Registry of Nonbank Covered Persons Subject to Certain Agency and Court Orders, 56028-56156 [2024-12689]
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Federal Register / Vol. 89, No. 130 / Monday, July 8, 2024 / Rules and Regulations
CONSUMER FINANCIAL PROTECTION
BUREAU
12 CFR Part 1092
[Docket No. CFPB–2022–0080]
RIN 3170–AB13
Registry of Nonbank Covered Persons
Subject to Certain Agency and Court
Orders
Consumer Financial Protection
Bureau.
ACTION: Final rule.
AGENCY:
Under the Consumer
Financial Protection Act of 2010
(CFPA), the Consumer Financial
Protection Bureau (Bureau or CFPB) is
issuing this final rule to require certain
types of nonbank covered persons
subject to certain final public orders
obtained or issued by a government
agency in connection with the offering
or provision of a consumer financial
product or service to report the
existence of the orders and related
information to a Bureau registry. The
Bureau is also requiring certain
supervised nonbanks to file annual
reports regarding compliance with
registered orders.
DATES:
Effective date: This rule is effective on
September 16, 2024.
Implementation dates: For
implementation dates, see § 1092.206.
FOR FURTHER INFORMATION CONTACT:
George Karithanom, Regulatory
Implementation and Guidance Program
Analyst, Office of Regulations, at 202–
435–7700. If you require this document
in an alternative electronic format,
please contact CFPB_Accessibility@
cfpb.gov.
SUPPLEMENTARY INFORMATION:
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SUMMARY:
I. Summary of the Final Rule
The Bureau is adopting this final rule
to establish and maintain a registry that
will collect information about certain
publicly available agency and court
orders and facilitate the Bureau’s
supervision of certain companies. In
this way, the Bureau will more
effectively be able to monitor and to
reduce the risks to consumers posed by
entities that violate consumer protection
laws. The final rule also authorizes the
Bureau to consolidate this information
in an online registry for use by the
public and other regulators.
The final rule requires certain
nonbank covered person entities (with
exclusions for insured depository
institutions, insured credit unions,
related persons, States, certain other
entities, and natural persons) to register
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with the Bureau upon becoming subject
to a public written order imposing
obligations based on violations of
certain consumer protection laws. Those
entities will be required to register in a
system established by the Bureau,
provide basic identifying information
about the company and the order
(including a copy of the order), and
periodically update the registry to
ensure its continued accuracy and
completeness. The Bureau intends to
publish this information on its website
and potentially in other forms.
The Bureau will also require certain
nonbanks subject to the Bureau’s
supervisory authority under section
1024(a) of the Consumer Financial
Protection Act of 2010 (CFPA) 1
annually to identify an executive (or
executives) responsible for and
knowledgeable of the firm’s efforts to
comply with the orders identified in the
registry. The supervised nonbank entity
will also be required to submit on an
annual basis a written statement signed
by the applicable executive regarding
the entity’s compliance with each order
in the registry.
Nonbanks that are subject to an order
published on the Nationwide Multistate
Licensing System’s Consumer Access
website (except for orders issued or
obtained at least in part by the Bureau)
may elect to comply with a one-time
registration option in lieu of complying
with the rule’s notification and writtenstatement requirements with respect to
that order.
Nonbank registrants will have to
register with the Bureau starting after an
applicable implementation date for the
registry specified in the rule. Different
implementation dates are specified for
larger participants, other supervised
nonbanks, and other nonbanks not
subject to Bureau supervision. Details
on how to register will be provided
through filing instructions.
II. Background
A. The Bureau and Other Agencies Take
Enforcement Actions Against Nonbanks
To Protect Consumers
The Bureau administers and enforces
Federal consumer financial laws against
nonbanks in consumer financial
markets. In addition to the Bureau,
Congress has authorized multiple other
Federal and State agencies to enforce
Federal consumer financial laws,
including the CFPA prohibition against
unfair, deceptive, or abusive acts or
practices (UDAAP) and enumerated
statutes including the Truth in Lending
Act, the Electronic Fund Transfer Act,
PO 00000
1 12
U.S.C. 5514(a).
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the Fair Credit Reporting Act, the Equal
Credit Opportunity Act, and other
statutes.2 Several Federal agencies, most
notably the Federal Trade Commission,
also enforce section 5 of the Federal
Trade Commission Act (FTC Act),
which similarly prohibits unfair or
deceptive acts or practices (UDAP).3
The prohibitions against unfair and
deceptive acts or practices in the CFPA
were modeled after the same
prohibitions in the FTC Act.
