Procedures for Supervisory Designation Proceedings, 30259-30268 [2024-08430]
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Rules and Regulations
Federal Register
Vol. 89, No. 79
Tuesday, April 23, 2024
This section of the FEDERAL REGISTER
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents.
CONSUMER FINANCIAL PROTECTION
BUREAU
12 CFR Part 1091
[Docket No. CFPB–2024–0006]
Procedures for Supervisory
Designation Proceedings
Consumer Financial Protection
Bureau.
ACTION: Final rule; request for public
comment.
AGENCY:
The Consumer Financial
Protection Bureau (CFPB or Bureau) is
updating the CFPB’s procedures for
designating nonbank covered persons
for supervision, to conform to a recent
organizational change and to further
ensure that proceedings are fair,
effective, and efficient for all parties.
DATES: This rule is effective on April 23,
2024. Comments must be received on or
before May 23, 2024.
ADDRESSES: You may submit comments,
identified by Docket No. CFPB–2024–
0006, by any of the following methods:
• Federal eRulemaking Portal:
https://www.regulations.gov. Follow the
instructions for submitting comments. A
brief summary of this document will be
available at https://
www.regulations.gov/docket/CFPB2024-0006.
• Email: 2024SupervisoryDesignationProceedings@
cfpb.gov. Include Docket No. CFPB–
2024–0006 in the subject line of the
message.
• Mail/Hand Delivery/Courier:
Comment Intake—Procedures for
Supervisory Designation Proceedings,
c/o Legal Division Docket Manager,
Consumer Financial Protection Bureau,
1700 G Street NW, Washington, DC
20552.
Instructions: The CFPB encourages
the early submission of comments. All
submissions should include the agency
name and docket number for this rule.
Commenters are encouraged to submit
comments electronically. In general, all
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SUMMARY:
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comments received will be posted
without change to https://
www.regulations.gov.
All submissions, including
attachments and other supporting
materials, will become part of the public
record and 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. Submissions will not be
edited to remove any identifying or
contact information.
FOR FURTHER INFORMATION CONTACT:
George Karithanom, Regulatory
Implementation & Guidance Program
Analyst, Office of Regulations, at 202–
435–7700 or https://
reginquiries.consumerfinance.gov/. If
you require this document in an
alternative electronic format, please
contact CFPB_Accessibility@cfpb.gov.
SUPPLEMENTARY INFORMATION:
Background
The Consumer Financial Protection
Act of 2010 (CFPA) establishes the
CFPB as an independent bureau in the
Federal Reserve System and assigns the
CFPB a range of rulemaking,
enforcement, supervision, and other
authorities.1
One of the supervisory authorities
under the CFPA is section 1024(a)(1)(C).
It authorizes the CFPB to supervise a
nonbank covered person that the CFPB
‘‘has reasonable cause to determine, by
order, after notice to the covered person
and a reasonable opportunity for such
covered person to respond . . . 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.’’ 2 In 2013, the CFPB issued
procedures to govern these supervisory
designation proceedings (2013 rule).3
However, the authority was largely
unused for a number of years.4 In 2022,
the CFPB announced that it would begin
1 Public Law 111–203, title X, 124 Stat. 1376,
1955–2113 (2010).
2 12 U.S.C. 5514(a)(1)(C). The Bureau must base
such reasonable-cause determinations on
complaints collected by the Bureau under 12 U.S.C.
5493(b)(3), or on information collected from other
sources. Id.
3 78 FR 40352 (July 3, 2013); see also 85 FR 75194
(Nov. 24, 2020) (updating certain cross-references).
4 The CFPB did, from time to time, issue
enforcement consent orders that included the
entity’s consent to supervision.
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to make active use of the supervisory
designation authority, and it made a
limited amendment to the procedures to
establish a specific process for public
release of final decisions and orders
(2022 rule).5
The CFPB has initiated a number of
supervisory designation proceedings
since the 2022 rule. On February 23,
2024, the CFPB publicly released the
first decision and order in a contested
proceeding, which discusses the CFPB’s
view of the section 1024(a)(1)(C)
authority.6 Other institutions have
consented to CFPB supervision, in some
cases without a proceeding and in other
cases during a proceeding. The CFPB
looks forward to a productive
supervisory relationship with all the
institutions that are now within its
supervisory authority.
In late February 2024, the CFPB began
a transition to a new organizational
structure for its supervision and
enforcement work. The functions of the
Associate Director of the Division of
Supervision, Enforcement, and Fair
Lending are being transferred to the
Supervision Director as head of a
Division of Supervision and the
Enforcement Director as head of a
Division of Enforcement. This rule is in
part intended to implement that change
in the context of supervisory
designation proceedings.
Legal Authority
Section 1024(b)(7) of the CFPA
authorizes the CFPB to ‘‘prescribe rules
to facilitate supervision’’ of the nonbank
covered persons described in section
1024(a), as well as to facilitate
‘‘assessment and detection of risks to
consumers.’’ 7 Additionally, section
1022(b)(1) provides, in relevant part,
that the CFPB Director ‘‘may 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.’’ 8 The CFPB issues this rule
based on its authority under section
1024(b)(7) and section 1022(b)(1).
5 87 FR 70703 (Nov. 21, 2022); see also 87 FR
25397 (Apr. 29, 2022).
6 World Acceptance Corp., File No. 2023–CFPB–
SUP–0001 (Nov. 30, 2023), available at https://
www.consumerfinance.gov/compliance/
supervision-examinations/institutions/.
7 12 U.S.C. 5514(b)(7).
8 12 U.S.C. 5512(b)(1).
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Discussion
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Subpart A—General
1091.101 Definitions.
The rule makes technical changes to
definitions.
Subpart B—Determination and
Voluntary Consent Procedures
1091.201 Voluntary consent to
supervisory authority.9
The initiating official and respondents
have resolved the large majority of
proceedings by consent. Under the 2013
rule, there were two provisions that
established separate procedural avenues
for entering into a consent agreements.
One provision (former § 1091.103(b))
required the initiating official to enclose
a proposed consent agreement with the
Notice of Reasonable Cause (Notice),
and the other provision (former
§ 1091.110) authorized consent
agreements to be agreed at any time.
There were small differences between
the two provisions.
Under this rule, a proposed consent
agreement will continue to be enclosed
with the Notice, and consent agreements
can also be agreed at any other time.
However, the Bureau is combining the
two previous provisions into one
provision (§ 1091.201) and harmonizing
their differences, in order to reduce
complexity and risk of confusion. One
of the two previous provisions stated
that the consent agreement does not
constitute an admission by the
respondent, while the other did not
address that point expressly; new
§ 1091.201 clarifies that a consent
agreement does not constitute an
admission. One of the two previous
provisions contemplated a two-year
period for supervision while the other
allowed duration to be addressed on a
case-by-case basis; new § 1091.201 takes
the latter course. All consent agreements
under both previous provisions were for
two years, and the CFPB anticipates that
will continue to be the typical duration.
But addressing duration on a case-bycase basis rather than by rule will
provide flexibility if a longer or shorter
period were hypothetically warranted.
1091.202 Notice of Reasonable
Cause.10
The Supervision Director as initiating
official commences a contested
proceeding by serving the respondent
with a Notice of Reasonable Cause
(Notice). The Notice is the ordinary
means by which the CFPB provides
notice under section 1024(a)(1)(C) of the
CFPA, although there may sometimes be
proceedings in which additional notice
9 Formerly
§§ 1091.103(b) and 1091.110.
§§ 1091.102 to 1091.104.
10 Formerly
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is provided at later points in the
proceeding, for example through
supplemental briefing.
Paragraph (c) simplifies certain
general background information about
the section 1024(a)(1)(C) process that
was included in the Notice under the
2013 rule.
Paragraph (d) includes an update to
the method for serving the Notice. The
2013 rule included methods of service
that were patterned on how a notice of
charges is served under the Rules of
Practice for Adjudication Proceedings.11
In order to provide an additional
measure of flexibility, this rule also
permits other methods that are
‘‘reasonably calculated to give notice.’’
Paragraph (e) codifies that the
initiating official may withdraw a
Notice. The 2013 rule did not expressly
address this subject.
1091.203 Response.12
This provision governs the response,
which is the respondent’s opportunity
to respond to the Notice. The rule makes
minor technical changes to the
provision.
1091.204 Reply by initiating official.
This new provision provides the
initiating official with the option of
filing a written reply to the response.
Under the 2013 rule, there was no such
reply. Because of the initiating official’s
role in formulating the Notice, the
initiating official will likely have
observations that are useful to the
Director in considering the response.
1091.205 Supplemental oral
response.13
This provision governs a
supplemental oral response before the
Director, which a respondent can
request in its response under
§ 1091.203. Under the 2013 rule, a
respondent presented the supplemental
oral response to the Associate Director
for Supervision, Enforcement, and Fair
Lending. However, as discussed in
connection with § 1091.206 below, in
light of the elimination of the Associate
Director position, the rule merges the
Associate Director’s and Director’s
adjudicative roles.14 The rule also gives
the Director more flexibility regarding
whether a supplemental oral response is
in person at the Bureau’s headquarters,
by telephone, or by video conference,
consistent with ongoing changes to
11 See
12 CFR 1081.113(d)(1).
§ 1091.105.
13 Formerly § 1091.106.
14 Because the existing definition of the term
Director under § 1091.101 includes a designee of
the Director, there might be circumstances where
the Director delegates the responsibility for being
present at a supplemental oral response to a
designee.
12 Formerly
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working practices and possible future
public health needs.15
1091.206 Determination by the
Director.16
After the Notice, response, reply (if
any), and supplemental oral response (if
any), the rule provides for the Director
to make a final determination in a
proceeding.
Under the 2013 rule, the Associate
Director of the Division of Supervision,
Enforcement, and Fair Lending
submitted a recommended
determination to the Director, and then
the Director issued a final
determination. But as noted above, the
role of Associate Director will no longer
exist under the new organizational
structure. The Associate Director’s
supervision-related functions are being
transferred to the Supervision Director,
who serves as initiating official in the
context of supervisory designation
proceedings. Accordingly, this rule
merges the adjudicative roles of the
Associate Director and Director in these
proceedings. This change, in addition to
aligning with the new organizational
structure, will make proceedings more
efficient. The former two-stage process
resulted in a more complex and
resource-intensive process and a longer
timeline for resolving proceedings.
Merging the adjudicative roles of
Associate Director and Director does not
diminish any of the respondent’s
opportunities to express its views to the
Bureau, but merely streamlines the
Bureau’s internal decision-making
process after those views are expressed.
Paragraph (b) codifies the fact that the
Director may sometimes request
supplemental briefing before making a
final determination, which is consistent
with the 2013 rule but was not expressly
discussed in the 2013 rule.
Paragraph (d) requires a separation of
functions between Bureau employees
who advise the Director in the Director’s
adjudicative role on the one hand and
Bureau employees who advise the
initiating official on the other. This
separation is not required by the
Administrative Procedure Act, but the
Bureau maintains it as a matter of
policy. The 2013 rule included a similar
separation of functions at the Director
level, although at the Associate Director
level it did not mandate a separation
between the Associate Director’s
advisers and initiating official’s
advisers.
15 See
also § 1091.203(b)(3).
§ 1091.109.
16 Formerly
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Subpart C—Post-Determination
Procedures
1091.301 Petition for termination of
order.17
This provision governs petitions by
respondents to terminate an existing
order. The rule makes technical changes
to conform to changes elsewhere in the
procedures. It also codifies the fact that
the Director might sometimes request
supplemental briefing, similar to
§ 1091.206(b).
Subpart D—Miscellaneous Provisions
1091.401 Methods of filing and
serving documents.18
The rule clarifies the method of filing
and serving documents, which will
generally be by email. The service of the
Notice at the start of a proceeding, when
a respondent’s email address may not be
known, is governed by a specific rule
under § 1091.202(d).
1091.402 Time limits.19
The rule simplifies the former method
for calculating time limits under the
2013 rule, which varied by delivery
channel to allow additional time for
mail or delivery services to arrive. This
complexity has generated confusion for
some respondents and is no longer
warranted because email is generally
instantaneous.
1091.403 Word limits.
The rule introduces a word limit for
the Notice, response, and certain other
key filings, based on Federal Rules of
Appellate Procedure 32(a)(7)(B) and
32(f). Relatedly, it introduces a
certification of word count based on
Federal Rule of Appellate Procedure
32(g). In past proceedings, some parties’
outside counsel submitted very lengthy
filings in the absence of any page or
word limit. Like any word limit, the
CFPB intends the new limit to help
focus arguments and mitigate expense
for all participants.
1091.404 Changes to methods of
filing and service, time limits, and word
limits.20
This provision governs changes to the
methods set out in §§ 1091.401 to
1091.403. In the case of changes to time
limits or word limits, the provision
notes that they are disfavored. Under
the provision, a change can be approved
in one of three ways: by consent of the
initiating official and the respondent,
with notice to the Director; by written
request to the Director; or upon the
Director’s own motion. The possibility
of changes by consent is intended to
avoid the need for the Director to
17 Formerly
§ 1091.113.
§ 1091.107.
19 Formerly § 1091.114.
20 Formerly § 1091.115(a) and (b).
18 Formerly
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become involved in minor issues that
are not controversial between the
initiating official and the respondent.
However, the provision states that the
Director can direct otherwise. There
may also be circumstances where the
initiating official believes that a
potential change warrants a decision by
the Director through a written request
and so withholds consent, even if the
initiating official does not oppose the
change.
1091.405 Confidentiality of
proceedings.21
The 2022 rule created a process for
the CFPB to publicly release final
decisions and orders. This rule
maintains the 2022 rule’s approach,
although it clarifies that consent
agreements entered into by the initiating
official and respondent under
§ 1091.201 are not subject to the public
release process. These agreements are
generally short formal documents
without reasoning that is significant or
could form the basis for precedent.
Relatedly, the CFPB notes that an order
entered as provided in § 1091.206(a)(1),
because a respondent has failed to file
a response and so has defaulted under
§ 1091.203(c), would typically not have
content that warrants public release.
However, such orders are subject to the
process under § 1091.405 for
considering public release, because of
the possibility that some may include
reasoning that warrants public release.
1091.406 Multiple respondents.
The rule clarifies that multiple
respondents might be named in a
Notice, as well as clarifying the process
for adding an additional respondent or
respondents to a pending proceeding.
