Registry of Nonbank Covered Persons Subject to Certain Agency and Court Orders, 6088-6142 [2022-27385]

Download as PDF 6088 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, lotter on DSK11XQN23PROD with PROPOSALS4 SUMMARY: VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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 PO 00000 Frm 00002 Fmt 4701 Sfmt 4702 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 E:\FR\FM\30JAP4.SGM 30JAP4 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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 lotter on DSK11XQN23PROD with PROPOSALS4 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). VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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 PO 00000 Frm 00003 Fmt 4701 Sfmt 4702 6089 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 E:\FR\FM\30JAP4.SGM 30JAP4 6090 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS4 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). VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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 PO 00000 Frm 00004 Fmt 4701 Sfmt 4702 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 E:\FR\FM\30JAP4.SGM 30JAP4 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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 lotter on DSK11XQN23PROD with PROPOSALS4 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 VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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. PO 00000 Frm 00005 Fmt 4701 Sfmt 4702 6091 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 E:\FR\FM\30JAP4.SGM 30JAP4 lotter on DSK11XQN23PROD with PROPOSALS4 6092 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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). VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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 PO 00000 Frm 00006 Fmt 4701 Sfmt 4702 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 E:\FR\FM\30JAP4.SGM 30JAP4 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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) lotter on DSK11XQN23PROD with PROPOSALS4 60 12 VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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’’). PO 00000 Frm 00007 Fmt 4701 Sfmt 4702 6093 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). E:\FR\FM\30JAP4.SGM 30JAP4 lotter on DSK11XQN23PROD with PROPOSALS4 6094 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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). VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 PO 00000 Frm 00008 Fmt 4701 Sfmt 4702 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. E:\FR\FM\30JAP4.SGM 30JAP4 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS4 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. VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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 PO 00000 Frm 00009 Fmt 4701 Sfmt 4702 6095 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 E:\FR\FM\30JAP4.SGM 30JAP4 lotter on DSK11XQN23PROD with PROPOSALS4 6096 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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 VerDate Sep<11>2014 19:17 Jan 27, 2023 U.S.C. 5512(c)(2)(E). U.S.C. 5512(c)(2)(F). 89 12 U.S.C. 5512(c)(4)(B)(ii). Jkt 259001 PO 00000 Frm 00010 Fmt 4701 Sfmt 4702 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 E:\FR\FM\30JAP4.SGM 30JAP4 lotter on DSK11XQN23PROD with PROPOSALS4 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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. VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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. PO 00000 Frm 00011 Fmt 4701 Sfmt 4702 6097 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 E:\FR\FM\30JAP4.SGM 30JAP4 6098 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS4 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. VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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. PO 00000 Frm 00012 Fmt 4701 Sfmt 4702 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. E:\FR\FM\30JAP4.SGM 30JAP4 lotter on DSK11XQN23PROD with PROPOSALS4 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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). VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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 PO 00000 Frm 00013 Fmt 4701 Sfmt 4702 6099 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). E:\FR\FM\30JAP4.SGM 30JAP4 6100 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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, lotter on DSK11XQN23PROD with PROPOSALS4 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. VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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). PO 00000 Frm 00014 Fmt 4701 Sfmt 4702 & 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. E:\FR\FM\30JAP4.SGM 30JAP4 lotter on DSK11XQN23PROD with PROPOSALS4 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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 VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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). PO 00000 Frm 00015 Fmt 4701 Sfmt 4702 6101 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 E:\FR\FM\30JAP4.SGM 30JAP4 lotter on DSK11XQN23PROD with PROPOSALS4 6102 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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. VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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, PO 00000 Frm 00016 Fmt 4701 Sfmt 4702 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 E:\FR\FM\30JAP4.SGM 30JAP4 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules situations that may arise in this context, and about appropriate mechanisms for addressing them. lotter on DSK11XQN23PROD with PROPOSALS4 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 VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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, PO 00000 Frm 00017 Fmt 4701 Sfmt 4702 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. E:\FR\FM\30JAP4.SGM 30JAP4 6104 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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. lotter on DSK11XQN23PROD with PROPOSALS4 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. VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 PO 00000 Frm 00018 Fmt 4701 Sfmt 4702 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 E:\FR\FM\30JAP4.SGM 30JAP4 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS4 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). VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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 PO 00000 Frm 00019 Fmt 4701 Sfmt 4702 6105 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 E:\FR\FM\30JAP4.SGM 30JAP4 6106 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS4 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.’’). VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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., PO 00000 Frm 00020 Fmt 4701 Sfmt 4702 134 New E:\FR\FM\30JAP4.SGM York Banking Law sec. 719(2). 