Furthermore, States across the country
began codifying State UDAP statutes
modeled after the FTC Act starting in
the 1960s and 1970s.4 Many State UDAP
statutes contain rules of construction
requiring State courts to use
interpretations of the FTC Act by the
Federal courts and the FTC as a guide
to interpreting their State UDAP
statutes.5 These laws differ in many
respects from each other, but generally
they hail from a common consumer
protection tradition originating with the
FTC Act, similar to the CFPA’s
prohibition on UDAAP.
The Bureau was created in the wake
of the 2008 financial crisis, which was
caused by a variety of overlapping
factors, including systemic malfeasance
in the mortgage industry.6 Since passage
of the CFPA, the Bureau has brought
nearly 350 enforcement actions against
nonbanks. When the Bureau issues an
order against a covered person (often,
but not always, as a consent order), or
brings an action in a court of law that
results in an order, the Bureau often
follows up with supervisory or
enforcement action to ensure the
company’s compliance with the order.
On numerous occasions, the Bureau has
uncovered companies that failed to
comply with consent orders that the
2 See 12 U.S.C. 5481(12), 5552; 12 CFR part 1082;
Bureau Interpretive Rule, Authority of States to
Enforce the Consumer Financial Protection Act of
2010, 87 FR 31940 (May 26, 2022).
3 15 U.S.C. 45.
4 Dee Pridgen, The Dynamic Duo of Consumer
Protection: State and Private Enforcement of Unfair
and Deceptive Trade Practices Laws, 81 Antitrust
L.J. 911, 912 (2017).
5 See, e.g., Ariz. Rev. Stat. Ann. sec. 44–1522(C)
(courts ‘‘may use as a guide’’ FTC and Federal court
interpretations of the FTC Act); Fla. Stat. sec.
501.204(2) (expressing the intent of the legislature
that ‘‘due consideration and great weight’’ be given
to interpretations of the FTC Act when interpreting
Florida’s State UDAP statute).
6 See U.S. Fin. Crisis Inquiry Comm’n, The
Financial Crisis Inquiry Report, at 104–11, 113–18
(2011), https://www.govinfo.gov/content/pkg/GPOFCIC/pdf/GPO-FCIC.pdf; see also S. Rep. No. 111–
176, at 11 (2010) (‘‘Th[e] financial crisis was
precipitated by the proliferation of poorly
underwritten mortgages with abusive terms,
followed by a broad fall in housing prices as those
mortgages went into default and led to increasing
foreclosures.’’).
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companies entered into with the Bureau
voluntarily.7
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B. Congress Instructed the Bureau To
Monitor Markets for Consumer
Financial Products and Services
Congress established the Bureau to
regulate (among other things) the
offering and provision of consumer
financial products and services under
the Federal consumer financial laws,
and it granted the Bureau authority to
ensure that the Bureau could achieve
that mission.8 But it also understood
that the Bureau could not fully and
effectively achieve that mission unless it
developed a clear window into the
markets for and persons involved in
offering and providing such products
and services. To that end, Congress
mandated that the Bureau ‘‘shall
monitor for risks to consumers in the
offering or provision of consumer
financial products or services, including
developments in markets for such
products or services.’’ 9
Notably, Congress directed the Bureau
to engage in such monitoring ‘‘to
support its rulemaking and other
functions,’’ 10 instructing the Bureau to
use monitoring to inform all of its work.
Congress separately described the
Bureau’s ‘‘primary functions’’ as
‘‘conducting financial education
programs’’; ‘‘collecting, investigating,
and responding to consumer
complaints’’; ‘‘collecting, researching,
monitoring, and publishing information
relevant to the functioning of markets
for consumer financial products and
services to identify risks to consumers
and the proper functioning of such
markets’’; ‘‘supervising covered persons
for compliance with Federal consumer
financial law, and taking appropriate
enforcement action to address violations
of Federal consumer financial law’’;
‘‘issuing rules, orders, and guidance
implementing Federal consumer
financial law’’; and ‘‘performing such
support activities as may be necessary
or useful to facilitate the other functions
of the Bureau.’’ 11 Put simply, Congress
envisioned that the Bureau would use
its market-monitoring work to inform its
7 See, e.g., RMK Financial Corp. d/b/a Majestic
Home Loan or MHL, CFPB No. 2023–CFPB–0002
(Feb. 27, 2023); CFPB v. American Advisors Group,
No. 21–cv–01674–JLS–JDEx (C.D. Cal. Oct. 25,
2021); Discover Bank, CFPB No. 2020–BCFP–0026
(Dec. 22, 2020); Bureau of Consumer Fin. Prot. v.
