor vehicles, or both--generally would not
be a ``covered order'' under this proposed definition. However, if the
order related at least in part to a function excepted from the
application of CFPA section 1029(a) as described in CFPA section
1029(b), this limitation would not apply, and the order would qualify
as a ``covered order.'' The functions described in 1029(b) include:
``provid[ing] consumers with any services related to residential or
commercial mortgages or self-financing transactions involving real
property;'' ``operat[ing] a line of business--(A) that involves the
extension of retail credit or retail leases involving motor vehicles;
and (B) in which--(i) the extension of retail credit or retail leases
are provided directly to consumers; and (ii) the contract governing
such extension of retail credit or retail leases is not routinely
assigned to an unaffiliated third party finance or leasing source;''
and ``offer[ing] or provid[ing] a consumer financial product or service
not involving or related to the sale, financing, leasing, rental,
repair, refurbishment, maintenance, or other servicing of motor
vehicles, motor vehicle parts, or any related or ancillary product or
service.'' \159\
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\155\ 12 U.S.C. 5519(a).
\156\ 12 U.S.C. 5519(b).
\157\ 12 U.S.C. 5519(f).
\158\ 12 U.S.C. 5519(a), (b).
\159\ 12 U.S.C. 5519(b).
---------------------------------------------------------------------------
Whereas the Bureau is confident that orders issued to nonbank
covered persons involving conduct that is the subject of a CFPA section
1027 exclusion generally will be probative of risks to consumers in
connection with conduct by such person that is not excluded under
section 1027, the Bureau is less certain that the same is true with
respect to orders issued to persons identified in section CFPA section
1029(a) involving conduct beyond the functions described in section
1029(b). To be sure, orders issued solely in connection with section
1029(a) conduct may nevertheless reflect upon a motor vehicle dealer's
compliance systems and procedures and otherwise indicate potential risk
to consumers that the Bureau might address through its authority as
provided in 1029(b). But the Bureau is less certain that this is
generally the case, given the nature and scope of the section 1029(a)
exclusion relative to its exemptions under 1029(b). Notwithstanding
this limitation, the Bureau is proposing to collect information
regarding orders that relate to the functions conducted by motor
vehicle dealers that are within the Bureau's jurisdiction under section
1029(b). The Bureau seeks comment on this limitation in the proposed
definition of ``covered order,'' including any reasons why orders
issued to motor vehicle dealers should or should not be covered.
201(f) Effective Date
The proposal would define the term ``effective date'' to mean, in
connection with a covered order, the effective date as identified in
the covered order; however, if no other effective date is specified,
then the date on which the covered order was issued would be treated as
the effective date for purposes of subpart B. The Bureau anticipates
that the effective date for many covered orders will be evident from
the face of the order, and in nearly all cases should be relatively
easy to identify. The Bureau seeks comment on whether this definition
would be sufficient to identify effective dates for covered orders.
Proposed Sec. 1092.201(f) would also provide that if the issuing
agency or a court stays or otherwise suspends the effectiveness of the
covered order, the effective date shall be delayed until such time as
the stay or suspension of effectiveness is lifted. Thus, the
registration obligations under proposed subpart B would also be delayed
accordingly. The Bureau anticipates that such situations would be rare
and seeks comment on whether this proposal would adequately address
them.
201(g) Identifying Information
Proposed Sec. 1092.201(g) would define the term ``identifying
information.'' This term would describe the scope of identifying
information a covered nonbank may be required to submit pursuant to
proposed Sec. 1092.202(c). Proposed Sec. 1092.201(g) would limit this
information to information that is already available to the covered
nonbank, and which uniquely identifies the covered nonbank. As
described in
[[Page 6113]]
proposed Sec. 1092.201(g), this information would include, to the
extent already available to the covered nonbank, legal name, State of
incorporation or organization, principal place of business address, and
any unique identifiers issued by a government agency or standards
organization. Examples of the latter identifiers that entities might be
required to provide under proposed Sec. 1092.202(c) would include an
NMLS identifier, a Home Mortgage Disclosure Act (HMDA) Reporter's
Identification Number, the Legal Entity Identifier (LEI) issued by a
utility endorsed by the LEI Regulatory Oversight Committee or endorsed
or otherwise governed by the Global LEI Foundation (GLEIF, or any
successor of the GLEIF),\160\ and a Federal Tax Identification number.
---------------------------------------------------------------------------
\160\ See 12 CFR 1003.4(a)(1)(i)(A) (addressing LEIs).
---------------------------------------------------------------------------
This information will help the Bureau identify covered nonbanks
with specificity, including ensuring that the Bureau can identify
covered nonbanks' submissions to other registries and databases where
applicable, such as the NMLS, and HMDA submissions. Furthermore, upon
publication, this information will facilitate the ability of consumers
to identify covered persons that are registered with the Bureau. The
proposal would not require the entity to obtain an identifier. Thus,
for example, if the NBR system were to ask about a particular type of
identifier and that type of identifier had not been assigned to the
covered nonbank, then under the proposal, the covered nonbank would be
able to indicate the identifier is not applicable. The Bureau seeks
comment on these proposed types of identifying information, and other
types of identifying information that the NBR system might collect and
publish.
201(h) Insured Depository Institution
The proposal would define the term ``insured depository
institution'' to have the same meaning as in 12 U.S.C. 5301(18)(A).
Section 5301(18)(A), in turn, incorporates the meaning of ``insured
depository institution'' provided in section 3 of the Federal Deposit
Insurance Act, 12 U.S.C. 1813.\161\
---------------------------------------------------------------------------
\161\ See 12 U.S.C. 1813(c)(2) (defining ``insured depository
institution'' as ``any bank or savings association the deposits of
which are insured by the [Federal Deposit Insurance] Corporation
pursuant to this chapter'').
---------------------------------------------------------------------------
201(i) Local Agency
The proposal would define the term ``local agency'' to mean a
regulatory or enforcement agency or authority of a county, city
(whether general law or chartered), city and county, municipal
corporation, district, or other political subdivision of a State, other
than a State agency. The term would not include State agencies.
The Bureau proposes to require registration in connection with
applicable orders issued or obtained by local agencies. The Bureau
understands that local agencies do issue or obtain public orders under
covered laws.\162\ For the reasons described above with respect to
orders issued by Federal and State agencies, the Bureau believes that
such orders may indicate risk to consumers, and that obtaining
information about these orders will support Bureau functions. The
Bureau seeks comment on including local agency orders in the proposal
and whether any aspects of local agency orders may require adjustments
or tailoring of the registration requirements.
---------------------------------------------------------------------------
\162\ See, e.g., Cal. Bus. & Prof. Code sec. 17204 (authorizing
enforcement of Cal. Bus. & Prof. Code sec. 17200 by certain county
counsel and city attorneys).
---------------------------------------------------------------------------
201(j) Order
The proposal would define the term ``order'' to include any written
order or judgment issued by an agency or court in an investigation,
matter, or proceeding. The term would include orders or judgments
issued after trials or agency hearings. It would also include default
judgments or orders issued after an entity fails to properly respond to
charges or claims made against it. In addition, it would include orders
or judgments issued to resolve matters without the need for further
litigation, including stipulated or consent orders, decrees, or
judgments, as well as settlements, multistate settlements, or
assurances of discontinuances embodied in orders or judgments issued by
agencies or courts. Furthermore, the term would include cease-and-
desist orders and orders suspending, conditioning, or revoking a
license based on a violation of law. The proposed definition would also
include legally enforceable written agreements under sections 8 and 50
of the Federal Deposit Insurance Act \163\ or any State counterparts.
The Bureau seeks comment on this definition, including whether any of
these types of orders do not merit registration, and whether any other
types of orders should be included in the definition.
---------------------------------------------------------------------------
\163\ 12 U.S.C. 1818, 1831aa.
---------------------------------------------------------------------------
The proposed definition of the term ``order'' would include an
order or judgment issued by one agency or a single order or judgment
jointly issued by multiple agencies. However, where more than one
agency issues a distinct order under its own authority, or a court
issues distinct orders with respect to the different parties in
connection with various actions or proceedings, even where the orders
involve the same subject matter or laws, each order would be considered
to be a separate order under the proposed definition. The Bureau seeks
comment on whether additional detail would be useful in applying the
proposed definition.
201(k) Public
The proposal would define the term ``public'' to mean, with respect
to a covered order or any portion thereof, published by the issuing
agency or court, or required by any provision of Federal or State law,
rule, or order to be published by the issuing agency or court. The
proposal would clarify that the term ``public'' does not include orders
or portions of orders that constitute confidential supervisory
information of any Federal or State agency.
The proposed term would include orders that are actually published
by the issuing agency or court, as well as orders that are required by
any provision of Federal or State law, rule, or order to be published
by the issuing agency or court. For example, section 8(u) of the
Federal Deposit Insurance Act \164\ requires the publication of certain
types of Federal banking agency orders. The proposed definition is
intended to include those orders, as well as those required to be
published by any other similar Federal or State law.
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\164\ 12 U.S.C. 1818(u).
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Under the proposal, an order would only be ``public'' if it has
been released or disseminated (or is required to be released or
disseminated) in a manner such that the order is accessible by the
general public--for example, by posting the order on a publicly
accessible website or by publishing it in a written format generally
available to members of the public. The proposed term, however, would
not include documents that are not made generally available but are
disclosed to specific persons, such as in response to Federal or State
Freedom of Information Act or open records law requests or as part of
litigation discovery proceedings. Under the proposal, an order also
would only qualify as ``public'' if it is published (or required to be
published) ``by the issuing agency or court.'' Therefore, independent
publication by a third party, such as publication that may occur in
connection with a covered person's securities disclosures, would not
make an order ``public'' within the
[[Page 6114]]
meaning of the proposal.\165\ The Bureau does not anticipate that
requiring registration of orders disclosed only through such methods as
freedom-of-information requests or securities disclosures would
materially improve the quantity and quality of the information provided
to the NBR system. To the contrary, the Bureau anticipates that third-
party disclosures in the securities context, or pursuant to freedom-of-
information requests, may sometimes fail to capture all significant
aspects of an order. The Bureau is also concerned that if such types of
disclosures were included in the final rule, subpart B's registration
requirements might affect an entity's decisions regarding securities or
litigation disclosures in a manner not intended by the Bureau.
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\165\ By contrast, an order would qualify as ``public'' where
the issuing agency or court makes the order available to a third-
party printing service or reporter for the purpose of publishing the
order in a publicly available format.
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The Bureau seeks comment as to whether the term ``public'' should
also include other types of disclosures, in addition to those proposed.
The proposed term would exclude orders or portions of orders that
constitute confidential supervisory information of any Federal or State
agency. The Bureau is concerned that requiring registration and
disclosure of confidential supervisory information might interfere with
the functions and missions of other agencies and does not believe that
requiring such registration and disclosure is necessary to accomplish
the purposes of the proposed rule. Such agencies may rely on
confidential communications with covered nonbanks in order to, for
example, foster full cooperation between those institutions and their
regulators and to protect those institutions and the public from harm
that could result from the disclosure of agency concerns regarding the
integrity and security of these institutions.\166\ The proposed
definition would therefore expressly exclude confidential supervisory
information. Where an order is not clearly marked or otherwise
designated by the regulator as confidential supervisory information,
the Bureau would expect the entity to have confirmed the confidential
supervisory information status of any order or portion of an order with
its regulator before relying on that status in connection with subpart
B's registration requirements.
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\166\ The Bureau has considered requiring covered nonbanks to
submit to the Bureau portions of orders that constitute confidential
supervisory information under proposed Sec. 1092.202, but then
exempting those confidential portions from publication under
proposed Sec. 1092.204. The Bureau, however, has preliminarily
concluded that the administrative burden associated with
implementing such an approach likely outweighs the advantage of
collecting such confidential portions of orders under the proposed
rule. The Bureau notes that it can use other mechanisms to obtain
confidential supervisory information from other regulators in
appropriate cases.
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201(l) Registered Entity
The proposal would define the term ``registered entity'' to mean
any person registered or required to be registered under proposed
subpart B. Entities that fail to comply with a requirement to register
under proposed subpart B would nonetheless still be subject to all of
the requirements applicable to registered entities under proposed
subpart B. If such an entity would be a supervised registered entity,
it would also be subject to the requirements applicable to a supervised
registered entity under proposed subpart B.
201(m) Remain(s) In Effect
The proposal would define the terms ``remain in effect'' and
``remains in effect'' to mean, with respect to any covered order, that
the covered nonbank remains subject to public provisions that impose
obligations on the covered nonbank to take certain actions or to
refrain from taking certain actions based on an alleged violation of a
covered law.
Proposed Sec. 1092.202(a) would use this proposed term in defining
the scope of proposed section 202's registration requirement. Proposed
Sec. 1092.202(f) would use this proposed term in specifying when a
covered nonbank would be required to submit a final filing to the NBR
system and would be permitted to cease updating its registration
information and filing written statements with respect to a covered
order.
201(n) State Agency
The proposal would define the term ``State agency'' to mean the
attorney general (or the equivalent thereof) of any State and any other
State regulatory or enforcement agency or authority. The Bureau intends
this definition to encompass all State government officials and
regulators authorized to bring actions to enforce any covered law,
including actions to enforce the CFPA's provisions or regulations
issued under the CFPA pursuant to CFPA section 1042(a)(1).\167\ The
Bureau seeks comment regarding whether its proposed definition is
sufficiently expansive to accomplish this objective. The term would
also include regulatory or enforcement agencies of certain tribal
governments that are included in the CFPA's definition of the term
``State.'' \168\
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\167\ 12 U.S.C. 5552(a)(1).
\168\ See 12 U.S.C. 5481(27) (defining ``State'' to include
``any federally recognized Indian tribe, as defined by the Secretary
of the Interior under'' 25 U.S.C. 5131(a)).
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The Bureau also seeks comment on whether and to what extent (if
any) the proposed definition should be limited.
201(o) Supervised Registered Entity
The proposal would define the term ``supervised registered entity''
to mean a registered entity that is subject to supervision and
examination by the Bureau pursuant to CFPA section 1024(a),\169\ with
certain exceptions.\170\ The CFPA authorizes the Bureau to require
reports and conduct examinations of certain persons, as described in
CFPA section 1024(a)(1)(A)-(E); the proposed term would refer to a
registered entity that is subject to supervision and examination by the
Bureau pursuant to any of those provisions.\171\
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\169\ 12 U.S.C. 5514(a).
\170\ An affiliate of an insured depository institution that is
subject to examination and supervision by the Bureau under 12 U.S.C.
5515(a) would not be included in the proposed definition of
supervised registered entity, where the affiliate is not subject to
examination and supervision by the Bureau under 12 U.S.C. 5514(a).
See 12 U.S.C. 5514(a)(3)(A) (providing that 12 U.S.C. 5514 shall not
apply to persons described in 12 U.S.C. 5515(a) or 5516(a)).
\171\ The proposal would not increase the number of entities
subject to Bureau examinations or otherwise modify the scope of the
Bureau's supervisory jurisdiction.
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For purposes of proposed Sec. 1092.201(o), the proposal would
clarify that the term ``subject to supervision and examination by the
Bureau pursuant to CFPA section 1024(a)'' would include an entity that
qualifies as a larger participant of a market for consumer financial
products or services under any rule issued by the Bureau pursuant to
CFPA section 1024(a)(1)(B) and (a)(2) (providing Bureau supervisory
authority over larger participants in certain markets as defined by
Bureau rule), or that is subject to an order issued by the Bureau
pursuant to CFPA section 1024(a)(1)(C) (providing Bureau supervisory
authority over certain nonbank covered persons based on risk
determination). The Bureau is proposing this language in 1092.201(o)(2)
only to clarify and make express that such persons would be included in
the proposed definition of the term supervised registered entity. The
Bureau is not proposing by means of this language to limit the scope of
the term ``supervised registered entity.''
Under the proposed definition of ``supervised registered entity,''
the
[[Page 6115]]
Bureau need not have previously exercised its authority to require
reports from, or conduct examinations of, a particular registered
entity for that entity to qualify as a supervised registered entity. A
registered entity would qualify as a supervised registered entity if
the Bureau could require reports from, or conduct examinations of, that
entity because it is a person described in CFPA section 1024(a)(1).
Such an entity would be ``subject to supervision and examination''
within the meaning of the proposal even if the Bureau has never
previously exercised its authority to require reports or conduct
examinations with respect to that entity.
Persons would be subject to the proposal's requirements applicable
to ``supervised registered entities'' so long as they satisfy the
proposed definition of that term. The Bureau recognizes that certain
entities may, in certain circumstances, satisfy the definition only for
a limited period of time. For example, an entity's activity levels may
change in such a manner as to cause the entity to cease to qualify as a
larger participant of a market for consumer financial products and
services as defined by CFPA section 1024(a)(1)(B) and 12 CFR part
1090,\172\ or an entity may cease to be a person subject to Bureau
supervision under CFPA section 1024(a)(1)(C) and 12 CFR part 1091.\173\
An entity would be required to comply with the proposal's requirements
applicable to ``supervised registered entities'' so long as it
qualifies as such an entity, but not once it ceases to so qualify.
Thus, for example, depending upon the timing of events, a supervised
registered entity might be required to register with, and submit
information to, the NBR system under proposed Sec. 1092.202 but not
subsequently submit a written statement under proposed Sec. 1092.203
if it ceases to qualify as a supervised registered entity before Sec.
1092.203(d)'s submission deadline.
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\172\ Such a determination would be made under the provisions of
12 CFR part 1090. See, e.g., 12 CFR 1090.102 (providing that ``[a]
person qualifying as a larger participant under subpart B of [12 CFR
part 1090] shall not cease to be a larger participant under [12 CFR
part 1090] until two years from the first day of the tax year in
which the person last met the applicable test under subpart B'').
\173\ Such a determination would be made under the provisions of
12 CFR part 1091. See, e.g., 12 CFR 1091.113 (regarding petitions
for termination of an order issued under 12 CFR 1091.109).
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The Bureau believes that applying proposed Sec. 1092.203's
requirements to supervised registered entities so long as they satisfy
the proposed definition of that term, even if they do so for limited
periods of time, would serve its goals in imposing such requirements,
as described above in section IV(D). The Bureau does not believe that
it should exempt, or otherwise distinguish for purposes of the
proposal, entities that are subject to supervision under CFPA section
1024(a) for limited periods of time. The Bureau believes that it is
important to obtain reports from such supervised registered entities
under proposed Sec. 1092.203 for the reasons discussed above in
section IV(D), including to ensure they are legitimate entities and
able to perform their obligations to consumers, to detect and assess
risks to consumers related to entities subject to Bureau supervision,
and to facilitate its assessments in connection with its risk-based
supervisory program under CFPA section 1024(b)(2). In addition,
requiring regular submission of written statements from such entities
would assist the Bureau in determining whether the entity should
continue to be subject to Bureau supervision under CFPA section
1024(a)(1)(C), for example. However, the Bureau preliminarily concludes
that obtaining such written statements from entities that are no longer
subject to the Bureau's supervision and examination authority under
CFPA section 1024(a) is not necessary to serve these purposes.
The Bureau seeks comment on its approach to persons whose
supervisory status may vary over time. In particular, the Bureau seeks
comment on whether to finalize an alternative arrangement whereby a
qualifying entity would be deemed a supervised registered entity for
purposes of the proposed rule for some set period of time--for example,
for the remainder of the calendar year following a change in supervised
entity status. The Bureau also seeks comment on an alternative
arrangement that would permit individual entities to petition the
Bureau for individualized treatment, or that would provide for specific
and individual consideration regarding subjecting such entities to the
proposal's reporting requirements.
The Bureau's proposed approach to applying the term ``supervised
registered entity'' would also extend to the recordkeeping requirements
proposed in Sec. 1092.203(e). Proposed Sec. 1092.203(e) would require
a supervised registered entity to maintain certain documents and other
records for five years after the submission of a written statement is
required, and to make such documents and other records available to the
Bureau upon request. Once a supervised registered entity ceases to
qualify as a supervised registered entity under proposed Sec.
1092.201(o), it would no longer be subject to Sec. 1092.203(e)'s
requirement to maintain and provide such records. (The entity may
nevertheless be subject to other requirements to maintain and provide
such records, where such requirements are imposed by Federal consumer
financial law or other applicable law.) If, because of a change in
circumstances, the entity later once again qualifies as a supervised
registered entity, the entity would once again become subject to
proposed Sec. 1092.203(e)'s recordkeeping requirement, but only as to
conduct undertaken to comply with Sec. 1092.203 that occurs after the
entity requalifies as a supervised registered entity. The Bureau seeks
comment on the proposed recordkeeping requirements for such entities.
The proposal would provide that the term ``supervised registered
entity'' would not include a service provider that is subject to Bureau
examination and supervision solely in its capacity as a service
provider and that is not otherwise subject to Bureau supervision and
examination. CFPA section 1024(e) authorizes the Bureau to exercise
supervisory authority with respect to a service provider to a person
described in CFPA section 1024(a)(1).\174\ CFPA sections 1025(d) and
1026(e) authorize the Bureau to exercise supervisory authority with
respect to certain other service providers.\175\ This provision of the
proposed definition clarifies that the term ``supervised registered
entity'' would not include a registered entity that is subject to
Bureau examination and supervision solely in its capacity as a service
provider under any of these provisions. However, the term supervised
registered entity would include a registered entity if the registered
entity is otherwise subject to Bureau supervision and examination under
CFPA section 1024(a)--i.e., if the registered entity is a person that
is described in CFPA section 1024(a)(1)--even if the registered entity
is also a service provider for some purposes under the CFPA.\176\ The
Bureau preliminarily concludes that, at least in the first instance,
the requirements set forth in proposed Sec. 1092.203 are best directed
at persons described in CFPA section 1024(a). The Bureau believes that
it can achieve the anticipated benefits described above without
extending its coverage to service providers subject to supervision
under CFPA section 1024.
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\174\ 12 U.S.C. 5514(e).
\175\ 12 U.S.C. 5515(d), 5516(e).
\176\ As discussed above, entities that are service providers
may nevertheless also be covered persons under the CFPA.
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Proposed Sec. 1092.201(o)(2) would provide that the term
``supervised
[[Page 6116]]
registered entity'' would not include a motor vehicle dealer that is
predominantly engaged in the sale and servicing of motor vehicles, the
leasing and servicing of motor vehicles, or both, within the meaning of
12 U.S.C. 5519(a), except to the extent such a person engages in
functions that are excepted from the application of CFPA section
1029(a) as described in CFPA 1029(b).\177\ Proposed Sec. 1092.201(e),
discussed above, would further provide that the only orders issued to
such motor vehicle dealers that would subject the dealer to the
requirements of proposed Sec. Sec. 1092.202 and 1092.203 would be
those issued in connection with the functions that are excepted from
the application of CFPA section 1029(a) as described in CFPA 1029(b).
The Bureau generally seeks comment on this proposed limitation.