Including multiple respondents in one
proceeding—for example, business
partners—may, in appropriate cases,
avoid the delay and inefficiency of
serial proceedings and also would allow
the Bureau to consider related issues at
once.22
1091.408 Issue exhaustion.23
The Supreme Court has explained
that: ‘‘Administrative review schemes
commonly require parties to give the
agency an opportunity to address an
issue before seeking judicial review of
that question.’’ 24 New § 1091.408 is an
express issue exhaustion provision that
parallels § 1081.408 of the Rules of
Practice for Adjudication Proceedings.
21 Formerly
§ 1091.115(c).
additional respondents might be
added to a proceeding at any stage, the provision
gives the Director flexibility to decide what process
is appropriate in order to provide the additional
respondents a reasonable opportunity to respond to
the supplemental Notice.
23 Formerly § 1091.105(d).
24 Carr v. Saul, 141 S. Ct. 1352, 1358 (2021).
22 Because
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The CFPB is adopting it for the same
reasons that the CFPB explained in the
context of the Rules of Practice.25 The
new issue exhaustion provision is
generally similar to former
§ 1091.105(d), which was titled
‘‘Waiver,’’ together with principles of
administrative law that would apply in
the absence of an express issue
exhaustion provision.
Effective Date and Transitional
Arrangements
This rule is effective upon Federal
Register publication. It applies to
proceedings initiated on or after the
effective date. It also applies to
proceedings that are pending on the
effective date, except to the extent the
Director determines that is not just or
practicable.26
Section 1022(b)(2) Analysis
In developing this rule, the Bureau
has considered its benefits, costs, and
impacts in a manner consistent with
section 1022(b)(2)(A) of the CFPA.27 In
addition, the Bureau has consulted with
the prudential regulators and the
Federal Trade Commission, including
regarding consistency of the rule with
any prudential, market, or systemic
objectives administered by those
agencies, in a manner consistent with
section 1022(b)(2)(B) of the CFPA.28
Among other sources of supervisory
authority, the Bureau can supervise a
nonbank covered person that the Bureau
‘‘has a reasonable cause to determine, by
order, after notice to the covered person
and a reasonable opportunity for such
covered person to respond . . . 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.’’ 29 The Bureau established a
rule to implement a procedure to fulfil
this statutory authority in 2013 (2013
rule) and amended this rule in 2022
(2022 rule). The Bureau is issuing this
25 See 88 FR 18382, 18387–88 (Mar. 29, 2023)
(discussing 12 CFR 1081.408).
26 The CFPB notes the Supreme Court commonly
applies rule changes, ‘‘insofar as just and
practicable,’’ to pending proceedings in Federal
courts. E.g., 344 FRD. 850, 851 (U.S. 2023); 340
FRD. 810, 811 (U.S. 2022); 337 FRD. 813, 814 (U.S.
2021). The CFPB also notes that the above
transitional arrangements, although not codified,
form an operative part of the rule.
27 12 U.S.C. 5512(b)(2)(A).
28 12 U.S.C. 5512(b)(2)(B). Whether section
1022(b)(2)(A) and section 1022(b)(2)(B) are
applicable to this rule is unclear, but in order to
inform the rulemaking more fully the Bureau
performed the described analysis and consultations.
29 12 U.S.C. 5514(a)(1)(C). The Bureau must base
such reasonable-cause determinations on
complaints collected by the Bureau under 12 U.S.C.
5493(b)(3), or on information collected from other
sources. Id.
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final rule to amend the procedures
governing the CFPB’s supervisory
designation proceedings.
A. Data Limitations and Quantification
of Benefits, Costs, and Impacts
The data are generally limited with
which to quantify potential costs,
benefits, and impacts of the rule’s
provisions. The CFPB has conducted a
limited number of supervisory
designation proceedings under the prior
2013 and 2022 rules, but the CFPB does
not have quantitative data regarding the
costs to respondents or other impacts of
those proceedings. The CFPB also does
not have quantitative data to predict the
impacts of the changes made by this
rule relative to the prior legal and
procedural framework, which is the
comparison that is relevant for this
analysis.
In light of these data limitations, the
analysis below generally provides a
qualitative discussion of the benefits,
costs and impacts of the rule. 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.
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B. Baseline for Analysis
In evaluating the rule’s benefits, costs,
and impacts of the rule, the CFPB
considers the impacts against a baseline
that includes the legal and procedural
framework regarding supervisory
designation proceedings for nonbank
covered persons that existed before the
issuance of the rule. Therefore, the
baseline for the analysis of the rule
includes separate adjudicative roles for
the Director and the Associate Director
for Supervision, Enforcement, and Fair
Lending—that is, the statutory baseline
implemented by the 2013 rule as
amended by the 2022 rule.
C. Potential Benefits and Costs to
Consumers and Covered Persons
The rule would apply to covered
persons as defined in the CFPA, which
are generally persons that engage in
offering or providing a consumer
financial product or service.30 Relative
to the statutory baseline, this rule
implements several changes that the
Bureau believes streamlines and
improves transparency in the decisionmaking process, and clarifies the rights
of nonbank covered entities subject to
this rule. Notably, this rule eliminates
the role of the Associate Director in
filing a recommendation prior to the
30 For the full scope of the term ‘‘covered person,’’
see 12 U.S.C. 5481(6).
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Director’s final determination and
instead assigns the Director to receive
responses, including optional
supplementary oral responses, in order
to make a final determination.
Furthermore, it clarifies the process by
which persons may enter consent
agreements with the Bureau, among
other procedural changes. Overall, the
Bureau believes these changes will not
diminish the rights of respondents to
reply to a Notice of Reasonable Cause,
do not impose significant costs relative
to the statutory baseline, increase
transparency in the decision-making
process, and clarify the processes by
which covered persons may either
respond or enter into a consent
agreement with the Bureau.
The rule eliminates the role of the
Associate Director in making a
recommendation to the Director. This
reflects a broader organizational
structural change at the CFPB that
eliminates the position of Associate
Director of Supervision, Enforcement,
and Fair Lending. Relative to the
baseline, the rule makes no changes to
the rights to respond by nonbank
covered entities, maintains separation of
roles between the initiating official and
decisional employees in the
determination process, maintains the
requirement that the Director include
the basis for their decision in their final
determination, and should reduce the
amount of time on net between service
of the Notice and the final
determination.31 The rule also codifies
the ability for the Director to request
additional briefing from the respondent,
the initiating official, or both. Because
there is no reduction in the ability of
nonbank covered entities to respond to
the Notice and access information
constituting the basis for the Director’s
determination, there are no additional
costs imposed on nonbank covered
entities. Furthermore, the Bureau
believes the reduction in time and
general streamlining of the decisional
process will benefit nonbank covered
entities by improving the efficiency of
this rule’s application.
The rule allows for the initiating
official to reply to the respondent’s
response to the Notice. The Bureau
believes this may benefit respondents by
allowing for more transparency in the
determination process. The 2013 rule
did not allow for the initiating official
to respond to the written reply but did
allow for the initiating official to
31 The length of time that the Director has to make
a final determination is increased relative to
baseline; however, the elimination of the role of the
Associate Director and streamlining of the
decisional process reduces the total amount of time
between Notice and determination.
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participate in the optional
supplementary oral response. Moreover,
the 2013 rule did not preclude the
initiating official from advising the
Associate Director in drafting their
recommendation. By allowing for a
reply by the initiating official to the
respondent’s written response, the
Bureau believes respondents could gain
more insight into the decisional process
which could then be incorporated into
an optional supplementary oral
response.
The rule also sets out changes in the
process by which a person may
voluntarily consent to the Bureau’s
supervisory authority. Specifically, the
rule consolidates two previous
provisions regarding consent
agreements. Under one provision of the
2013 rule, a respondent could respond
to a Notice by signing an enclosed
consent agreement that led to the
respondent being supervised for two
years. Under a separate provision, the
respondent and the Bureau could enter
into a consent agreement at any time,
with a duration to be determined by
case-by-case negotiation. Under the new
rule, a proposed consent agreement will
continue to be enclosed with the Notice
and an agreement can also be reached at
any other time, but the rule will no
longer mandate a two-year period in the
former case.
Relative to the baseline, the removal
of the default option of a two-year
consent agreement, to be replaced with
the option for a consent agreement with
a negotiated length of time, may impose
additional costs on covered entities
subject to this rule. However, the
Bureau believes several factors limit the
expected realized costs of this change.
First, as mentioned above, the Bureau
has conducted a limited number of
supervisory designation proceedings
under this authority. The Bureau
anticipates it will continue to conduct a
limited number of proceedings relative
to the size of the market of covered
entities subject to this rule. Second,
based on prior experience and expertise,
the Bureau anticipates that the majority
of consent agreements will continue to
last for a period of two years. Third, in
a case where the complexity or severity
of potential consumer risks merits a
supervisory relationship longer than
two years in the initiating official’s
assessment, there are other features of
the rule that limit any additional
realized costs relative to baseline on the
covered entity, notably the option to
contest the Notice and the ability for the
Bureau to issue a new Notice at the end
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of the initial two-year order under the
baseline.32
There is a large population of firms
potentially subject to this rule.33 The
Bureau does not currently have access
to comprehensive data on the number of
nonbank covered persons subject to
supervisory authority. To establish an
estimate of the population of nonbank
covered entities potentially subject to
this rule, the Bureau uses the latest
Economic Census publicly available
data and North American Industry
Classification System (NAICS) industry
codes that align with financial
services.34 The Bureau estimates there
are approximately 154,430 entities in
these covered industries. It should also
be noted that this estimate does not
include other nonbank covered entities
not categorized in one of the
enumerated industries, e.g., if consumer
financial services are not their primary
business activity. To date, the Bureau
has exercised its supervisory authority
under the 2013 and 2022 rules on fewer
than a dozen covered entities and in any
given year, and the Bureau anticipates
exercising authority under this rule on
the same number of entities. Hence, the
Bureau believes the impact of this rule
will be relatively limited, mitigating the
realization of any potential costs
associated with changes relative to
baseline.
The majority of cases initiated under
the 2013 rule have been settled by
consent agreement and all past consent
agreements have been for two years. The
Bureau expects similar outcomes under
this rule. However, the initiating official
32 As noted elsewhere in this analysis, the
substantive costs associated with contested
proceedings have not changed appreciably between
the statutory baseline and the proposed rule. Hence,
a covered entity issued Notice has the option to
accept a negotiated consent agreement with
potentially different costs relative to baseline or
undergo contested proceedings with similar costs
relative to baseline.
33 The procedures established in the 2013 rule
and this rule are only to assess whether a nonbank
covered person will be made subject to the Bureau’s
supervisory authority based on a reasonable-cause
determination. In general, there is no reason to
make a determination under the 2013 rule or this
rule with respect to a nonbank covered entity
subject to the Bureau’s supervisory authority under
some other provision of section 1024(a) of the
CFPA, 12 U.S.C. 5514(a). However, as discussed in
the 2013 rule this is possible. Therefore, the Bureau
does not exclude from coverage of the 2013 rule or
this final rule nonbank covered entities that may be
subject to supervision under a separate provision of
section 1024(a).
34 The relevant NAICS codes examined are 5222
(Nondepository credit intermediation); 5223
(Activities related to credit intermediation); 523920
(Portfolio management); 523930 (Investment
advice); 532112 (Passenger car leasing); 532120
(Truck, utility trailer, and recreational vehicle
rental and leasing); 5313 (Activities related to real
estate); 561450 (Consumer reporting); and 561440
(Debt collection).
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may assess that a longer period of time
is necessary to maintain an effective
supervisory relationship if a particular
case is complex or poses severe risks to
consumers.35 In this case, a covered
entity undergoing a supervisory
proceeding under this rule may receive
Notice with a proposed consent
agreement lasting longer than two
years.36
An order lasting longer than two years
may pose additional costs relative to the
baseline for the covered entity via
additional supervisory activity. The
Bureau has previously estimated the
cost of compliance with supervisory
activity based on reported average exam
length and labor costs incurred by firms
to participate in supervisory exams.37
This calculation results in an estimate of
approximately $27,000 in labor costs to
comply with a supervisory examination.
The Bureau recognizes that this estimate
reflects national average labor costs and
are thus subject to variability with
respect to specific firms’ realized costs.
Furthermore, the Bureau recognizes that
the staffing estimates are assessments
for an average firm’s needs and may also
be subject to variability with respect to
specific firms’ requirements. The
Bureau is open to public comments that
provide additional data on estimates of
staffing requirements and costs for
compliance with supervisory
activities.38
35 In principle, an initiating official may assess
that a shorter period of time is sufficient for a
supervisory relationship. While the Bureau
anticipates that this would be a rare occurrence
given the Bureau’s experience and expertise suggest
that the minimum period of time to allow for an
examination and follow-up is generally two years,
this would likely lessen the costs associated with
application of this rule on a nonbank covered
entity.
36 The respondent may otherwise understand that
the Bureau and initiating official propose a consent
agreement lasting longer than two years, e.g., via
other communications with the Bureau and
initiating official.
37 For an estimate of the length of examination,
see Office of the Inspector General of the Board of
Governors of the Federal Reserve System and the
CFPB, ‘‘The Bureau Can Improve Its Risk
Assessment Framework for Prioritizing and
Scheduling Examination Activities’’ (Mar. 25, 2019)
at 13, available at https://oig.federalreserve.gov/
reports/bureau-risk-assessment-frameworkmar2019.pdf.
38 The Bureau has previously estimated the cost
of compliance with supervisory activity based on
reported average exam lengths, which would
average one supervisory examination per year and
require one-tenth of a full-time equivalent attorney
and one full-time compliance officer. Furthermore,
the Bureau estimates that supervisory examinations
would last for 8 weeks on average, with an
additional two weeks of preparation (supra note
38). Using the national average hourly labor cost of
$84.84 for attorneys and $38.55 for compliance
officers, the Bureau estimates that the direct labor
costs for a supervisory examination would total
approximately $19,000 (See U.S. Bureau of Labor
Statistics, National Occupational Employment and
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The Bureau anticipates that the
majority of consent agreements under
this rule will continue to be for two
years, posing no significant additional
costs on covered entities. The Bureau
recognizes that for some entities
undergoing supervisory activity under
this rule, the complexity of the entity or
the severity of consumer risk may result
in a consent agreement lasting longer
than two years, with each additional
year imposing additional costs relative
to baseline of approximately $27,000. In
principle, it is possible that entities
undergoing supervisory activity under
this rule may enter into a consent
agreement longer than three years;
however, the Bureau anticipates this to
be unlikely.