Encore Capital Grp., No. 3:20–cv–01750–GPC–KSC
(S.D. Cal. Oct. 16, 2020); Sec. Nat’l Automotive
Acceptance Co., CFPB No. 2017–CFPB–0013 (Apr.
26, 2017); Military Credit Servs., LLC, CFPB No.
2016–CFPB–0029 (Dec. 20, 2016).
8 See 12 U.S.C. 5511.
9 See 12 U.S.C. 5512(c)(1).
10 Id. (emphasis added).
11 12 U.S.C. 5511(c).
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activities, all with the express purpose
of ‘‘ensuring that all consumers have
access to markets for consumer financial
products and services and that markets
for consumer financial products and
services are fair, transparent, and
competitive.’’ 12
To achieve these ends, Congress took
care to ensure that the Bureau had the
tools necessary to effectively monitor for
risks in the markets for consumer
financial products and services. It
granted the Bureau authority ‘‘to gather
information from time to time regarding
the organization, business conduct,
markets, and activities of covered
persons and service providers.’’ 13 In
particular, Congress authorized the
Bureau to ‘‘require covered persons and
service providers participating in
consumer financial services markets to
file with the Bureau, under oath or
otherwise, in such form and within such
reasonable period of time as the Bureau
may prescribe by rule or order, annual
or special reports, or answers in writing
to specific questions,’’ that would
furnish the Bureau with such
information ‘‘as necessary for the
Bureau to fulfill the monitoring . . .
responsibilities imposed by
Congress.’’ 14
To assist the Bureau in allocating
resources to perform its monitoring,
Congress also identified a nonexhaustive list of factors that the Bureau
may consider, including ‘‘likely risks
and costs to consumers associated with
buying or using a type of consumer
financial product or service’’; 15
‘‘understanding by consumers of the
risks of a type of consumer financial
product or service’’; 16 ‘‘the legal
protections applicable to the offering or
provision of a consumer financial
product or service, including the extent
to which the law is likely to adequately
protect consumers’’; 17 ‘‘rates of growth
in the offering or provision of a
consumer financial product or
service’’; 18 ‘‘the extent, if any, to which
the risks of a consumer financial
product or service may
disproportionately affect traditionally
underserved consumers’’; 19 and ‘‘the
types, number, and other pertinent
characteristics of covered persons that
offer or provide the consumer financial
product or service.’’ 20
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12 12
U.S.C. 5511(a).
U.S.C. 5512(c)(4)(A).
14 12 U.S.C. 5512(c)(4)(B)(ii) (emphasis added).
15 12 U.S.C. 5512(c)(2)(A).
16 12 U.S.C. 5512(c)(2)(B).
17 12 U.S.C. 5512(c)(2)(C).
18 12 U.S.C. 5512(c)(2)(D).
19 12 U.S.C. 5512(c)(2)(E).
20 12 U.S.C. 5512(c)(2)(F).
13 12
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Congress also anticipated that the
insights the Bureau would gain from
such market monitoring should at times
become available to a wider audience
than just Bureau employees. Not only
did Congress mandate that the Bureau
‘‘publish not fewer than 1 report of
significant findings of its monitoring
. . . in each calendar year,’’ but it also
instructed that the Bureau may make
non-confidential information available
to the public ‘‘as is in the public
interest.’’ 21 Congress gave the Bureau
discretion to determine the format of
publication, authorizing the Bureau to
make the information available
‘‘through aggregated reports or other
appropriate formats designed to protect
confidential information in accordance
with [specified protections in this
section].’’ 22 These instructions
regarding public release of marketmonitoring information align with one
of the Bureau’s ‘‘primary functions’’
mentioned above—to ‘‘publish[ ]
information relevant to the functioning
of markets for consumer financial
products and services to identify risks to
consumers and the proper functioning
of such markets.’’ 23
The Bureau takes its marketmonitoring obligations seriously, and it
has incorporated valuable insights
gained to date from such monitoring in
conducting the multiple functions
assigned to it under the CFPA,
including its supervisory and
enforcement efforts, as well as its
rulemaking, consumer education, and
other functions.24 As discussed in
further detail below, this final rule seeks
to continue and build upon that
commitment by creating an order
registry to accomplish a number of
goals, with a particular focus on
21 12
U.S.C. 5512(c)(3).
U.S.C. 5512(c)(3)(B).
23 12 U.S.C. 5511(c)(3).