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\177\ 12 U.S.C. 5519 (``Exclusion for Auto Dealers''). Also, as
with other supervised registered entities, the motor vehicle dealer
would only qualify as a ``supervised registered entity'' if it were
subject to the Bureau's supervisory jurisdiction under 12 U.S.C.
5514(a). Technically, the exclusion in proposed Sec. 1092.201(o)(2)
should be unnecessary because it is identical to the proposed
exclusion from the definition of ``covered nonbank'' in proposed
Sec. 1092.201(d)(4), and only covered nonbanks can qualify as
supervised registered entities. Nevertheless, the Bureau has
proposed Sec. 1092.201(o)(2) to reiterate that the exclusion
described in proposed Sec. 1092.201(d)(4) also limits which
entities qualify as ``supervised registered entities.''
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Proposed Sec. 1092.201(o)(3) would provide that the term
``supervised registered entity'' would not include a person that
qualifies as a covered person based solely on conduct that is the
subject of, and that is not otherwise exempted from, an exclusion from
the Bureau's supervisory authority under CFPA section 1027.\178\ This
proposed component of the term ``supervised registered entity'' would
be similar to a component in the proposed definition of the term
``covered nonbank,'' as discussed in more detail in the section-by-
section discussion of proposed Sec. 1092.201(d), above. However, while
proposed Sec. 1092.201(d) would describe exclusions from the Bureau's
rulemaking authority, proposed Sec. 1092.201(o)(3) would describe
exclusions from the Bureau's supervisory authority. This provision
would clarify that persons excluded from the supervisory authority of
the Bureau under one or more of the provisions of section 1027 of the
CFPA would not be ``supervised registered entities.'' However, where
the CFPA provides that any of the activities engaged in by such persons
are subject to the Bureau's supervisory authority, this limitation
would not exclude the person from qualifying as a ``supervised
registered entity.'' For example, CFPA section 1027(l)(1) provides an
exclusion from the Bureau's supervisory authority for certain persons
engaging in certain activities relating to charitable
contributions.\179\ Under the proposal, a person would not be deemed a
``supervised registered entity'' if it qualifies for this statutory
exclusion and is not otherwise exempt from it. But CFPA section
1027(l)(2) exempts certain activities from this statutory exclusion by
providing that ``the exclusion in [CFPA section 1027(l)(1)] does not
apply to any activities not described in [CFPA section 1027(l)(1)] that
are the offering or provision of any consumer financial product or
service, or are otherwise subject to any enumerated consumer law or any
law for which authorities are transferred under subtitle F or H.''
\180\ Under proposed Sec. 1092.201(o), an entity described in CFPA
section 1027(l)(1) engaging in the activities described therein would
qualify as a ``supervised registered entity'' so long as it also
engages in any of the activities described in CFPA section 1027(l)(2).
And, as a ``supervised registered entity'' under the proposed Sec.
1092.201(o), such entity would be subject to all of proposed Sec.
1092.203's requirements applicable to ``supervised registered
entities'' with respect to any ``covered order,'' regardless of whether
the applicable ``covered order'' addressed conduct subject to the
statutory exclusion in CFPA section 1027(l)(1). The Bureau generally
seeks comment on this proposed limitation.
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\178\ 12 U.S.C. 5517.
\179\ 12 U.S.C. 5517(l)(1) (``Exclusion for Activities Relating
to Charitable Contributions'').
\180\ 12 U.S.C. 5517(l)(2).
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Finally, proposed Sec. 1092.201(o)(4) would provide that the term
``supervised registered entity'' would not include a person with less
than $1 million in annual receipts. The exclusion would be based on the
receipts resulting from offering or providing all consumer financial
products and services described in CFPA section 1024(a).\181\ The
Bureau proposes to define the term ``annual receipts'' to have the same
meaning as it has in Sec. 104(a) at part 1090 of the Bureau's
regulations, including the provisions of that definition at Sec.
104(a)(i) regarding receipts, Sec. 104(a)(ii) regarding period of
measurement, and Sec. 104(a)(iii) regarding annual receipts of
affiliated companies.\182\ The Bureau is proposing the exclusion in
proposed Sec. 1092.201(o) for two reasons. First, providers of
consumer financial products and services with significantly lower
levels of receipts generally pose lower risks because they engage with
fewer consumers, obtain less money from those consumers, or both.
Second, the information collection burdens on entities with receipts of
$1 million or less, on a relative basis, generally would be higher than
for larger entities.
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\181\ 12 U.S.C. 5514(a).
\182\ 12 CFR 1090.104(a).
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The proposed exclusion from the definition of ``supervised
registered entity'' based on volume of annual receipts would also be
consistent with the CFPA's requirement that the Bureau take entity size
into account as part of its risk-based supervision program.\183\
Accordingly, the Bureau is proposing to exclude persons with less than
$1 million in annual receipts from the proposed annual reporting
requirements applicable to supervised registered entities under
proposed Sec. 1092.203.
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\183\ See 12 U.S.C. 5514(b)(2)(A), (B) (requiring the Bureau to
take into consideration ``the asset size of the covered person'' and
``the volume of transactions involving consumer financial products
or services in which the covered person engages''). Furthermore,
while the Bureau does not believe that it needs to rely on its
authority under 12 U.S.C. 5512(b)(3) to exempt classes of covered
persons from rules in proposing this small-entity exclusion, the
Bureau believes that the exclusion would be warranted as an exercise
of its section 1022(b)(3) exemption authority, to the extent that
provision was applicable. See 12 U.S.C. 5512(b)(3). As under 12
U.S.C. 5514(b)(2), an entity-size-based exclusion accords with 12
U.S.C. 5512(b)(3)(B)(i) and (ii), which instruct the Bureau to
consider ``the total assets of the class of covered persons'' and
``the volume of transactions . . . in which the class of covered
persons engage'' in issuing exemptions. 12 U.S.C. 5512(b)(3)(B)(i)-
(ii). In addition, given the relatively limited scope of the harm to
consumers that entities with annual receipts not exceeding $1
million would generally be able to cause, the Bureau does not
believe that the factor articulated in 12 U.S.C. 5512(b)(3)(B)(iii)
(``existing provisions of law which are applicable to the consumer
financial product or service and the extent to which such provisions
provide consumers with adequate protection'') weighs against
adopting the proposed small-entity exclusion.
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However, the Bureau is not proposing to exclude such smaller
entities from the information-collection requirements provided in
proposed Sec. 1092.202. The Bureau believes that the limited burden
that would be imposed on such entities due to such information-
collection requirements would be warranted in light of the market-
monitoring benefits to the Bureau and other users of the NBR system, as
discussed elsewhere in this proposal. The Bureau could evaluate the
need for additional supervisory attention related to a smaller
supervised nonbank based on its submissions under proposed Sec.
1092.202 and any additional information at its disposal. As discussed
above in section IV and the section-by-section discussion of proposed
Sec. 1092.202, those submissions would provide additional information
relevant to the Bureau's
[[Page 6117]]
assessments of risk in connection with its prioritization efforts under
CFPA section 1024(b)(2).\184\
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\184\ 12 U.S.C. 5514(b)(2).
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The Bureau seeks comment on the scope of the proposed definition,
including the proposed exclusions.
Section 1092.202 Registration and Submission of Information Regarding
Covered Orders
Proposed Sec. 1092.202 would require covered nonbanks to register
with the NBR system by timely submitting information to the NBR system
regarding covered orders. The proposed section would establish
requirements regarding the timing and content of information to be
submitted.
The Bureau believes that requiring covered nonbanks to register
with the NBR system would further the objectives of proposed subpart B
even in the event the Bureau were not to finalize proposed requirements
that supervised registered entities submit written statements as
described in proposed Sec. 1092.203. Proposed Sec. 1092.202 would
apply to a broader set of entities than would proposed Sec. 1092.203,
and the Bureau believes that requiring registration of entities under
proposed Sec. 1092.202 would provide independent benefit to the Bureau
and to consumers.
202(a) Scope of Registration Requirement
Proposed Sec. 1092.202(a) defines the scope of the registration
requirement. To maximize the value of subpart B's registration
requirements, while taking into consideration administrative costs to
the Bureau and covered nonbanks in keeping the registry updated, the
Bureau proposes to limit Sec. 1092.202 to covered orders (as that term
is defined at proposed Sec. 1092.201(e)) that have an effective date
(as that term is defined at proposed Sec. 1092.201(f)) on or after the
effective date of subpart B, or that remain in effect (as that term is
defined at proposed Sec. 1092.201(m)) as of the effective date of
subpart B. The Bureau preliminarily concludes that this limitation of
the registration requirement's scope would help ensure that the most
relevant orders are submitted into the NBR system. The Bureau
recognizes that there is potential value in requiring registration with
respect to older orders that no longer remain in effect. Among other
things, such registration would help inform the Bureau and consumers
regarding older orders and help to identify an even larger number of
repeat offenders than could be identified through the registration
requirement as proposed in Sec. 1092.202. On the other hand, requiring
covered nonbanks to identify and register older orders to which they
were once subject, but that no longer impose any present obligations,
may be burdensome. In addition, extending the registration requirement
to older orders would impose additional administrative costs on the
Bureau. The Bureau believes that limiting the registration requirement
to covered orders with an effective date on or after the effective date
of subpart B, or that remain in effect as of subpart B's effective
date, strikes the appropriate balance in terms of establishing an
informative and useful registry without imposing undue burdens on
either industry or the Bureau. To maximize the value of subpart B's
registration requirements, while taking into consideration
administrative costs to the Bureau and covered nonbanks in keeping the
registry updated, the Bureau therefore proposes to limit Sec. 1092.202
to covered orders (as that term is defined at proposed Sec.
1092.201(e)) that have an effective date (as that term is defined at
proposed Sec. 1092.201(f)) on or after the effective date of subpart
B, or that remain in effect (as that term is defined at proposed Sec.
1092.201(m)) as of the effective date of subpart B. However, the Bureau
seeks comment as to whether the registration requirement should be
modified to include registration of older orders.
202(b) Requirement To Register and Submit Information Regarding Covered
Orders
Proposed Sec. 1092.202(b) would establish subpart B's requirements
for covered nonbanks to register with the NBR system and to provide and
maintain certain registration information.
Proposed Sec. 1092.202(b)(1) would provide that each covered
nonbank that is identified by name as a party subject to a covered
order described in paragraph (a) shall register as a registered entity
with the NBR system in accordance with proposed Sec. 1092.202(b) if it
is not already so registered, and shall provide or update, as
applicable, the information described in subpart B in the form and
manner specified by the Bureau. As discussed in connection with
proposed Sec. 1092.201(e)(1), a covered nonbank that is identified by
name as a party subject to the order would be required to register
under this paragraph even if the covered nonbank is not listed in the
title or caption of the order, or as the primary respondent, defendant,
or subject of the order. A covered nonbank may be subject to the
requirements of proposed Sec. 1092.202 even if the issuing agency or
court does not list the covered nonbank as a party in related press
releases or Internet links.
The Bureau considered but is not proposing alternative approaches,
including applying the requirements of this section to any covered
nonbank alleged or found in a covered order to have violated a covered
law, even if such party were not expressly named. This alternative
would capture circumstances where, for instance, a covered order
applies to a category of entities, such as all affiliates of a
particular named covered nonbank, but the order does not specifically
name all of the entities that fall within that category (e.g., does not
specifically list the names of all of the affiliates of the named
covered nonbank). While this alternative would potentially widen the
scope of information the Bureau would obtain relevant to its market
monitoring objectives, it preliminarily concludes that the proposed
approach would effectively achieve those objectives with greater
administrative ease. The Bureau seeks comment on the scope of the
proposed requirement, including this alternative approach and whether
other means of identifying applicable covered nonbanks with respect to
particular covered orders should be adopted.
As provided at Sec. 1092.102(a), the Bureau proposes to specify
the form and manner for electronic filings and submissions to the NBR
system that are required or made voluntarily under part 1092, including
Sec. Sec. 1092.202 and 1092.204. The Bureau would issue specific
guidance for filings and submissions.
Proposed Sec. 1092.202(b)(2)(i) would require each covered nonbank
that is required to register under proposed Sec. 1092.202 to submit a
filing containing the information described in proposed Sec. Sec.
1092.202(c) and 1092.202(d) to the NBR system within the later of 90
days after the applicable NBR system implementation date or 90 days
after the effective date of any applicable covered order. Thus, a
covered nonbank would not be required under proposed subpart B to
register any covered orders to which it may be subject until 90 days
after the NBR system implementation date for this provision. For
covered orders with effective dates after the NBR system implementation
date, an applicable covered nonbank would be required to register the
covered order within 90 days after the covered order's effective date,
as that term is defined at proposed Sec. 1092.201(f). The Bureau
believes the 90-day period would give sufficient time for a covered
nonbank to collect and submit the applicable
[[Page 6118]]
information to the NBR system and would also generally permit a
sufficient length of time for any relevant agency or court stays to
take effect. The Bureau seeks comment on the length of the 90-day
period, including whether the filing deadline should be tied to the
effective date of the order or some other date, and whether the Bureau
should consider taking other measures to address agency or court stays.
The Bureau also seeks comment on whether other issues may arise in
connection with orders that would indicate a reason not to require
registration under proposed Sec. 1092.202(b) within the 90-day period.
As discussed above regarding proposed Sec. 1092.101(e), the Bureau
currently estimates that the NBR implementation date for proposed
Sec. Sec. 1092.202 and 1092.203 will be no earlier than January 2024
and may be substantially later. The exact NBR implementation date will
depend upon, among other things, the comments received to this proposal
and the Bureau's ability to launch the registration system.
Proposed Sec. 1092.202(b)(2)(ii) would require each covered
nonbank that is required to register under proposed Sec. 1092.202 to
submit a revised filing amending any information described in
paragraphs (c) and (d) to the NBR system within 90 days after any
amendments are made to the covered order or any of the information
described in paragraphs (c) or (d) changes. The Bureau believes that
requiring entities to maintain up-to-date information with the NBR
system will significantly enhance the usefulness of the NBR system for
the Bureau, consumers, and other users of the NBR system.
The Bureau requests comment on the general requirements of proposed
Sec. 1092.202(b), including the requirement to register and update
registration information within the specified timeframes. The Bureau
requests comment on whether registration and registration updates
should be required more or less often, and if so, why and in what
circumstances.
202(c) Required Identifying Information and Administrative Information
Proposed Sec. 1092.202(c) would require a registered entity to
provide all identifying information and administrative information
required by the NBR system. In filing instructions, the Bureau would
issue under proposed Sec. 1092.102(a), the Bureau would specify the
types of identifying information and administrative information
registered entities would be required to submit. Proposed Sec.
1092.201(a) would define the term ``administrative information,'' and
proposed Sec. 1092.201(g) would define the term ``identifying
information.'' Proposed Sec. 1092.202(c) also would clarify that the
Bureau's filing instructions may require joint or combined submissions
to the NBR system by covered nonbanks that are affiliates as defined in
proposed Sec. 1092.101(a).
The Bureau requests comment on the general requirements of proposed
Sec. 1092.202(c), including the requirement to register and update
identifying information and administrative information within the
timeframes described in proposed Sec. 1092.202(b). The Bureau requests
comment on whether registration of updates with respect to this
information should be required more or less often, and if so, why and
in what circumstances. The Bureau also seeks comment on the proposed
distinctions between identifying information and administrative
information, and whether collection of other types of information would
help in the administration of the NBR system or benefit its users.
202(d) Information Regarding Covered Orders
Proposed Sec. 1092.202(d) would require a registered entity to
provide additional types of information more specifically related to
each covered order subject to proposed Sec. 1092.202. First, proposed
Sec. 1092.202(d)(1) would require a registered entity to provide a
fully executed, accurate, and complete copy of the covered order, in a
format specified by the Bureau. This information would help the Bureau
more clearly identify the covered orders to which the registered entity
is subject, as well as the terms of those orders, and would provide
access to updated copies of those orders. The information would provide
similar benefits to other regulators, consumers, and other users of the
NBR system upon publication.
This proposed section would also provide that any portions of a
covered order that are not public must not be submitted. These
nonpublic portions would be required to be clearly marked on the copy
submitted, to promote ease of use. For example, a nonpublic section
could be redacted and marked as nonpublic. As discussed above regarding
proposed Sec. Sec. 1092.201(e)(3) and 1092.201(k), the Bureau is
concerned that requiring registration and disclosure of confidential
supervisory information or other nonpublic information might interfere
with the functions and missions of other agencies and does not believe
that requiring such registration and disclosure is necessary to
accomplish the purposes of the proposed rule. The Bureau seeks comment
on this aspect of the proposed rule. The Bureau also seeks comment on
whether the Bureau should permit covered nonbanks to submit only select
portions of covered orders, and if so, what portions of such orders
should be submitted, and which should be excluded from the submission
requirement.
Proposed Sec. 1092.202(d)(2) would require a registered entity to
provide five additional types of data regarding each covered order
subject to Sec. 1092.202. The Bureau believes all of the described
data fields would be useful to the Bureau in locating, understanding,
organizing, and using the information submitted. Upon publication, the
data fields will be similarly useful to other users of the NBR system
as well. In addition, requiring covered nonbanks to identify and submit
these fields will help ensure accuracy and lower administrative costs
for the Bureau.
First, proposed Sec. 1092.202(d)(2)(i) would require a registered
entity to identify the government entity that issued the covered order.
Second, proposed Sec. 1092.202(d)(2)(ii) would require a registered
entity to provide the covered order's effective date, as that term is
defined at proposed Sec. 1092.201(f). Third, proposed Sec.
1092.202(d)(2)(iii) would require a registered entity to provide the
date of expiration, if any, of the covered order, or a statement that
there is none. Thus, for example, where a covered order expires by its
own terms after perhaps five or some other term of years, the
registered entity would be required to provide that information. The
Bureau requests comment on whether the date of expiration of covered
orders would be sufficiently clear to comply with this provision or
whether additional specification on this point from the Bureau would be
useful. Fourth, proposed Sec. 1092.202(d)(2)(iv) would require a
registered entity to identify all covered laws found to have been
violated or, for orders issued upon the parties' consent, alleged to
have been violated, in the covered order. The Bureau would expect that
registered entities would satisfy this requirement by providing
accurate Federal or State citations for the applicable covered laws.
The Bureau believes this information would increase the usefulness of
the NBR system. It would better enable the Bureau to identify and
assess any risks to consumers relating to the violations, and once
published
[[Page 6119]]
would also enable users of the system to more easily search and review
filings.
Fifth, proposed Sec. 1092.202(d)(2)(v) would require a registered
entity to provide the names of any of the registered entity's
affiliates registered under subpart B with respect to the same covered
order. The Bureau anticipates that this information would be useful in
identifying affiliate relationships between registered entities that
are registered with the NBR system, which might not otherwise be
obvious or apparent. Proposed Sec. 1092.101(a) would define the term
``affiliate'' to have the meaning given to that term in the CFPA, which
would include any person that controls, is controlled by, or is under
common control with another person.\185\
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\185\ See 12 U.S.C. 5481(1).
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Proposed Sec. 1092.202(d)(3) would require a registered entity, if
the registered entity is a supervised registered entity, also to file
the name and title of its attesting executive for purposes of proposed
Sec. 1092.203 with respect to the covered order. The benefits of
designating an attesting executive are discussed in detail above in
section IV(D). In addition, the Bureau believes that its collection
(and ultimate publication) in the registry of the name and title of a
supervised registered entity's attesting executive would be important
to the Bureau and other users of the NBR system. Requiring the entity
to identify the name and title of the attesting executive designated in
connection with each covered order will assist the Bureau in
administering the requirements in proposed Sec. 1092.203 regarding
annual written statements. In addition, as discussed below regarding
proposed Sec. 1092.203(b), collecting information regarding the name
and title of the attesting executive for a given covered order will
provide the Bureau with insight into the entity's organization,
business conduct, and activities, and will inform the Bureau's
supervisory work, including its risk-based prioritization process.
Publishing this information will also provide benefits to the public
and other users of the proposed NBR system, as discussed further below
in connection with proposed Sec. 1092.204(a).
The Bureau would rely on two separate statutory grants of authority
in collecting the attesting executive's name and title, each of which
would provide an independent statutory basis for proposed Sec.
1092.202(d)(3). The Bureau would collect this information under its
market-monitoring authority under CFPA section 1022(c)(1) and (4) to
``gather information regarding the organization, business conduct,
markets, and activities'' of supervised registered entities.\186\ The
Bureau would also collect this information under its CFPA section
1024(b)(7) authority to prescribe rules regarding registration,
recordkeeping, and other requirements for covered persons subject to
Bureau supervision under CFPA section 1024.\187\
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\186\ 12 U.S.C. 5512(c)(1), (4).
\187\ 12 U.S.C. 5514(b)(7).
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The Bureau requests comment on whether proposed Sec. 1092.202(d)
should identify additional or different categories of information
collected by the NBR system, including but not limited to information
regarding covered orders or the registered entity.
202(e) Expiration of Covered Order Status
Proposed Sec. 1092.202(e) would provide for an outer limit on the
time period during which the existence of a covered order would subject
a registered entity to the requirements of proposed subpart B. In
circumstances where a covered order terminates (or otherwise ceases to
remain in effect) within ten years after the order's effective date,
the registered entity's obligations to update its filing under proposed
Sec. 1092.202 or to file written statements with respect to the
covered order under proposed Sec. 1092.203 would cease after its final
filing under proposed Sec. 1092.202(f)(1).\188\ The Bureau, however,
recognizes that some covered orders may not terminate (or otherwise
cease to remain in effect) within ten years of the orders' effective
dates. In such circumstances, proposed Sec. 1092.202(e) would provide
that a covered order shall cease to be a covered order for purposes of
subpart B as of the later of: (1) ten years after its effective date;
or (2) if the covered order expressly provides for a termination date
more than ten years after its effective date, the expressly provided
termination date.
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\188\ See the discussion of proposed Sec. 1092.202(f) below.
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The Bureau preliminarily concludes that, in most cases, it may be
less likely to obtain meaningful information in connection with
existing orders after ten years have passed since their effective
dates. The Bureau also preliminarily concludes that maintaining the
proposal's registration and written-statement requirements for at least
ten years after the effective date of covered orders that remain in
effect would provide useful information to the Bureau and other uses of
the system, as described in this proposal. Among other things,
maintaining the obligation to update registration information for ten
years would better enable the Bureau to identify covered nonbanks in
the event a subsequent covered order requires additional registration.
Limiting registration obligations to more recent orders should also
help limit the burden imposed by proposed subpart B's requirements on
covered nonbanks. However, where a covered order expressly provides for
a later termination date, the Bureau believes that it should continue
to collect and publish information on the order under the provisions of
proposed Sec. 1092.202 through 204. The Bureau seeks comment on all
aspects of proposed Sec. 1092.202(e). In particular, the Bureau seeks
comment on whether to adopt a different approach to setting and
determining the sunset period for orders, and on whether the proposed
baseline ten-year period should be longer or shorter. The Bureau also
seeks comment on whether registered entities would benefit from
additional guidance in determining whether a covered order expressly
provides for a termination date more than ten years after its effective
date, and what constitutes the expressly provided termination date of
such a covered order.