Finally, the Bureau notes that there
are features of this rule and the statutory
baseline that further limit any expected
realized costs posed by the proposed
rule. First, by their nature, consent
agreements necessitate both parties’
agreement to the order. A respondent
may negotiate with the initiating official
over the parameters of a consent
agreement or may enter contested
proceedings.39 In general, entering into
contested proceedings represents a cost
on the respondent; however, insofar as
there have been no substantive changes
in the costs associated with entering
contested proceedings relative to the
baseline, the difference between these
costs and the costs associated with the
2013 rule’s provision to accept a twoyear consent agreement represents an
upper limit on the additional costs
represented by this final rule relative to
baseline.40 Second, in cases where the
Wage Estimates United States, May 2023, https://
www.bls.gov/oes/current/oes-nat.htm). Assuming
that wages represent approximately 70.4% of the
total labor costs using the estimate of total
compensation for private employees (See U.S.
Bureau of Labor Statistics, Employer Costs for
Employee Compensation: Private Industry Database,
March 2024, https://www.bls.gov/web/ecec/ececprivate-dataset.xlsx), this results in an estimate of
approximately $27,000 in labor costs to comply
with a supervisory examination.
39 Under the 2013 rule, there have been
substantive communications between respondents
and the Bureau prior to entering into any consent
agreement, regardless under which provision of the
2013 rule the consent agreement was made. The
Bureau anticipates that substantive
communications will continue under this final rule
and does not assess there to be significant changes
in costs associated with these communications
relative to baseline.
40 A hypothetical firm that would contest the
Notice under the 2013 rule would presumably
continue to contest under this proposed final rule
and incur no additional costs relative to baseline.
A firm that would accept a two-year consent
agreement under the 2013 rule but opt for contested
proceedings under this rule would incur additional
costs relative to baseline equivalent to the
difference in costs between a contested proceeding
and the two-year consent agreement. Hence, their
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initiating official assesses that there is
substantial complexity or severe
consumer risks that merit supervisory
activity beyond two years, under the
statutory baseline a nonbank covered
entity subject to application of the rule
could opt for a two-year consent
agreement; however, the Bureau could
reissue a Notice at the end of this
period, leading to additional costs
associated with receipt, consideration,
and reply to a fresh Notice. Under this
final rule, the initiating official could
propose a longer consent agreement
that, subject to negotiation and
acceptance of this consent agreement by
the respondent, could avoid the
potential need for another designation
after two years and costs associated with
receipt, consideration, and reply to a
fresh Notice.
In summary, while the elimination of
the two-year default option for consent
agreement, to be replaced with the
option for a consent agreement with
negotiated length of time, may impose
additional costs relative to baseline, the
Bureau assesses these additional costs to
be negligible. First, that the Bureau
would be authorized to undertake
supervisory activities with respect to a
nonbank under this rule would not
necessarily mean that the Bureau would
in fact undertake such activities
regarding that covered person in the
near future. Rather, the supervision of
any particular covered person as a result
of this rule would be probabilistic in
nature. Second, for a covered person
undergoing supervisory activity under
this rule, the Bureau anticipates the
majority of cases will be settled by
consent agreements lasting two years,
imposing no additional costs. Third, for
those entities where supervisory activity
results in a proposed consent
agreements lasting longer than two
years, these potential realized costs are
further mitigated by other features of the
rule.41
realized costs would be this difference. Similarly,
a firm that would accept a two-year consent
agreement under the 2013 rule and a possibly
longer consent agreement under this final rule
would incur additional costs relative to baseline
equivalent to the difference between the costs
associated with the consent agreement under this
rule and those associated with the consent
agreement under the 2013 rule. Moreover, the costs
associated with a possibly longer consent agreement
would be necessarily less than the costs of
contested proceedings.
41 The Bureau acknowledges that there are
limitations in the estimates associated with relevant
costs; however, with the estimates presented here,
the Bureau believes the additional costs imposed on
nonbank covered entities subject to this rule
relative to baseline would be negligible (based on
the limited number of supervisory activities the
Bureau anticipates each year under this rule, the
probabilistic nature that any particular entity would
undergo supervisory activities under this rule, and
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The rule also makes certain other
procedural changes to the processes for
making and terminating designations,
including: codifying the Director’s
authority to request supplemental
briefing; imposing a word limit on key
filings; clarifying procedures for filing
and serving documents, with documents
being generally filed and served by
email; clarifying applicable procedures
when there are multiple respondents;
and codifying an issue exhaustion
requirement that is generally similar to
existing law. The rule further clarifies
that the process for publicly releasing
decisions and orders does not apply to
consent agreements, because they lack
sufficient content to serve as a
precedent for future proceedings. The
Bureau does not believe these changes
impose significant additional costs onto
nonbank covered persons relative to the
baseline.
The rule will not have an impact on
insured depository institutions or
insured credit unions with $10 billion
or less in assets as described in section
1026(a) of the CFPA.42 Nor will the
proposed rule have a unique impact on
rural consumers.
Regulatory Matters
As a rule of agency organization,
procedure, or practice, this rule is
exempt from the notice-and-comment
rulemaking requirements of the
Administrative Procedure Act.43
However, the Bureau is accepting
comments on the rule.
Because no notice of proposed
rulemaking is required, the Regulatory
Flexibility Act does not require an
initial or final regulatory flexibility
analysis.44 Moreover, the Bureau’s
Director certifies that this rule will not
have a significant economic impact on
a substantial number of small entities.
Therefore, an analysis is also not
required on that basis.45 This is for two
independent reasons. First, the costs
associated with the changes made by
this rule relative to the baseline of the
existing procedures are limited, as
discussed above. Second, the number of
entities that will be subject to the
procedures is small, and within that
group the number that would be small
entities is likely to be either none or in
the single digits each year, representing
a very small fraction of small entities in
the relevant consumer finance markets.
the likelihood any supervisory activities would
result in a consent agreement longer than two
years).
42 12 U.S.C. 5516(a).
43 5 U.S.C. 553(b).
44 5 U.S.C. 603, 604.
45 5 U.S.C. 605(b).
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The Bureau has also determined that
this rule does not impose any new or
revise any existing recordkeeping,
reporting, or disclosure requirements on
covered entities or members of the
public that would be collections of
information requiring approval by the
Office of Management and Budget under
the Paperwork Reduction Act.46
Severability
If any provision of part 1091, or any
application of a provision, is stayed or
determined to be invalid, the remaining
provisions or applications are severable
and shall continue in effect.
List of Subjects in 12 CFR Part 1091
Administrative practice and
procedure, Consumer protection, Credit,
Trade practices.
Authority and Issuance
For the reasons set forth above, the
Bureau revises 12 CFR part 1091 as set
forth below:
■
PART 1091—PROCEDURES FOR
SUPERVISORY DESIGNATION
PROCEEDINGS
Subpart A—General
Sec.
1091.100
1091.101
Scope and purpose.
Definitions.
Subpart B—Determination and Voluntary
Consent Procedures
Sec.
1091.201 Voluntary consent to supervisory
authority.
1091.202 Notice of Reasonable Cause.
1091.203 Response.
1091.204 Reply by initiating official.
1091.205 Supplemental oral response.
1091.206 Determination by the Director.
Subpart C—Post-Determination Procedures
Sec.
1091.301
Petition for termination of order.
Subpart D—Miscellaneous Provisions
Sec.
1091.401 Methods of filing and serving
documents.
1091.402 Time limits.
1091.403 Word limits.
1091.404 Changes to methods of filing and
service, time limits, and word limits.
1091.405 Confidentiality of proceedings.
1091.406 Multiple respondents.
1091.407 Adjudication proceedings
otherwise brought by the Bureau.
1091.408 Issue exhaustion.
1091.409 No limitation on relief sought in
civil action or administrative
adjudication.
46 44
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State has the definition in 12 U.S.C.
5481.
PART 1091—PROCEDURES FOR
SUPERVISORY DESIGNATION
PROCEEDINGS
Subpart B—Determination and
Voluntary Consent Procedures
Authority: 12 U.S.C. 5512(b)(1),
5514(a)(1)(C), 5514(b)(7).
§ 1091.201 Voluntary consent to
supervisory authority.
Subpart A—General
§ 1091.100
Scope and purpose.
This part sets forth procedures to
implement section 1024(a)(1)(C) of the
Consumer Financial Protection Act of
2010 (12 U.S.C. 5514(a)(1)(C)) and
establishes rules to facilitate the
Bureau’s supervisory authority over
certain nonbank covered persons
pursuant to section 1024(b)(7) of the Act
(12 U.S.C. 5514(b)(7)).
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§ 1091.101
Definitions.
For the purposes of this part, the
following definitions apply:
Bureau, consumer, consumer
financial product or service, and
covered person have the definitions in
12 U.S.C. 5481.
Decisional employee means an
employee of the Bureau who has not
engaged in assisting the initiating
official in either determining whether to
issue a Notice of Reasonable Cause, or
presenting the initiating official’s
position in support of a Notice of
Reasonable Cause, either in writing or in
a supplemental oral response, to the
Director.
Director means the Director of the
Bureau or his or her designee. If there
is no Director, the term means a person
authorized to perform the functions of
the Director under this part, or his or
her designee. For purposes of when the
Director receives, files, or serves
documents, the Director includes an
employee acting on behalf of the
Director.
Initiating official means the
Supervision Director or another Bureau
employee designated by the Director.
For purposes of receiving, filing, and
serving documents or participating in a
supplemental oral response, the
initiating official includes an employee
acting on behalf of the initiating official.
Nonbank covered person means a
covered person, except for persons
described in 12 U.S.C. 5515(a) and
5516(a).
Notice of Reasonable Cause and
Notice mean a Notice issued under
§ 1091.202.
Person has the definition in 12 U.S.C.
5481.
Respondent means a person who has
been issued a Notice of Reasonable
Cause under § 1091.202 or who has
entered into a consent agreement under
§ 1091.201.
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(a) At any time, a person and the
initiating official may enter into a
consent agreement by which the person
voluntarily consents to the Bureau’s
supervisory authority under 12 U.S.C.
5514. The consent agreement shall
constitute an order authorized by 12
U.S.C. 5514(a)(1)(C).
(b) A consent agreement under this
section does not constitute an admission
that a person is a nonbank covered
person that 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.
(c) A consent agreement may specify
a period of time that the person will be
subject to the Bureau’s authority under
12 U.S.C. 5514. If the consent agreement
specifies a period of time, it shall not be
eligible for a petition for termination
pursuant to § 1091.301. If the consent
agreement does not specify a period of
time, the consent agreement will
continue until terminated pursuant to
§ 1091.301.
(d) A consent agreement under this
section shall state that the person
waives any right to judicial review of
the consent agreement.
(e) The initiating official encloses a
proposed consent agreement with the
Notice of Reasonable Cause in
accordance with § 1091.202(c)(6).
§ 1091.202
Notice of Reasonable Cause.
(a) Generally. The initiating official is
authorized to issue a Notice of
Reasonable Cause to a person stating
that the Bureau may have reasonable
cause to determine that the respondent
is a nonbank covered person that 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.
(b) Basis of Notice. A Notice of
Reasonable Cause shall be based on:
(1) Complaints collected through the
system under 12 U.S.C. 5493(b)(3); and/
or
(2) Information from other sources.
(c) Contents of Notice. A Notice of
Reasonable Cause is subject to the word
limit in § 1091.403 and shall contain the
following:
(1) A description of the basis for the
assertion that the Bureau may have
reasonable cause to determine that a
respondent is a nonbank covered person
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30265
that 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, including a summary of the
documents, records, or other items
relied on by the initiating official to
issue a Notice. Such summary will be
consistent with the protection of
sensitive information, including
compliance with Federal privacy law
and whistleblower protections;
(2) A statement that this proceeding is
governed by 12 U.S.C. 5514(a)(1)(C) and
12 CFR part 1091;
(3) A statement that failure to respond
within 30 days, in the manner specified
by § 1091.203, will constitute a waiver
of the right to respond and may result
in a default determination by the
Director;
(4) Instructions for filing documents
with the Director;
(5) Instructions for serving documents
on the initiating official; and
(6) In an appendix, a proposed
consent agreement under § 1091.201.
(d) Service of Notice. A Notice of
Reasonable Cause shall be served on a
respondent by any means that are
reasonably calculated to give notice.
This includes, but is not limited to, the
methods available under 12 CFR
1081.113(d)(1). The initiating official
shall promptly file a copy of the Notice
and a record of service with the
Director.
(e) Withdrawal of Notice. The
initiating official may withdraw the
Notice at any time. Such a withdrawal
shall not prevent the initiation of
another proceeding under this part.
§ 1091.203
Response.
(a) Timing and word limit. Within 30
days of service of a Notice, a respondent
shall file any response with the Director
and serve it on the initiating official,
according to the instructions set forth in
the Notice. The response is subject to
the word limit in § 1091.403.
(b) Content of the response. (1) If the
respondent disputes that it is a nonbank
covered person that 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, the response shall
set forth the basis for the respondent’s
position.
(2) The response shall be
accompanied by appendices that
include (and are limited to) all
documents, records, or other evidence a
respondent wishes to use to support the
arguments or assertions set forth in the
response.
(3) If the respondent wishes to present
a supplemental oral response, the
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response must include that request. The
respondent may also include, for the
Director’s consideration, the
respondent’s preference for the
supplemental oral response to be by
telephone, by video conference, or in
person at the Bureau’s headquarters in
Washington, DC. A respondent’s failure
to request to present a supplemental
oral response shall constitute a waiver
of the opportunity to present a
supplemental oral response.
(4) The response shall include an
email address for serving documents on
the respondent, which may be its
attorney’s email address.
(5) The response shall be
accompanied, as an appendix, by an
affidavit or declaration, made by the
individual respondent if a natural
person, or, if a corporate or other entity
that is not a natural person, by an
officer, managing or general member, or
partner authorized to represent the
respondent, affirming that the response
is true and accurate and does not
contain any omissions that would cause
the response to be materially
misleading.
(c) Default. If a respondent does not
file a response within the time period
set forth in paragraph (a) of this section,
it shall constitute a waiver of the
respondent’s right to respond. At the
initiating official’s request, the Director
may issue a decision and order as
provided in § 1091.206(a)(1)).