24 See, e.g., CFPB Semiannual Regulatory Agenda,
87 FR 5326, 5328 (Jan. 31, 2022) (‘‘The Bureau’s
market monitoring work assists in identifying issues
for potential future rulemaking work.’’); Payday,
Vehicle, and Certain High-Cost Installment Loans,
82 FR 54472, 54475, 54488, 54498 (Nov. 17, 2017)
(citing information obtained through Bureau
market-monitoring efforts); Arbitration Agreements,
82 FR 33210, 33220 (July 19, 2017) (same). See also,
e.g., Consumer Fin. Prot. Bureau, Buy Now, Pay
Later: Market trends and consumer impacts (Sept.
2022), https://files.consumerfinance.gov/f/
documents/cfpb_buy-now-pay-later-market-trendsconsumer-impacts_report_2022-09.pdf (publishing
information obtained through Bureau marketmonitoring efforts); Consumer Fin. Prot. Bureau,
Consumer Credit Trends: Credit Card Line
Decreases (June 2022), https://files.consumer
finance.gov/f/documents/cfpb_credit-card-linedecreases_report_2022-06.pdf (same); Consumer
Fin. Prot. Bureau, Data Point: Checking Account
Overdraft at Financial Institutions Served by Core
Processors (Dec. 2021), https://files.consumer
finance.gov/f/documents/cfpb_overdraft-coreprocessors_report_2021-12.pdf (same).
22 12
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Federal Register / Vol. 89, No. 130 / Monday, July 8, 2024 / Rules and Regulations
monitoring for risks to consumers
related to repeat offenders of consumer
protection law. A public registry of
agency and court orders issued or
obtained in connection with violations
of law will help the Bureau and the
broader public monitor trends
concerning corporate recidivism relating
to consumer protection law, including
areas where prior violations of law are
indicia of risk to consumers.
More generally, entities subject to
such public orders relating to the
offering or provision of consumer
financial products and services may
pose ongoing risks to consumers in the
markets for those products and services.
A broad collection of such public orders
will shed light on how laws are being
enforced across consumer protection
laws, jurisdictions, and markets, and
help identify trends and potential gaps
in enforcement. Both heightened
enforcement and the absence of
enforcement could possibly provide
information regarding risks to
consumers—the former as evidence that
government agencies with various
jurisdictions have identified the need to
enforce consumer protection laws, and
the latter as potential evidence of less
risk to consumers, or perhaps of
inattention by regulatory agencies. A
centralized, up-to-date repository of
such public orders will provide valuable
market-based insight that the Bureau
could use both to identify concerning
trends in these markets that it otherwise
might miss and to decide which of
several different policy tools would best
address the consumer risks presented by
these trends. In short, the information
sought will significantly increase the
Bureau’s ability to identify, understand,
and ultimately prevent harm in the
markets for consumer financial products
and services. These and other core goals
of the information the Bureau will
collect are discussed further below at
part IV.
Consistent with an approach
suggested by commenters, the Bureau is
adopting a one-time registration option
for nonbanks that are identified by name
as a party subject to an order that is
published on the Nationwide Multistate
Licensing System (NMLS) Consumer
Access website,
www.NMLSConsumerAccess.org (except
for orders issued or obtained by the
Bureau). Such nonbanks may choose to
submit certain information to the
Bureau in lieu of complying with the
other ongoing requirements of the final
rule with respect to the order. The
information provided to the Bureau in
connection with such orders will notify
the Bureau about the nonbank and the
relevant order and will enable the
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Bureau to follow up with the NMLS’s
operator and any applicable agency as
appropriate.
C. Congress Authorized the Bureau To
Supervise Certain Nonbank Covered
Persons
One of the Bureau’s key
responsibilities under the CFPA is the
supervision of very large banks, thrifts,
and credit unions, and their affiliates,
and certain nonbank covered persons.
Congress has authorized the Bureau to
supervise certain categories of nonbank
covered persons under CFPA section
1024.25 Congress provided that the
Bureau ‘‘shall require reports and
conduct examinations on a periodic
basis’’ of nonbank covered persons
subject to its supervisory authority for
purposes of ‘‘assessing compliance with
the requirements of Federal consumer
financial law’’; ‘‘obtaining information
about the activities and compliance
systems or procedures of such
person[s]’’; and ‘‘detecting and assessing
risks to consumers and to markets for
consumer financial products and
services.’’ 26 Pursuant to the CFPA, the
Bureau implements a risk-based
supervision program under which it
prioritizes nonbank covered persons for
supervision in accordance with its
assessment of risks posed to
consumers.27 In making prioritization
determinations, the Bureau considers
several factors, including ‘‘the asset size
of the covered person,’’ 28 ‘‘the volume
of transactions involving consumer
financial products or services in which
the covered person engages,’’ 29 ‘‘the
risks to consumers created by the
provision of such consumer financial
products or services,’’ 30 ‘‘the extent to
which such institutions are subject to
oversight by State authorities for
consumer protection,’’ 31 and ‘‘any other
factors that the Bureau determines to be
relevant to a class of covered
persons.’’ 32 CFPA section
1024(b)(7)(A)–(C) further authorizes the
Bureau to prescribe rules to facilitate
supervision and assessing and detecting
risks to consumers, as well as to ensure
that supervised nonbanks ‘‘are
legitimate entities and are able to
perform their obligations to
consumers.’’ 33
Under CFPA section 1024(b)(7)(A)–
(C), the Bureau is requiring that certain
PO 00000
25 12
U.S.C. 5514.