30JAP4 lotter on DSK11XQN23PROD with PROPOSALS4 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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 VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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, PO 00000 Frm 00021 Fmt 4701 Sfmt 4702 6107 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 E:\FR\FM\30JAP4.SGM 30JAP4 6108 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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). lotter on DSK11XQN23PROD with PROPOSALS4 138 As VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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). PO 00000 Frm 00022 Fmt 4701 Sfmt 4702 E:\FR\FM\30JAP4.SGM 30JAP4 lotter on DSK11XQN23PROD with PROPOSALS4 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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 VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 147 12 U.S.C. 5517(l)(2). U.S.C. 5514(a). 149 See 12 U.S.C. 5514(c)(1), (d). 148 12 PO 00000 Frm 00023 Fmt 4701 Sfmt 4702 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). E:\FR\FM\30JAP4.SGM 30JAP4 lotter on DSK11XQN23PROD with PROPOSALS4 6110 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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 VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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 PO 00000 U.S.C. 5481(24). Frm 00024 Fmt 4701 Sfmt 4702 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 E:\FR\FM\30JAP4.SGM 30JAP4 lotter on DSK11XQN23PROD with PROPOSALS4 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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. VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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 PO 00000 Frm 00025 Fmt 4701 Sfmt 4702 6111 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 E:\FR\FM\30JAP4.SGM Continued 30JAP4 6112 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS4 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). VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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 PO 00000 Frm 00026 Fmt 4701 Sfmt 4702 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 E:\FR\FM\30JAP4.SGM 30JAP4 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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. lotter on DSK11XQN23PROD with PROPOSALS4 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’’). VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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. PO 00000 Frm 00027 Fmt 4701 Sfmt 4702 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 E:\FR\FM\30JAP4.SGM U.S.C. 1818(u). 30JAP4 6114 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS4 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. VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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 PO 00000 U.S.C. 5552(a)(1). Frm 00028 Fmt 4701 Sfmt 4702 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. E:\FR\FM\30JAP4.SGM 30JAP4 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS4 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). VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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. PO 00000 Frm 00029 Fmt 4701 Sfmt 4702 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 E:\FR\FM\30JAP4.SGM 30JAP4 6116 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS4 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. VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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). PO 00000 Frm 00030 Fmt 4701 Sfmt 4702 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. E:\FR\FM\30JAP4.SGM 30JAP4 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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. lotter on DSK11XQN23PROD with PROPOSALS4 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). VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 § 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 PO 00000 Frm 00031 Fmt 4701 Sfmt 4702 6117 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 E:\FR\FM\30JAP4.SGM 30JAP4 6118 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS4 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. VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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 PO 00000 Frm 00032 Fmt 4701 Sfmt 4702 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 E:\FR\FM\30JAP4.SGM 30JAP4 lotter on DSK11XQN23PROD with PROPOSALS4 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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). VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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 PO 00000 Frm 00033 Fmt 4701 Sfmt 4702 6119 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. E:\FR\FM\30JAP4.SGM 30JAP4 6120 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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. lotter on DSK11XQN23PROD with PROPOSALS4 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. VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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. PO 00000 Frm 00034 Fmt 4701 Sfmt 4702 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. E:\FR\FM\30JAP4.SGM 30JAP4 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS4 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 VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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). PO 00000 Frm 00035 Fmt 4701 Sfmt 4702 6121 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 E:\FR\FM\30JAP4.SGM 30JAP4 lotter on DSK11XQN23PROD with PROPOSALS4 6122 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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 VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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 PO 00000 Frm 00036 Fmt 4701 Sfmt 4702 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 E:\FR\FM\30JAP4.SGM 30JAP4 lotter on DSK11XQN23PROD with PROPOSALS4 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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. VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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 PO 00000 Frm 00037 Fmt 4701 Sfmt 4702 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. E:\FR\FM\30JAP4.SGM 30JAP4 6124 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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. lotter on DSK11XQN23PROD with PROPOSALS4 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 VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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. PO 00000 Frm 00038 Fmt 4701 Sfmt 4702 