(d) No Discovery. There shall be no
discovery in connection with a
response.
§ 1091.204
Reply by initiating official.
If the respondent files and serves a
response, within 21 days the initiating
official may file a reply with the
Director and serve it on the respondent.
The reply is subject to the word limit in
§ 1091.403.
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§ 1091.205
Supplemental oral response.
(a) If the respondent makes a timely
request in a response under § 1091.203
for the opportunity to present a
supplemental oral response, the Director
shall issue an order setting forth the
date, time, and general information
relating to the conduct of a
supplemental oral response.
(b) There shall be no discovery
permitted or witnesses called in
connection with a supplemental oral
response.
(c) If a respondent is a corporate or
other entity, and not a natural person,
the respondent shall be represented in
any supplemental oral response by:
(1) An officer, managing or general
member, or partner authorized to
represent the respondent; or
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(2) An attorney in good standing of
the bar of the highest court of any State.
(d) If a respondent is a natural person,
the respondent shall be represented in
any supplemental oral response by:
(1) The respondent personally; or
(2) An attorney in good standing of
the bar of the highest court of any State.
(e) The Director shall cause an audio
recording of a supplemental oral
response to be made by a court reporter
or other designated person. A
respondent may purchase a copy or
transcript of the recording at the
respondent’s own expense.
(f) The initiating official may
participate in any supplemental oral
response conducted under this section.
(g) A respondent’s failure to
participate in a supplemental oral
response scheduled by the Director shall
constitute the respondent’s waiver of
the opportunity to present a
supplemental oral response.
§ 1091.206
Determination by the Director.
(a) Within 60 days after the
supplemental oral response, or, if there
is no supplemental oral response, the
deadline for the reply, the Director shall
issue either:
(1) A decision and order subjecting
the respondent to the Bureau’s
supervisory authority pursuant to 12
U.S.C. 5514(a)(1)(C); or
(2) A notification that the Director is
terminating the proceeding. Such
notification shall have no precedential
effect and shall not prevent the
initiation of another proceeding under
this part.
(b) The Director may, on the Director’s
own motion at any time before making
a determination under paragraph (a) of
this section, request that the respondent,
initiating official, or both provide any
supplemental briefing that Director
considers appropriate.
(c) Any decision and order issued by
the Director pursuant to paragraph (a)(1)
of this section shall include the basis for
the decision and an effective date for the
order.
(d) Only decisional employees may
advise and assist the Director in the
consideration and disposition of a
proceeding under this part.
(e) A decision and order issued
pursuant to paragraph (a)(1) of this
section shall constitute final agency
action under 5 U.S.C. 704.
Subpart C—Post-Determination
Procedures
§ 1091.301
order.
Petition for termination of
(a) Any person subject to an order
under 1091.206(a)(1) may, no sooner
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than two years after issuance of such an
order and no more frequently than
annually thereafter, petition for
termination of the order. The same
applies to an order under § 1091.201,
subject to the limitations in
§ 1091.201(c).
(b) A petition for termination
submitted pursuant to paragraph (a) of
this section shall set forth the reasons
supporting termination of the order,
including any actions taken by a
respondent since issuance of the order
to address the conduct that led to
issuance of the order, and may include
any supporting information or evidence
that the petitioner believes is relevant to
the Director’s determination of the
matter. A petition for termination must
be filed with the Director and served on
the initiating official and is subject to
the word limit in § 1091.403.
(c) The initiating official shall, within
30 days of receipt of a petition for
termination, file a recommendation with
the Director and serve it on the
respondent. The initiating official’s
recommendation shall state whether the
initiating official recommends that the
order be terminated, or modified, or that
the petition for termination be denied
and the basis for such recommendation.
The recommendation is subject to the
word limit in § 1091.403.
(d) Not later than 90 days after
submission of a petition under
paragraph (a) of this section, the
Director shall issue a written decision
either terminating or modifying the
order, or denying the petition. If the
Director modifies the order or denies the
petition, the Director shall explain the
basis for his or her decision with respect
to the petition. At any time before
issuing a decision, the Director may, on
the Director’s own motion, request that
the respondent and initiating official
provide any supplemental briefing that
Director considers appropriate.
(e) The decision of the Director made
pursuant to paragraph (d) of this section
shall constitute final agency action
under 5 U.S.C. 704.
Subpart D—Miscellaneous Provisions
§ 1091.401 Methods of filing and serving
documents.
(a) By the respondent. The respondent
files documents with the Director, and
serves documents on the initiating
official, in accordance with the
instructions in the Notice.
(b) By the initiating official. The
initiating official serves documents on
the respondent at the email address
specified in the Response (except for
service of the Notice, which is governed
by § 1091.202(d)). The initiating official
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files documents with the Director by
any appropriate method.
(c) By the Director. The Director
serves documents on the respondent at
the email address specified in the
Response. The Director serves
documents on the initiating official by
any appropriate method.
(d) Changes. Changes to the methods
of filing and serving documents are
addressed in § 1091.404.
§ 1091.402
Time limits.
In computing any period of time
prescribed by this part, or by order of
the Director, the date of the act or event
that commences the designated period
of time is not included. The last day so
computed is included unless it is a
Saturday, Sunday, or Federal holiday as
set forth in 5 U.S.C. 6103(a). When the
last day is a Saturday, Sunday, or
Federal holiday, the period runs until
the end of the next day that is not a
Saturday, Sunday, or Federal holiday.
Intermediate Saturdays, Sundays, and
Federal holidays are included in the
computation of time, except when the
time period within which an act is to be
performed is ten days or less. Changes
to time limits are addressed in
§ 1091.404.
§ 1091.403
Word limits.
ddrumheller on DSK120RN23PROD with RULES1
(a) Calculation of word limits. A
Notice, response, reply, petition for
termination, or recommendation on a
petition for termination must contains
no more than 13,000 words. This word
limit does not apply to any cover page,
table of contents, table of citations,
signature block, or appendices. Changes
to word limits are addressed in
§ 1091.404.
(b) Certification of word count. A
document referenced in paragraph (a) of
this section must be accompanied by an
appendix stating the number of words
in the document, not including any
cover page, table of contents, table of
citations, signature block, or
appendices. It must be signed by
counsel for the party filing the
document, or by another representative
if that party does not have counsel.
(c) Change upon written request to
Director. The initiating official or the
respondent may file a written request to
the Director for a change, for good cause
shown. The mere filing of a written
request for a change does not alleviate
the obligation to meet an applicable
requirement, absent written
confirmation that the request has been
granted.
(c) Change upon Director’s own
motion. The Director may make a
change on the Director’s own motion.
(e) No conferral of rights. Deadlines
for action by the Bureau established in
this part do not confer any rights on
respondents.
§ 1091.405
Confidentiality of proceedings.
(a) General rule. In connection with a
proceeding under this part, including a
petition for termination under
§ 1091.301, all documents, records or
other items submitted by a respondent
to the Bureau, all documents prepared
by, or on behalf of, or for the use of the
Bureau, and any communications
between the Bureau and a person, shall
be deemed confidential supervisory
information under 12 CFR 1070.2(i)(1).
However, this paragraph does not apply
to the version of a document that is
released on the Bureau’s website under
paragraph (b) of this section.
(b) Publication of final decisions and
orders by the Director. The Director will
make a determination regarding whether
a decision or order under
§ 1091.206(a)(1) or § 1091.301(d) will be
publicly released on the Bureau’s
website, in whole or in part. The
respondent may file a submission
regarding that issue, within ten days
after service of the decision or order.
The Director will not release
information in a decision or order to the
extent it would be exempt from
disclosure under 5 U.S.C. 552(b)(4) or
(b)(6) or the Director determines there is
other good cause. The Director may also
decide that any determination regarding
public release will itself be released on
the website, in whole or in part. Section
1091.206(d) is not applicable to
determinations under this paragraph.
§ 1091.404 Changes to methods of filing
and service, time limits, and word limits.
§ 1091.406
(a) Generally. This section governs a
change to a method of filing or service,
to a time limit, or to a word limit,
whether prescribed by this part or by
the Director. Changes to time limits or
word limits are disfavored.
(b) Change upon consent. The
initiating official and respondent may
agree in writing to a change, unless the
Director specifies otherwise. The
initiating official shall file notice of the
change with the Director.
(a) Notice issued to multiple
respondents. The initiating official may
issue and serve a Notice with respect to
multiple respondents. The respondents
may elect to make either joint or
separate responses to such a Notice
under § 1091.203 and be jointly or
separately represented at a
supplemental oral response under
§ 1091.205.
(b) Supplemental Notice to add
respondents. The initiating official may
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16:26 Apr 22, 2024
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PO 00000
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Multiple respondents.
Fmt 4700
Sfmt 4700
30267
issue a supplemental Notice in a
pending proceeding to add one or more
respondents. The Director will adopt
such procedural steps as may be
appropriate to ensure that the added
respondents have a reasonable
opportunity to respond to the
supplemental Notice.
§ 1091.407 Adjudication proceedings
otherwise brought by the Bureau.
(a) The Bureau may, in its discretion,
provide the notice and opportunity to
respond required by 12 U.S.C.
5514(a)(1)(C) in a notice of charges
otherwise brought by the Bureau
pursuant to 12 CFR 1081.200 and the
adjudication proceedings pursuant to
part 1081. Also, a person may agree to
submit to the Bureau’s supervisory
authority under 12 U.S.C. 5514(a)(1)(C)
as part of a consent order entered into
in connection with an adjudication
proceeding or civil action.
(b) If the Bureau chooses to proceed
in the manner described in paragraph
(a) of this section, it shall so indicate in
the notice of charges, and any order of
the Director resulting from the notice of
charges shall constitute the order
referred to in 12 U.S.C. 5514(a)(1)(C).
(c) If the Bureau proceeds pursuant to
paragraph (a) of this section, the
provisions of §§ 1091.201 to 1091.206
and 1091.401 to 1091.406 will be
inapplicable to such proceeding.
§ 1091.408
Issue exhaustion.
(a) Scope. This section applies to any
argument to support a respondent’s
position, including any argument that
could be a basis for setting aside Bureau
action under 5 U.S.C. 706 or any other
source of law.
(b) Duties to raise arguments. A
respondent must raise an argument in
its written response, or else it is not
preserved for judicial review of a
proceeding under subpart B. A
respondent must raise an argument in
its petition for termination, or else it is
not preserved for judicial review of a
proceeding under subpart C. If the
Director requests supplemental briefing,
and if a given argument is within the
scope of the supplemental briefing
requested, the respondent must raise the
argument in the supplemental briefing
or else it is not preserved for judicial
review of a proceeding under subpart B
or subpart C, as applicable.
(c) Manner of raising arguments. An
argument must be raised in a manner
that complies with this part and that
provides a fair opportunity to consider
the argument.
(d) Discretion to consider unpreserved
arguments. The Director has discretion
to consider an unpreserved argument,
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including by considering it in the
alternative. If the Director considers an
unpreserved argument in the
alternative, the argument remains
unpreserved.
§ 1091.409 No limitation on relief sought in
civil action or administrative adjudication.
Nothing in this part shall be
construed to limit the relief the Bureau
may seek in any civil action or
administrative adjudication, including
but not limited to, seeking an order to
have a person deemed subject to the
Bureau’s supervisory authority under
12 U.S.C. 5514, including for the
reasons set forth in 12 U.S.C.
5514(a)(1)(C).
Rohit Chopra,
Director, Consumer Financial Protection
Bureau.
[FR Doc. 2024–08430 Filed 4–22–24; 8:45 am]
BILLING CODE 4810–AM–P
DEPARTMENT OF STATE
22 CFR Part 62
[Public Notice: 12342]
RIN 1400–AC36
Exchange Visitor Program—General
Provisions
U.S. Department of State.
Final rule.
AGENCY:
ACTION:
On March 28, 2023, the U.S.
Department of State (Department of
State) published in the Federal Register
an interim final rule with request for
comment (2023 Interim Final Rule) for
the Exchange Visitor Program
regulations that apply to sponsors the
Department of State designates to
conduct international educational and
cultural exchange programs. In this final
rule, the Department of State responds
to public comments submitted in
response to the 2023 Interim Final Rule
and makes minor revisions to the
regulations.
SUMMARY:
DATES:
This rule is effective on May 23,
2024.
ddrumheller on DSK120RN23PROD with RULES1
FOR FURTHER INFORMATION CONTACT:
Rebecca Pasini, Deputy Assistant
Secretary of the Office of Private Sector
Exchange at SA–5, 2200 C Street NW,
Washington, DC 20522 or via email at
JExchanges@state.gov or phone at (202)
632–9327.
SUPPLEMENTARY INFORMATION: The 2023
Interim Final Rule, effective April 27,
2023 (88 FR 18249), allows sponsors to
sign Forms DS–2019 using digital
signatures and to transmit Forms DS–
2019 electronically to a specified list of
VerDate Sep<11>2014
23:52 Apr 22, 2024
Jkt 262001
recipients. In this final rule, the
Department of State addresses the
comments that parties submitted in
response to the 2023 Interim Final Rule
and makes minor revisions to the
regulatory language. Most of the 64
commenting parties addressed two
topics: sponsor preference for electronic
signatures rather than digital signatures,
and the need for sponsors to
electronically transmit Forms DS–2019
directly to third parties acting on their
behalf. After consideration, the
Department of State has retained the
requirement for digital signatures for
signing Forms DS–2019, and it makes
no changes to the list of entities to
which sponsors may transmit Forms
DS–2019 electronically. However, this
rule will modify the regulations at
22 CFR 62.12(c)(3) to allow third parties
to retrieve Forms DS–2019 directly from
sponsors’ password-protected computer
network systems and/or databases. This
modification allows third parties to
retrieve copies of digital Forms DS–2019
directly from sponsors that wish to give
them such access.
The Department of State also
continues to permit sponsors to wet sign
and physically mail Forms DS–2019 to
exchange visitors and/or third parties.
Sponsors that find the functionality of
digital signatures too burdensome or
costly or wish to continue to send
Forms DS–2019 in bulk to third parties
are not required to adopt the new
procedures.
In addition to commenting on the
proposed regulations, many parties
submitted questions and/or requests for
clarification. To the extent such
inquiries relate to this rulemaking, the
Department of State will address them
herein. Otherwise, the Department of
State recommends that interested
parties refer to J1visa.state.gov for more
detailed guidance and/or direct specific
queries to the jexchanges@state.gov or
to one of the category-specific email
accounts.