U.S.C. 5514(b)(1).
U.S.C. 5514(b)(2).
28 12 U.S.C. 5514(b)(2)(A).
29 12 U.S.C. 5514(b)(2)(B).
30 12 U.S.C. 5514(b)(2)(C).
31 12 U.S.C. 5514(b)(2)(D).
32 12 U.S.C. 5514(b)(2)(E).
33 12 U.S.C. 5514(b)(7)(A)–(C).
supervised nonbanks annually submit a
written statement regarding the
company’s compliance with any
outstanding registered orders. The
statement must be signed by a
designated senior executive. In the
written statement, the attesting
executive must generally describe the
steps the executive has undertaken to
review and oversee the company’s
activities subject to the applicable order
for the preceding calendar year. The
executive must then provide an
attestation regarding the company’s
compliance with the order.
The required written statement will
assist the Bureau in achieving each of
the statutory objectives listed in CFPA
section 1024(b)(7)(A)–(C). Therefore,
each of those objectives provides a
distinct, independently sufficient basis
for the final rule’s written-statement
requirements.34
First, requiring submission of an
annual written statement will facilitate
Bureau supervision and the Bureau’s
assessment and detection of risks to
consumers. In particular, as part of the
Bureau’s risk-based supervision
program, the Bureau considers
supervised nonbanks’ compliance
record regarding consumer protection
law when prioritizing supervisory
resources. The annual written
statement, including the steps taken by
the executive to review and oversee
activity related to the order, will
provide the CFPB valuable information
in understanding how compliance is
managed at the supervised entity. The
requirement will also provide valuable
information in connection with other
aspects of the Bureau’s supervisory
work and will assist the Bureau’s
monitoring efforts. For example, in 2022
the Bureau announced that it was
increasing its supervisory focus on
repeat offenders, particularly those
which violate agency or court orders.35
As part of that focus, it created a Repeat
Offender Unit within its supervision
program focused on: (i) reviewing and
monitoring the activities of repeat
offenders; (ii) identifying the root cause
of recurring violations; (iii) pursuing
and recommending solutions and
remedies that hold entities accountable
for failing to consistently comply with
Federal consumer financial law; and (iv)
designing a model for order review and
monitoring that reduces the occurrences
26 12
27 12
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34 For a more extended discussion of these
matters, see part IV(D) and the section-by-section
discussion of § 1092.204 below.
35 See Consumer Fin. Prot. Bureau, Supervisory
Highlights: Issue 28, Fall 2022, at 2–3 (Nov. 2022),
https://files.consumerfinance.gov/f/documents/
cfpb_supervisory-highlights_issue-28_2022-11.pdf.
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of repeat offenses.36 The Repeat
Offender Unit is tasked more generally
with enhancing detection of repeat
offenses, developing processes for rapid
review and response designed to
address root causes of violations, and
recommending corrective actions
designed to stop recidivist behavior.37
The Bureau believes that the annual
written statement will greatly facilitate
that work, among other things.
Second, the final rule’s writtenstatement requirements will help ensure
the company providing the statement is
a legitimate entity and is able to perform
its obligations to consumers.
Information regarding a company’s
compliance with outstanding orders is
probative of whether the company is
willing and able to satisfy its legal
obligations and of whether the company
treats potential sanctions for repeat
violations of relevant consumer
protection laws as a mere cost of doing
business. The written-statement
requirements will also provide an
incentive for supervised nonbanks to
perform their obligations to consumers
by requiring supervised nonbanks to
specify which individual executives are
responsible for achieving compliance
with particular orders. Publication of
the identity of this executive as
intended by the Bureau will enhance
the incentive.
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III. Legal Authority
The Bureau is issuing this final rule
pursuant to its authority under the
CFPA. This section includes a general
discussion of several CFPA provisions
on which the Bureau relies in this
rulemaking. Additional description of
these authorities, and the final rule’s
reliance on them, is also contained in
part II above and part IV below as well
as in the section-by-section analysis.