The Bureau also seeks comment on whether the applicable sunset
period should depend upon the content of the order. For example, the
Bureau considered whether the sunset period for a covered order should
be shorter where the only obligations based on alleged violations of
covered laws and imposed in the public provisions of such order were to
pay money (such as payment of a civil money penalty or fine, or payment
of refunds, restitution, or disgorgement). Under this alternative
approach, for such covered orders without express termination dates,
the orders would have ceased being covered orders for purposes of
subpart B after some period shorter than the ten-year sunset proposed
here. The Bureau is not proposing this approach for reasons of
simplicity and administrative efficiency, and because the Bureau
believes that the sunset provision in proposed Sec. 1092.202(e) would
generally be preferable for most such covered orders. However, the
Bureau seeks comment on this proposed alternative and, more generally,
on whether and why it should adopt a shorter sunset period for these
orders. The Bureau also seeks comment on other approaches that would
establish different sunset periods depending on the content of the
order, and other types of orders that might have different sunset
periods.
[[Page 6120]]
The Bureau further considered requiring registered entities to
continue treating an order that would otherwise sunset under the
proposal as a covered order for purposes of this proposed rule if the
Bureau determined, after providing the entity notice and an opportunity
to respond, that continuing to do so was necessary for the Bureau to
fulfill its monitoring or supervisory responsibilities. For example,
based on information supplied by another agency or otherwise in its
possession, the Bureau may have cause to believe that the nonbank
continued to be in violation of the order. For such cases, the Bureau
considered requiring continued compliance with the requirements of
subpart B beyond the expiration period if the Bureau ultimately
concluded doing so was necessary for the Bureau to fulfill its
monitoring or supervisory responsibilities. The Bureau is not proposing
this approach for reasons of simplicity and administrative efficiency,
and because the Bureau believes that the proposed sunset provision
would be likely to provide sufficient information regarding most
covered orders. However, the Bureau seeks comment on whether it should
include this additional requirement in the final rule and whether any
additions or subtractions to it would better achieve its intended
purpose. The Bureau also seeks comment on whether, if it included this
additional requirement in a final rule, it should specify any
alternative or additional criteria that the Bureau might consider in
reaching its determination whether a particular covered order should
remain subject to the requirements of subpart B.
202(f) Requirement To Submit Revised and Final Filings With Respect to
Certain Covered Orders
Proposed Sec. 1092.202(f) would address situations where a covered
order is terminated, modified, or abrogated (whether by its own terms,
by action of the applicable agency, or by a court). It would also
address situations where an order ceases to be a covered order for
purposes of subpart B by operation of proposed Sec. 1092.202(e). In
all such cases, proposed Sec. 1092.202(f)(1) would require the
registered entity to submit a revised filing to the NBR system within
90 days after the effective date of the order's termination,
modification, or abrogation, or after the date the order ceases to be a
covered order. This requirement will help in administering the
registry, and it will support the Bureau's monitoring work by ensuring
that the registry is up to date.
Proposed Sec. 1092.202(f)(2) would address situations where a
covered order no longer remains in effect or no longer qualifies as a
covered order due to the covered order's termination, modification, or
abrogation, or the application of Sec. 1092.202(e). In such cases,
proposed Sec. 1092.202(f)(2) would clarify that following its final
filing under paragraph (1) with respect to the covered order, the
registered entity would have no further obligation to update its filing
or to file written statements with respect to such covered order under
proposed subpart B. However, the Bureau would expect to make historical
information publicly available via the NBR registration system. As
provided at proposed Sec. 1092.201(m), the proposal would define the
term ``remains in effect'' to mean that the covered nonbank remains
subject to public provisions of the order that impose obligations on
the covered nonbank to take certain actions or to refrain from taking
certain actions based on an alleged violation of a covered law. Once a
covered nonbank no longer remains subject to such public provisions,
proposed Sec. 1092.202(f)(2) would permit the covered nonbank to cease
updating its registration information and filing written statements
with respect to the order.
The Bureau seeks comment on all aspects of proposed Sec.
1092.202(f).
202(g) Notification by Certain Persons of Non-Registration Under This
Section
Proposed Sec. 1092.202(g) would provide that a person may submit a
notice to the NBR system stating that it is not registering pursuant to
this section because it has a good faith basis to believe that it is
not a covered nonbank or that an order in question does not qualify as
a covered order. Such a filing may be combined with any similar filing
under proposed Sec. 1092.203(f).\189\ Proposed Sec. 1092.202(g) would
also require the person to promptly comply with Sec. 1092.202 upon
becoming aware of facts or circumstances that would not permit it to
continue representing that it has a good faith basis to believe that it
is not a covered nonbank or that an order in question does not qualify
as a covered order. The Bureau is proposing to treat information
submitted under this paragraph as ``administrative information'' as
defined by proposed Sec. 1092.201(a).
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\189\ See also the section-by-section discussion of proposed
Sec. 1092.203(f), which would provide a similar option with respect
to proposed Sec. 1092.203.
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While the Bureau believes the reporting and registration
requirements under proposed Sec. 1092.202 impose very minimal burden
on nonbank covered persons, and that determining an entity's status as
a covered nonbank (or an order's status as a covered order) should be a
straightforward task for the vast majority of relevant persons, the
Bureau is proposing Sec. 1092.202(g) as an additional means of
providing flexibility to those few entities where uncertainty in some
respect raises good faith concerns that they do not meet the definition
of a covered nonbank (or an order does not meet the definition of a
covered order). Under the proposal, such persons could elect to file a
notice under proposed Sec. 1092.202(g). When a person makes a non-
frivolous filing under proposed Sec. 1092.202(g) stating that it has a
good faith basis to believe that it is not a covered nonbank (or that
an order is not a covered order), the Bureau would not bring an
enforcement action against that person based on the person's failure to
comply with proposed Sec. 1092.202 unless the Bureau has first
notified the person that the Bureau believes the person does in fact
qualify as a covered nonbank (or that an order does qualify as a
covered order) and has subsequently provided the person with a
reasonable opportunity to comply with proposed Sec. 1092.202.
Among other things, the Bureau would permit entities to file
notifications under proposed Sec. 1092.202(g) when they have a good
faith basis to believe that they do not qualify as a ``covered
nonbank'' because they constitute part of a ``State,'' as that term is
defined in CFPA section 1001(27).\190\ Under proposed Sec.
1092.102(c), the filing of such a notification would not affect the
entity's ability to dispute more generally that it qualifies as a
person subject to Bureau authority.\191\
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\190\ 12 U.S.C. 5481(27). As discussed above, proposed Sec.
1092.201(d)(2) would exclude States from the definition of ``covered
nonbank.''
\191\ As an alternative to filing a notification under proposed
Sec. 1092.202(g), an entity could simply choose to register under
the proposal, even though it has a good faith basis for believing
that it does not qualify as a covered nonbank (or that its order
does not qualify as a covered order). Under proposed Sec.
1092.102(c), such registration would not prejudice the entity's
ability to dispute the Bureau's authority over it.
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The Bureau anticipates that, in most cases, it would not respond to
Sec. 1092.202(g) notices with the Bureau's views on whether filers in
fact qualify as covered nonbanks (or whether orders in fact qualify as
covered orders). The Bureau also emphasizes that a non-response from
the Bureau should not be misapprehended as Bureau acquiescence in the
filer's assertions in the notice (or in the legitimacy of the filer's
assertion of good faith). The
[[Page 6121]]
Bureau, however, preliminarily concludes that obtaining these
notifications may assist the Bureau in better understanding how
potentially regulated entities interpret the scope of proposed Sec.
1092.202.
The Bureau considered alternatives to Sec. 1092.202(g), including
an alternative whereby entities would not file a notice of non-
registration with the Bureau, but could avoid penalties for non-
registration if in fact they could establish a good faith belief that
they did not qualify as covered nonbanks subject to Sec. 1092.202 (or
their orders did not qualify as covered orders). Under this
alternative, entities would maintain such good faith belief so long as
the Bureau had not made clear that Sec. 1092.202 would apply to them
(or their orders). Although the Bureau preliminarily concludes that
this alternative is not preferable to requiring entities to actually
file a notice of non-registration, the Bureau seeks comment on whether
it should finalize this alternative instead. It also seeks comment on
whether, if it finalized this alternative, entities would require
additional guidance on the circumstances pursuant to which an entity
could no longer legitimately assert a good faith belief that Sec.
1092.202 would not apply to its conduct. While the Bureau anticipates
that such circumstances would certainly include entity-specific notice
from the Bureau that Sec. 1092.202 applies, the Bureau does not
believe such notice should be required to terminate a good faith
defense to registration. Among other circumstances, the Bureau
anticipates that at least formal Bureau interpretations of (for
example) the definition of a ``covered person'' under the CFPA, or
published Bureau interpretations specific to the scope of the proposed
registration requirements, would generally suffice to terminate such
belief.
Finally, as the Bureau does not believe proposed Sec. 1092.202's
reporting and registration requirements impose significant burdens on
covered nonbanks, the Bureau also seeks comment on whether it should
not finalize proposed Sec. 1092.202(g).
Section 1092.203 Annual Reporting Requirements for Supervised
Registered Entities
203(a) Scope of Annual Reporting Requirements
Proposed Sec. 1092.203(a) would provide that the proposed section
would apply only with respect to covered orders with an effective date
(as that term is defined at proposed Sec. 1092.201(f)) on or after the
NBR system implementation date for proposed Sec. 1092.203.
This section would apply only to certain larger supervised
entities.\192\ The Bureau preliminarily concludes that the reporting
requirements set forth in this section--which focus specifically on
larger supervised entities' compliance with the orders registered
pursuant to Sec. 1092.202--should apply only prospectively to those
covered orders with an effective date on or after the NBR
implementation date for proposed Sec. 1092.203. The prospective
application of Sec. 1092.203 would ensure that entities faced with
enforcement actions that might result in covered orders could take
Sec. 1092.203's requirements into account in their decisionmaking.
While the Bureau does not believe that compliance with Sec. 1092.203's
requirements would materially affect an entity's decisionmaking about
how to respond to a prospective enforcement action--as discussed in
further detail in section VII, for the vast majority of entities, the
Bureau generally does not anticipate any of the proposed rule's
reporting and publication requirements imposing meaningful burden
either operationally or on their bottom line--the Bureau proposes this
provision out of an abundance of caution. In addition, this limitation
would help ensure that supervised registered entities would be required
to submit reports only after the NBR system implementation date. The
Bureau seeks comment on whether Sec. 1092.203(a)'s proposed limitation
of Sec. 1092.203's scope is warranted. The Bureau also seeks comment
on whether any further limitation of or adjustments to Sec. 1092.203's
scope may be appropriate, and whether the Bureau should consider
excluding any additional persons, orders, laws, or other matters from
proposed Sec. 1092.203's reporting requirements.
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\192\ As discussed above in the section-by-section discussion of
proposed Sec. 1092.201(o)(4), the proposal would exclude from the
term ``supervised registered entity'' persons with less than $1
million in annual receipts resulting from offering or providing all
consumer financial products and services described in 12 U.S.C.
5514(a).
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203(b) Requirement To Designate Attesting Executive
Proposed Sec. 1092.203(b) would require a supervised registered
entity subject to an applicable covered order to designate as its
attesting executive for purposes of subpart B its highest-ranking duly
appointed senior executive officer (or, if the supervised registered
entity does not have any duly appointed officers, the highest-ranking
individual charged with managerial or oversight responsibility for the
supervised registered entity) whose assigned duties include ensuring
the supervised registered entity's compliance with Federal consumer
financial law, who has knowledge of the entity's systems and procedures
for achieving compliance with the covered order, and who has control
over the entity's efforts to comply with the covered order. The
supervised registered entity would be required annually to designate
one attesting executive for each covered order to which it is subject
and for all submissions and other purposes related to that covered
order under subpart B. The supervised registered entity would also be
required to authorize the attesting executive to perform the duties of
an attesting executive on behalf of the supervised registered entity
with respect to the covered order as required in proposed Sec.
1092.203, including submitting the written statement described in Sec.
1092.203(d).
Criteria That an Attesting Executive Must Satisfy
For the reasons described above in section IV(D), proposed Sec.
1092.203(b) would provide that a supervised registered entity subject
to a covered order described in Sec. 1092.203(a) would generally be
required to designate as its attesting executive for purposes of
subpart B its highest-ranking duly appointed senior executive officer
(i) whose assigned duties include ensuring the supervised registered
entity's compliance with Federal consumer financial law, (ii) who has
knowledge of the entity's systems and procedures for achieving
compliance with the covered order, and (iii) who has control over the
entity's efforts to comply with the covered order. If the supervised
registered entity has no duly appointed officers, proposed Sec.
1092.203(b) would require the entity to designate as its attesting
executive the highest-ranking individual charged with managerial or
oversight responsibility for the supervised registered entity who meets
those three criteria.
As explained below in the discussion of proposed Sec. 1092.203(d),
the Bureau is proposing that the attesting executive would attest to
and sign a written statement submitted by the supervised registered
entity regarding the entity's compliance with covered orders. That
proposal would have the benefit of ensuring that the supervised
registered entity's reporting obligations under proposed Sec. 1092.203
have received attention from the highest applicable level of a
supervised registered entity's management. The Bureau is proposing this
requirement in proposed Sec. 1092.203(b) in order to ensure that the
[[Page 6122]]
person who attests and signs the written statement has sufficient
authority and access to all the relevant company stakeholders to ensure
that the report is as complete and accurate as possible. The Bureau
believes that the language of proposed Sec. 1092.203(b) would ensure
that the supervised registered entity designates an appropriately high-
ranking employee as its attesting executive. Such a person will be in
the best position to know all relevant information with respect to the
order, and to provide a reliable attestation in the written statement
regarding the entity's compliance with the covered order.
The Bureau anticipates that this individual will in most cases
likely be a top senior executive of the entity. For entities that are
not organized as corporations, and thus may not have duly appointed
officers, the proposed Sec. 1092.203(b) clarifies that the attesting
executive may be another individual who is charged with managerial or
oversight responsibility for the supervised registered entity. The
Bureau anticipates that this individual will in most cases serve in a
capacity equivalent to a high-ranking senior executive at a
corporation. For example, a supervised registered entity organized as a
limited liability company that is run by an individual managing member
and lacks executive officers may designate the managing member as its
``attesting executive,'' where the managing member's assigned duties
include ensuring the supervised registered entity's compliance with
Federal consumer financial law and the managing member has the
requisite knowledge and control as described in proposed Sec.
1092.203(b). Likewise, a supervised registered entity organized as a
general or limited partnership may designate an individual partner who
otherwise satisfies the requirements set forth in proposed Sec.
1092.203(b). The use of the term ``executive'' is not intended to
preclude the designation of such persons as ``attesting executives''
where the supervised registered entity otherwise lacks a senior
executive officer who satisfies proposed Sec. 1092.203(b)'s
requirements.
The Bureau anticipates that entities would take appropriate steps
to ensure compliance with the proposed rule in the event that an
executive leaves employment or changes duties, or a higher-ranking
executive is put in place. For example, a supervised registered entity
might consider designating an alternate attesting executive for each
covered order to address such possibilities, including by ensuring that
they have sufficient knowledge of the entity's systems and procedures
for achieving compliance with the applicable covered order(s) and
control over the entity's efforts to comply with the covered order(s).
The proposal would also require that the supervised registered
entity designate as its attesting executive for a covered order a
person who has knowledge of the entity's systems and procedures for
achieving compliance with the covered order. The Bureau anticipates
that this requirement would help ensure that the annual written
statement is completed by an individual with sufficient knowledge of
the entity's systems and procedures for achieving compliance to make
the written statement required by proposed Sec. 1092.203(d). The
Bureau expects that an executive who lacked knowledge of those
compliance systems and procedures would not be in the best position to
identify violations of the order. Therefore, without the proposed
knowledge requirement, the attestation proposed at Sec. 1092.203(d)(2)
would lose much of its usefulness.
Proposed Sec. 1092.202(b) would also require that the attesting
executive be required to have control over the entity's efforts to
comply with the covered order. By this requirement, the Bureau means to
require that the executive have the ability, under the entity's
existing compliance systems and procedures, to direct and supervise the
entity's efforts to comply with the applicable covered order. This
proposed requirement would complement the knowledge requirement
discussed above, since the Bureau believes an executive with control
over the entity's efforts to comply with the covered order will be more
likely also to have (and to demand) the requisite knowledge regarding
the entity's related compliance systems and procedures. It is possible
that an executive with knowledge of an entity's related compliance
systems and procedures, but who does not have control over the entity's
efforts to comply with an applicable covered order, would not be fully
informed regarding violations of the order. The Bureau would also be
able to use information regarding which executives have control of the
entity's efforts to comply with specific covered orders in connection
with its supervisory reviews of the entity's compliance systems and
procedures, compliance with Federal consumer financial law, and risks
to consumers and markets.
In addition, the Bureau expects that the proposal's requirements to
designate an attesting executive who has knowledge of the entity's
systems and procedures for achieving compliance with its covered
orders, and who has control over the entity's efforts to comply with
its covered orders, would create an additional incentive for certain
entities to comply with their obligations to consumers. The Bureau
believes that most supervised registered entities would comply with
covered orders even without the proposal. However, these requirements
would motivate additional compliance efforts at certain entities that
have failed to take adequate steps to comply with the order. The Bureau
also believes that if a particular executive is identified to the
Bureau as the person ultimately accountable for ensuring compliance
with a covered order, the clear delineation of that executive's
responsibility will prompt the executive to focus greater attention on
ensuring compliance, which in turn will increase the likelihood of
compliance.
In addition, the Bureau anticipates that obtaining information
about which senior executive officer(s) at a supervised registered
entity have knowledge of the entity's systems and procedures for
achieving compliance with specific covered orders, and who have control
over the entity's efforts to comply with those covered orders, would
facilitate the Bureau's ability to identify situations in which
individual executives have recklessly disregarded, or have actual
knowledge of, the entity's violations of covered orders. The Bureau
believes that this information would better enable the Bureau to
identify risks to consumers related to such orders and the entity's
compliance systems and procedures, and to take steps to address such
risks through its supervisory or other authorities. Where the
applicable covered order is a Bureau order, such information will also
facilitate the Bureau's efforts to assess compliance with the order and
to make determinations regarding any potential related Bureau
supervisory or enforcement actions. For example, where information
obtained under proposed Sec. 1092.203 indicates that a high-ranking
executive has knowledge of (or has recklessly disregarded) violations
of legal obligations falling within the scope of the Bureau's
jurisdiction, and has authority to control the violative conduct, the
Bureau could use that information in assessing whether an enforcement
action should be brought not only against the nonbank covered person,
but also against the individual executive.
In developing this proposal, the Bureau considered various options
other than requiring entities to designate a senior executive officer
as an attesting
[[Page 6123]]
executive. The Bureau considered permitting entities to designate lower
ranking individuals whose assigned duties include ensuring the
supervised registered entity's compliance with Federal consumer
financial law and who possessed sufficient knowledge and control to
provide a written statement under proposed Sec. 1092.203. However, the
Bureau believes that requiring entities to designate their highest-
ranking executive officer would better help ensure that all relevant
information was considered when submitting the written statement. In
addition, because the attestation that would be provided under proposed
Sec. 1092.203(d)(2) would be subject to the knowledge of the attesting
executive, the Bureau believes this requirement would help enhance the
reliability of that attestation, and thus the accuracy of the written
statement. Lower-ranking managers at the entity might not be aware of
all relevant facts. Also, the Bureau believes that the designation
requirement will provide an important piece of information regarding
the organizational structure of an entity's compliance management
system--namely, the identity of the entity's highest-ranking executive
whose assigned duties include ensuring the supervised registered
entity's compliance with Federal consumer financial law, and who has
the requisite level of knowledge and control. This information will be
valuable to the Bureau's understanding of the supervised registered
entity's compliance systems and procedures and its organization,
business conduct, and activities subject to the covered order. Such
information would inform the Bureau's functions, including its use of
its supervisory and enforcement authorities.
As another alternative to imposing this requirement, the Bureau
might instead require the entity to appoint an individual with a given
title--for example, the entity's Chief Compliance Officer (CCO), or
equivalent. However, the Bureau does not have comprehensive information
regarding the organizational structures of the entities it supervises,
and the Bureau expects that many supervised registered entities may
have organizational structures that do not provide for a CCO or other
officer title. The proposed requirement to designate the entity's
highest-ranking executive who satisfies the specified criteria would
help ensure that an appropriately high-level individual was designated
but would retain flexibility to accommodate a range of entity
organizational structures. And as discussed above, the Bureau believes
that requiring the entity to designate its attesting executive for each
covered order would provide the Bureau with information regarding the
entity, including its compliance systems and procedures and its
organization, business conduct, and activities subject to the covered
order.
As another alternative to the approach proposed in Sec.
1092.203(b), the Bureau might require supervised registered entities to
obtain a review or audit by an independent third-party consultant of
the entities' written statements and the facts underlying the written
statements. However, the Bureau believes this alternative would impose
costs on the entity that would largely be avoided by the proposal's
requirement to designate an attesting executive already providing
services to the entity and would require the Bureau to impose controls
on such reviews in order to ensure their usefulness. In addition, this
alternative would not provide the Bureau with the information regarding
the entity described above.
The Bureau requests comment on all aspect of proposed Sec.
1092.203(b), including any additions or alterations of the proposed
requirement, as well as comment on each of the alternative approaches
discussed above. The Bureau seeks comment as well on whether this
provision provides sufficient guidance to supervised registered
entities regarding which individuals may be designated as ``attesting
executives.'' The Bureau also seeks comment on whether additional
clarification should be provided with respect to supervised registered
entities that are organized as entities other than corporations. The
Bureau further seeks comment on whether the definition identifies an
appropriate individual at the supervised registered entity for purposes
of fulfilling the obligations set forth in proposed Sec. 1092.203.
Requirement To Designate an Attesting Executive for Each Covered Order
on an Annual Basis
Proposed Sec. 1092.203(b) would require a supervised registered
entity to annually designate one attesting executive for each
applicable covered order to which it is subject and for all submissions
and other purposes related to that covered order under proposed subpart
B. The Bureau believes that requiring a supervised registered entity to
designate an attesting executive for each covered order will facilitate
the Bureau's supervision of the supervised registered entity by, among
other things, facilitating the Bureau's supervisory communications with
the supervised registered entity regarding the covered order, including
any related supervisory concerns. The Bureau would also be able to
contact the attesting executive with questions and to understand how
the executive's responsibilities relate to the entity's obligations
under its covered orders. The Bureau thus believes that this proposed
designation requirement would help ensure compliance with the proposed
rule, facilitate the Bureau's supervision of the supervised registered
entity, help the Bureau assess and detect risks to consumers, and help
ensure that the entity is legitimate and able to perform its
obligations to consumers.