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. E:\FR\FM\30JAP4.SGM 30JAP4 lotter on DSK11XQN23PROD with PROPOSALS4 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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). VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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. PO 00000 Frm 00039 Fmt 4701 Sfmt 4702 6125 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). E:\FR\FM\30JAP4.SGM 30JAP4 lotter on DSK11XQN23PROD with PROPOSALS4 6126 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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 VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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 PO 00000 Frm 00040 Fmt 4701 Sfmt 4702 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. E:\FR\FM\30JAP4.SGM 30JAP4 lotter on DSK11XQN23PROD with PROPOSALS4 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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. VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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 PO 00000 U.S.C. 5514(a)(1). Frm 00041 Fmt 4701 Sfmt 4702 6127 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 E:\FR\FM\30JAP4.SGM 30JAP4 lotter on DSK11XQN23PROD with PROPOSALS4 6128 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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 VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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 PO 00000 Frm 00042 Fmt 4701 Sfmt 4702 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].’’). E:\FR\FM\30JAP4.SGM 30JAP4 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS4 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. VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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 PO 00000 Frm 00043 Fmt 4701 Sfmt 4702 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, E:\FR\FM\30JAP4.SGM 30JAP4 6130 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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. lotter on DSK11XQN23PROD with PROPOSALS4 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 VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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). PO 00000 Frm 00044 Fmt 4701 Sfmt 4702 • 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). E:\FR\FM\30JAP4.SGM 30JAP4 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 6131 TABLE 1—POTENTIAL SCOPE OF PROPOSED RULE 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) lotter on DSK11XQN23PROD with PROPOSALS4 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 VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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 PO 00000 Frm 00045 Fmt 4701 Sfmt 4702 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. E:\FR\FM\30JAP4.SGM 30JAP4 6132 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS4 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 VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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 PO 00000 Frm 00046 Fmt 4701 Sfmt 4702 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 E:\FR\FM\30JAP4.SGM 30JAP4 lotter on DSK11XQN23PROD with PROPOSALS4 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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). VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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 PO 00000 Frm 00047 Fmt 4701 Sfmt 4702 E:\FR\FM\30JAP4.SGM 30JAP4 6134 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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. lotter on DSK11XQN23PROD with PROPOSALS4 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 VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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, PO 00000 Frm 00048 Fmt 4701 Sfmt 4702 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. E:\FR\FM\30JAP4.SGM 30JAP4 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules lotter on DSK11XQN23PROD with PROPOSALS4 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). VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 6135 • 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). PO 00000 Frm 00049 Fmt 4701 Sfmt 4702 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. E:\FR\FM\30JAP4.SGM 30JAP4 lotter on DSK11XQN23PROD with PROPOSALS4 6136 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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 VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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 PO 00000 Frm 00050 Fmt 4701 Sfmt 4702 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 E:\FR\FM\30JAP4.SGM 30JAP4 lotter on DSK11XQN23PROD with PROPOSALS4 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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). VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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 PO 00000 Frm 00051 Fmt 4701 Sfmt 4702 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). E:\FR\FM\30JAP4.SGM 30JAP4 6138 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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. lotter on DSK11XQN23PROD with PROPOSALS4 § 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. VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 (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. PO 00000 Frm 00052 Fmt 4701 Sfmt 4702 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 E:\FR\FM\30JAP4.SGM 30JAP4 lotter on DSK11XQN23PROD with PROPOSALS4 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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. VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 (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), PO 00000 Frm 00053 Fmt 4701 Sfmt 4702 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 E:\FR\FM\30JAP4.SGM 30JAP4 lotter on DSK11XQN23PROD with PROPOSALS4 6140 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules § 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 VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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. PO 00000 Frm 00054 Fmt 4701 Sfmt 4702 (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 E:\FR\FM\30JAP4.SGM 30JAP4 Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules 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. lotter on DSK11XQN23PROD with PROPOSALS4 § 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] VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 PO 00000 Frm 00055 Fmt 4701 Sfmt 4702 6141 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). E:\FR\FM\30JAP4.SGM 30JAP4 6142 • • • • • Federal Register / Vol. 88, No. 19 / Monday, January 30, 2023 / Proposed Rules • 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. lotter on DSK11XQN23PROD with PROPOSALS4 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). VerDate Sep<11>2014 19:17 Jan 27, 2023 Jkt 259001 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