Digital Versus Electronic Signatures
22 CFR 62.12(b)(2)(iii)
Seventeen of the parties submitting
comments on the 2023 Interim Final
Rule addressed the Department of
State’s decision to allow Responsible
Officers and Alternate Responsible
Officers (collectively, Officers) to sign
Forms DS–2019 with ‘‘digital’’ signature
software as opposed to the broader
category of ‘‘electronic’’ signature
software, of which digital is a subset.
These parties offered the following
reasons in support of their requests that
the Department of State allow electronic
signatures: (1) the definition of ‘‘digital
PO 00000
Frm 00010
Fmt 4700
Sfmt 4700
software’’ in the 2023 Interim Final Rule
is too vague for sponsors to know
whether their software selections meet
regulatory requirements; (2) the
cryptographical requirements of digital
software increase costs and burdens;
(3) the vetting of Officers and their
limited access to the Student and
Exchange Visitor Information System
(SEVIS) already provide a high level of
security; (4) wet-signed, printed,
scanned, and converted-to-portable
document format (pdf) Forms DS–2019
are no more or less secure than those
signed with electronic signature
software and electronically transmitted;
(5) it is cumbersome and costly for
sponsors with J and F programs to have
two operating procedures; (6) the
Department of State already accepts
electronic signatures on the U.S.
Department of Homeland Security’s
(DHS’s) Forms I–20 (Certificate of
Eligibility for Nonimmigrant Student
Status); and (7) the variety of printed
Forms DS–2019 (given different
signature, printing, and paper options)
may confuse U.S. Government
authorities who grant J visas, determine
admissibility and entry into the United
States, or otherwise review Forms DS–
2019. The Department of State
considered many of these factors when
it originally decided to require the
higher level of security that digital
signatures offer, and it continues to
believe that the benefits of such security
overcome the concerns of commenting
parties. It addresses each issue
individually as follows:
Definition of digital signature. Seven
commenting parties expressed
confusion over the Department of State’s
definition of ‘‘digital signature.’’
Sponsors can utilize any digital
signature software that is an application
of technology for cryptographically
derived signatures that is supported by
a process such as a public key
infrastructure and that ensures
meaningful authentication of the
identity of the signer and integrity of the
document. Two examples are
DocuSign® and Adobe Acrobat® Sign,
and there are numerous other examples
of digital signature technologies with
which the public may be familiar. In
response to questions from commenting
parties, the Department of State
identifies some examples of signatures
that are not considered digital for
purposes of regulatory compliance:
copied and pasted signatures, signatures
drawn via computer mouse, and typed
signatures. The Department of State
continues to believe that sponsors may
consult either internal or external
information technology experts who can
E:\FR\FM\23APR1.SGM
23APR1
]]>Agencies
- CONSUMER FINANCIAL PROTECTION BUREAU
[Federal Register Volume 89, Number 79 (Tuesday, April 23, 2024)]
[Rules and Regulations]
[Pages 30259-30268]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-08430]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
========================================================================
Federal Register / Vol. 89, No. 79 / Tuesday, April 23, 2024 / Rules
and Regulations
[[Page 30259]]
CONSUMER FINANCIAL PROTECTION BUREAU
12 CFR Part 1091
[Docket No. CFPB-2024-0006]
Procedures for Supervisory Designation Proceedings
AGENCY: Consumer Financial Protection Bureau.
ACTION: Final rule; request for public comment.
-----------------------------------------------------------------------
SUMMARY: The Consumer Financial Protection Bureau (CFPB or Bureau) is
updating the CFPB's procedures for designating nonbank covered persons
for supervision, to conform to a recent organizational change and to
further ensure that proceedings are fair, effective, and efficient for
all parties.
DATES: This rule is effective on April 23, 2024. Comments must be
received on or before May 23, 2024.
ADDRESSES: You may submit comments, identified by Docket No. CFPB-2024-
0006, by any of the following methods:
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments. A brief summary of
this document will be available at https://www.regulations.gov/docket/CFPB-2024-0006.
Email: [email protected].
Include Docket No. CFPB-2024-0006 in the subject line of the message.
Mail/Hand Delivery/Courier: Comment Intake--Procedures for
Supervisory Designation Proceedings, c/o Legal Division Docket Manager,
Consumer Financial Protection Bureau, 1700 G Street NW, Washington, DC
20552.
Instructions: The CFPB encourages the early submission of comments.
All submissions should include the agency name and docket number for
this rule. Commenters are encouraged to submit comments electronically.
In general, all comments received will be posted without change to
https://www.regulations.gov.
All submissions, including attachments and other supporting
materials, will become part of the public record and 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. Submissions will not be edited to
remove any identifying or contact information.
FOR FURTHER INFORMATION CONTACT: George Karithanom, Regulatory
Implementation & Guidance Program Analyst, Office of Regulations, at
202-435-7700 or https://reginquiries.consumerfinance.gov/. If you
require this document in an alternative electronic format, please
contact [email protected].
SUPPLEMENTARY INFORMATION:
Background
The Consumer Financial Protection Act of 2010 (CFPA) establishes
the CFPB as an independent bureau in the Federal Reserve System and
assigns the CFPB a range of rulemaking, enforcement, supervision, and
other authorities.\1\
---------------------------------------------------------------------------
\1\ Public Law 111-203, title X, 124 Stat. 1376, 1955-2113
(2010).
---------------------------------------------------------------------------
One of the supervisory authorities under the CFPA is section
1024(a)(1)(C). It authorizes the CFPB to supervise a nonbank covered
person that the CFPB ``has reasonable cause to determine, by order,
after notice to the covered person and a reasonable opportunity for
such covered person to respond . . . 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.'' \2\ In 2013,
the CFPB issued procedures to govern these supervisory designation
proceedings (2013 rule).\3\ However, the authority was largely unused
for a number of years.\4\ In 2022, the CFPB announced that it would
begin to make active use of the supervisory designation authority, and
it made a limited amendment to the procedures to establish a specific
process for public release of final decisions and orders (2022
rule).\5\
---------------------------------------------------------------------------
\2\ 12 U.S.C. 5514(a)(1)(C). The Bureau must base such
reasonable-cause determinations on complaints collected by the
Bureau under 12 U.S.C. 5493(b)(3), or on information collected from
other sources. Id.
\3\ 78 FR 40352 (July 3, 2013); see also 85 FR 75194 (Nov. 24,
2020) (updating certain cross-references).
\4\ The CFPB did, from time to time, issue enforcement consent
orders that included the entity's consent to supervision.
\5\ 87 FR 70703 (Nov. 21, 2022); see also 87 FR 25397 (Apr. 29,
2022).
---------------------------------------------------------------------------
The CFPB has initiated a number of supervisory designation
proceedings since the 2022 rule. On February 23, 2024, the CFPB
publicly released the first decision and order in a contested
proceeding, which discusses the CFPB's view of the section
1024(a)(1)(C) authority.\6\ Other institutions have consented to CFPB
supervision, in some cases without a proceeding and in other cases
during a proceeding. The CFPB looks forward to a productive supervisory
relationship with all the institutions that are now within its
supervisory authority.
---------------------------------------------------------------------------
\6\ World Acceptance Corp., File No. 2023-CFPB-SUP-0001 (Nov.
30, 2023), available at https://www.consumerfinance.gov/compliance/supervision-examinations/institutions/.
---------------------------------------------------------------------------
In late February 2024, the CFPB began a transition to a new
organizational structure for its supervision and enforcement work. The
functions of the Associate Director of the Division of Supervision,
Enforcement, and Fair Lending are being transferred to the Supervision
Director as head of a Division of Supervision and the Enforcement
Director as head of a Division of Enforcement. This rule is in part
intended to implement that change in the context of supervisory
designation proceedings.
Legal Authority
Section 1024(b)(7) of the CFPA authorizes the CFPB to ``prescribe
rules to facilitate supervision'' of the nonbank covered persons
described in section 1024(a), as well as to facilitate ``assessment and
detection of risks to consumers.'' \7\ Additionally, section 1022(b)(1)
provides, in relevant part, that the CFPB Director ``may 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.'' \8\ The
CFPB issues this rule based on its authority under section 1024(b)(7)
and section 1022(b)(1).
---------------------------------------------------------------------------
\7\ 12 U.S.C. 5514(b)(7).
\8\ 12 U.S.C. 5512(b)(1).
---------------------------------------------------------------------------
[[Page 30260]]
Discussion
Subpart A--General
1091.101 Definitions.
The rule makes technical changes to definitions.
Subpart B--Determination and Voluntary Consent Procedures
1091.201 Voluntary consent to supervisory authority.\9\
---------------------------------------------------------------------------
\9\ Formerly Sec. Sec. 1091.103(b) and 1091.110.
---------------------------------------------------------------------------
The initiating official and respondents have resolved the large
majority of proceedings by consent. Under the 2013 rule, there were two
provisions that established separate procedural avenues for entering
into a consent agreements. One provision (former Sec. 1091.103(b))
required the initiating official to enclose a proposed consent
agreement with the Notice of Reasonable Cause (Notice), and the other
provision (former Sec. 1091.110) authorized consent agreements to be
agreed at any time. There were small differences between the two
provisions.
Under this rule, a proposed consent agreement will continue to be
enclosed with the Notice, and consent agreements can also be agreed at
any other time. However, the Bureau is combining the two previous
provisions into one provision (Sec. 1091.201) and harmonizing their
differences, in order to reduce complexity and risk of confusion. One
of the two previous provisions stated that the consent agreement does
not constitute an admission by the respondent, while the other did not
address that point expressly; new Sec. 1091.201 clarifies that a
consent agreement does not constitute an admission. One of the two
previous provisions contemplated a two-year period for supervision
while the other allowed duration to be addressed on a case-by-case
basis; new Sec. 1091.201 takes the latter course. All consent
agreements under both previous provisions were for two years, and the
CFPB anticipates that will continue to be the typical duration. But
addressing duration on a case-by-case basis rather than by rule will
provide flexibility if a longer or shorter period were hypothetically
warranted.
1091.202 Notice of Reasonable Cause.\10\
---------------------------------------------------------------------------
\10\ Formerly Sec. Sec. 1091.102 to 1091.104.
---------------------------------------------------------------------------
The Supervision Director as initiating official commences a
contested proceeding by serving the respondent with a Notice of
Reasonable Cause (Notice). The Notice is the ordinary means by which
the CFPB provides notice under section 1024(a)(1)(C) of the CFPA,
although there may sometimes be proceedings in which additional notice
is provided at later points in the proceeding, for example through
supplemental briefing.
Paragraph (c) simplifies certain general background information
about the section 1024(a)(1)(C) process that was included in the Notice
under the 2013 rule.
Paragraph (d) includes an update to the method for serving the
Notice. The 2013 rule included methods of service that were patterned
on how a notice of charges is served under the Rules of Practice for
Adjudication Proceedings.\11\ In order to provide an additional measure
of flexibility, this rule also permits other methods that are
``reasonably calculated to give notice.''
---------------------------------------------------------------------------
\11\ See 12 CFR 1081.113(d)(1).
---------------------------------------------------------------------------
Paragraph (e) codifies that the initiating official may withdraw a
Notice. The 2013 rule did not expressly address this subject.
1091.203 Response.\12\
---------------------------------------------------------------------------
\12\ Formerly Sec. 1091.105.
---------------------------------------------------------------------------
This provision governs the response, which is the respondent's
opportunity to respond to the Notice. The rule makes minor technical
changes to the provision.
1091.204 Reply by initiating official.
This new provision provides the initiating official with the option
of filing a written reply to the response. Under the 2013 rule, there
was no such reply. Because of the initiating official's role in
formulating the Notice, the initiating official will likely have
observations that are useful to the Director in considering the
response.
1091.205 Supplemental oral response.\13\
---------------------------------------------------------------------------
\13\ Formerly Sec. 1091.106.
---------------------------------------------------------------------------
This provision governs a supplemental oral response before the
Director, which a respondent can request in its response under Sec.
1091.203. Under the 2013 rule, a respondent presented the supplemental
oral response to the Associate Director for Supervision, Enforcement,
and Fair Lending. However, as discussed in connection with Sec.
1091.206 below, in light of the elimination of the Associate Director
position, the rule merges the Associate Director's and Director's
adjudicative roles.\14\ The rule also gives the Director more
flexibility regarding whether a supplemental oral response is in person
at the Bureau's headquarters, by telephone, or by video conference,
consistent with ongoing changes to working practices and possible
future public health needs.\15\
---------------------------------------------------------------------------
\14\ Because the existing definition of the term Director under
Sec. 1091.101 includes a designee of the Director, there might be
circumstances where the Director delegates the responsibility for
being present at a supplemental oral response to a designee.
\15\ See also Sec. 1091.203(b)(3).
---------------------------------------------------------------------------
1091.206 Determination by the Director.\16\
---------------------------------------------------------------------------
\16\ Formerly Sec. 1091.109.
---------------------------------------------------------------------------
After the Notice, response, reply (if any), and supplemental oral
response (if any), the rule provides for the Director to make a final
determination in a proceeding.
Under the 2013 rule, the Associate Director of the Division of
Supervision, Enforcement, and Fair Lending submitted a recommended
determination to the Director, and then the Director issued a final
determination. But as noted above, the role of Associate Director will
no longer exist under the new organizational structure. The Associate
Director's supervision-related functions are being transferred to the
Supervision Director, who serves as initiating official in the context
of supervisory designation proceedings. Accordingly, this rule merges
the adjudicative roles of the Associate Director and Director in these
proceedings. This change, in addition to aligning with the new
organizational structure, will make proceedings more efficient. The
former two-stage process resulted in a more complex and resource-
intensive process and a longer timeline for resolving proceedings.
Merging the adjudicative roles of Associate Director and Director does
not diminish any of the respondent's opportunities to express its views
to the Bureau, but merely streamlines the Bureau's internal decision-
making process after those views are expressed.
Paragraph (b) codifies the fact that the Director may sometimes
request supplemental briefing before making a final determination,
which is consistent with the 2013 rule but was not expressly discussed
in the 2013 rule.