The Bureau expects that under most circumstances, a supervised
registered entity would designate one single individual as its
attesting executive for all of the covered orders to which it is
subject. However, there may be situations in which there is no one
senior executive officer with the requisite knowledge of the entity's
systems and procedures for achieving compliance with all of the covered
orders to which the entity is subject, and who has control over the
entity's efforts to comply with those orders. In such a case, the
entity could designate different attesting executives for the covered
orders. By requiring a supervised registered entity to designate one
attesting executive for each covered order described in proposed Sec.
1092.203(a) to which it is subject, proposed Sec. 1092.203(b) would
enable the Bureau to better identify such situations. The Bureau seeks
comment on this approach, including whether it adequately ensures the
submission of informed, accurate, and meaningful written statements
under proposed Sec. 1092.203, and whether supervised registered
entities should be required to designate one single executive to submit
a written statement with respect to all of the covered orders to which
the supervised registered entity is subject. The Bureau also seeks
comment on whether supervised registered entities are likely to be
organized in such a way as to make this provision useful, or whether
under the proposed requirements an entity would likely be required to
designate a single attesting executive in nearly all cases.
The Bureau also believes that by requiring the entity to designate
its attesting executive(s) on an annual basis, the proposal would
better enable the Bureau to understand the reporting relationships
within the entity and the entity's compliance systems and procedures.
The Bureau seeks comment on the requirement to designate attesting
executives on an annual basis.
[[Page 6124]]
203(c) Requirement To Provide Attesting Executive(s) With Access to
Documents and Information
Proposed Sec. 1092.203(c) would require a supervised registered
entity subject to proposed Sec. 1092.203 to provide its attesting
executive(s) with prompt access to all documents and information
related to the supervised registered entity's compliance with all
applicable covered order(s) as necessary to make the written
statement(s) required in proposed Sec. 1092.203(d).
The Bureau believes that this proposed requirement would help
ensure that the attesting executive for an applicable covered order has
timely access to the documents and information needed to submit an
informed and accurate written statement under proposed Sec.
1092.203(d). A supervised registered entity would not be permitted to
refuse or deny to its attesting executive access to documents or
information related to the supervised registered entity's compliance
with the covered order. Under the proposed requirement, the Bureau
would expect the attesting executive to have prompt access to all such
documents and information, notwithstanding, for example, any privileges
that may apply to the documents and information, or where or how the
documents and information are stored.
The Bureau believes that this requirement would enhance the
accuracy and usefulness of the written statement, which in turn would
enhance the Bureau's ability to supervise the entity effectively,
assess and detect risks to consumers, and ensure the entity is
legitimate and able to perform its obligations to consumers. The Bureau
requests comment on the need for this requirement and whether other
requirements, modifications, or amendments to proposed Sec.
1092.203(c) should be considered in order to ensure the accuracy and
usefulness of the written statement.
203(d) Annual Requirement To Submit Written Statement to the Bureau for
Each Covered Order
Proposed Sec. 1092.203(d) would require, on or before March 31 of
each calendar year, that the supervised registered entity submit to the
NBR system, in the form and manner specified by the Bureau, a written
statement with respect to each covered order described in proposed
Sec. 1092.203(a). In the written statement, the attesting executive
would be required to provide a summary description of the executive's
efforts to review and oversee compliance with the applicable order, and
to attest regarding the entity's compliance with the order.
Proposed Sec. 1092.203(d) would require the written statement to
be signed by the supervised registered entity's attesting executive for
the reasons discussed above.
Proposed Sec. 1092.203(d)(1) would require the written statement
to contain a general summary description of the steps, if any, the
attesting executive has undertaken to review and oversee the supervised
registered entity's activities subject to the applicable covered order
for the preceding calendar year. This proposal is intended to provide
information to the Bureau regarding the compliance monitoring efforts
that have been undertaken by the executive during the applicable time
period in connection with the order. The proposed rule would not
establish any minimum procedures or otherwise specify the steps the
executive must take in order to review and oversee the entity's
activities. Instead, the rule would require only that the executive
provide the Bureau with a general description of the steps the
executive has already taken in this regard. The Bureau believes that
this information would enhance the usefulness of the written statement
by providing valuable context regarding the basis of the attesting
executive's knowledge and by assisting the Bureau with determining the
degree to which the Bureau may rely on the written statement. The
Bureau believes that this information would be useful because the
proposal would not by itself establish minimum requirements regarding
the attesting executive's review and oversight of the entity's
activities.
Proposed Sec. 1092.203(d)(2) would require the attesting executive
to attest whether, to the attesting executive's knowledge, the
supervised registered entity during the preceding calendar year
identified any violations or other instances of noncompliance with any
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 attestation would be provided subject to the attesting
executive's knowledge. As discussed above with respect to proposed
Sec. 1092.203(b) and proposed Sec. 1092.203(c), the Bureau
anticipates that the attesting executive would have adequate knowledge
of the entity's systems and procedures for achieving compliance with
the covered order to provide a useful attestation. The Bureau seeks
comment as to whether the proposed rule contains sufficient safeguards
to achieve this desired outcome.
The written statement described in the proposal would address
violations and other instances of noncompliance with obligations that
are ``based on'' a violation of a covered law. Consistent with the
discussion above in the section-by-section discussion of the definition
of ``covered order'' at proposed Sec. 1092.201(e)(4), for purposes of
this proposed requirement, an obligation would be ``based on'' an
alleged violation where the order identifies the covered law in
question, asserts or otherwise indicates that the covered nonbank has
violated it, and imposes the obligation on the covered nonbank as a
result of the alleged violation.\193\ This would include, for example,
obligations imposed as ``fencing-in'' or injunctive relief, so long as
those obligations were imposed at least in part as a result of the
entity's violation of a covered law. The proposed written statement
would also need to address, for example, any obligation imposed as part
of other legal or equitable relief granted with respect to the
violation of a covered law, as well as any obligation imposed in order
to prevent, remedy, or otherwise address a violation of a covered law,
or the conditions resulting from such violation. As discussed above, an
order may identify a covered law as the legal basis for the obligations
imposed by referencing another document, such as a written opinion,
stipulation, or complaint, that shows that a covered law served as the
legal basis for the obligations imposed in the order. The Bureau is
proposing this approach because an order may satisfy the proposed
definition of ``covered order'' but nonetheless contain provisions that
are entirely unrelated to covered laws. This element of the requirement
in proposed Sec. 1092.203(d)(2) is intended to exclude such provisions
that are entirely unrelated to violations of covered laws. The Bureau
seeks comment on this proposed approach.
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\193\ As in the context of proposed Sec. 1092.201(e)(4), an
obligation imposed based on multiple violations, some of covered
laws and some of other laws, would qualify as an ``obligation[ ] . .
. based on an alleged violation of a covered law'' within the
meaning of Sec. 1092.203(d)(1), even if the violations of the non-
covered laws would themselves have sufficed to warrant the
imposition of the obligation.
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The supervised registered entity would be required to state whether
it has or has not identified instances of noncompliance with respect to
each covered order. If no such instances of noncompliance have been
identified, the supervised registered entity would be required to so
state. The proposed rule would not establish any minimum procedures or
otherwise impose or
[[Page 6125]]
specify steps a supervised registered entity must take in order to
review or monitor compliance with each covered order.\194\ Instead, the
proposed rule would merely require supervised registered entities to
report violations and noncompliance that they have already identified
in the course of their own compliance reviews and assessments. The
Bureau believes that supervised registered entities likely already
conduct reviews to determine their compliance with covered orders, and
those reviews would assist in completing the required written
statements. The Bureau would not expect the proposal to amend or affect
any review, reporting, or recordkeeping requirement contained in any
covered order or other provision of law. The Bureau, however, seeks
comment on whether the proposed rule should prescribe minimum
requirements for supervised registered entities' review of their
compliance with the covered orders to which they are subject. The
Bureau also seeks comment on whether the proposal should include other
requirements for the written statement to provide related information.
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\194\ As discussed above in section IV(D), the Bureau expects
that some supervised registered entities may bolster their
compliance efforts in response to the proposal.
---------------------------------------------------------------------------
While proposed Sec. 1092.203(d) would require the written
statement to be signed by the supervised registered entity's attesting
executive, it would not require the attesting executive to submit a
statement subject to the penalty of perjury. Nevertheless, knowingly
and willfully filing a false attestation or report with the Bureau may
be subject to criminal penalties.\195\ The Bureau believes that the
signature requirement, and the consequent potential for criminal
liability where a knowingly false attestation is made, would be likely
to deter attesting executives from submitting written statements that
are incorrect or based on incomplete or otherwise inadequate
information. This requirement should significantly enhance the accuracy
and usefulness of the written statement. The Bureau seeks comment on
its proposal to require the attesting executive's signature on the
statement but not to require a statement subject to the penalty of
perjury.
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\195\ See 18 U.S.C. 1001.
---------------------------------------------------------------------------
The Bureau relies on its rulemaking authority under CFPA section
1024(b)(7)(A)-(C) in requiring supervised registered entities to submit
written statements.\196\ Each of those paragraphs provides independent
authority for the requirement to submit written statements. First, CFPA
section 1024(b)(7)(A) and (B) authorize these written-statement
requirements because the statements would facilitate the Bureau's
supervision efforts and its assessment and detection of risks to
consumers.\197\ As discussed in more detail above in section IV(D), the
Bureau believes the proposed written statement would facilitate the
Bureau's supervision efforts, including by providing the Bureau with
important additional information regarding risks to consumers that may
be associated with the covered order; informing the Bureau's risk-based
prioritization of its supervisory activities under CFPA section
1024(b); and improving the Bureau's ability to conduct its supervisory
and examination activities with respect to the supervised nonbank, when
it does choose to exercise its supervisory authority. Submission of a
written statement that identifies noncompliance with reported orders
would provide the Bureau with important information regarding risks to
consumers that may be associated with the order. Such orders themselves
frequently contain provisions aimed at ensuring an entity's future
legal compliance with the covered laws violated. An entity's compliance
with such provisions may mitigate the continuing risks to consumers
presented by the entity and thus the potential need for current
supervisory activities. By contrast, evidence of noncompliance with an
order requiring registration under the proposal would be probative of a
potential need for supervisory examination of the supervised nonbank
and would be a relevant factor for the Bureau to consider in conducting
its risk-based prioritization of its supervisory program under CFPA
section 1024(b)(2), including (b)(2)(C), (D), and (E). Likewise, in
cases where the Bureau determines to exercise its supervisory
authorities with respect to a supervised nonbank required to submit
written statements under the proposal, the Bureau would expect those
written statements to provide important information relevant to
conducting examination work. For example, the Bureau may use the
written statements in determining what information to require from a
supervised nonbank, in determining the content of supervisory
communications and recommendations, or in making other decisions
regarding the use of its supervisory authority.\198\
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\196\ 12 U.S.C. 5514(b)(7)(A)-(C).
\197\ As explained in the ``legal authority'' section above, 12
U.S.C. 5514(b)(7)(A) and (B) provide independent sources of
rulemaking authority. Also, for the reasons explained in the ``legal
authority'' section, 12 U.S.C. 5514(b)(7)(B) authorizes the Bureau
to require supervised registered entities to ``generate''--i.e.,
create--the written statement and then ``provide'' it to the Bureau.
\198\ The Bureau would anticipate that the proposed requirements
in Sec. 1092.203 would promote these objectives with respect to
entities subject to Bureau supervision even in the event the Bureau
did not require registration and publication of identifying
information regarding covered nonbanks as described in proposed
Sec. Sec. 1092.202 and 1092.204.
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Second, the Bureau has authority to require preparation of the
written statements under CFPA section 1024(b)(7)(C) because the written
statements will help ensure that supervised registered entities ``are
legitimate entities and are able to perform their obligations to
consumers.'' \199\ As explained above in section III(C), the Bureau
interprets CFPA section 1024(b)(7)(C) as authorizing it to prescribe
substantive rules to ensure that supervised entities are willing and
able to comply with their legal obligations to consumers, including
those imposed by Federal consumer financial law. As discussed in more
detail above in section IV(D), the Bureau believes that the proposed
requirement to submit an annual written statement will help ensure that
the supervised registered entity takes its legal duties seriously, and
that it is not treating the risk of enforcement actions for violations
of legal obligations as a mere cost of doing business. If an entity
reports under proposed Sec. 1092.203(d)(2) that it has violated its
obligations under covered orders, that may indicate that the entity
lacks the willingness or ability more generally to comply with its
legal obligations, including its obligations under the Federal consumer
financial laws that the Bureau enforces. That would especially be the
case if an entity reports violations under proposed Sec.
1092.203(d)(2) in multiple years or with respect to multiple covered
orders, or if the violation amounts to a repeat of the conduct that
initially gave rise to the covered order. Under CFPA section
1024(b)(2),\200\ the Bureau may prioritize such an entity for
supervisory examination to determine whether the entity has worked in
good faith to maintain protocols aimed at ensuring compliance with its
legal obligations and detecting and appropriately addressing any legal
violations that the entity may commit. In this way, the written
statement required by Sec. 1092.203(d)(2) would assist the Bureau in
ensuring that supervised registered entities are legitimate entities
and are able to perform their obligations to consumers.
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\199\ 12 U.S.C. 5514(b)(7)(C).
\200\ 12 U.S.C. 5514(b)(2).
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[[Page 6126]]
The Bureau seeks comment on all aspects of proposed Sec.
1092.203(d), including whether to provide for increased frequency of
reporting in the event of certain violations or other instances of
noncompliance, such as instances of noncompliance that the Bureau
believes may have resulted in more significant harm to consumers.
The Bureau also seeks comment on whether the proposal should
include other requirements for a supervised registered entity to submit
information related to its compliance with covered orders. The Bureau
considered proposing additional requirements that would require a
supervised registered entity to submit more detailed information
regarding compliance with each covered order. In particular, the Bureau
considered adopting a requirement that the written statement contain a
written description of the instances of noncompliance that have been
identified. This information would enable the Bureau to identify and
assess the nature and extent of such noncompliance and related risks to
consumers as part of its risk-based supervision program.
The Bureau is also considering adopting a requirement that the
written statement contain a short description of the entity's
compliance systems and procedures relating to the covered order,
including a description of the processes for notifying the attesting
executive regarding violations or other instances of noncompliance with
the order. The Bureau expects that many executives may choose to
provide such information in the summary narrative portion of the
written statement required in proposed Sec. 1092.203(d)(1), as part of
describing the steps that the attesting executive has undertaken to
review and oversee the supervised registered entity's activities
subject to the applicable covered order, but seeks comment on whether
to expressly require submission of such information in the final rule.
The Bureau is also considering adopting a requirement that the
attesting executive attest that, in the executive's professional
judgment, the entity's compliance systems and procedures are reasonably
designed to detect violations of the applicable covered order and
ensure that such violations are reported to the attesting executive.
Such a requirement would provide the Bureau with information regarding
the adequacy of the entity's compliance management system and would
enable the Bureau to better assess the reliability of the written
statement.
Like the requirements in proposed Sec. 1092.203(d) previously
discussed, these additional requirements would help ensure that the
entity has reasonable measures in place to inform the attesting
executive about violations of covered orders and would thus help ensure
that the written statement is useful to the Bureau. These requirements
would also provide an incentive for those entities that do not take
their legal obligations seriously to take additional steps to enhance
compliance. Notwithstanding these benefits, the Bureau has not included
these additional requirements in the current proposal because it
preliminarily concludes that the proposed written statement should
provide sufficient information to permit the Bureau to determine on a
case-by-case basis whether to request such additional information from
filers. That is, rather than automatically requiring submission of such
information by all supervised registered entities, the Bureau
anticipates that the proposed written statement will position the
Bureau to inquire further about such submissions to the registry as
needed on a case-by-case basis in the normal course of its supervision
of supervised registered entities. However, the Bureau seeks comment on
whether it should adopt any of these additional requirements for the
written statement in the ordinary course.
203(e) Requirement To Maintain and Make Available Related Records
Proposed Sec. 1092.203(e) would impose recordkeeping requirements
with respect to the preparation of the written statement. These
requirements are designed to promote effective and efficient
enforcement and supervision of proposed Sec. 1092.203. The Bureau
would rely on its rulemaking authorities under CFPA section
1024(b)(7)(A)-(C) in imposing proposed Sec. 1092.203(e)'s
recordkeeping requirements.
Proposed Sec. 1092.203(e) would require a supervised registered
entity to maintain documents and other records sufficient to document
the entity's preparation of the written statement, to provide
reasonable support for the written statement, and to otherwise
demonstrate compliance with the requirements of proposed Sec. 1092.203
with respect to any submission under that section. The proposed section
would require the supervised registered entity to maintain those
documents and records for five years after such submission is required.
The proposal would also require the supervised registered entity to
make such documents and other records available to the Bureau upon the
Bureau's request. The purpose of this requirement would be to enable
the Bureau to assess, as part of its normal supervisory process, the
supervised registered entity's compliance with proposed Sec. 1092.203.
The Bureau would expect such documents and other records to be in a
form sufficient to enable the Bureau to conduct this assessment. The
Bureau believes that the five-year time period would appropriately
facilitate the Bureau's examination and enforcement capabilities with
respect to compliance with proposed Sec. 1092.203's requirements.
The Bureau requests comment on all aspects of proposed Sec.
1092.203(e). In particular, the Bureau requests comment as to whether
the proposed recordkeeping requirements ensure adequate support for the
written statement and whether the Bureau should impose additional or
alternative recordkeeping requirements--for example, by specifying
additional requirements for the records' contents or requiring that the
records be memorialized in written memoranda or reports. The Bureau
also seeks comment on whether it should consider requiring records to
be maintained for a different period of time.
203(f) Notification of Entity's Good Faith Belief That Requirements Do
Not Apply
Proposed Sec. 1092.203(f) would provide that a person may submit a
notice to the NBR system stating that it is neither designating an
attesting executive nor submitting a written statement pursuant to
Sec. 1092.203 because it has a good faith basis to believe that it is
not a supervised registered entity or that an order in question is not
a covered order. Such a filing may be combined with any similar filing
under proposed Sec. 1092.202(g).\201\ Proposed Sec. 1092.203(f) would
also require the person to promptly comply with Sec. 1092.203 upon
becoming aware of facts or circumstances that would not permit it to
continue representing that it has a good faith basis to believe that it
is not a supervised registered entity or that an order in question is
not a covered order. The Bureau is proposing to treat information
submitted under Sec. 1092.203(f) as ``administrative information'' as
defined by proposed Sec. 1092.201(a).
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\201\ See also the section-by-section discussion of proposed
Sec. 1092.202(g), which would provide a similar option with respect
to proposed Sec. 1092.202.
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The Bureau is proposing Sec. 1092.203(f) for several reasons.
First, while determining whether a company qualifies as a ``supervised
registered entity'' (or whether an order is a covered
[[Page 6127]]
order) should be straightforward in most cases, some persons may be
uncertain about whether they are a supervised registered entity (or
whether an order is a covered order). Even when they have a good faith
basis to believe they are not a supervised registered entity (or an
order is not a covered order), they could annually designate an
attesting executive and file annual written statements if they did not
want to incur the risk of violating the requirements of proposed Sec.
1092.203. But that approach could impose burden on persons who
ultimately are not supervised registered entities (or whose orders are
not covered orders). The Bureau therefore proposes an alternative
option for these persons. Rather than facing the burden of designating
an attesting executive and filing written statements, such an entity
could elect to file a notice under proposed Sec. 1092.203(f). When a
person makes a non-frivolous filing under proposed Sec. 1092.203(f)
stating that it has a good faith basis to believe that it is not a
supervised registered entity (or an order is not a covered order), the
Bureau would not bring an enforcement action against that person based
on the person's failure to comply with proposed Sec. 1092.203 unless
the Bureau has first notified the person that the Bureau believes the
person does in fact qualify as a supervised registered entity (or the
order in question qualifies as a covered order) and has subsequently
provided the person with a reasonable opportunity to comply with
proposed Sec. 1092.203.\202\
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\202\ Under proposed Sec. 1092.102(c), the filing of a
notification under Sec. 1092.203(f) would not affect the entity's
ability to dispute more generally that it qualifies as a person
subject to Bureau authority.
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The Bureau also believes that filings under proposed Sec.
1092.203(f) may reduce uncertainty by the Bureau about why certain
entities are not designating an attesting executive or providing a
written statement under proposed Sec. 1092.203. These notifications
also may provide the Bureau with information about how market
participants are interpreting the scope of proposed Sec. 1092.203,
about the potential need for the Bureau to instruct certain persons to
designate an attesting executive and provide written statements, and
about the potential need for guidance or rulemaking clarifying the
scope of proposed Sec. 1092.203.
As in the case of proposed Sec. 1092.202(g), the Bureau has
considered an alternative to proposed Sec. 1092.203(f) under which
entities would not file a notice with the Bureau, but they could avoid
penalties for non-compliance with Sec. 1092.203 if in fact they could
establish a good faith belief that they did not qualify as supervised
registered entities subject to Sec. 1092.203 (or their order was not a
covered order). Under this alternative, entities would maintain such
good faith belief so long as the Bureau had not made clear that Sec.
1092.203 would apply to them. Although the Bureau preliminarily
concludes that this alternative is not preferable to requiring entities
to actually file notices under proposed Sec. 1092.203(f), the Bureau
seeks comment on whether it should finalize this alternative instead.
It also seeks comment on whether, if it finalized this alternative,
entities would require additional guidance on the circumstances
pursuant to which an entity could no longer legitimately assert a good
faith belief that Sec. 1092.203 would not apply to its conduct. While
the Bureau anticipates that such circumstances would certainly include
entity-specific notice from the Bureau that Sec. 1092.203 applies, the
Bureau does not believe such notice should be required to terminate a
good faith defense to registration. Among other circumstances, the
Bureau anticipates that at least formal Bureau interpretations of (for
example) the provisions of CFPA section 1024(a)(1) would generally
suffice to terminate such belief.\203\
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\203\ 12 U.S.C. 5514(a)(1).
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The Bureau also seeks comment on whether it should not finalize
proposed Sec. 1092.203(f) or the potential alternative to that
provision.
Section 1092.204 Publication and Correction of Registration Information
204(a) Internet Posting of Registration Information
Proposed Sec. 1092.204(a) would require the Bureau to make
available to the public the information submitted to it by persons
pursuant to proposed Sec. 1092.202, except that the Bureau may choose
not to publish certain administrative information or other information
that the Bureau determines may be inaccurate, not required to be
submitted under subpart B, or otherwise not in compliance with part
1092 and any accompanying guidance. Proposed Sec. 1092.204(a) would
further provide that the Bureau may make registration information
available to the public by means that include publishing it on the
Bureau's publicly available Internet site within a timeframe determined
by the Bureau in its discretion. However, as discussed below regarding
proposed Sec. 1092.204(b), the proposal would specifically provide
that the Bureau would not disclose the written statement submitted
under proposed Sec. 1092.203.