A. CFPA Section 1022(b)
CFPA section 1022(b)(1) authorizes
the Bureau to prescribe rules ‘‘as may be
necessary or appropriate to enable the
Bureau to administer and carry out the
purposes and objectives of the Federal
consumer financial laws, and to prevent
evasions thereof.’’ 38 Among other
statutes, the CFPA—i.e., title X of the
Dodd-Frank Wall Street Reform and
Consumer Protection Act (Dodd-Frank
Act)—is a Federal consumer financial
law.39 Accordingly, in issuing the final
rule, the Bureau is exercising its
authority under CFPA section 1022(b) to
36 Id.
37 Id.
at 3.
U.S.C. 5512(b)(1).
39 See 12 U.S.C. 5481(14) (defining ‘‘Federal
consumer financial law’’ to include the provisions
of title X of the Dodd-Frank Act).
prescribe rules that carry out the
purposes and objectives of the CFPA
and prevent evasions thereof. CFPA
section 1022(b)(2) prescribes certain
standards for rulemaking that the
Bureau must follow in exercising its
authority under section 1022(b)(1).40
For a discussion of the Bureau’s
standards for rulemaking under CFPA
section 1022(b)(2), see part VIII below.
B. CFPA Section 1022(c)(1)–(4) and (7)
The provisions of the final rule that
(1) require nonbank covered persons to
inform the Bureau that they have an
applicable order entered against them,
(2) provide basic identifying and
administrative information and
information regarding the orders
(including copies of the orders), and (3)
authorize publication of this
information, are authorized under CFPA
sections 1022(c)(1) through (4) and
1022(c)(7), as well as CFPA section
1022(b).41
CFPA sections 1022(c)(1)–(4)
authorize the Bureau to prescribe rules
to collect information from covered
persons for purposes of monitoring for
risks to consumers in the offering or
provision of consumer financial
products or services. The Bureau is
collecting this information to monitor,
on an ongoing basis, both individual
and market-wide compliance with
consumer protection laws and orders for
alleged violations of those laws. The
Bureau considers violations of
consumer protection laws probative of
‘‘risks to consumers in the offering and
provision of consumer financial
products or services.’’ 42 In particular,
the Bureau believes that entities subject
to public orders enforcing the law
relating to the offering or provision of
consumer financial products and
services may pose heightened and
ongoing risks to consumers in the
markets for those products and services.
It further believes that monitoring for
such orders will allow the Bureau to
track specific instances of, and more
general developments regarding,
potential corporate recidivism, which
presents special risks to consumers for
reasons discussed in greater detail
below. The Bureau also believes that
enforcement trends, as shown by public
orders enforcing the law across
consumer protection laws, jurisdictions,
and markets, will potentially shed light
on risks to consumers in the offering or
provision of consumer financial
products or services. Heightened
enforcement could indicate areas where
38 12
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40 See
12 U.S.C. 5512(b)(2).
U.S.C. 5512(b), (c)(1)–(4), (c)(7).
42 12 U.S.C. 5512(c)(1).
41 12
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numerous regulators have identified risk
of harm to consumers. Conversely, the
absence of enforcement in other areas
could indicate less risk to consumers, or
perhaps a lack of attention by regulators
that shows a need for further
monitoring.
More specifically, in order to support
its rulemaking and other functions,
section 1022(c)(1) of the CFPA requires
the Bureau to monitor for risks to
consumers in the offering or provision
of consumer financial products or
services, including developments in the
markets for such products or services.43
As discussed further below at part IV(B),
section 1022(c)(2) of the CFPA
authorizes the Bureau to allocate
resources to perform the monitoring
required by section 1022 by considering
‘‘likely risks and costs to consumers
associated with buying or using a type
of consumer financial product or
service,’’ ‘‘understanding by consumers
of the risks of a type of consumer
financial product or service,’’ ‘‘the legal
protections applicable to the offering or
provision of a consumer financial
product or service, including the extent
to which the law is likely to adequately
protect consumers,’’ ‘‘rates of growth in
the offering or provision of a consumer
financial product or service,’’ ‘‘the
extent, if any, to which the risks of a
consumer financial product or service
may disproportionately affect
traditionally underserved consumers,’’
and ‘‘the types, number, and other
pertinent characteristics of covered
persons that offer or provide the
consumer financial product or
service.’’ 44 Section 1022(c)(4)(A) of the
CFPA authorizes the Bureau to conduct
the monitoring required by section 1022
by ‘‘gather[ing] information from time to
time regarding the organization,
business conduct, markets, and
activities of covered persons and service
providers.’’ 45 The Bureau is authorized
to gather this information by, among
other things, requiring covered persons
participating in consumer financial
services markets to file annual or special
reports, or answers in writing to specific
questions, that furnish information ‘‘as
necessary for the Bureau to fulfill the
monitoring . . . responsibilities
imposed by Congress.’’ 46 The Bureau
43 12 U.S.C. 5512(c)(1) (‘‘In order to support its
rulemaking and other functions, the Bureau shall
monitor for risks to consumers in the offering or
provision of consumer financial products or
services, including developments in markets for
such products or services.’’).