Paragraph (d) requires a separation of functions between Bureau
employees who advise the Director in the Director's adjudicative role
on the one hand and Bureau employees who advise the initiating official
on the other. This separation is not required by the Administrative
Procedure Act, but the Bureau maintains it as a matter of policy. The
2013 rule included a similar separation of functions at the Director
level, although at the Associate Director level it did not mandate a
separation between the Associate Director's advisers and initiating
official's advisers.
[[Page 30261]]
Subpart C--Post-Determination Procedures
1091.301 Petition for termination of order.\17\
---------------------------------------------------------------------------
\17\ Formerly Sec. 1091.113.
---------------------------------------------------------------------------
This provision governs petitions by respondents to terminate an
existing order. The rule makes technical changes to conform to changes
elsewhere in the procedures. It also codifies the fact that the
Director might sometimes request supplemental briefing, similar to
Sec. 1091.206(b).
Subpart D--Miscellaneous Provisions
1091.401 Methods of filing and serving documents.\18\
---------------------------------------------------------------------------
\18\ Formerly Sec. 1091.107.
---------------------------------------------------------------------------
The rule clarifies the method of filing and serving documents,
which will generally be by email. The service of the Notice at the
start of a proceeding, when a respondent's email address may not be
known, is governed by a specific rule under Sec. 1091.202(d).
1091.402 Time limits.\19\
---------------------------------------------------------------------------
\19\ Formerly Sec. 1091.114.
---------------------------------------------------------------------------
The rule simplifies the former method for calculating time limits
under the 2013 rule, which varied by delivery channel to allow
additional time for mail or delivery services to arrive. This
complexity has generated confusion for some respondents and is no
longer warranted because email is generally instantaneous.
1091.403 Word limits.
The rule introduces a word limit for the Notice, response, and
certain other key filings, based on Federal Rules of Appellate
Procedure 32(a)(7)(B) and 32(f). Relatedly, it introduces a
certification of word count based on Federal Rule of Appellate
Procedure 32(g). In past proceedings, some parties' outside counsel
submitted very lengthy filings in the absence of any page or word
limit. Like any word limit, the CFPB intends the new limit to help
focus arguments and mitigate expense for all participants.
1091.404 Changes to methods of filing and service, time limits, and
word limits.\20\
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\20\ Formerly Sec. 1091.115(a) and (b).
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This provision governs changes to the methods set out in Sec. Sec.
1091.401 to 1091.403. In the case of changes to time limits or word
limits, the provision notes that they are disfavored. Under the
provision, a change can be approved in one of three ways: by consent of
the initiating official and the respondent, with notice to the
Director; by written request to the Director; or upon the Director's
own motion. The possibility of changes by consent is intended to avoid
the need for the Director to become involved in minor issues that are
not controversial between the initiating official and the respondent.
However, the provision states that the Director can direct otherwise.
There may also be circumstances where the initiating official believes
that a potential change warrants a decision by the Director through a
written request and so withholds consent, even if the initiating
official does not oppose the change.
1091.405 Confidentiality of proceedings.\21\
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\21\ Formerly Sec. 1091.115(c).
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The 2022 rule created a process for the CFPB to publicly release
final decisions and orders. This rule maintains the 2022 rule's
approach, although it clarifies that consent agreements entered into by
the initiating official and respondent under Sec. 1091.201 are not
subject to the public release process. These agreements are generally
short formal documents without reasoning that is significant or could
form the basis for precedent. Relatedly, the CFPB notes that an order
entered as provided in Sec. 1091.206(a)(1), because a respondent has
failed to file a response and so has defaulted under Sec. 1091.203(c),
would typically not have content that warrants public release. However,
such orders are subject to the process under Sec. 1091.405 for
considering public release, because of the possibility that some may
include reasoning that warrants public release.
1091.406 Multiple respondents.
The rule clarifies that multiple respondents might be named in a
Notice, as well as clarifying the process for adding an additional
respondent or respondents to a pending proceeding. Including multiple
respondents in one proceeding--for example, business partners--may, in
appropriate cases, avoid the delay and inefficiency of serial
proceedings and also would allow the Bureau to consider related issues
at once.\22\
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\22\ Because additional respondents might be added to a
proceeding at any stage, the provision gives the Director
flexibility to decide what process is appropriate in order to
provide the additional respondents a reasonable opportunity to
respond to the supplemental Notice.
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1091.408 Issue exhaustion.\23\
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\23\ Formerly Sec. 1091.105(d).
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The Supreme Court has explained that: ``Administrative review
schemes commonly require parties to give the agency an opportunity to
address an issue before seeking judicial review of that question.''
\24\ New Sec. 1091.408 is an express issue exhaustion provision that
parallels Sec. 1081.408 of the Rules of Practice for Adjudication
Proceedings. The CFPB is adopting it for the same reasons that the CFPB
explained in the context of the Rules of Practice.\25\ The new issue
exhaustion provision is generally similar to former Sec. 1091.105(d),
which was titled ``Waiver,'' together with principles of administrative
law that would apply in the absence of an express issue exhaustion
provision.
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\24\ Carr v. Saul, 141 S. Ct. 1352, 1358 (2021).
\25\ See 88 FR 18382, 18387-88 (Mar. 29, 2023) (discussing 12
CFR 1081.408).
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Effective Date and Transitional Arrangements
This rule is effective upon Federal Register publication. It
applies to proceedings initiated on or after the effective date. It
also applies to proceedings that are pending on the effective date,
except to the extent the Director determines that is not just or
practicable.\26\
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\26\ The CFPB notes the Supreme Court commonly applies rule
changes, ``insofar as just and practicable,'' to pending proceedings
in Federal courts. E.g., 344 FRD. 850, 851 (U.S. 2023); 340 FRD.
810, 811 (U.S. 2022); 337 FRD. 813, 814 (U.S. 2021). The CFPB also
notes that the above transitional arrangements, although not
codified, form an operative part of the rule.
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Section 1022(b)(2) Analysis
In developing this rule, the Bureau has considered its benefits,
costs, and impacts in a manner consistent with section 1022(b)(2)(A) of
the CFPA.\27\ In addition, the Bureau has consulted with the prudential
regulators and the Federal Trade Commission, including regarding
consistency of the rule with any prudential, market, or systemic
objectives administered by those agencies, in a manner consistent with
section 1022(b)(2)(B) of the CFPA.\28\
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\27\ 12 U.S.C. 5512(b)(2)(A).
\28\ 12 U.S.C. 5512(b)(2)(B). Whether section 1022(b)(2)(A) and
section 1022(b)(2)(B) are applicable to this rule is unclear, but in
order to inform the rulemaking more fully the Bureau performed the
described analysis and consultations.
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Among other sources of supervisory authority, the Bureau can
supervise a nonbank covered person that the Bureau ``has a reasonable
cause to determine, by order, after notice to the covered person and a
reasonable opportunity for such covered person to respond . . . 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.'' \29\ The Bureau established a rule to implement a procedure
to fulfil this statutory authority in 2013 (2013 rule) and amended this
rule in 2022 (2022 rule). The Bureau is issuing this
[[Page 30262]]
final rule to amend the procedures governing the CFPB's supervisory
designation proceedings.
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\29\ 12 U.S.C. 5514(a)(1)(C). The Bureau must base such
reasonable-cause determinations on complaints collected by the
Bureau under 12 U.S.C. 5493(b)(3), or on information collected from
other sources. Id.
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A. Data Limitations and Quantification of Benefits, Costs, and Impacts
The data are generally limited with which to quantify potential
costs, benefits, and impacts of the rule's provisions. The CFPB has
conducted a limited number of supervisory designation proceedings under
the prior 2013 and 2022 rules, but the CFPB does not have quantitative
data regarding the costs to respondents or other impacts of those
proceedings. The CFPB also does not have quantitative data to predict
the impacts of the changes made by this rule relative to the prior
legal and procedural framework, which is the comparison that is
relevant for this analysis.
In light of these data limitations, the analysis below generally
provides a qualitative discussion of the benefits, costs and impacts of
the rule. 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.
B. Baseline for Analysis
In evaluating the rule's benefits, costs, and impacts of the rule,
the CFPB considers the impacts against a baseline that includes the
legal and procedural framework regarding supervisory designation
proceedings for nonbank covered persons that existed before the
issuance of the rule. Therefore, the baseline for the analysis of the
rule includes separate adjudicative roles for the Director and the
Associate Director for Supervision, Enforcement, and Fair Lending--that
is, the statutory baseline implemented by the 2013 rule as amended by
the 2022 rule.
C. Potential Benefits and Costs to Consumers and Covered Persons
The rule would apply to covered persons as defined in the CFPA,
which are generally persons that engage in offering or providing a
consumer financial product or service.\30\ Relative to the statutory
baseline, this rule implements several changes that the Bureau believes
streamlines and improves transparency in the decision-making process,
and clarifies the rights of nonbank covered entities subject to this
rule. Notably, this rule eliminates the role of the Associate Director
in filing a recommendation prior to the Director's final determination
and instead assigns the Director to receive responses, including
optional supplementary oral responses, in order to make a final
determination. Furthermore, it clarifies the process by which persons
may enter consent agreements with the Bureau, among other procedural
changes. Overall, the Bureau believes these changes will not diminish
the rights of respondents to reply to a Notice of Reasonable Cause, do
not impose significant costs relative to the statutory baseline,
increase transparency in the decision-making process, and clarify the
processes by which covered persons may either respond or enter into a
consent agreement with the Bureau.
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\30\ For the full scope of the term ``covered person,'' see 12
U.S.C. 5481(6).
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The rule eliminates the role of the Associate Director in making a
recommendation to the Director. This reflects a broader organizational
structural change at the CFPB that eliminates the position of Associate
Director of Supervision, Enforcement, and Fair Lending. Relative to the
baseline, the rule makes no changes to the rights to respond by nonbank
covered entities, maintains separation of roles between the initiating
official and decisional employees in the determination process,
maintains the requirement that the Director include the basis for their
decision in their final determination, and should reduce the amount of
time on net between service of the Notice and the final
determination.\31\ The rule also codifies the ability for the Director
to request additional briefing from the respondent, the initiating
official, or both. Because there is no reduction in the ability of
nonbank covered entities to respond to the Notice and access
information constituting the basis for the Director's determination,
there are no additional costs imposed on nonbank covered entities.
Furthermore, the Bureau believes the reduction in time and general
streamlining of the decisional process will benefit nonbank covered
entities by improving the efficiency of this rule's application.
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\31\ The length of time that the Director has to make a final
determination is increased relative to baseline; however, the
elimination of the role of the Associate Director and streamlining
of the decisional process reduces the total amount of time between
Notice and determination.
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The rule allows for the initiating official to reply to the
respondent's response to the Notice. The Bureau believes this may
benefit respondents by allowing for more transparency in the
determination process. The 2013 rule did not allow for the initiating
official to respond to the written reply but did allow for the
initiating official to participate in the optional supplementary oral
response. Moreover, the 2013 rule did not preclude the initiating
official from advising the Associate Director in drafting their
recommendation. By allowing for a reply by the initiating official to
the respondent's written response, the Bureau believes respondents
could gain more insight into the decisional process which could then be
incorporated into an optional supplementary oral response.
The rule also sets out changes in the process by which a person may
voluntarily consent to the Bureau's supervisory authority.
Specifically, the rule consolidates two previous provisions regarding
consent agreements. Under one provision of the 2013 rule, a respondent
could respond to a Notice by signing an enclosed consent agreement that
led to the respondent being supervised for two years. Under a separate
provision, the respondent and the Bureau could enter into a consent
agreement at any time, with a duration to be determined by case-by-case
negotiation. Under the new rule, a proposed consent agreement will
continue to be enclosed with the Notice and an agreement can also be
reached at any other time, but the rule will no longer mandate a two-
year period in the former case.
Relative to the baseline, the removal of the default option of a
two-year consent agreement, to be replaced with the option for a
consent agreement with a negotiated length of time, may impose
additional costs on covered entities subject to this rule. However, the
Bureau believes several factors limit the expected realized costs of
this change. First, as mentioned above, the Bureau has conducted a
limited number of supervisory designation proceedings under this
authority. The Bureau anticipates it will continue to conduct a limited
number of proceedings relative to the size of the market of covered
entities subject to this rule. Second, based on prior experience and
expertise, the Bureau anticipates that the majority of consent
agreements will continue to last for a period of two years. Third, in a
case where the complexity or severity of potential consumer risks
merits a supervisory relationship longer than two years in the
initiating official's assessment, there are other features of the rule
that limit any additional realized costs relative to baseline on the
covered entity, notably the option to contest the Notice and the
ability for the Bureau to issue a new Notice at the end
[[Page 30263]]
of the initial two-year order under the baseline.\32\
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\32\ As noted elsewhere in this analysis, the substantive costs
associated with contested proceedings have not changed appreciably
between the statutory baseline and the proposed rule. Hence, a
covered entity issued Notice has the option to accept a negotiated
consent agreement with potentially different costs relative to
baseline or undergo contested proceedings with similar costs
relative to baseline.
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There is a large population of firms potentially subject to this
rule.\33\ The Bureau does not currently have access to comprehensive
data on the number of nonbank covered persons subject to supervisory
authority. To establish an estimate of the population of nonbank
covered entities potentially subject to this rule, the Bureau uses the
latest Economic Census publicly available data and North American
Industry Classification System (NAICS) industry codes that align with
financial services.\34\ The Bureau estimates there are approximately
154,430 entities in these covered industries. It should also be noted
that this estimate does not include other nonbank covered entities not
categorized in one of the enumerated industries, e.g., if consumer
financial services are not their primary business activity. To date,
the Bureau has exercised its supervisory authority under the 2013 and
2022 rules on fewer than a dozen covered entities and in any given
year, and the Bureau anticipates exercising authority under this rule
on the same number of entities. Hence, the Bureau believes the impact
of this rule will be relatively limited, mitigating the realization of
any potential costs associated with changes relative to baseline.
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\33\ The procedures established in the 2013 rule and this rule
are only to assess whether a nonbank covered person will be made
subject to the Bureau's supervisory authority based on a reasonable-
cause determination. In general, there is no reason to make a
determination under the 2013 rule or this rule with respect to a
nonbank covered entity subject to the Bureau's supervisory authority
under some other provision of section 1024(a) of the CFPA, 12 U.S.C.
5514(a). However, as discussed in the 2013 rule this is possible.
Therefore, the Bureau does not exclude from coverage of the 2013
rule or this final rule nonbank covered entities that may be subject
to supervision under a separate provision of section 1024(a).