Publication of registered entities' identifying information would
facilitate the ability of consumers to identify covered persons that
are registered with the Bureau.\204\ And the Bureau believes that
publication of additional information about registered entities and
covered orders would be in the public interest.\205\ Namely, as
discussed in more detail in section IV(E) above, proposed Sec.
1092.204(a) would provide information of use to consumers, other
regulators, industry, nongovernment organizations, and the general
public. Proposed Sec. 1092.204(a) also would formally align the
proposed NBR system with Federal government emphasis on making
government data available to and usable by the public, by default, to
the greatest extent possible.\206\
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\204\ 12 U.S.C. 5512(c)(7)(B).
\205\ 12 U.S.C. 5512(c)(3)(B).
\206\ See, e.g., Open, Public, Electronic, and Necessary
Government Data Act, in title II of Public Law 115-435 (Jan. 14,
2019); Office of Management and Budget, M-19-18, Federal Data
Strategy--A Framework for Consistency (June 4, 2019), https://www.whitehouse.gov/wp-content/uploads/2019/06/M-19-18.pdf.
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As discussed in more detail in section IV(E) above, making the data
collected publicly available would further the rationale of the
proposal--that is, enhancing oversight and awareness of covered orders
and the covered nonbanks that are subject to them. Regulators and other
agencies at all levels of government (not just the Bureau) could use
the information the Bureau makes publicly available to set priorities.
The Bureau believes publication is also in the public interest because
researchers could analyze the information the Bureau makes publicly
available to gain valuable insight into the issues addressed in the
nonbank registry system. For example, they could produce reports that
may inform consumers and the public more broadly of potential risks
related to covered orders, or otherwise use the public data to promote
private innovation. Organizations representing consumer interests could
also use the information to assist with their consumer protection
efforts. Publication can also help inform the public, including
industry actors, about how regulators are enforcing Federal consumer
financial laws and other similar laws. For example, industry actors
could use the registry as a convenient source of information regarding
regulator actions and trends across jurisdictions, helping them to
better understand legal risks and compliance obligations. At least in
[[Page 6128]]
certain cases, consumers may be able to use the information in the
registry to make informed choices regarding consumer financial products
and services, including potentially using the information to assist
with the assertion of private rights of action that might be available
under the Federal consumer financial laws. Finally, publication would
help promote Bureau accountability by helping the public better see and
understand the results of the nonbank registry initiative, and to help
the public gain greater insight into Bureau decision-making. As
discussed above in section IV(E), the Bureau believes that identifying
the executive who has knowledge and control of the supervised entity's
efforts to comply with the covered order would provide particular
benefits to the Bureau, the public, and other users of the system.
The Bureau seeks comment on potential costs and benefits of making
data from the nonbank registry system publicly available. In
particular, the Bureau seeks comment on whether it should decline to
finalize the provisions in proposed Sec. 1092.204, and whether it
should not publicize some of the information collected pursuant to
proposed Sec. 1092.202. The Bureau appreciates that there may be some
risk that publication would deter some entities from consenting to
agency and court orders that they might otherwise agree to, due to the
potential for additional attention created by the registry, any
additional burden that may be imposed by the requirement to submit
annual written statements, and any other deleterious effects that the
entities may perceive related to registration requirements. This effect
in turn may impact the Bureau's enforcement efforts and those of other
Federal, State, and local agencies. The Bureau seeks comment on such
potential effects, on how those effects might weigh against the
benefits of publication, and on whether the Bureau might adopt any
mechanisms to help prevent or minimize any concerns relating to the
enforcement activities of the Bureau or other agencies.
In addition, there may be some uncertainty over the degree to which
consumers would use the publicized information and, when they do, over
how consumers could interpret such information. For example, consumers
may misunderstand registration to mean that registered entities are
``legitimate,'' that registration itself serves as an endorsement by
the Bureau, or that all registered entities are supervised, or
regularly supervised, by the Bureau. Registration would not in and of
itself establish the entity's legitimacy or serve as a Bureau
endorsement in any way. Moreover, proposed subpart B would not
constitute a licensing system or an authorization by the Bureau for
covered nonbanks to engage in offering or providing consumer financial
products or services. For these reasons, the Bureau continues to
evaluate the possibility that publishing information collected under
subpart B has the potential to create confusion, which, to the extent
it occurs, is unlikely to serve the public interest. If the Bureau
finalizes proposed Sec. 1092.204, it would consider options for
publishing the information in a manner that mitigates this risk.
Proposed Sec. 1092.204(a) would provide that the Bureau may choose
not to publish certain administrative information or other information
that the Bureau determines may be inaccurate, not required to be
submitted under subpart B, or otherwise not in compliance with part
1092 and any accompanying guidance. The Bureau proposes to exclude
administrative information, as defined at proposed Sec. 1092.201(a),
from the proposed publication requirement because it believes the
publication of such information may not in all instances be especially
useful to external users of the system. Administrative information is
likely to include information such as time and date stamps, contact
information, and administrative questions. The Bureau anticipates that
it may need such information to work with personnel at nonbanks and in
order to administer the NBR system. The Bureau believes that publishing
such information would not be in the public interest because
publication would be unnecessary and likely would be counterproductive
to the goals of ensuring compliance with the proposal and publishing
usable information.
The Bureau would also reserve the right not to publish any
information that it determines may be inaccurate, not required to be
submitted under subpart B, or otherwise not in compliance with part
1092 and any accompanying guidance. For example, persons may submit
unauthorized or inadvertent filings, or filings regarding orders that
would not require registration under the proposal, or other inaccurate
or inappropriate filings. The Bureau believes it would require
flexibility not to publish such information in order to maintain the
accuracy and integrity of the NBR system and the data that would be
published by the Bureau. And publication of information that the Bureau
determines is, or may be, inaccurate, not required to be submitted
under subpart B, or that is otherwise not appropriately submitted under
the proposal and accompanying guidance, would not further the goals of
the proposal. The Bureau seeks comment on this approach and whether it
should provide any additional flexibility, or add any restrictions,
with respect to the publication required by this section.
Furthermore, consistent with CFPA section 1022(c)(8),\207\ the
Bureau would not publish information protected from public disclosure
under 5 U.S.C. 552(b) or 552a of title 5, United States Code, or any
other provision of law. The Bureau, however, does not believe that any
of the information proposed to be collected under proposed Sec.
1092.202 would be protected from public disclosure by law. The Bureau
requests comments on this question, and whether any other steps should
be taken to protect this information from public disclosure.
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\207\ 12 U.S.C. 5512(c)(8) (``In . . . publicly releasing
information held by the Bureau, or requiring covered persons to
publicly report information, the Bureau shall take steps to ensure
that proprietary, personal, or confidential consumer information
that is protected from public disclosure under [the FOIA] or [the
Privacy Act of 1974, 5 U.S.C. 552a,] or any other provision of law,
is not made public under [the CFPA].'').
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The Bureau recognizes that by relying in part on its supervisory
authority in section 1024 of the CFPA to require submission of
information to the nonbank registry, registry information could be
construed to be ``confidential supervisory information'' as defined in
the Bureau's confidentiality rules at 12 CFR 1070.2(i). Public release
of information pursuant to Sec. 1092.204(a) would be authorized by the
Bureau's confidentiality rules at 12 CFR 1070.45(a)(7), which permits
the Bureau to disclose confidential information ``[a]s required under
any other applicable law.'' The Bureau does not believe that the
information proposed to be published under Sec. 1092.204(a) would
raise the concerns generally addressed by the Bureau's restrictions on
disclosure of confidential supervisory information. For example, the
Bureau anticipates that the information collected pursuant to Sec.
1092.202 would otherwise be subject to disclosure under the Freedom of
Information Act and would not be particularly sensitive to financial
institutions or compromise any substantial privacy interest; that
disclosure of the information would not impede the confidential
supervisory process; and that disclosure would not present risks to the
financial system writ large.
204(b) Exclusion of Written Statement
Proposed Sec. 1092.204(b) would provide that the publication
described
[[Page 6129]]
in proposed Sec. 1092.204(a) would not include the written statement
submitted under proposed Sec. 1092.203, and that such information
would be treated as confidential supervisory information subject to the
provisions of part 1070. The Bureau proposes to require the submission
of the written statement pursuant to CFPA section 1024(b)(7), which
authorizes the Bureau to prescribe rules regarding registration,
recordkeeping, and other requirements for covered persons subject to
its supervisory authority under CFPA section 1024. The Bureau believes
that treating the written statements that it receives under proposed
Sec. 1092.203 as confidential, and not publishing them under proposed
Sec. 1092.204, would facilitate the Bureau's supervision of supervised
registered entities by enabling the Bureau to obtain frank and candid
assessments and other information from supervised registered entities
regarding violations and noncompliance in connection with covered
orders. This information in turn would better enable the Bureau to spot
emerging risks, focus its supervisory efforts, and address underlying
issues regarding noncompliance, compliance systems and processes, and
risks to consumers.
There may be some benefit to other users of the NBR system from
publishing the written statements that it receives under proposed Sec.
1092.203, including enhancing the ability of other agencies and
affected consumers to monitor compliance. However, the Bureau believes
that these potential benefits are likely to be outweighed by increased
candor and compliance with proposed Sec. 1092.203. The Bureau's
supervision program depends upon the full and frank exchange of
information with the institutions it supervises. Consistent with the
policies of the prudential regulators, the Bureau's policy is to treat
information obtained in the supervisory process as confidential and
privileged.\208\ For example, the Bureau will treat all such
information as exempt from disclosure under exemption 8 of the Freedom
of Information Act.\209\ The Bureau believes that these considerations
would also underlie supervisory communications with supervised
registered entities under proposed Sec. 1092.203, and that the
proposed approach would enhance the usefulness of submissions under
proposed Sec. 1092.203, increase the Bureau's ability to detect and
assess potential noncompliance and emerging risks to consumers, and
promote compliance with the law.\210\
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\208\ See CFPB Compliance Bulletin 2015-01 (Jan. 27, 2015),
https://files.consumerfinance.gov/f/201501_cfpb_compliance-bulletin_treatment-of-confidential-supervisory-information.pdf; CFPB
Bulletin 2012-01 (Jan. 4, 2012), https://files.consumerfinance.gov/f/2012/01/GC_bulletin_12-01.pdf. Also consistent with the policies
of the prudential regulators, the Bureau recognizes that the sharing
of confidential supervisory information with other government
agencies may in some circumstances be appropriate, and in some
cases, required. See id. For example, in accordance with the scheme
of coordinated supervision established by Congress, the Bureau's
policy is to share confidential supervisory information with the
prudential regulators and State regulators that share supervisory
jurisdiction over an institution supervised by the Bureau. See id.
\209\ See 5 U.S.C. 552(b)(8).
\210\ Proposed Sec. 1092.102(c) would provide that proposed
part 1092 would not alter applicable processes whereby a person may
dispute that it qualifies as a person subject to Bureau authority.
The Bureau believes written statements submitted to the NBR system
under proposed Sec. 1092.204 would constitute Bureau confidential
supervisory information under the regulatory definition of that term
even if the submitter later disputes that it qualifies as a person
subject to the Bureau's supervisory authority. See 12 CFR 1070.2(i)
(defining Bureau confidential supervisory information), (q)
(``Supervised financial institution means a financial institution
that is or that may become subject to the Bureau's supervisory
authority.'').
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The Bureau seeks comment on the proposed approach, whether
treatment of such submissions as Bureau confidential supervisory
information is warranted, and whether the Bureau should consider taking
other steps to facilitate the submission of written statements.
204(c) Other Publications of Information
Proposed Sec. 1092.204(c) would provide that the Bureau may, at
its discretion, compile and aggregate data submitted by persons under
proposed subpart B and may publish such compilations or aggregations
(in addition to any other publication under proposed Sec.
1092.204(a)). Any such publication that relates to annual written
statements submitted under proposed Sec. 1092.203 would be in a form
that is consistent with the Bureau's treatment of those annual written
statements as Bureau confidential supervisory information.\211\
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\211\ See, e.g., 12 CFR 1070.41(c).
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204(d) Correction of Submissions to the NBR System
Proposed Sec. 1092.204(d) would clarify that a covered nonbank
must correct an information submission within 30 days of when it
becomes aware or has reason to know the submitted information was and
remains inaccurate. Proposed Sec. 1092.204(d) would clarify that the
process for making corrections will be described in the filing
instructions the Bureau issues pursuant to proposed Sec. 1092.102(a).
Proposed Sec. 1092.204(d) also would clarify that the Bureau may
direct a covered nonbank to correct errors or other non-compliant
submissions to the NBR system. Under proposed Sec. 1092.204(d), the
Bureau could direct corrections at any time and in its sole discretion.
Subpart C--Reserved
Subpart C of part 1092 would be reserved for rules that may be
proposed in a separate notice of proposed rulemaking.
VI. Proposed Effective Date of Final Rule
The Administrative Procedure Act generally requires that rules be
published not less than 30 days before their effective dates.\212\ The
Bureau proposes that, once issued, the final rule for this proposal
would be effective 30 days after it is published in the Federal
Register. However, as described in more detail in the section-by-
section discussion of proposed Sec. Sec. 1092.202(b) and 1092.203(a),
registrants will only need to submit information once the Bureau
launches and announces a registration system, which is likely to be no
earlier than January 2024.
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\212\ 5 U.S.C. 553(d).
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VII. Dodd-Frank Act Section 1022(b)(2) Analysis
A. Overview
In developing the proposed rule, the Bureau has considered the
proposed rule's potential benefits, costs, and impacts.\213\ The Bureau
requests comment on the preliminary analysis presented below, as well
as submissions of additional data that could inform the Bureau's
analysis of the benefits, costs, and impacts. In developing the
proposed rule, the Bureau has consulted with, or offered to consult
with, the appropriate prudential regulators and other Federal agencies,
including regarding consistency with any prudential, market, or
systemic objectives administered by such agencies. Under CFPA sections
1022(c)(7)(C) and 1024(b)(7)(D), the Bureau has also consulted with
State agencies regarding the proposed rule's requirements and
registration system.\214\
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\213\ Specifically, section 1022(b)(2)(A) of the CFPA requires
the Bureau to consider the potential benefits and costs of the
regulation to consumers and covered persons, including the potential
reduction of access by consumers to consumer financial products and
services; the impact of the proposed rule on insured depository
institutions and insured credit unions with $10 billion or less in
total assets as described in section 1026 of the CFPA; and the
impact on consumers in rural areas. 12 U.S.C. 5512(b)(2)(A).
\214\ 12 U.S.C. 5512(c)(7)(C), 5514(b)(7)(D).
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The Bureau is issuing this proposal to require nonbanks to report
certain
[[Page 6130]]
public agency and court orders imposing obligations based on violations
of consumer protection laws because the Bureau believes that the Bureau
would benefit from the creation and maintenance of a central repository
for information regarding such public orders that have been imposed
upon nonbank covered persons. The Bureau also believes that consumers,
the public, and other potential users of the proposed registration
system would benefit from publication of certain information in the
registry. In addition, the Bureau would also benefit from receiving
annual supervisory reports from its supervised nonbanks regarding their
compliance with such orders.
The proposed rule has three provisions, which are separately
analyzed below. The first proposed provision (hereinafter referred to
as the ``Registration Provision'') would require nonbank covered
persons that are subject to certain public orders to register with the
Bureau and to submit copies of each such public order to the Bureau.
The second proposed provision (hereinafter referred to as the
``Supervisory Reports Provision'') would require nonbank covered
persons that are subject to supervision and examination by the Bureau
to prepare and submit an annual written statement, signed by a
designated individual, regarding compliance with each covered public
order. The third proposed provision (hereinafter referred to as the
``Publication Provision'') describes the registration information the
Bureau would make publicly available.
B. Data Limitations and Quantification of Benefits, Costs, and Impacts
The discussion below relies in part on information that the Bureau
has obtained from other regulatory agencies and publicly available
sources. The Bureau has performed outreach with other regulatory
agencies on many of the issues addressed by the proposed rule. However,
as discussed further below, the data are generally limited with which
to quantify the potential costs, benefits, and impacts of the proposed
provisions. In light of these data limitations, the analysis below
generally provides a qualitative discussion of the benefits, costs, and
impacts of the proposed provisions. General economic principles and the
Bureau's experience and expertise in consumer financial markets,
together with the limited data that are available, provide insight into
these benefits, costs, and impacts. The Bureau requests additional data
or studies that could help quantify the benefits and costs to consumers
and covered persons of the proposed provisions.
C. Baseline for Analysis
In evaluating the potential benefits, costs, and impacts of the
proposed rule, the Bureau takes as a baseline the current legal
framework regarding orders that would be covered under the proposed
rule. Therefore, the baseline for the analysis of the proposed rule is
that nonbank covered persons are not required to register with the
Bureau, nonbank covered persons subject to Bureau supervision and
examination generally are not required to prepare and submit annual
reports regarding compliance with public orders enforcing the law, and
information on the nonbank covered persons and most corresponding
covered orders is generally not published by the Bureau in the manner
contemplated by the proposed rule.
If finalized as proposed, the rule should affect the market as
described below for as long as it is in effect. However, the costs,
benefits, and impacts of any rule are difficult to predict far into the
future. Therefore, the analysis below of the benefits, costs, and
impacts of the proposed rule is most likely to be accurate for the
first several years following implementation of the proposed rule.
D. Potential Benefits and Costs of the Proposed Rule to Consumers and
Covered Persons
With certain exceptions, the proposed rule would apply to covered
persons as defined in the CFPA, including persons that engage in
offering or providing a consumer financial product or service.\215\
Among others,\216\ these products and services would generally include
those listed below, at least to the extent they are offered or provided
for use by consumers primarily for personal, family, or household
purposes:
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\215\ For the full scope of the term ``covered person,'' see 12
U.S.C. 5481(6).
\216\ For the full scope of the term ``consumer financial
product or service,'' see 12 U.S.C. 5481(5).
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Extending credit and servicing loans;
Extending or brokering certain leases of personal or real
property;
Providing real estate settlement services;
Engaging in deposit-taking activities, transmitting or
exchanging funds, or otherwise acting as a custodian of funds;
Selling, providing, or issuing stored value or payment
instruments;
Providing check cashing, check collection, or check
guaranty services;
Providing payments or other financial data processing
products or services to a consumer by any technological means;
Providing financial advisory services;
Collecting, analyzing, maintaining, or providing consumer
report information or certain other account information; and
Collecting debt related to any consumer financial product
or service.\217\
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\217\ See 12 U.S.C. 5481(15) (defining term ''financial product
or service'').
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The Registration and Publication Provisions would affect such
covered persons (as that term is defined in 12 U.S.C. 5481(6)) that (1)
are not insured depository institutions, insured credit unions, or
related persons (as that term is defined in 12 U.S.C. 5481(25)), and
(2) have had covered orders issued against them, unless such covered
persons are subject to certain exclusions. The Supervisory Reports
Provision would affect such covered persons that (1) are subject to
supervision and examination by the Bureau pursuant to CFPA section
1024(a),\218\ (2) have had covered orders issued against them, and (3)
are at or above the $1 million annual receipt threshold, unless such
covered persons are subject to certain exclusions.
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\218\ 12 U.S.C. 5514(a).
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A major benefit of the proposed rule would be that it would give
the Bureau higher-quality data on the number and type of covered
orders. Currently, the Bureau does not have high-quality data on the
number of covered orders, nor does it have high-quality data on the
number of nonbank covered persons that are subject to covered orders.
To derive an estimate of the number of affected entities under the
proposed rule using publicly available data, the Bureau used data from
the most recent Economic Census. Table 1 below presents entity counts
for the North American Industry Classification System (NAICS) codes
that generally align with the financial services and products listed
above. The markets defined by NAICS codes in some cases include
entities that would not qualify as covered nonbanks under the proposed
rule. It is also possible that some covered nonbanks may not be counted
in the table below, because, e.g., the financial services they provide
are not their primary line of business. The Bureau seeks comment on
NAICS codes not included in Table 1 that include a significant number
of entities that could be affected by the proposed rule.
[[Page 6131]]
Table 1--Potential Scope of Proposed Rule
------------------------------------------------------------------------
Number of
NAICS name(s) NAICS code(s) NAICS entities
------------------------------------------------------------------------
Nondepository Credit Intermediation..... 5222 14,330
Activities Related to Credit 5223 13,618
Intermediation.........................
Portfolio Management.................... 523920 24,430
Investment Advice....................... 523930 17,510
Passenger Car Leasing................... 532112 449
Truck, Utility Trailer, and Recreational 532120 1,612
Vehicle Rental and Leasing.............
Activities Related to Real Estate....... 5313 79,563
Consumer Reporting...................... 561450 307
Debt Collection......................... 561440 3,224
-------------------------------
Total............................... .............. 155,043
------------------------------------------------------------------------
Therefore, for purposes of its analysis of the proposed rule, the
Bureau estimates that there are roughly 155,043 covered nonbanks. As
noted above, covered nonbanks would only be affected by the rule if
they are subject to covered orders. Based on its experience and
expertise, the Bureau estimates that perhaps one percent, and at most
five percent, of covered nonbanks are subject to covered orders.
Therefore, the Bureau estimates that the rule would likely affect
between 1,550 and 7,752 covered nonbanks.
The Bureau seeks comment and submissions of data concerning the
number and characteristics (such as annual revenues, number of
employees, and main area of business) of covered nonbanks subject to
covered orders. In light of the currently limited data available to the
Bureau on the number of covered nonbanks subject to covered orders, the
analysis below focuses on the potential benefits and costs of the
proposed rule for affected consumers and covered nonbanks.
1. Registration Provision
Under this proposed provision, affected entities would have to
provide: (1) identifying information and administrative information and
(2) information regarding covered orders. The Bureau believes this
information should be readily available to affected firms. Therefore,
the cost of complying with the Registration Provision for most affected
firms should be on the order of a few hours of an employee's time. The
cost may be higher for firms with several covered orders, or with
covered orders that are frequently modified.
Some firms may be unsure whether they are covered persons not
otherwise excluded from the rule, or whether they are subject to
covered orders. For firms unsure of their obligations under the
proposed provision, one option would be to hire outside legal counsel
to advise them on these issues, which could be costly for small firms.
However, another option for such firms would be to register using the
NBR system, even if doing so is not legally required. As explained
above, the cost associated with registering an order is likely
minimal--a few hours of an employee's time. In addition, if firms have
a good faith basis to believe they are not covered nonbanks (or that
their orders are not covered orders), they may submit a notice to the
nonbank registration system stating as such under proposed Sec.