44 12 U.S.C. 5512(c)(2)(A)–(F).
45 12 U.S.C. 5512(c)(4)(A).
46 12 U.S.C. 5512(c)(4)(B)(ii) (‘‘In order to gather
information described in subparagraph (A), the
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may require such information to be filed
‘‘in such form and within such
reasonable period of time as the Bureau
may prescribe by rule or order.’’ 47
Section 1022(c)(7)(A) of the CFPA
further authorizes the Bureau to
‘‘prescribe rules regarding registration
requirements applicable to a covered
person, other than an insured
depository institution, insured credit
union, or related person.’’ 48 Section
1022(c)(7)(B) provides that, ‘‘[s]ubject to
rules prescribed by the Bureau, the
Bureau may publicly disclose
registration information to facilitate the
ability of consumers to identify covered
persons that are registered with the
Bureau.’’ 49 The Bureau interprets
section 1022(c)(7)(B) as authorizing it to
publish registration information
required by Bureau rule under section
1022(c)(7)(A) so that consumers may
identify the nonbank covered persons
on which the Bureau has imposed
registration requirements.
Finally, CFPA section 1022(c)(3)
authorizes the Bureau to publicly
release information obtained pursuant
to CFPA section 1022, subject to
limitations specified therein.50
Specifically, section 1022(c)(3) states
that the Bureau ‘‘may make public such
information obtained by the Bureau
under [section 1022] as is in the public
interest, through aggregated reports or
other appropriate formats designed to
protect confidential information in
accordance with [specified protections
in section 1022].’’ 51 Information
submitted to the Bureau’s registry is
protected by, among other things, CFPA
section 1022(c)(8), which states that
‘‘[i]n collecting information from any
person, publicly releasing information
held by the Bureau, or requiring covered
persons to publicly report information,
the Bureau shall take steps to ensure
that proprietary, personal, or
confidential consumer information that
is protected from public disclosure
under [the Freedom of Information Act,
5 U.S.C. 552(b),] or [the Privacy Act of
1974, 5 U.S.C. 552a,] or any other
provision of law, is not made public
Bureau may . . . require covered persons and
service providers participating in consumer
financial services markets to file with the Bureau,
under oath or otherwise, in such form and within
such reasonable period of time as the Bureau may
prescribe by rule or order, annual or special reports,
or answers in writing to specific questions,
furnishing information described in paragraph (4),
as necessary for the Bureau to fulfill the monitoring,
assessment, and reporting responsibilities imposed
by Congress.’’).
47 12 U.S.C. 5512(c)(4)(B)(ii).
48 12 U.S.C. 5512(c)(7)(A).
49 12 U.S.C. 5512(c)(7)(B).
50 See 12 U.S.C. 5512(c)(3).
51 12 U.S.C. 5512(c)(3)(B).
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under [the CFPA].’’ 52 The Bureau’s
registry is designed to not collect any
protected proprietary, personal, or
confidential consumer information, and
thus, the Bureau will not publish, or
require public reporting of, any such
information.
See the introduction to the section-bysection analysis of § 1092.202 for a
discussion of certain comments received
by the Bureau about the discussion in
the Bureau’s proposed rule 53 of the
Bureau’s authorities under CFPA
section 1022(b)(1)–(4) and (7).
C. CFPA Section 1024(b)
As explained above, section 1024(b)
of the CFPA authorizes the Bureau to
exercise supervisory authority over
certain nonbank covered persons.54
Section 1024(b)(1) requires the Bureau
to periodically require reports and
conduct examinations of persons subject
to its supervisory authority to assess
compliance with Federal consumer
financial law, obtain information about
the activities and compliance systems or
procedures of persons subject to its
supervisory authority, and detect and
assess risks to consumers and to markets
for consumer financial products and
services.55 Section 1024(b)(2) requires
that the Bureau exercise its supervisory
authority over nonbank covered persons
under section 1024(b)(1) based on its
assessment of risks posed to consumers
in the relevant product markets and
geographic markets, and taking into
consideration, as applicable: ‘‘(A) the
52 12 U.S.C. 5512(c)(8). In the remainder of this
preamble, the Bureau refers to information
protected from disclosure under CFPA section
1022(c)(8) as ‘‘protected proprietary, personal, or
confidential consumer information.’’