\34\ The relevant NAICS codes examined are 5222 (Nondepository
credit intermediation); 5223 (Activities related to credit
intermediation); 523920 (Portfolio management); 523930 (Investment
advice); 532112 (Passenger car leasing); 532120 (Truck, utility
trailer, and recreational vehicle rental and leasing); 5313
(Activities related to real estate); 561450 (Consumer reporting);
and 561440 (Debt collection).
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The majority of cases initiated under the 2013 rule have been
settled by consent agreement and all past consent agreements have been
for two years. The Bureau expects similar outcomes under this rule.
However, the initiating official may assess that a longer period of
time is necessary to maintain an effective supervisory relationship if
a particular case is complex or poses severe risks to consumers.\35\ In
this case, a covered entity undergoing a supervisory proceeding under
this rule may receive Notice with a proposed consent agreement lasting
longer than two years.\36\
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\35\ In principle, an initiating official may assess that a
shorter period of time is sufficient for a supervisory relationship.
While the Bureau anticipates that this would be a rare occurrence
given the Bureau's experience and expertise suggest that the minimum
period of time to allow for an examination and follow-up is
generally two years, this would likely lessen the costs associated
with application of this rule on a nonbank covered entity.
\36\ The respondent may otherwise understand that the Bureau and
initiating official propose a consent agreement lasting longer than
two years, e.g., via other communications with the Bureau and
initiating official.
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An order lasting longer than two years may pose additional costs
relative to the baseline for the covered entity via additional
supervisory activity. The Bureau has previously estimated the cost of
compliance with supervisory activity based on reported average exam
length and labor costs incurred by firms to participate in supervisory
exams.\37\ This calculation results in an estimate of approximately
$27,000 in labor costs to comply with a supervisory examination. The
Bureau recognizes that this estimate reflects national average labor
costs and are thus subject to variability with respect to specific
firms' realized costs. Furthermore, the Bureau recognizes that the
staffing estimates are assessments for an average firm's needs and may
also be subject to variability with respect to specific firms'
requirements. The Bureau is open to public comments that provide
additional data on estimates of staffing requirements and costs for
compliance with supervisory activities.\38\
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\37\ For an estimate of the length of examination, see Office of
the Inspector General of the Board of Governors of the Federal
Reserve System and the CFPB, ``The Bureau Can Improve Its Risk
Assessment Framework for Prioritizing and Scheduling Examination
Activities'' (Mar. 25, 2019) at 13, available at https://oig.federalreserve.gov/reports/bureau-risk-assessment-framework-mar2019.pdf.
\38\ The Bureau has previously estimated the cost of compliance
with supervisory activity based on reported average exam lengths,
which would average one supervisory examination per year and require
one-tenth of a full-time equivalent attorney and one full-time
compliance officer. Furthermore, the Bureau estimates that
supervisory examinations would last for 8 weeks on average, with an
additional two weeks of preparation (supra note 38). Using the
national average hourly labor cost of $84.84 for attorneys and
$38.55 for compliance officers, the Bureau estimates that the direct
labor costs for a supervisory examination would total approximately
$19,000 (See U.S. Bureau of Labor Statistics, National Occupational
Employment and Wage Estimates United States, May 2023, https://www.bls.gov/oes/current/oes-nat.htm). Assuming that wages represent
approximately 70.4% of the total labor costs using the estimate of
total compensation for private employees (See U.S. Bureau of Labor
Statistics, Employer Costs for Employee Compensation: Private
Industry Database, March 2024, https://www.bls.gov/web/ecec/ecec-private-dataset.xlsx), this results in an estimate of approximately
$27,000 in labor costs to comply with a supervisory examination.
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The Bureau anticipates that the majority of consent agreements
under this rule will continue to be for two years, posing no
significant additional costs on covered entities. The Bureau recognizes
that for some entities undergoing supervisory activity under this rule,
the complexity of the entity or the severity of consumer risk may
result in a consent agreement lasting longer than two years, with each
additional year imposing additional costs relative to baseline of
approximately $27,000. In principle, it is possible that entities
undergoing supervisory activity under this rule may enter into a
consent agreement longer than three years; however, the Bureau
anticipates this to be unlikely.
Finally, the Bureau notes that there are features of this rule and
the statutory baseline that further limit any expected realized costs
posed by the proposed rule. First, by their nature, consent agreements
necessitate both parties' agreement to the order. A respondent may
negotiate with the initiating official over the parameters of a consent
agreement or may enter contested proceedings.\39\ In general, entering
into contested proceedings represents a cost on the respondent;
however, insofar as there have been no substantive changes in the costs
associated with entering contested proceedings relative to the
baseline, the difference between these costs and the costs associated
with the 2013 rule's provision to accept a two-year consent agreement
represents an upper limit on the additional costs represented by this
final rule relative to baseline.\40\ Second, in cases where the
[[Page 30264]]
initiating official assesses that there is substantial complexity or
severe consumer risks that merit supervisory activity beyond two years,
under the statutory baseline a nonbank covered entity subject to
application of the rule could opt for a two-year consent agreement;
however, the Bureau could reissue a Notice at the end of this period,
leading to additional costs associated with receipt, consideration, and
reply to a fresh Notice. Under this final rule, the initiating official
could propose a longer consent agreement that, subject to negotiation
and acceptance of this consent agreement by the respondent, could avoid
the potential need for another designation after two years and costs
associated with receipt, consideration, and reply to a fresh Notice.
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\39\ Under the 2013 rule, there have been substantive
communications between respondents and the Bureau prior to entering
into any consent agreement, regardless under which provision of the
2013 rule the consent agreement was made. The Bureau anticipates
that substantive communications will continue under this final rule
and does not assess there to be significant changes in costs
associated with these communications relative to baseline.
\40\ A hypothetical firm that would contest the Notice under the
2013 rule would presumably continue to contest under this proposed
final rule and incur no additional costs relative to baseline. A
firm that would accept a two-year consent agreement under the 2013
rule but opt for contested proceedings under this rule would incur
additional costs relative to baseline equivalent to the difference
in costs between a contested proceeding and the two-year consent
agreement. Hence, their realized costs would be this difference.
Similarly, a firm that would accept a two-year consent agreement
under the 2013 rule and a possibly longer consent agreement under
this final rule would incur additional costs relative to baseline
equivalent to the difference between the costs associated with the
consent agreement under this rule and those associated with the
consent agreement under the 2013 rule. Moreover, the costs
associated with a possibly longer consent agreement would be
necessarily less than the costs of contested proceedings.
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In summary, while the elimination of the two-year default option
for consent agreement, to be replaced with the option for a consent
agreement with negotiated length of time, may impose additional costs
relative to baseline, the Bureau assesses these additional costs to be
negligible. First, that the Bureau would be authorized to undertake
supervisory activities with respect to a nonbank under this rule would
not necessarily mean that the Bureau would in fact undertake such
activities regarding that covered person in the near future. Rather,
the supervision of any particular covered person as a result of this
rule would be probabilistic in nature. Second, for a covered person
undergoing supervisory activity under this rule, the Bureau anticipates
the majority of cases will be settled by consent agreements lasting two
years, imposing no additional costs. Third, for those entities where
supervisory activity results in a proposed consent agreements lasting
longer than two years, these potential realized costs are further
mitigated by other features of the rule.\41\
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\41\ The Bureau acknowledges that there are limitations in the
estimates associated with relevant costs; however, with the
estimates presented here, the Bureau believes the additional costs
imposed on nonbank covered entities subject to this rule relative to
baseline would be negligible (based on the limited number of
supervisory activities the Bureau anticipates each year under this
rule, the probabilistic nature that any particular entity would
undergo supervisory activities under this rule, and the likelihood
any supervisory activities would result in a consent agreement
longer than two years).
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The rule also makes certain other procedural changes to the
processes for making and terminating designations, including: codifying
the Director's authority to request supplemental briefing; imposing a
word limit on key filings; clarifying procedures for filing and serving
documents, with documents being generally filed and served by email;
clarifying applicable procedures when there are multiple respondents;
and codifying an issue exhaustion requirement that is generally similar
to existing law. The rule further clarifies that the process for
publicly releasing decisions and orders does not apply to consent
agreements, because they lack sufficient content to serve as a
precedent for future proceedings. The Bureau does not believe these
changes impose significant additional costs onto nonbank covered
persons relative to the baseline.
The rule will not have an impact on insured depository institutions
or insured credit unions with $10 billion or less in assets as
described in section 1026(a) of the CFPA.\42\ Nor will the proposed
rule have a unique impact on rural consumers.
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\42\ 12 U.S.C. 5516(a).
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Regulatory Matters
As a rule of agency organization, procedure, or practice, this rule
is exempt from the notice-and-comment rulemaking requirements of the
Administrative Procedure Act.\43\ However, the Bureau is accepting
comments on the rule.
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\43\ 5 U.S.C. 553(b).
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Because no notice of proposed rulemaking is required, the
Regulatory Flexibility Act does not require an initial or final
regulatory flexibility analysis.\44\ Moreover, the Bureau's Director
certifies that this rule will not have a significant economic impact on
a substantial number of small entities. Therefore, an analysis is also
not required on that basis.\45\ This is for two independent reasons.
First, the costs associated with the changes made by this rule relative
to the baseline of the existing procedures are limited, as discussed
above. Second, the number of entities that will be subject to the
procedures is small, and within that group the number that would be
small entities is likely to be either none or in the single digits each
year, representing a very small fraction of small entities in the
relevant consumer finance markets.
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\44\ 5 U.S.C. 603, 604.
\45\ 5 U.S.C. 605(b).
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The Bureau has also determined that this rule does not impose any
new or revise any existing recordkeeping, reporting, or disclosure
requirements on covered entities or members of the public that would be
collections of information requiring approval by the Office of
Management and Budget under the Paperwork Reduction Act.\46\
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\46\ 44 U.S.C. 3501-3521.
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Severability
If any provision of part 1091, or any application of a provision,
is stayed or determined to be invalid, the remaining provisions or
applications are severable and shall continue in effect.
List of Subjects in 12 CFR Part 1091
Administrative practice and procedure, Consumer protection, Credit,
Trade practices.
Authority and Issuance
0
For the reasons set forth above, the Bureau revises 12 CFR part 1091 as
set forth below:
PART 1091--PROCEDURES FOR SUPERVISORY DESIGNATION PROCEEDINGS
Subpart A--General
Sec.
1091.100 Scope and purpose.
1091.101 Definitions.
Subpart B--Determination and Voluntary Consent Procedures
Sec.
1091.201 Voluntary consent to supervisory authority.
1091.202 Notice of Reasonable Cause.
1091.203 Response.
1091.204 Reply by initiating official.
1091.205 Supplemental oral response.
1091.206 Determination by the Director.
Subpart C--Post-Determination Procedures
Sec.
1091.301 Petition for termination of order.
Subpart D--Miscellaneous Provisions
Sec.
1091.401 Methods of filing and serving documents.
1091.402 Time limits.
1091.403 Word limits.
1091.404 Changes to methods of filing and service, time limits, and
word limits.
1091.405 Confidentiality of proceedings.
1091.406 Multiple respondents.
1091.407 Adjudication proceedings otherwise brought by the Bureau.
1091.408 Issue exhaustion.
1091.409 No limitation on relief sought in civil action or
administrative adjudication.
[[Page 30265]]
PART 1091--PROCEDURES FOR SUPERVISORY DESIGNATION PROCEEDINGS
Authority: 12 U.S.C. 5512(b)(1), 5514(a)(1)(C), 5514(b)(7).
Subpart A--General
Sec. 1091.100 Scope and purpose.
This part sets forth procedures to implement section 1024(a)(1)(C)
of the Consumer Financial Protection Act of 2010 (12 U.S.C.
5514(a)(1)(C)) and establishes rules to facilitate the Bureau's
supervisory authority over certain nonbank covered persons pursuant to
section 1024(b)(7) of the Act (12 U.S.C. 5514(b)(7)).
Sec. 1091.101 Definitions.
For the purposes of this part, the following definitions apply:
Bureau, consumer, consumer financial product or service, and
covered person have the definitions in 12 U.S.C. 5481.
Decisional employee means an employee of the Bureau who has not
engaged in assisting the initiating official in either determining
whether to issue a Notice of Reasonable Cause, or presenting the
initiating official's position in support of a Notice of Reasonable
Cause, either in writing or in a supplemental oral response, to the
Director.
Director means the Director of the Bureau or his or her designee.
If there is no Director, the term means a person authorized to perform
the functions of the Director under this part, or his or her designee.
For purposes of when the Director receives, files, or serves documents,
the Director includes an employee acting on behalf of the Director.
Initiating official means the Supervision Director or another
Bureau employee designated by the Director. For purposes of receiving,
filing, and serving documents or participating in a supplemental oral
response, the initiating official includes an employee acting on behalf
of the initiating official.
Nonbank covered person means a covered person, except for persons
described in 12 U.S.C. 5515(a) and 5516(a).
Notice of Reasonable Cause and Notice mean a Notice issued under
Sec. 1091.202.
Person has the definition in 12 U.S.C. 5481.
Respondent means a person who has been issued a Notice of
Reasonable Cause under Sec. 1091.202 or who has entered into a consent
agreement under Sec. 1091.201.
State has the definition in 12 U.S.C. 5481.
Subpart B--Determination and Voluntary Consent Procedures
Sec. 1091.201 Voluntary consent to supervisory authority.
(a) At any time, a person and the initiating official may enter
into a consent agreement by which the person voluntarily consents to
the Bureau's supervisory authority under 12 U.S.C. 5514. The consent
agreement shall constitute an order authorized by 12 U.S.C.
5514(a)(1)(C).
(b) A consent agreement under this section does not constitute an
admission that a person is a nonbank covered person that 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.
(c) A consent agreement may specify a period of time that the
person will be subject to the Bureau's authority under 12 U.S.C. 5514.
If the consent agreement specifies a period of time, it shall not be
eligible for a petition for termination pursuant to Sec. 1091.301. If
the consent agreement does not specify a period of time, the consent
agreement will continue until terminated pursuant to Sec. 1091.301.
(d) A consent agreement under this section shall state that the
person waives any right to judicial review of the consent agreement.
(e) The initiating official encloses a proposed consent agreement
with the Notice of Reasonable Cause in accordance with Sec.
1091.202(c)(6).
Sec. 1091.202 Notice of Reasonable Cause.