1092.202(g). Preparing and submitting such notices would take at most a
few hours of an employee's time. The Bureau further notes that the mere
act of registering an order or submitting a Sec. 1092.202(g) notice is
unlikely to have significant indirect costs because proposed Sec.
1092.102(c) would provide that the rule ``does not alter any applicable
process whereby a person may dispute that it qualifies as a person
subject to Bureau authority.'' Firms should generally choose the lowest
cost option available to them, and low-cost options--either registering
under the NBR system or filing a notice under proposed Sec.
1092.202(g)--are options available to firms.
To obtain a quantitative estimate of the cost of this proposed
provision, the Bureau assesses the average hourly base wage rate for
the reporting requirement at $43.60 per hour. This is the mean hourly
wage for employees in four major occupational groups assessed to be
most likely responsible for the registration process: Management
($59.31/hr); Legal Occupations ($54.38/hr); Business and Financial
Operations ($39.82/hr); and Office and Administrative Support ($20.88/
hr).\219\ We multiply the average hourly wage of $43.60 by the private
industry benefits factor of 1.42 to get a fully loaded wage rate of
$61.90/hr.\220\ The Bureau includes these four occupational groups in
order to account for the mix of specialized employees that may assist
in the registration process. The Bureau assesses that the registration
process will generally be completed by office and administrative
support employees that are generally responsible for the registrant's
paperwork and other administrative tasks. Employees specialized in
business and financial operations or in legal occupations are likely to
provide information and assistance with the registration process.
Senior officers and other managers are likely to review the
registration information before it is submitted and may provide
additional information. The Bureau requests any information that would
inform its estimate of the average hourly compensation of employees
required to register under the proposed rule. Assuming as outlined
above a fully loaded wage rate of roughly $60, and that complying with
this proposed provision would take around five hours of employees'
time, yields a cost impact of around $300 per firm. Therefore, the
impact of this proposed provision on affected firms would be limited.
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\219\ See U.S. Bureau of Labor Statistics, National Occupational
Employment and Wage Estimates United States (May 2021), https://www.bls.gov/oes/current/oes_nat.htm.
\220\ As of March 2022, the ratio between total compensation and
wages for private industry workers is 1.42. See U.S. Bureau of Labor
Statistics, Employer Costs for Employee Compensation: Private
industry dataset (March 2022), https://www.bls.gov/web/ecec/ecec-private-dataset.xlsx.
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This proposed provision would likely not provide any benefits for
affected firms.
This proposed provision would give the CFPB high-quality
information on outstanding covered orders and the entities subject to
those orders. That information would assist the Bureau in monitoring
for risks to consumers in the offering or provision of consumer
financial products or services. The proposed registry would allow the
Bureau to more effectively monitor for potential risks to consumers
arising from both individual violations of consumer protection laws and
broader
[[Page 6132]]
patterns in such violations and enforcement actions intended to address
them. Such monitoring, in turn, would help inform the Bureau's exercise
of its other authorities. It would assist the Bureau in determining
whether to prioritize certain entities for risk-based supervision, or
to investigate whether certain entities have committed violations that
warrant Bureau enforcement actions. The Bureau also anticipates that
the Registration Provision would give it more information on important
gaps in existing consumer financial protection laws and would therefore
improve future Bureau regulations. In addition, by providing the Bureau
with more information on consumer harms in various markets, the
Registration Provision would improve the Bureau's consumer education
efforts. All of these effects would benefit consumers. The Bureau does
not have any data to quantify these benefits.
This proposed provision would likely not impose any significant
costs on consumers. As noted above, this proposed provision could
impose some costs on some firms, and it is possible that those firms
would respond to these increased costs by increasing prices for
consumers. But as discussed above, the costs of this proposed provision
would be limited, so any price increases caused by the rule would also
be limited. Moreover, many firms would not be affected at all by this
proposed provision and so would not raise prices because of this
proposed provision.
2. Supervisory Reports Provision
This proposed provision would only affect covered nonbanks subject
to Bureau supervision and examination. Therefore, it would affect fewer
covered nonbanks and fewer consumers than the first provision analyzed
above.
Some firms may be unsure whether they are supervised covered
persons not otherwise excluded from the rule, or whether they are
subject to covered orders, so they may be unsure whether they would
have to comply with this proposed provision. The Bureau notes that
complying with this proposed provision if it is legally unnecessary is
unlikely to have greater costs than if it is legally necessary, because
proposed Sec. 1092.102(c) would provide that the rule does not alter
applicable processes whereby a person may dispute that it qualifies as
a person subject to Bureau authority. Also, under proposed Sec.
1092.203(f), if a firm has a good faith basis to believe that it is not
a supervised registered entity subject to the Supervisory Reports
Provision (or that its order is not a covered order), it may submit a
notice to the nonbank registration system stating as such. Preparing
and submitting such a notice would take at most a few hours of an
employee's time. Firms should generally choose the lowest cost option
available to them. Therefore, firms are unlikely to spend more to
determine whether they need to comply with the Supervisory Reports
Provision than the cost to the firm of complying with the provision or,
for firms with a good faith basis to believe they are not supervised
registered entities, of filing a Sec. 1092.203(f) notice.
This provision would require that affected supervised entities
designate an attesting executive. The attesting executive would be a
duly appointed senior executive officer (or, if no such officer exists,
the highest-ranking individual at the entity charged with managerial or
oversight responsibilities) (i) whose assigned duties include ensuring
the supervised registered entity's compliance with Federal consumer
financial law, (ii) who possesses knowledge of the supervised entity's
systems and procedures for achieving compliance with the covered order,
and (iii) who has control over the supervised entity's efforts to
comply with the covered order. The Bureau believes that, even under the
baseline scenario, most supervised entities would be taking active
steps to comply with covered orders, and therefore would already have
such an officer or individual in place to oversee the entity's
compliance with its obligations under the covered order. Therefore, the
Bureau anticipates that this designation requirement would impose
little or no additional cost on most supervised registered entities.
The Bureau notes that the cost may be higher for supervised entities
that lack a high-ranking officer or other employee with the requisite
qualifications to serve as an attesting executive. But the Bureau
believes that there would be few such entities. The Bureau seeks
comment on whether proposed Sec. 1092.203(b)'s designation requirement
is likely to impose material additional costs on supervised registered
entities, beyond the costs those entities are already likely to incur
as part of fulfilling their obligations under the covered orders to
which they are subject.
The Supervisory Reports Provision would also require that the
supervised registered entity submit a written statement signed by the
applicable attesting executive for each covered order to which it is
subject. In the written statement, the attesting executive would: (i)
generally describe the steps that the attesting executive has
undertaken to review and oversee the supervised registered entity's
activities subject to the applicable covered order for the preceding
calendar year; and (ii) attest whether, to the attesting executive's
knowledge, the supervised registered entity during the preceding
calendar year identified any violations or other instances of
noncompliance with any 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 Bureau cannot precisely quantify the impact of the written-
statement requirement on impacted firms, but based on its experience
and expertise, the Bureau believes that most entities subject to
covered orders endeavor in good faith to comply with them and will
already have in place some manner of systems and procedures to help
achieve such compliance. For these entities, the proposed written-
statement requirement would require little more than submitting a
written statement from the attesting executive that describes the steps
the executive took consistent with the established systems and
procedures to reach conclusions regarding entity compliance with the
orders. Thus, relative to the baseline, the written-statement
requirement should impose only modest costs on most covered entities,
related primarily to the time and effort needed to (i) memorialize the
attesting executive's existing oversight of compliance and (ii)
determine whether the supervised registered entity during the preceding
calendar year identified any violations or other instances of
noncompliance with any 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. While the attesting executive would
sign the written statement, the Bureau expects that other employees in
other major occupational groups (Legal Occupations, Business and
Financial Operations, and Office and Administrative Support) would
support the attesting executive in preparing the statement. Assuming
that satisfying the written-statement requirement would take twenty
hours of employees' time, and that the average cost to entities of an
employee's time is roughly $60 an hour as discussed above, yields an
estimate that the cost of this requirement on covered entities would be
roughly $1200 per firm.
The Bureau acknowledges that, under the baseline, some supervised
registered entities may not have in place systems and procedures to
allow them to confidently identify violations or other instances of
noncompliance with any
[[Page 6133]]
obligations that were imposed in a public provision of the covered
order. As discussed elsewhere in this preamble, the Supervisory Reports
Provision would likely prompt some such entities to adopt new or
additional compliance systems and procedures, imposing a greater cost
on them. However, as noted above, based on its experience and
expertise, the Bureau believes that most entities subject to covered
orders endeavor in good faith to comply with them and will already have
in place some manner of systems and procedures to help achieve such
compliance. Therefore, the Bureau believes that the number of
supervised registered entities that would put in place significant new
compliance systems and procedures as a result of the rule would be
relatively small.
In addition, the Supervisory Reports Provision would require
entities to maintain records related to the written statement for five
years. Conservatively assuming that ensuring the necessary documents
are properly stored also requires ten hours of employee time adds $600
to the costs to affected entities of this proposed provision.
Note that, for the purposes of this proposed rule, the term
``supervised registered entity'' excludes persons with less than $1
million in annual receipts resulting from offering or providing
consumer financial products and services described in CFPA section
1024(a).\221\ Therefore, the combined costs of around $1800 imposed by
the Supervisory Reports Provision on the majority of affected entities
should be roughly 0.2 percent or less of annual receipts. The costs may
be higher at larger entities because identifying instances of
noncompliance with obligations imposed in a public provision of a
covered order may be more complex at larger entities. The costs would
also likely be higher at entities with multiple instances of
noncompliance with public provisions of covered orders, or with
multiple covered orders.
---------------------------------------------------------------------------
\221\ 12 U.S.C. 5514(a).
---------------------------------------------------------------------------
As explained in greater detail in section V(D) above, the
Supervisory Reports Provision would facilitate the Bureau's risk-based
supervision efforts, including its efforts to assess compliance with
the requirements of Federal consumer financial law, obtain information
about the supervised entities' activities and compliance systems or
procedures, and detect and assess risks to consumers and to markets for
consumer financial products and services. All of these effects would
benefit consumers. Moreover, while as noted above the Bureau believes
that most entities subject to covered orders endeavor in good faith to
comply with them and will already have in place some manner of systems
and procedures to help achieve such compliance, it is also likely that
this proposed provision would cause a few entities without such systems
and procedures to develop them. This would also benefit consumers. The
Bureau does not have any data to quantify this benefit. The Bureau
requests comments and information on ways to quantify these benefits.
3. Publication Provision
For affected covered nonbanks, the main effect of this provision
would be that (1) their identifying information and administrative
information, (2) information regarding covered orders that they provide
to the Bureau, and (3) for supervised registered entities, the name and
title of the attesting executive, could be posted on the Internet by
the Bureau. Much of this information would be public even under the
baseline, so the additional direct effect of this information being
posted on the Bureau's website should be small.
However, because covered nonbanks would provide this information
only if they are subject to covered orders, consumers might interpret
the presence of a covered nonbank on the Bureau's website as negative
information about that covered nonbank. Therefore, this proposed
provision may have negative reputational costs for the covered nonbank
whose information is published on the Bureau website. Yet, covered
orders would be public information even under the baseline with no
rule. Therefore, this proposed provision would not make public any non-
public orders. This would limit the likely costs on covered nonbanks of
the proposed provision.
This proposed provision would allow information related to covered
orders that is already available to the general public to be
centralized on the Bureau's website. This could make the information
more readily accessible than it would otherwise be. A large body of
research has studied the circumstances under which providing consumers
better access to information does, and does not, improve consumer
outcomes.\222\ One consensus from this research is that well-designed
information disclosures can be effective at directing consumer
attention. For example, one study found that providing payday loan
borrowers with information about the costs of payday loans reduced
payday loan borrowing.\223\ However, another consensus from this
research is that information disclosures do not always materially
affect consumer decision-making, and that the impact of information
disclosures on consumer decision-making depends on their design and
implementation. Impactful information disclosures are typically more
direct (e.g., disclosing the costs of payday loans to payday loan
borrowers) and more timely (e.g., disclosed to payday loan borrowers at
the time they are obtaining a payday loan) than the information that
would be centralized and published under this proposed provision.
Therefore, the Bureau believes that most consumers would not change
their behavior due to this proposed provision, so the impact of this
proposed provision on most affected entities would likely not be
significant. The Bureau acknowledges that the issues disclosed by a few
covered orders may be so controversial among consumers that their
publication on the Bureau website could impose a substantial impact on
the firms affected by those orders. However, as noted above, covered
orders would be public information even under the baseline with no
rule. Therefore, covered orders that disclose particularly
controversial practices would likely be well-known among consumers even
under the baseline.
---------------------------------------------------------------------------
\222\ For one review of this research, see Thomas A. Durkin and
Gregory Elliehausen, Truth in Lending: Theory, History, and a Way
Forward (2011).
\223\ See Marianne Bertrand and Adair Morse, Information
Disclosure, Cognitive Biases, and Payday Borrowing, 66 The Journal
of Finance 1865, 1865-93 (2011).
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This proposed provision could benefit firms in affected markets,
even those without covered orders, by centralizing information on
covered orders. This could give firms a clearer picture of how consumer
financial protection laws are enforced across agencies and
jurisdictions, and could reduce costs for firms that would conduct
research into this question under the baseline. The Bureau does not
have any data with which to quantify these benefits.
For consumers, one effect of the proposed provision would be
improved access to information about covered nonbanks with covered
orders. However, as noted above, this information would be public even
under the baseline. Moreover, as discussed in more detail above,
impactful information disclosures are typically more direct and more
timely than the information that would be centralized and published
under this proposed
[[Page 6134]]
provision. Therefore, the Bureau believes that most consumers would not
change their behavior due to this proposed provision. The Bureau
acknowledges that the issues disclosed by a few covered orders may be
so controversial among consumers that their publication on the Bureau
website could impose a substantial impact on the firms affected by
those orders. However, as noted above, covered orders would be public
information even under the baseline with no rule. Therefore, covered
orders that disclose particularly controversial practices would likely
be well-known among consumers even under the baseline.
By centralizing information on covered orders, another effect of
the proposed provision would be to improve the ability of regulatory
agencies besides the Bureau to conduct their activities, including
supervision, enforcement, regulation, market monitoring, research, and
consumer education. This would benefit consumers. The Bureau does not
have any data to quantify this benefit.
This proposed provision would likely not impose any significant
costs on consumers. As noted above, this proposed provision could
impose some costs on some firms, and it is possible that those firms
would respond to these increased costs by increasing prices for
consumers. But as discussed above, the costs of this proposed provision
on affected firms would be limited, so any cost increases caused by the
rule would be limited at affected firms. Moreover, many firms would not
be affected at all by this proposed provision and so would not raise
prices because of this proposed provision.
E. Potential Specific Impacts of the Proposed Rule
1. Depository Institutions and Credit Unions With $10 Billion or Less
in Total Assets, As Described in Section 1026
This proposed rule would only apply to nonbanks. Therefore, it
would have no direct impacts on any insured depository institutions or
insured credit unions. The rule might have some indirect effects on
some insured depository institutions and insured credit unions with $10
billion or less in total assets. For example, insured depository
institutions and insured credit unions that are affiliated with
affected entities might experience indirect costs, because the proposed
rule could impose some costs on their nonbank affiliates. Insured
depository institutions and insured credit unions that compete with
affected entities might experience indirect benefits because of the
proposed rule, because the proposed rule would impose some costs on
their competitors. But as noted above, even for nonbanks that are
directly affected by the proposed rule, the Bureau does not anticipate
that the rule's impact will be significant in most cases. Therefore,
the Bureau anticipates that any indirect effects on insured depository
institutions or insured credit unions with $10 billion or less in total
assets would be even less significant.
2. Impact of the Proposed Rule on Access to Consumer Financial Products
and Services and on Consumers in Rural Areas
By imposing some costs on affected covered nonbanks, the proposed
rule could cause affected covered nonbanks to provide fewer financial
products and services (or financial products and services at higher
cost) to consumers. However, as noted above, the proposed rule would
likely impose only limited costs on a limited number of covered
nonbanks. Therefore, the impact of the proposed rule on consumer access
to financial products and services would be limited even at affected
covered nonbanks. Moreover, bank and nonbank entities that would not be
directly affected by the proposed rule could provide financial products
and services to consumers that would otherwise obtain these financial
products and services from affected covered nonbanks. Therefore, the
negative impact of the proposed rule on consumer access to financial
products and services would be limited. By improving the ability of the
CFPB to conduct its activities, including supervision, enforcement,
regulation, market monitoring, and consumer education, the proposed
rule would likely improve the functioning of the broader market and so
may also have positive effects on consumer access to consumer financial
products or services provided in conformity with applicable legal
obligations designed to protect consumers.
Broadly, the Bureau believes that the analysis above of the impact
of the proposed rule on consumers in general provides an accurate
analysis of the impact of the proposed rule on consumers in rural
areas. The impact of the proposed rule on consumers in rural areas
would likely be relatively smaller if the proposed rule would affect
fewer entities in rural areas. High-quality data on the rural market
share of entities that would be affected by the proposed rule does not
exist, so the Bureau cannot judge with certainty the relative impact of
the rule on rural areas. However, for certain large and well-studied
markets, there is evidence that nonbanks have larger market shares in
urban areas and smaller market shares in rural areas.\224\ Based on
this limited evidence, the Bureau expects that the impact of the
proposed rule would be smaller in rural areas.
---------------------------------------------------------------------------
\224\ For evidence on the mortgage market, see Julapa Jagtiani,
Lauren Lambie-Hanson, and Timothy Lambie-Hanson, Fintech Lending and
Mortgage Credit Access, 1 The Journal of FinTech (2021). For
evidence on the auto loan market, see Donghoon Lee, Michael Lee, and
Reed Orchinik, Market Structure and the Availability of Credit:
Evidence from Auto Credit, MIT Sloan Research Paper (2022), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3966710.
---------------------------------------------------------------------------
VIII. Regulatory Flexibility Act Analysis
A. Overview
The Regulatory Flexibility Act (RFA) generally requires an agency
to conduct an initial regulatory flexibility analysis (IRFA) and a
final regulatory flexibility analysis of any rule subject to notice-
and-comment rulemaking requirements, unless the agency certifies that
the rule will not have a significant economic impact on a substantial
number of small entities.\225\ The Bureau also is subject to certain
additional procedures under the RFA involving the convening of a panel
to consult with small business representatives before proposing a rule
for which an IRFA is required.\226\
---------------------------------------------------------------------------
\225\ 5 U.S.C. 601 et seq.
\226\ 5 U.S.C. 609.
---------------------------------------------------------------------------
An IRFA is not required for this proposed rule because for the
reasons explained below the proposed rule, if adopted, would not have a
significant economic impact on a substantial number of small entities.
B. Impact of Proposed Provisions on Small Entities
The proposed rule has three provisions, which are separately
analyzed below. The first proposed provision (hereinafter referred to
as the ``Registration Provision'') would require nonbank covered
persons that are subject to certain public agency and court orders
enforcing the law to register with the Bureau and to submit copies of
such public orders to the Bureau. The second proposed provision
(hereinafter referred to as the ``Supervisory Reports Provision'')
would require nonbank covered persons that are supervised by the Bureau
to prepare and submit an annual written statement, signed by a
designated individual, regarding compliance with each covered public
order. The third proposed provision (hereinafter referred to as the
``Publication Provision'') describes the registration information the
Bureau would make publicly available.
[[Page 6135]]
The analysis below evaluates the potential economic impact of the
proposed provisions on small entities as defined by the RFA.\227\ The
RFA's definition of ``small'' varies by type of entity.\228\
---------------------------------------------------------------------------
\227\ For purposes of assessing the impacts of the proposed rule
on small entities, ``small entities'' is defined in the RFA to
include small businesses, small not-for-profit organizations, and
small government jurisdictions. 5 U.S.C. 601(6). A ``small
business'' is determined by application of Small Business
Administration regulations and reference to the North American
Industry Classification System (NAICS) classifications and size
standards. 5 U.S.C. 601(3). A ``small organization'' is any ``not-
for-profit enterprise which is independently owned and operated and
is not dominant in its field.'' 5 U.S.C. 601(4). A ``small
governmental jurisdiction'' is the government of a city, county,
town, township, village, school district, or special district with a
population of less than 50,000. 5 U.S.C. 601(5).
\228\ U. S. Small Bus. Admin., Table of Small Business Size
Standards Matched to North American Industry Classification System
Codes, https://www.sba.gov/sites/default/files/2022-09/Table%20of%20Size%20Standards_NAICS%202022%20Final%20Rule_Effective%20October%201%2C%202022.pdf (current SBA size standards).
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With certain exceptions, the proposed rule would apply to covered
persons as defined in the CFPA, including persons that engage in
offering or providing a consumer financial product or service.\229\
Among others,\230\ these products and services would generally include
those listed below, at least to the extent they are offered or provided
for use by consumers primarily for personal, family, or household
purposes.
---------------------------------------------------------------------------
\229\ For the full scope of the term ``covered person,'' see 12
U.S.C. 5481(6).
\230\ For the full scope of the term ``consumer financial
product or service,'' see 12 U.S.C. 5481(5).
---------------------------------------------------------------------------
Extending credit and servicing loans;
Extending or brokering certain leases of personal or real
property;
Providing real estate settlement services;
Engaging in deposit-taking activities, transmitting or
exchanging funds, or otherwise acting as a custodian of funds;
Selling, providing, or issuing stored value or payment
instruments;
Providing check cashing, check collection, or check
guaranty services;
Providing payments or other financial data processing
products or services to a consumer by any technological means;
Providing financial advisory services;
Collecting, analyzing, maintaining, or providing consumer
report information or certain other account information; and
Collecting debt related to any consumer financial product
or service.\231\
---------------------------------------------------------------------------
\231\ See 12 U.S.C. 5481(15) (defining term ``financial product
or service'').
---------------------------------------------------------------------------
The Registration and Publication Provisions would affect such
covered persons (as that term is defined in 12 U.S.C. 5481(6)) that (1)
are not insured depository institutions, insured credit unions, or
related persons (as that term is defined in 12 U.S.C. 5481(25)), and
(2) have had covered orders issued against them, unless such covered
persons are subject to certain exclusions. The Supervisory Reports
Provision would affect such covered persons that (1) are subject to
supervision and examination by the Bureau pursuant to CFPA section
1024(a),\232\ (2) have had covered orders issued against them, and (3)
are at or above the $1 million annual receipt threshold, unless such
covered persons are subject to certain exclusions.
---------------------------------------------------------------------------
\232\ 12 U.S.C. 5514(a).
---------------------------------------------------------------------------
A major benefit of the proposed rule would be that it would give
the Bureau higher-quality data on covered orders. Currently, the Bureau
does not have high-quality data on the number of covered orders, nor
does it have reliable information on the number of small, covered firms
that are subject to covered orders. Therefore, the Bureau cannot
reliably estimate the number of small entities that would be impacted
by the proposed rule.