BUREAU OF CONSUMER FINANCIAL PROTECTION

[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





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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]]


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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.

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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.
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    \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\
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    \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.
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    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.'').
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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.
---------------------------------------------------------------------------

    \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 . . . .'').
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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\
---------------------------------------------------------------------------

    \45\ 12 U.S.C. 5512(b), (c)(1)-(4).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \46\ 12 U.S.C. 5512(c)(1).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \52\ 12 U.S.C. 5512(c)(7)(A).
    \53\ 12 U.S.C. 5512(c)(7)(B).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    \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'').
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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\
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    \69\ 12 U.S.C. 5512(c).
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    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.
---------------------------------------------------------------------------

    \71\ 12 U.S.C. 5512(c).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \80\ 12 U.S.C. 5514(a), (b)(2).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \84\ 12 U.S.C. 5512(c)(2)(A).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \85\ 12 U.S.C. 5512(c)(2)(B).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \86\ 12 U.S.C. 5512(c)(2)(C).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \87\ 12 U.S.C. 5512(c)(2)(E).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \88\ 12 U.S.C. 5512(c)(2)(F).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \89\ 12 U.S.C. 5512(c)(4)(B)(ii).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \112\ See, e.g., Open, Public, Electronic, and Necessary 
Government Data Act, in title II of Public Law No. 115-435 (Jan. 14, 
2019).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \113\ 12 U.S.C. 5512(b).
---------------------------------------------------------------------------

    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).
---------------------------------------------------------------------------

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'').
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \126\ 15 U.S.C. 45(a)(1).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    ``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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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'').
---------------------------------------------------------------------------

    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.''
---------------------------------------------------------------------------

    \137\ See, e.g., Cal. Fin. Code sec. 90009(c).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \140\ 12 U.S.C. 5481(27).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    \144\ 12 U.S.C. 5519 (``Exclusion for Auto Dealers'').
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
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    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.
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    \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.
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    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\
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    \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.
---------------------------------------------------------------------------

    \164\ 12 U.S.C. 1818(u).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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)).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \181\ 12 U.S.C. 5514(a).
    \182\ 12 CFR 1090.104(a).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \184\ 12 U.S.C. 5514(b)(2).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \185\ See 12 U.S.C. 5481(1).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \186\ 12 U.S.C. 5512(c)(1), (4).
    \187\ 12 U.S.C. 5514(b)(7).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    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).
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    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).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    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].'').
---------------------------------------------------------------------------

    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.'').
---------------------------------------------------------------------------

    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).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \212\ 5 U.S.C. 553(d).
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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:
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

     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\
---------------------------------------------------------------------------

    \217\ 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),\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.
---------------------------------------------------------------------------

    \218\ 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 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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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).
---------------------------------------------------------------------------

    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\
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    \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.
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    \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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     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\
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    \231\ 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),\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.
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    \232\ 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 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.
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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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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.
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    \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).
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    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.
     Vt. Stat. Ann. tit. 9, sec. 2453.
     Vt. Stat. Ann. tit. 9, sec. 2481w(b), (c), (d).

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).

Washington

     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), (7).
     Wash. Rev. Code. sec. 19.230.340(2), (4).
     Wash. Rev. Code. sec. 19.265.050(3).

West Virginia

     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

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