(a) Generally. The initiating official is authorized to issue a
Notice of Reasonable Cause to a person stating that the Bureau may have
reasonable cause to determine that the respondent is a nonbank covered
person that 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.
(b) Basis of Notice. A Notice of Reasonable Cause shall be based
on:
(1) Complaints collected through the system under 12 U.S.C.
5493(b)(3); and/or
(2) Information from other sources.
(c) Contents of Notice. A Notice of Reasonable Cause is subject to
the word limit in Sec. 1091.403 and shall contain the following:
(1) A description of the basis for the assertion that the Bureau
may have reasonable cause to determine that a respondent is a nonbank
covered person that 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, including a summary of the documents,
records, or other items relied on by the initiating official to issue a
Notice. Such summary will be consistent with the protection of
sensitive information, including compliance with Federal privacy law
and whistleblower protections;
(2) A statement that this proceeding is governed by 12 U.S.C.
5514(a)(1)(C) and 12 CFR part 1091;
(3) A statement that failure to respond within 30 days, in the
manner specified by Sec. 1091.203, will constitute a waiver of the
right to respond and may result in a default determination by the
Director;
(4) Instructions for filing documents with the Director;
(5) Instructions for serving documents on the initiating official;
and
(6) In an appendix, a proposed consent agreement under Sec.
1091.201.
(d) Service of Notice. A Notice of Reasonable Cause shall be served
on a respondent by any means that are reasonably calculated to give
notice. This includes, but is not limited to, the methods available
under 12 CFR 1081.113(d)(1). The initiating official shall promptly
file a copy of the Notice and a record of service with the Director.
(e) Withdrawal of Notice. The initiating official may withdraw the
Notice at any time. Such a withdrawal shall not prevent the initiation
of another proceeding under this part.
Sec. 1091.203 Response.
(a) Timing and word limit. Within 30 days of service of a Notice, a
respondent shall file any response with the Director and serve it on
the initiating official, according to the instructions set forth in the
Notice. The response is subject to the word limit in Sec. 1091.403.
(b) Content of the response. (1) If the respondent disputes that it
is a nonbank covered person that 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, the response
shall set forth the basis for the respondent's position.
(2) The response shall be accompanied by appendices that include
(and are limited to) all documents, records, or other evidence a
respondent wishes to use to support the arguments or assertions set
forth in the response.
(3) If the respondent wishes to present a supplemental oral
response, the
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response must include that request. The respondent may also include,
for the Director's consideration, the respondent's preference for the
supplemental oral response to be by telephone, by video conference, or
in person at the Bureau's headquarters in Washington, DC. A
respondent's failure to request to present a supplemental oral response
shall constitute a waiver of the opportunity to present a supplemental
oral response.
(4) The response shall include an email address for serving
documents on the respondent, which may be its attorney's email address.
(5) The response shall be accompanied, as an appendix, by an
affidavit or declaration, made by the individual respondent if a
natural person, or, if a corporate or other entity that is not a
natural person, by an officer, managing or general member, or partner
authorized to represent the respondent, affirming that the response is
true and accurate and does not contain any omissions that would cause
the response to be materially misleading.
(c) Default. If a respondent does not file a response within the
time period set forth in paragraph (a) of this section, it shall
constitute a waiver of the respondent's right to respond. At the
initiating official's request, the Director may issue a decision and
order as provided in Sec. 1091.206(a)(1)).
(d) No Discovery. There shall be no discovery in connection with a
response.
Sec. 1091.204 Reply by initiating official.
If the respondent files and serves a response, within 21 days the
initiating official may file a reply with the Director and serve it on
the respondent. The reply is subject to the word limit in Sec.
1091.403.
Sec. 1091.205 Supplemental oral response.
(a) If the respondent makes a timely request in a response under
Sec. 1091.203 for the opportunity to present a supplemental oral
response, the Director shall issue an order setting forth the date,
time, and general information relating to the conduct of a supplemental
oral response.
(b) There shall be no discovery permitted or witnesses called in
connection with a supplemental oral response.
(c) If a respondent is a corporate or other entity, and not a
natural person, the respondent shall be represented in any supplemental
oral response by:
(1) An officer, managing or general member, or partner authorized
to represent the respondent; or
(2) An attorney in good standing of the bar of the highest court of
any State.
(d) If a respondent is a natural person, the respondent shall be
represented in any supplemental oral response by:
(1) The respondent personally; or
(2) An attorney in good standing of the bar of the highest court of
any State.
(e) The Director shall cause an audio recording of a supplemental
oral response to be made by a court reporter or other designated
person. A respondent may purchase a copy or transcript of the recording
at the respondent's own expense.
(f) The initiating official may participate in any supplemental
oral response conducted under this section.
(g) A respondent's failure to participate in a supplemental oral
response scheduled by the Director shall constitute the respondent's
waiver of the opportunity to present a supplemental oral response.
Sec. 1091.206 Determination by the Director.
(a) Within 60 days after the supplemental oral response, or, if
there is no supplemental oral response, the deadline for the reply, the
Director shall issue either:
(1) A decision and order subjecting the respondent to the Bureau's
supervisory authority pursuant to 12 U.S.C. 5514(a)(1)(C); or
(2) A notification that the Director is terminating the proceeding.
Such notification shall have no precedential effect and shall not
prevent the initiation of another proceeding under this part.
(b) The Director may, on the Director's own motion at any time
before making a determination under paragraph (a) of this section,
request that the respondent, initiating official, or both provide any
supplemental briefing that Director considers appropriate.
(c) Any decision and order issued by the Director pursuant to
paragraph (a)(1) of this section shall include the basis for the
decision and an effective date for the order.
(d) Only decisional employees may advise and assist the Director in
the consideration and disposition of a proceeding under this part.
(e) A decision and order issued pursuant to paragraph (a)(1) of
this section shall constitute final agency action under 5 U.S.C. 704.
Subpart C--Post-Determination Procedures
Sec. 1091.301 Petition for termination of order.
(a) Any person subject to an order under 1091.206(a)(1) may, no
sooner than two years after issuance of such an order and no more
frequently than annually thereafter, petition for termination of the
order. The same applies to an order under Sec. 1091.201, subject to
the limitations in Sec. 1091.201(c).
(b) A petition for termination submitted pursuant to paragraph (a)
of this section shall set forth the reasons supporting termination of
the order, including any actions taken by a respondent since issuance
of the order to address the conduct that led to issuance of the order,
and may include any supporting information or evidence that the
petitioner believes is relevant to the Director's determination of the
matter. A petition for termination must be filed with the Director and
served on the initiating official and is subject to the word limit in
Sec. 1091.403.
(c) The initiating official shall, within 30 days of receipt of a
petition for termination, file a recommendation with the Director and
serve it on the respondent. The initiating official's recommendation
shall state whether the initiating official recommends that the order
be terminated, or modified, or that the petition for termination be
denied and the basis for such recommendation. The recommendation is
subject to the word limit in Sec. 1091.403.
(d) Not later than 90 days after submission of a petition under
paragraph (a) of this section, the Director shall issue a written
decision either terminating or modifying the order, or denying the
petition. If the Director modifies the order or denies the petition,
the Director shall explain the basis for his or her decision with
respect to the petition. At any time before issuing a decision, the
Director may, on the Director's own motion, request that the respondent
and initiating official provide any supplemental briefing that Director
considers appropriate.
(e) The decision of the Director made pursuant to paragraph (d) of
this section shall constitute final agency action under 5 U.S.C. 704.
Subpart D--Miscellaneous Provisions
Sec. 1091.401 Methods of filing and serving documents.
(a) By the respondent. The respondent files documents with the
Director, and serves documents on the initiating official, in
accordance with the instructions in the Notice.
(b) By the initiating official. The initiating official serves
documents on the respondent at the email address specified in the
Response (except for service of the Notice, which is governed by Sec.
1091.202(d)). The initiating official
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files documents with the Director by any appropriate method.
(c) By the Director. The Director serves documents on the
respondent at the email address specified in the Response. The Director
serves documents on the initiating official by any appropriate method.
(d) Changes. Changes to the methods of filing and serving documents
are addressed in Sec. 1091.404.
Sec. 1091.402 Time limits.
In computing any period of time prescribed by this part, or by
order of the Director, the date of the act or event that commences the
designated period of time is not included. The last day so computed is
included unless it is a Saturday, Sunday, or Federal holiday as set
forth in 5 U.S.C. 6103(a). When the last day is a Saturday, Sunday, or
Federal holiday, the period runs until the end of the next day that is
not a Saturday, Sunday, or Federal holiday. Intermediate Saturdays,
Sundays, and Federal holidays are included in the computation of time,
except when the time period within which an act is to be performed is
ten days or less. Changes to time limits are addressed in Sec.
1091.404.
Sec. 1091.403 Word limits.
(a) Calculation of word limits. A Notice, response, reply, petition
for termination, or recommendation on a petition for termination must
contains no more than 13,000 words. This word limit does not apply to
any cover page, table of contents, table of citations, signature block,
or appendices. Changes to word limits are addressed in Sec. 1091.404.
(b) Certification of word count. A document referenced in paragraph
(a) of this section must be accompanied by an appendix stating the
number of words in the document, not including any cover page, table of
contents, table of citations, signature block, or appendices. It must
be signed by counsel for the party filing the document, or by another
representative if that party does not have counsel.
Sec. 1091.404 Changes to methods of filing and service, time limits,
and word limits.
(a) Generally. This section governs a change to a method of filing
or service, to a time limit, or to a word limit, whether prescribed by
this part or by the Director. Changes to time limits or word limits are
disfavored.
(b) Change upon consent. The initiating official and respondent may
agree in writing to a change, unless the Director specifies otherwise.
The initiating official shall file notice of the change with the
Director.
(c) Change upon written request to Director. The initiating
official or the respondent may file a written request to the Director
for a change, for good cause shown. The mere filing of a written
request for a change does not alleviate the obligation to meet an
applicable requirement, absent written confirmation that the request
has been granted.
(c) Change upon Director's own motion. The Director may make a
change on the Director's own motion.
(e) No conferral of rights. Deadlines for action by the Bureau
established in this part do not confer any rights on respondents.
Sec. 1091.405 Confidentiality of proceedings.
(a) General rule. In connection with a proceeding under this part,
including a petition for termination under Sec. 1091.301, all
documents, records or other items submitted by a respondent to the
Bureau, all documents prepared by, or on behalf of, or for the use of
the Bureau, and any communications between the Bureau and a person,
shall be deemed confidential supervisory information under 12 CFR
1070.2(i)(1). However, this paragraph does not apply to the version of
a document that is released on the Bureau's website under paragraph (b)
of this section.
(b) Publication of final decisions and orders by the Director. The
Director will make a determination regarding whether a decision or
order under Sec. 1091.206(a)(1) or Sec. 1091.301(d) will be publicly
released on the Bureau's website, in whole or in part. The respondent
may file a submission regarding that issue, within ten days after
service of the decision or order. The Director will not release
information in a decision or order to the extent it would be exempt
from disclosure under 5 U.S.C. 552(b)(4) or (b)(6) or the Director
determines there is other good cause. The Director may also decide that
any determination regarding public release will itself be released on
the website, in whole or in part. Section 1091.206(d) is not applicable
to determinations under this paragraph.
Sec. 1091.406 Multiple respondents.
(a) Notice issued to multiple respondents. The initiating official
may issue and serve a Notice with respect to multiple respondents. The
respondents may elect to make either joint or separate responses to
such a Notice under Sec. 1091.203 and be jointly or separately
represented at a supplemental oral response under Sec. 1091.205.
(b) Supplemental Notice to add respondents. The initiating official
may issue a supplemental Notice in a pending proceeding to add one or
more respondents. The Director will adopt such procedural steps as may
be appropriate to ensure that the added respondents have a reasonable
opportunity to respond to the supplemental Notice.
Sec. 1091.407 Adjudication proceedings otherwise brought by the
Bureau.
(a) The Bureau may, in its discretion, provide the notice and
opportunity to respond required by 12 U.S.C. 5514(a)(1)(C) in a notice
of charges otherwise brought by the Bureau pursuant to 12 CFR 1081.200
and the adjudication proceedings pursuant to part 1081. Also, a person
may agree to submit to the Bureau's supervisory authority under 12
U.S.C. 5514(a)(1)(C) as part of a consent order entered into in
connection with an adjudication proceeding or civil action.
(b) If the Bureau chooses to proceed in the manner described in
paragraph (a) of this section, it shall so indicate in the notice of
charges, and any order of the Director resulting from the notice of
charges shall constitute the order referred to in 12 U.S.C.
5514(a)(1)(C).
(c) If the Bureau proceeds pursuant to paragraph (a) of this
section, the provisions of Sec. Sec. 1091.201 to 1091.206 and 1091.401
to 1091.406 will be inapplicable to such proceeding.
Sec. 1091.408 Issue exhaustion.
(a) Scope. This section applies to any argument to support a
respondent's position, including any argument that could be a basis for
setting aside Bureau action under 5 U.S.C. 706 or any other source of
law.
(b) Duties to raise arguments. A respondent must raise an argument
in its written response, or else it is not preserved for judicial
review of a proceeding under subpart B. A respondent must raise an
argument in its petition for termination, or else it is not preserved
for judicial review of a proceeding under subpart C. If the Director
requests supplemental briefing, and if a given argument is within the
scope of the supplemental briefing requested, the respondent must raise
the argument in the supplemental briefing or else it is not preserved
for judicial review of a proceeding under subpart B or subpart C, as
applicable.
(c) Manner of raising arguments. An argument must be raised in a
manner that complies with this part and that provides a fair
opportunity to consider the argument.
(d) Discretion to consider unpreserved arguments. The Director has
discretion to consider an unpreserved argument,
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including by considering it in the alternative. If the Director
considers an unpreserved argument in the alternative, the argument
remains unpreserved.
Sec. 1091.409 No limitation on relief sought in civil action or
administrative adjudication.
Nothing in this part shall be construed to limit the relief the
Bureau may seek in any civil action or administrative adjudication,
including but not limited to, seeking an order to have a person deemed
subject to the Bureau's supervisory authority under 12 U.S.C. 5514,
including for the reasons set forth in 12 U.S.C. 5514(a)(1)(C).
Rohit Chopra,
Director, Consumer Financial Protection Bureau.
[FR Doc. 2024-08430 Filed 4-22-24; 8:45 am]
BILLING CODE 4810-AM-P