1. Registration Provision
The first proposed provision would require covered firms to
register using the NBR system and submit certain required information.
Required information includes identifying and administrative
information, as well as information regarding covered orders. This
information should be readily accessible to almost all entities
affected and providing it through the NBR system should be
straightforward. Firms would not have to purchase new hardware or
software, or train specialized personnel, to comply with this proposed
provision.
To obtain a quantitative estimate of the cost of this proposed
provision, the Bureau assesses the average hourly base wage rate for
the reporting requirement at $43.60 per hour. This is the mean hourly
wage for employees in four major occupational groups assessed to be
most likely responsible for the registration process: Management
($59.31/hr); Legal Occupations ($54.38/hr); Business and Financial
Operations ($39.82/hr); and Office and Administrative Support ($20.88/
hr).\233\ We multiply the average hourly wage of $43.60 by the private
industry benefits factor of 1.42 to get a fully loaded wage rate of
$61.90/hr.\234\ The Bureau includes these four occupational groups in
order to account for the mix of specialized employees that may assist
in the registration process. The Bureau assesses that the registration
process will generally be completed by office and administrative
support employees that are generally responsible for the registrant's
paperwork and other administrative tasks. Employees specialized in
business and financial operations or in legal occupations are likely to
provide information and assistance with the registration process.
Senior officers and other managers are likely to review the
registration information before it is submitted and may provide
additional information. The Bureau requests any information that would
inform its estimate of the average hourly compensation of employees
required to register under the proposed rule. Assuming as outlined
above a fully loaded wage rate of roughly $60, and that complying with
this proposed provision would take around five hours of employees'
time, yields a cost impact of around $300 per firm. Therefore, the
impact of this proposed provision on affected firms would be limited.
---------------------------------------------------------------------------
\233\ See U.S. Bureau of Labor Statistics, National Occupational
Employment and Wage Estimates Statistics for May 2021, https://www.bls.gov/oes/current/oes_nat.htm.
\234\ As of March 2022, the ratio between total compensation and
wages for private industry workers is 1.42. See U.S. Bureau of Labor
Statistics, Employer Costs for Employee Compensation: Private
industry dataset (March 2022), https://www.bls.gov/web/ecec/ecec-private-dataset.xlsx.
---------------------------------------------------------------------------
2. Supervisory Reports Provision
This second provision would require that affected supervised
entities designate an attesting executive. The attesting executive
would be a duly appointed senior executive officer (or, if no such
officer exists, the highest-ranking individual at the entity charged
with managerial or oversight responsibilities) (i) whose assigned
duties include ensuring the supervised registered entity's compliance
with Federal consumer financial law, (ii) who possesses knowledge of
the supervised entity's systems and procedures for achieving compliance
with the covered order, and (iii) who has control over the supervised
entity's efforts to comply with the covered order. The Bureau believes
that, even under the baseline scenario, most supervised entities would
be taking active steps to comply with covered orders, and therefore
[[Page 6136]]
would already have such an officer or individual in place to oversee
the entity's compliance with its obligations under the covered order.
Therefore, the Bureau anticipates that this designation requirement
would impose little or no additional impact on most supervised
registered entities. The Bureau notes that the impacts may be higher
for supervised entities that lack a high-ranking officer or other
employee with the requisite qualifications to serve as an attesting
executive, but the Bureau believes that there would be few such
entities. The Bureau seeks comment on whether proposed section 203(b)'s
designation requirement is likely to impose material additional impacts
on supervised registered entities, beyond the impacts those entities
are already likely to incur as part of fulfilling their obligations
under the covered orders to which they are subject.
The Supervisory Reports Provision would also require that the
supervised registered entity submit a written statement signed by the
applicable attesting executive for each covered order to which it is
subject. In the written statement, the attesting executive would: (i)
generally describe the steps that the attesting executive has
undertaken to review and oversee the supervised registered entity's
activities subject to the applicable covered order for the preceding
calendar year; and (ii) attest whether, to the attesting executive's
knowledge, the supervised registered entity during the preceding
calendar year identified any violations or other instances of
noncompliance with any 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 Bureau cannot precisely quantify the impact of the written-
statement requirement on impacted firms but based on its experience and
expertise, the Bureau believes that most entities subject to covered
orders endeavor in good faith to comply with them and will already have
in place some manner of systems and procedures to help achieve such
compliance. For these entities, the proposed written-statement
requirement would require little more than submitting a written
statement from the attesting executive that describes the steps the
executive took consistent with the established systems and procedures
to reach conclusions regarding entity compliance with the orders. Thus,
relative to the baseline, the written-statement requirement should
impose only modest costs on most covered entities, related primarily to
the time and effort needed to (i) memorialize the attesting executive's
existing oversight of compliance and (ii) determine whether the
supervised registered entity during the preceding calendar year
identified any violations or other instances of noncompliance with any
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. While the attesting executive would sign the written
statement, the Bureau expects that other employees in other major
occupational groups (Legal Occupations, Business and Financial
Operations, and Office and Administrative Support) would support the
attesting executive in preparing the statement. Assuming that
satisfying the written-statement requirement would take twenty hours of
employees' time, and that the average cost to entities of an employee's
time is roughly $60 an hour as discussed above, yields an estimate that
the cost of this requirement on covered entities would be roughly $1200
per entity.
The Bureau acknowledges that, under the baseline, some supervised
registered entities firms may not have in place systems and procedures
to allow them to confidently identify violations or other instances of
noncompliance with any obligations that were imposed in a public
provision of the covered order. As discussed elsewhere in this
preamble, the Supervisory Reports Provision would likely prompt some
such entities to adopt new or additional compliance systems and
procedures, imposing a greater cost on them. However, as noted above,
based on its experience and expertise, the Bureau believes that most
entities subject to covered orders endeavor in good faith to comply
with them and will already have in place some manner of systems and
procedures to help achieve such compliance. Therefore, the Bureau
believes that the number of supervised registered entities that would
put in place significant new compliance systems and procedures as a
result of the rule would be relatively small.
In addition, the Supervisory Reports Provision would require
entities to maintain records related to the written statement for five
years. Conservatively assuming that ensuring the necessary documents
are properly stored also requires ten hours of employee time adds $600
to the costs to affected entities of this proposed provision.
Note that, for the purposes of this proposed rule, the term
``supervised registered entity'' excludes persons with less than $1
million in annual receipts resulting from offering or providing
consumer financial products and services described in CFPA section
1024(a). Therefore, the combined costs of around $1800 imposed by the
Supervisory Reports Provision on the majority of affected entities
should be roughly 0.2 percent of annual receipts. Therefore, the impact
of this proposed provision on most affected small entities would be
limited. The costs may be higher at larger entities because identifying
instances of noncompliance with obligations imposed in a public
provision of a covered order may be more complex at larger entities.
The costs would also likely be higher at entities with multiple
instances of noncompliance with public provisions of covered orders, or
with multiple covered orders.
3. Publication Provision
For affected covered nonbanks, the main effect of the third
proposed provision would be that (1) their identifying information and
administrative information, (2) information regarding covered orders
that they provide to the Bureau, and (3) for supervised registered
entities, the name and title of the attesting executive, could be
posted on the Internet by the Bureau. Much of this information would be
public even under the baseline, so the additional direct effect of this
information being posted on the Bureau's website should be small.
However, because covered nonbanks would provide this information
only if they are subject to covered orders, consumers might interpret
the presence of a covered nonbank on the Bureau's website as negative
information about that covered nonbank. Therefore, this proposed
provision may have negative reputational costs for the covered nonbanks
whose information is published on the Bureau's website. Yet covered
orders would be public information even under the baseline with no
rule. Therefore, this proposed provision would not make public any non-
public orders. This would limit the likely costs on covered nonbanks of
the proposed provision.
This proposed provision would allow information related to covered
orders that is already available to the general public to be
centralized on the Bureau's website. This could make the information
more readily accessible than it would otherwise be. A large body of
research has studied the circumstances under which providing consumers
better access to information does, and does not, improve consumer
outcomes.\235\ One consensus from this
[[Page 6137]]
research is that well-designed information disclosures can be effective
at directing consumer attention. For example, one study found that
providing payday loan borrowers with information about the costs of
payday loans reduced payday loan borrowing.\236\ However, another
consensus from this research is that information disclosures do not
always materially affect consumer decision-making, and that the impact
of information disclosures on consumer decision-making depends on their
design and implementation. Impactful information disclosures are
typically more direct (e.g., disclosing the costs of payday loans to
payday loan borrowers) and more timely (e.g., disclosed to payday loan
borrowers at the time they are obtaining a payday loan) than the
information that would be centralized and published under this proposed
provision. Therefore, the Bureau believes that most consumers would not
change their behavior due to this proposed provision, so the impact of
this proposed provision on most affected entities would likely not be
significant. The Bureau acknowledges that the issues disclosed by a few
covered orders may be so controversial among consumers that their
publication on the Bureau website could impose a substantial impact on
the firms affected by those orders. However, as noted above, covered
orders would be public information even under the baseline with no
rule. Therefore, covered orders that disclose particularly
controversial practices would likely be well-known among consumers even
under the baseline. As a result, the Bureau believes that this proposed
provision is unlikely to have a significant economic impact on a
substantial number of small entities.
---------------------------------------------------------------------------
\235\ For one review of this research, see Thomas A. Durkin and
Gregory Elliehausen, Truth in Lending: Theory, History, and a Way
Forward (2011).
\236\ See Marianne Bertrand and Adair Morse, Information
Disclosure, Cognitive Biases, and Payday Borrowing, 66 The Journal
of Finance 1865, 1865-93 (2011).
---------------------------------------------------------------------------
For the reasons described above, the Bureau believes that no
provision of the proposed rule would have a significant economic impact
on a substantial number of small entities. Moreover, the impact of each
provision is sufficiently small that the three provisions together
would not have a significant economic impact on a substantial number of
small entities.
Accordingly, the Director hereby certifies that this proposed rule,
if adopted, would not have a significant economic impact on a
substantial number of small entities. Thus, neither an IRFA nor a small
business review panel is required for this proposal. The Bureau
requests comment on the analysis above and requests any relevant data.
IX. Paperwork Reduction Act
Under the Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501 et
seq., Federal agencies are generally required to seek approval from the
Office of Management and Budget (OMB) for information collection
requirements prior to implementation. Under the PRA, the Bureau may not
conduct nor sponsor, and, notwithstanding any other provision of law, a
person is not required to respond to, an information collection unless
the information collection displays a valid control number assigned by
OMB. The information collection requirements in this proposed rule
would be mandatory. Certain information collected under this
requirement would not be made available to the public, in accordance
with applicable law.
The collections of information contained in this proposed rule, and
identified as such, have been submitted to OMB for review under section
3507(d) of the PRA. A complete description of the information
collection requirements (including the burden estimate methods) is
provided in the information collection request (ICR) that the Bureau
has submitted to OMB under the requirements of the PRA. Please send
your comments to the Office of Information and Regulatory Affairs, OMB,
Attention: Desk Officer for the Bureau of Consumer Financial
Protection. Send these comments by email to [email protected]
or by fax to 202-395-6974. If you wish to share your comments with the
Bureau, please send a copy of these comments as described in the
Addresses section above. The ICR submitted to OMB requesting approval
under the PRA for the information collection requirements contained
herein is available at www.regulations.gov as well as on OMB's public-
facing docket at www.reginfo.gov.
Title of Collection: Nonbank Registration--Agency and Court Orders
Registration.
OMB Control Number: 3170-00XX.
Type of Review: Request for approval of a new information
collection.
Affected Public: Private sector.
Estimated Number of Respondents: 7,752.
Estimated Total Annual Burden Hours: 35 hours.
Comments are invited on: (a) Whether the collection of information
is necessary for the proper performance of the functions of the Bureau,
including whether the information will have practical utility; (b) the
accuracy of the Bureau's estimate of the burden of the collection of
information, including the validity of the methods and the assumptions
used; (c) ways to enhance the quality, utility, and clarity of the
information to be collected; and (d) ways to minimize the burden of the
collection of information on respondents, including through the use of
automated collection techniques or other forms of information
technology. Comments submitted in response to this proposal will be
summarized and/or included in the request for OMB approval. All
comments will become a matter of public record.
If applicable, the notice of final rule will display the control
number assigned by OMB to any information collection requirements
proposed herein and adopted in the final rule.
List of Subjects
Administrative practice and procedure, Consumer protection, Credit,
Intergovernmental relations, Law enforcement, Nonbank registration,
Registration, Reporting and recordkeeping requirements, Trade
practices.
Authority and Issuance
0
For the reasons set forth above, the Bureau proposes to add part 1092
to chapter X in title 12 of the Code of Federal Regulations, to read as
follows.
PART 1092--NONBANK REGISTRATION
Subpart A--General
Sec.
1092.100 Authority and purpose.
1092.101 General definitions.
1092.102 Submission and use of registration information.
1092.103 Severability.
Subpart B--Registry of Nonbank Covered Persons Subject to Certain
Agency and Court Orders
1092.200 Scope and purpose.
1092.201 Definitions.
1092.202 Registration and submission of information regarding
covered orders.
1092.203 Annual reporting requirements for supervised registered
entities.
1092.204 Publication and correction of registration information.
Subpart C--[Reserved]
Appendix A to Part 1092--List of State Covered Laws
Authority: 12 U.S.C. 5512(b) and (c); 12 U.S.C. 5514(b).
[[Page 6138]]
Subpart A--General
Sec. 1092.100 Authority and purpose.
(a) Authority. The regulation in this part is issued by the Bureau
pursuant to section 1022(b) and (c) and section 1024(b) of the Consumer
Financial Protection Act of 2010 (CFPA), codified at 12 U.S.C. 5512(b)
and (c), and 12 U.S.C. 5514(b).
(b) Purpose. The purpose of this part is to prescribe rules
governing the registration of nonbanks, and the collection and
submission of registration information by such persons, and for public
release of the collected information as appropriate.
(1) Subpart A contains general provisions and definitions used in
this part.
(2) Subpart B sets forth requirements regarding the registration of
nonbanks subject to certain agency and court orders.
(3) Subpart C is reserved.
Sec. 1092.101 General definitions.
For the purposes of this part, unless the context indicates
otherwise, the following definitions apply:
(a) Affiliate, consumer, consumer financial product or service,
covered person, Federal consumer financial law, insured credit union,
person, related person, service provider, and State have the same
meanings as in 12 U.S.C. 5481.
(b) Bureau means the Consumer Financial Protection Bureau.
(c) Include, includes, and including mean that the items named may
not encompass all possible items that are covered, whether like or
unlike the items named.
(d) Nonbank registration system means the Bureau's electronic
registration system identified and maintained by the Bureau for the
purposes of this part.
(e) Nonbank registration system implementation date means, for a
given requirement or subpart of this part, the date(s) determined by
the Bureau to commence the operations of the nonbank registration
system in connection with that requirement or subpart.
Sec. 1092.102 Submission and use of registration information.
(a) Filing instructions. The Bureau shall specify the form and
manner for electronic filings and submissions to the nonbank
registration system that are required or made voluntarily under this
part. The Bureau also may provide for extensions of deadlines or time
periods prescribed by this part for persons affected by declared
disasters or other emergency situations.
(b) Coordination or combination of systems. In administering the
nonbank registration system, the Bureau may rely on information a
person previously submitted to the nonbank registration system under
this part and may coordinate or combine systems in consultation with
State agencies as described in 12 U.S.C. 5512(c)(7)(C) and 12 U.S.C.
5514(b)(7)(D).
(c) Bureau use of registration information. The Bureau may use the
information submitted to the nonbank registration system under this
part to support its objectives and functions, including in determining
when to exercise its authority under 12 U.S.C. 5514 to conduct
examinations and when to exercise its enforcement powers under subtitle
E of the CFPA. However, this part does not alter any applicable process
whereby a person may dispute that it qualifies as a person subject to
Bureau authority.
Sec. 1092.103 Severability.
The provisions of this part are separate and severable from one
another. If any provision is stayed or determined to be invalid, the
remaining provisions shall continue in effect.
Subpart B--Registry of Nonbank Covered Persons Subject to Certain
Agency and Court Orders
Sec. 1092.200 Scope and purpose.
(a) Scope. This subpart requires nonbank covered persons that are
subject to certain public agency and court orders to register with the
Bureau and to submit a copy of each such public order to the Bureau.
This subpart also requires certain nonbank covered persons that are
supervised by the Bureau to prepare and submit an annual written
statement, signed by a designated individual, regarding compliance with
each such public order. Finally, this subpart also describes the
registration information the Bureau will make publicly available.
(b) Purpose. The purposes of the information collection
requirements contained in this subpart are:
(1) To support Bureau functions by monitoring for risks to
consumers in the offering or provision of consumer financial products
or services, including developments in markets for such products or
services, pursuant to 12 U.S.C. 5512(c)(1);
(2) To prescribe rules regarding registration requirements
applicable to nonbank covered persons, pursuant to 12 U.S.C.
5512(c)(7);
(3) To facilitate the supervision of persons described in 12 U.S.C.
5514(a)(1), pursuant to 12 U.S.C. 5514(b);
(4) To assess and detect risks to consumers, pursuant to 12 U.S.C.
5514(b); and
(5) To ensure that persons described in 12 U.S.C. 5514(a)(1) are
legitimate entities and are able to perform their obligations to
consumers, pursuant to 12 U.S.C. 5514(b).
Sec. 1092.201 Definitions.
For the purposes of this subpart, unless the context indicates
otherwise, the following definitions apply:
(a) Administrative information means contact information regarding
persons subject to this subpart and other information submitted or
collected to facilitate the administration of the nonbank registration
system.
(b) Attesting executive means, with respect to any covered order
regarding a supervised registered entity, the individual designated by
the supervised registered entity to perform the supervised registered
entity's duties with respect to the covered order under Sec. 203 of
this part.
(c) Covered law means a law listed in paragraphs (1) through (6) of
this paragraph (c), to the extent 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:
(1) A Federal consumer financial law;
(2) Any other law as to which the Bureau may exercise enforcement
authority;
(3) The prohibition on unfair or deceptive acts or practices under
section 5 of the Federal Trade Commission Act (FTC Act), 15 U.S.C. 45,
or any rule or order issued for the purpose of implementing that
prohibition;
(4) A State law prohibiting unfair, deceptive, or abusive acts or
practices that is identified in appendix A to this part;
(5) A State law amending or otherwise succeeding a law identified
in appendix A to this part, to the extent that such law is materially
similar to its predecessor; or
(6) A rule or order issued by a State agency for the purpose of
implementing a prohibition on unfair, deceptive, or abusive acts or
practices contained in a State law described in paragraph (4) or (5) of
this paragraph (c).
(d) Covered nonbank means a covered person that is not any of the
following:
(1) An insured depository institution, insured credit union, or
related person;
(2) A State;
(3) A natural person;
(4) A motor vehicle dealer that is predominantly engaged in the
sale and
[[Page 6139]]
servicing of motor vehicles, the leasing and servicing of motor
vehicles, or both, within the meaning of 12 U.S.C. 5519(a), except to
the extent such a person engages in functions that are excepted from
the application of 12 U.S.C. 5519(a) as described in 12 U.S.C. 5519(b);
or
(5) A person that qualifies as a covered person based solely on
conduct that is the subject of, and that is not otherwise exempted
from, an exclusion from the Bureau's rulemaking authority under 12
U.S.C. 5517.
(e) Covered order means a final, public order issued by an agency
or court, whether or not issued upon consent, that:
(1) Identifies a covered nonbank by name as a party subject to the
order;
(2) Was issued at least in part in any action or proceeding brought
by any Federal agency, State agency, or local agency;
(3) Contains public provisions that impose obligations on the
covered nonbank to take certain actions or to refrain from taking
certain actions;
(4) Imposes such obligations on the covered nonbank based on an
alleged violation of a covered law; and
(5) Has an effective date on or later than January 1, 2017.
The term ``covered order'' does not include an order issued to a
motor vehicle dealer that is predominantly engaged in the sale and
servicing of motor vehicles, the leasing and servicing of motor
vehicles, or both, within the meaning of 12 U.S.C. 5519(a), except to
the extent such order is in connection with the functions that are
excepted from the application of 12 U.S.C. 5519(a) as described in 12
U.S.C. 5519(b).
(f) Effective date means, in connection with a covered order, the
effective date as identified in the covered order; provided that if no
other effective date is specified, then the date on which the covered
order was issued shall be treated as the effective date for purposes of
this subpart. If the issuing agency or a court stays or otherwise
suspends the effectiveness of the covered order, the effective date
shall be delayed until such time as the stay or suspension of
effectiveness is lifted.
(g) Identifying information means existing information available to
the covered nonbank that uniquely identifies the covered nonbank,
including the entity's legal name, State of incorporation or
organization, principal place of business address, and any unique
identifiers issued by a government agency or standards organization.
(h) Insured depository institution has the same meaning as in 12
U.S.C. 5301(18)(A).
(i) Local agency means a regulatory or enforcement agency or
authority of a county, city (whether general law or chartered), city
and county, municipal corporation, district, or other political
subdivision of a State, other than a State agency.
(j) Order includes any written order or judgment issued by an
agency or court in an investigation, matter, or proceeding.
(k) Public means, with respect to a covered order or any portion
thereof, published by the issuing agency or court, or required by any
provision of Federal or State law, rule, or order to be published by
the issuing agency or court. The term does not include orders or
portions of orders that constitute confidential supervisory information
of any Federal or State agency.
(l) Registered entity means any person registered or required to be
registered under this subpart.
(m) Remain(s) in effect means, with respect to any covered order,
that the covered nonbank remains subject to public provisions that
impose obligations on the covered nonbank to take certain actions or to
refrain from taking certain actions based on an alleged violation of a
covered law.
(n) State agency means the attorney general (or the equivalent
thereof) of any State and any other State regulatory or enforcement
agency or authority.
(o) Supervised registered entity means a registered entity that is
subject to supervision and examination by the Bureau pursuant to 12
U.S.C. 5514(a) except as provided in paragraphs (o)(1) through (4) of
this section. For purposes of this definition, the term ``subject to
supervision and examination by the Bureau pursuant to 12 U.S.C.
5514(a)'' includes an entity that qualifies as a larger participant of
a market for consumer financial products or services under any rule
issued by the Bureau pursuant to 12 U.S.C. 5514(a)(1)(B) and (a)(2), or
that is subject to an order issued by the Bureau pursuant to 12 U.S.C.
5514(a)(1)(C). The term ``supervised registered entity'' does not
include:
(1) A service provider that is subject to Bureau examination and
supervision solely in its capacity as a service provider and that is
not otherwise subject to Bureau supervision and examination;
(2) A motor vehicle dealer that is predominantly engaged in the
sale and servicing of motor vehicles, the leasing and servicing of
motor vehicles, or both, within the meaning of 12 U.S.C. 5519(a),
except to the extent such a person engages in functions that are
excepted from the application of 12 U.S.C. 5519(a) as described in 12
U.S.C. 5519(b);
(3) A person that qualifies as a covered person based solely on
conduct that is the subject of, and that is not otherwise exempted
from, an exclusion from the Bureau's supervisory authority under 12
U.S.C. 5517; or
(4) A person with less than $1 million in annual receipts resulting
from offering or providing all consumer financial products and services
described in 12 U.S.C. 5514(a). For purposes of this exclusion, the
term ``annual receipts'' has the same meaning as that term has in 12
CFR 1090.104(a), including 12 CFR 1090.104(a)(i) through (iii).
Sec. 1092.202 Registration and submission of information regarding
covered orders.
(a) Scope of registration requirement. This section shall apply
only with respect to covered orders with an effective date on or after
the effective date of this subpart, or that remain in effect as of the
effective date of this subpart.
(b) Requirement to register and submit information regarding
covered orders.
(1) Each covered nonbank that is identified by name as a party
subject to a covered order described in paragraph (a) of this section
shall register as a registered entity with the nonbank registration
system in accordance with this section if it is not already so
registered, and shall provide or update, as applicable, the information
described in this subpart in the form and manner specified by the
Bureau.
(2) Each covered nonbank required to register under this section
shall:
(i) Submit a filing containing the information described in
paragraphs (c) and (d) of this section to the nonbank registration
system within the later of 90 days after the applicable nonbank
registration system implementation date or 90 days after the effective
date of any applicable covered order; and
(ii) Submit a revised filing amending any information described in
paragraphs (c) and (d) of this section to the nonbank registration
system within 90 days after any amendments are made to the covered
order or any of the information described in paragraph (c) or (d) of
this section changes.
(c) Required identifying information and administrative
information. A registered entity shall provide all identifying
information and administrative information required by the nonbank
registration system. In filing instructions issued pursuant to
[[Page 6140]]
Sec. 1092.102(a), the Bureau may require that covered nonbanks that
are affiliates make joint or combined submissions under this section.
(d) Information regarding covered orders. A registered entity shall
provide the following information for each covered order subject to
this section:
(1) A fully executed, accurate, and complete copy of the covered
order, in a format specified by the Bureau; provided that any portions
of a covered order that are not public shall not be submitted, and
these portions shall be clearly marked on the copy submitted;
(2) In connection with each applicable covered order, information
identifying:
(i) The government entity that issued the covered order;
(ii) The effective date of the covered order;
(iii) The date of expiration, if any, of the covered order, or a
statement that there is none;
(iv) All covered laws found to have been violated or, for orders
issued upon the parties' consent, alleged to have been violated; and
(v) The names of any of the registered entity's affiliates
registered under this subpart with respect to the same covered order;
and
(3) If the registered entity is a supervised registered entity, the
name and title of its attesting executive for purposes of Sec.
1092.203 with respect to the covered order.
(e) Expiration of covered order status. A covered order shall cease
to be a covered order for purposes of this subpart as of the later of:
(1) Ten years after its effective date; or
(2) If the covered order expressly provides for a termination date
more than ten years after its effective date, the expressly provided
termination date.
(f) Requirement to submit revised and final filings with respect to
certain covered orders.
(1) If a covered order is terminated, modified, or abrogated
(whether by its own terms, by action of the applicable agency, or by a
court), or if an order ceases to be a covered order for purposes of
this subpart by operation of paragraph (e) of this section, the
registered entity shall submit a revised filing to the nonbank
registration system within 90 days after the effective date of such
termination, modification, or abrogation, or the date such order ceases
to be a covered order.
(2) If, due to such termination, modification, or abrogation of a
covered order, or due to the application of paragraph (e) of this
section, the order no longer remains in effect or is no longer a
covered order, then, following its final filing under paragraph (f)(1)
of this section with respect to such covered order, the registered
entity will have no further obligation to update its filing or to file
written statements with respect to such covered order under this
subpart.
(g) Notification by certain persons of non-registration under this
section. A person may submit a notice to the nonbank registration
system stating that it is not registering pursuant to this section
because it has a good faith basis to believe that it is not a covered
nonbank or that an order in question does not qualify as a covered
order. Such person shall promptly comply with this section upon
becoming aware of facts or circumstances that would not permit it to
continue representing that it has a good faith basis to believe that it
is not a covered nonbank or that an order in question does not qualify
as a covered order.
Sec. 1092.203 Annual reporting requirements for supervised
registered entities.
(a) Scope of annual reporting requirements. This section shall
apply only with respect to covered orders with an effective date on or
after the nonbank registration system implementation date for this
section.
(b) Requirement to designate attesting executive. A supervised
registered entity subject to a covered order described in paragraph (a)
of this section shall designate as its attesting executive for purposes
of this subpart its highest-ranking duly appointed senior executive
officer (or, if the supervised registered entity does not have any duly
appointed officers, the highest-ranking individual charged with
managerial or oversight responsibility for the supervised registered
entity) whose assigned duties include ensuring the supervised
registered entity's compliance with Federal consumer financial law, who
has knowledge of the entity's systems and procedures for achieving
compliance with the covered order, and who has control over the
entity's efforts to comply with the covered order. The supervised
registered entity shall annually designate one attesting executive for
each such covered order to which it is subject and for all submissions
and other purposes related to that covered order under this subpart.
The supervised registered entity shall authorize the attesting
executive to perform the duties of an attesting executive on behalf of
the supervised registered entity with respect to the covered order as
required in this section, including submitting the written statement
described in paragraph (d) of this section.
(c) Requirement to provide attesting executive(s) with access to
documents and information. A supervised registered entity subject to
this section shall provide its attesting executive(s) with prompt
access to all documents and information related to the supervised
registered entity's compliance with all applicable covered order(s) as
necessary to make the written statement(s) required in paragraph (d) of
this section.
(d) Annual requirement to submit written statement to the Bureau
for each covered order. On or before March 31 of each calendar year,
the supervised registered entity shall, in the form and manner
specified by the Bureau, submit to the nonbank registration system a
written statement with respect to each covered order described in
paragraph (a) of this section. The written statement shall be signed by
the attesting executive on behalf of the supervised registered entity.
In the written statement, the attesting executive shall:
(1) Generally describe the steps that the attesting executive has
undertaken to review and oversee the supervised registered entity's
activities subject to the applicable covered order for the preceding
calendar year; and
(2) Attest whether, to the attesting executive's knowledge, the
supervised registered entity during the preceding calendar year
identified any violations or other instances of noncompliance with any
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.
(e) Requirement to maintain and make available related records. A
supervised registered entity shall maintain documents and other records
sufficient to provide reasonable support for its written statement
under paragraph (d) of this section and to otherwise demonstrate
compliance with the requirements of this section with respect to any
submission under this section, for five years after such submission is
required. The supervised registered entity shall make such documents
and other records available to the Bureau upon request.
(f) Notification of entity's good faith belief that requirements do
not apply. A person may submit a notice to the nonbank registration
system stating that it is neither designating an attesting executive
nor submitting a written statement pursuant to this section because it
has a good faith basis to believe that it is not a supervised
registered entity or that an order in question is not a covered order.
Such person shall promptly comply with this section upon becoming aware
of facts or
[[Page 6141]]
circumstances that would not permit it to continue representing that it
has a good faith basis to believe that it is not a supervised
registered entity or that an order in question is not a covered order.
Sec. 1092.204 Publication and correction of registration
information.
(a) Internet posting of registration information. The Bureau shall
make available to the public the information submitted to the nonbank
registration system pursuant to Sec. 1092.202, except that the Bureau
may choose not to publish certain administrative information or other
information that the Bureau determines may be inaccurate, not required
to be submitted under this subpart, or otherwise not in compliance with
this part and any accompanying guidance. The Bureau may make
registration information available to the public by means that include
publishing it on the Bureau's publicly available Internet site within a
timeframe determined by the Bureau in its discretion.
(b) Exclusion of written statement. The publication described in
paragraph (a) of this section will not include the written statement
submitted under Sec. 1092.203. Such information will be treated as
Bureau confidential supervisory information subject to the provisions
of part 1070 of this chapter.
(c) Other publications of information. In addition to the
publication described in paragraph (a) of this section, the Bureau may,
at its discretion, compile and aggregate information submitted by
persons pursuant to this subpart and make any compilations or
aggregations of such information publicly available as the Bureau deems
appropriate.
(d) Correction of submissions to the nonbank registration system.
If any information submitted to the nonbank registration system under
this subpart was inaccurate when submitted and remains inaccurate, the
covered nonbank shall file a corrected report in the form and manner
specified by the Bureau within 30 calendar days after the date on which
such covered nonbank becomes aware or has reason to know of the
inaccuracy. In addition, the Bureau may at any time and in its sole
discretion direct a covered nonbank to correct errors or other non-
compliant submissions to the nonbank registration system made under
this subpart.
Subpart C--[Reserved]
Appendix A to Part 1092 --List of State Covered laws
Alabama
Ala. Code sec. 5-18A-13(j).
Ala. Code sec. 8-19-5.
Alaska
Alaska Stat. sec. 06.20.200.
Alaska Stat. sec. 06.40.090.
Alaska Stat. sec. 06.60.320.
Alaska Stat. sec. 06.60.340.
Alaska Stat. sec. 45.50.471.
Arizona
Ariz. Rev. Stat. sec. 6-611.
Ariz. Rev. Stat. sec. 6-710(8).
Ariz. Rev. Stat. sec. 6-909(C).
Ariz. Rev. Stat. sec. 6-947(D).
Ariz. Rev. Stat. sec. 6-984(D).
Ariz. Rev. Stat. sec. 6-1309(A).
Ariz. Rev. Stat. sec. 44-1522(A).
Ariz. Rev. Stat. sec. 44-1703(4).
Arkansas
Ark. Code Ann. sec. 4-88-107.
Ark. Code Ann. sec. 4-88-108(a)(1).
Ark. Code Ann. sec. 4-90-705.
Ark. Code Ann. sec. 4-107-203.
Ark. Code Ann. sec. 4-115-102.
Ark. Code Ann. sec. 23-39-405.
California
Cal. Bus. & Prof. Code sec. 17200 to 17209.
Cal. Bus. & Prof. Code sec. 17500.
Cal. Civ. Code sec. 1770.
Cal. Civ. Code sec. 1788.101(a), (b)(1), (7), (8), (9),
(10).
Cal. Fin. Code sec. 4995.3(b).
Cal. Fin. Code sec. 22755(b), (i).
Cal. Fin. Code sec. 90003.
Colorado
Colo. Rev. Stat. sec. 5-3.1-121.
Colo. Rev. Stat. sec. 5-20-109(b).
Colo. Rev. Stat. sec. 6-1-105.
Connecticut
Conn. Gen. Stat. sec. 36a-498(g)(2).
Conn. Gen. Stat. sec. 36a-539(d)(2), (6).
Conn. Gen. Stat. sec. 36a-561(3), (4).
Conn. Gen. Stat. sec. 36a-586(d)(2), (5); (e)(2).
Conn. Gen. Stat. sec. 36a-607(c)(2)(5).
Conn. Gen. Stat. sec. 42-110b.
Delaware
Del. Code Ann. tit. 5, sec. 2114.
Del. Code Ann. tit. 5, sec. 2209(a)(3).
Del. Code Ann. tit. 5, sec. 2315(a)(3).
Del. Code Ann. tit. 5, sec. 2418(2), (9).
Del. Code Ann. tit. 5, sec. 2904(a)(3).
Del. Code Ann. tit. 6, sec. 2513.
Del. Code Ann. tit. 6, sec. 2532, 2533.
District of Columbia
D.C. Code sec. 26-1114(d)(2), (9).
D.C. Code sec. 28-3904.
Florida
Fla. Stat. sec. 501.204.
Fla. Stat. sec. 560.114(1)(d).
Fla. Stat. sec. 560.309(10).
Fla. Stat. sec. 687.141(2), (3).
Georgia
Ga. Code Ann. sec. 7-7-2(1), (3), (4).
Ga. Code Ann. sec. 10-1-372.
Ga. Code Ann. sec. 10-1-393.
Hawaii
Haw. Rev. Stat. sec. 454F-17(2), (9), (14).
Haw. Rev. Stat. sec. 480-2.
Haw. Rev. Stat. sec. 480J-45(7), (10).
Haw. Rev. Stat. sec. 481A-3.
Haw. Rev. Stat. sec. 489D-23(2), (4).
Idaho
Idaho Code sec. 26-31-317(2), (9).
Idaho Code sec. 26-2505(2).
Idaho Code sec. 28-46-413(8).
Idaho Code sec. 48-603.
Idaho Code sec. 48-603A.
Illinois
815 Ill. Comp. Stat. sec. 122/4-5(3), (8).
815 Ill. Comp. Stat. sec. 505/2 to 505/2AAAA.
815 Ill. Comp. Stat. sec. 510/2.
815 Ill. Comp. Stat. sec. 635/7-13(2), (9).
Indiana
Ind. Code sec. 24-4.4-3-104.6(b), (i).
Ind. Code sec. 24-4.5-7-410(c), (g).
Ind. Code sec. 24-5-0.5-3.
Ind. Code sec. 24-5-0.5-10.
Iowa
Iowa Code sec. 535D.17(2), (9).
Iowa Code sec. 537.3209(1).
Iowa Code sec. 538A.3(4).
Iowa Code sec. 714.16(2)(a).
Iowa Code sec. 714H.3.
Kansas
Kan. Stat. Ann. sec. 50-626.
Kan. Stat. Ann. sec. 50-1017(2), (3).
Kentucky
Ky. Rev. Stat. Ann. sec. 286.9-100(7).
Ky. Rev. Stat. Ann. sec. 286.11-039(f).
Ky. Rev. Stat. Ann. sec. 286.12-110(1)(a)(4).
Ky. Rev. Stat. Ann. sec. 367.170.
Louisiana
La. Rev. Stat. Ann. sec. 6:1092(D)(2), (9).
La. Rev. Stat. Ann. sec. 6:1393(3)(b).
La. Rev. Stat. Ann. sec. 6:1412(2).
La. Rev. Stat. Ann. sec. 9:3574.3(2), (3).
La. Rev. Stat. Ann. sec. 51:1405.
La. Rev. Stat. Ann. sec. 51:1915.
Maine
Me. Rev. Stat. tit. 5, sec. 207.
Me. Rev. Stat. tit. 9-A, sec. 5-118(2), (3), (4).
Me. Rev. Stat. tit. 10, sec. 1212.
Me. Rev. Stat. tit. 32, sec. 6155(1).
Me. Rev. Stat. tit. 32, sec. 6198(5).
Maryland
Md. Code Ann., Com. Law sec. 12-1208(2).
Md. Code Ann., Com. Law sec. 13-303.
Md. Code Ann., Com. Law sec. 14-1302(b).
Md. Code Ann., Com. Law sec. 14-1323.
Md. Code Ann., Com. Law sec. 14-3807.
Md. Code Ann., Educ. sec. 26-602(a)(2).
Massachusetts
Mass. Gen. Laws ch. 93A, sec. 2.
Mass. Gen. Laws ch. 93L, sec. 8.
Michigan
Mich. Comp. Laws sec. 445.903.
Mich. Comp. Laws sec. 445.1823(e).
Minnesota
Minn. Stat. sec. 58B.07(2).
[[Page 6142]]
Minn. Stat. sec. 325D.09.
Minn. Stat. sec. 325D.44.
Minn. Stat. sec. 325F.67.
Minn. Stat. sec. 325F.69.
Minn. Stat. sec. 332A.02-332A.19.
Mississippi
Miss. Code Ann. sec. 75-24-5.
Miss. Code Ann. sec. 75-67-109.
Miss. Code Ann. sec. 75-67-445.
Miss. Code Ann. sec. 75-67-516.
Miss. Code Ann. sec. 75-67-617.
Miss. Code Ann. sec. 81-18-27(h).
Miss. Code Ann. sec. 81-19-23(b)(i).
Missouri
Mo. Rev. Stat. sec. 407.020.
Mo. Rev. Stat. sec. 443.737(2), (9).
Montana
Mont. Code Ann. sec. 30-14-103.
Mont. Code Ann. sec. 30-14-2001 to -15.
Mont. Code Ann. sec. 31-1-723(5), (7), (18).
Mont. Code Ann. sec. 31-1-724(2).
Nebraska
Neb. Rev. Stat. sec. 45-804(5).
Neb. Rev. Stat. sec. 45-812.
Neb. Rev. Stat. sec. 59-1602.
Neb. Rev. Stat. sec. 87-302.
Nevada
Nev. Rev. Stat. sec. 598.746(5).
Nev. Rev. Stat. sec. 598.787.
Nev. Rev. Stat. sec. 598.0915 to .0925.
Nev. Rev. Stat. sec. 604A.5021(5), (6).
Nev. Rev. Stat. sec. 604A.5049(5), (6).
Nev. Rev. Stat. sec. 604A.5072(5), (6).
Nev. Rev. Stat. sec. 604A.582.
Nev. Rev. Stat. sec. 604A.592.
Nev. Rev. Stat. sec. 675.280.
New Hampshire
N.H. Rev. Stat. Ann. sec. 358-A:2.
N.H. Rev. Stat. Ann. sec. 397-A:14(g), (n).
N.H. Rev. Stat. Ann. sec. 399-F:4(III).
New Jersey
N.J. Stat. Ann. sec. 17:11C-41(g).
N.J. Stat. Ann. sec. 17:16F-39(b).
N.J. Stat. Ann. sec. 17:16ZZ-9(b).
N.J. Stat. Ann. sec. 56:8-2.
New Mexico
N.M. Stat. Ann. sec. 57-12-3.
N.M. Stat. Ann. sec. 58-21-21.
N.M. Stat. Ann. sec. 58-21A-12.
N.M. Stat. Ann. sec. 58-21B-13(C)(2), (9).
New York
N.Y. Banking Law sec. 719(2), (9).
N.Y. Exec. Law sec. 63(12).
N.Y. Fin. Serv. sec. 702(i).
N.Y. Gen. Bus. Law sec. 349.
N.Y. Gen. Bus. Law sec. 458-e.
N.Y. Gen. Bus. Law sec. 458-h.
N.Y. Gen. Bus. Law sec. 521-d.
N.Y. Gen. Bus. Law sec. 741.
N.Y. Real Prop. Law sec. 280-b(2).
North Carolina
N.C. Gen. Stat. sec. 53-270(4).
N.C. Gen. Stat. sec. 75-1.1.
North Dakota
N.D. Cent. Code sec. 51-15-02.
N.D. Cent. Code sec. 51-15-02.3.
N.D. Cent. Code sec. 13-04.1-09(4), (10).
N.D. Cent. Code sec. 13-09-25(4), (8).
N.D. Cent. Code sec. 13-10-17(2).
N.D. Cent. Code sec. 13-11-23(1)(p).
Ohio
Ohio Rev. Code Ann. sec. 1321.11.
Ohio Rev. Code Ann. sec. 1321.41.
Ohio Rev. Code Ann. sec. 1321.44.
Ohio Rev. Code Ann. sec. 1321.60(A).
Ohio Rev. Code Ann. sec. 1321.651(B).
Ohio Rev. Code Ann. sec. 1322.40(I).
Ohio Rev. Code Ann. sec. 1345.02.
Ohio Rev. Code Ann. sec. 4165.02.
Oklahoma
Okla. Stat. Ann. tit. 15, sec. 753(20), (28).
Okla. Stat. Ann. tit. 59, sec. 2095.18(2), (9).
Okla. Stat. Ann. tit. 78, sec. 53.
Oregon
Or. Rev. Stat. sec. 646.607.
Or. Rev. Stat. sec. 86A.163.
Or. Rev. Stat. sec. 86A.236(3), (5), (13).
Or. Rev. Stat. sec. 646.608(1)(d), (u).
Or. Rev. Stat. sec. 646A.720(10).
Or. Rev. Stat. sec. 725.060.
Or. Rev. Stat. sec. 725A.058.
Pennsylvania
7 PA. Cons. Stat. sec. 6123(a)(3).
73 PA. Cons. Stat. sec. 201-3.
73 PA. Cons. Stat. sec. 2183(4).
73 PA. Cons. Stat. sec. 2188(c)(2).
Rhode Island
R.I. Gen. Laws sec. 5-80-8(5).
R.I. Gen. Laws sec. 6-13.1-2.
R.I. Gen. Laws sec. 6-13.1-30.
R.I. Gen. Laws sec. 19-14-21.
R.I. Gen. Laws sec. 19-14.3-3.8(8), (9).
R.I. Gen. Laws sec. 19-14.8-28(a)(16).
R.I. Gen. Laws sec. 19-14.10-17(2), (9).
R.I. Gen. Laws sec. 19-14.11-4(2).
R.I. Gen. Laws sec. 19-33-12(2), (4).
South Carolina
S.C. Code Ann. sec. 34-29-120.
S.C. Code Ann. sec. 34-36-10 to 80.
S.C. Code Ann. sec. 34-39-200(3), (5).
S.C. Code Ann. sec. 34-41-80(3), (5).
S.C. Code Ann. sec. 37-2-304(1).
S.C. Code Ann. sec. 37-3-304(1).
S.C. Code Ann. sec. 37-7-116(3), (8), (10).
S.C. Code Ann. sec. 39-5-20.
South Dakota
S.D. Codified Laws sec. 37-24-6.
S.D. Codified Laws sec. 37-25A-43.
S.D. Codified Laws sec. 54-4-63.
Tennessee
Tenn. Code Ann. sec. 45-13-401(8).
Tenn. Code Ann. sec. 45-17-112(k).
Tenn. Code Ann. sec. 45-18-121(g).
Tenn. Code Ann. sec. 47-16-101 to 110.
Tenn. Code Ann. sec. 47-18-104.
Tenn. Code Ann. sec. 47-18-120.
Tenn. Code Ann. sec. 47-18-1003(4).
Tenn. Code Ann. sec. 47-18-5402(a)(1).
Texas
Tex. Bus. & Com. Code Ann. sec. 17.46.
Tex. Fin. Code Ann. sec. 180.153(2), (11).
Tex. Fin. Code Ann. sec. 308.002.
Tex. Fin. Code Ann. sec. 341.403.
Tex. Fin. Code Ann. sec. 394.207.
Tex. Fin. Code Ann. sec. 394.212(9).
Utah
Utah Code Ann. sec. 13-11-4.
Utah Code Ann. sec. 13-11-4.1.
Utah Code Ann. sec. 13-11a-4.
Utah Code Ann. sec. 13-21-3(1)(g).
Vermont
Vt. Stat. Ann. tit. 8, sec. 2121.
Vt. Stat. Ann. tit. 8, sec. 2241(2), (9).
Vt. Stat. Ann. tit. 8, sec. 2760b(b).
Vt. Stat. Ann. tit. 8, sec. 2922.