53 See 88 FR 6088 (Jan. 30, 2023). For further
discussion of the Bureau’s proposed rule, see part
V(C) below.
54 The nonbank covered persons over which the
Bureau has supervisory authority are listed in
section 1024(a)(1) of the CFPA. They include
covered persons that: offer or provide origination,
brokerage, or servicing of loans secured by real
estate for use by consumers primarily for personal,
family, or household purposes, or loan modification
or foreclosure relief services in connection with
such loans; are larger participants of a market for
consumer financial products or services, as defined
by Bureau rule; the Bureau has reasonable cause to
determine, by order, that the covered person is
engaging, or has engaged, in conduct that poses
risks to consumers with regard to the offering or
provision of consumer financial products or
services; offer or provide private education loans;
or offer or provide payday loans. 12 U.S.C.
5514(a)(1).
55 12 U.S.C. 5514(b)(1) provides: ‘‘The Bureau
shall require reports and conduct examinations on
a periodic basis of persons described in subsection
(a)(1) for purposes of—(A) assessing compliance
with the requirements of Federal consumer
financial law; (B) obtaining information about the
activities and compliance systems or procedures of
such person; and (C) detecting and assessing risks
to consumers and to markets for consumer financial
products and services.’’
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asset size of the covered person; (B) the
volume of transactions involving
consumer financial products or services
in which the covered person engages;
(C) the risks to consumers created by the
provision of such consumer financial
products or services; (D) the extent to
which such institutions are subject to
oversight by State authorities for
consumer protection; and (E) any other
factors that the Bureau determines to be
relevant to a class of covered
persons.’’ 56
Section 1024(b)(7) of the CFPA in turn
identifies three independent sources of
Bureau rulemaking authority. First,
section 1024(b)(7)(A) requires the
Bureau to prescribe rules to facilitate the
supervision of nonbank covered persons
subject to the Bureau’s supervisory
authority and assessment and detection
of risks to consumers.57 Second, section
1024(b)(7)(B) authorizes the Bureau to
require nonbank covered persons
subject to its supervisory authority to
‘‘generate, provide, or retain records for
the purposes of facilitating supervision
of such persons and assessing and
detecting risks to consumers.’’ 58 As
explained below in the introduction to
the section-by-section analysis of
§ 1092.204, the Bureau interprets this
section as authorizing it to require
nonbank covered persons subject to its
supervisory authority to ‘‘generate’’—
i.e., create 59—reports regarding their
activities and then ‘‘provide’’ them to
the Bureau.
The third source of authority, CFPA
section 1024(b)(7)(C), authorizes the
Bureau to prescribe rules regarding
nonbank covered persons subject to its
supervisory authority ‘‘to ensure that
such persons are legitimate entities and
are able to perform their obligations to
consumers.’’ 60 The Bureau interprets
this section as authorizing it to prescribe
substantive rules to ensure that
supervised entities are willing and able
to comply with their legal, financial,
56 12
U.S.C. 5514(b)(2).
U.S.C. 5514(b)(7)(A) (‘‘The Bureau shall
prescribe rules to facilitate supervision of persons
described in subsection (a)(1) and assessment and
detection of risks to consumers.’’).
58 12 U.S.C. 5514(b)(7)(B) (‘‘The Bureau may
require a person described in subsection (a)(1), to
generate, provide, or retain records for the purposes
of facilitating supervision of such persons and
assessing and detecting risks to consumers.’’).
59 See Generate, Webster’s Third New
International Dictionary (1981) (defining ‘‘generate’’
as ‘‘to bring into existence’’).
60 12 U.S.C. 5514(b)(7)(C) (‘‘The Bureau may
prescribe rules regarding a person described in
subsection (a)(1), to ensure that such persons are
legitimate entities and are able to perform their
obligations to consumers. Such requirements may
include background checks for principals, officers,
directors, or key personnel and bonding or other
appropriate financial requirements.’’).
57 12
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and other obligations to consumers,
including those imposed by Federal
consumer financial law. The term
‘‘obligations’’ encompasses ‘‘anything
that a person is bound to do or forbear
from doing,’’ including duties ‘‘imposed
by law, contract, [or] promise.’’ 61 The
Bureau construes the phrase ‘‘legitimate
entities’’ as encompassing an inquiry
into whether an entity takes seriously its
duty to ‘‘[c]omply[ ] with the law.’’ 62
Legitimate entities do not presume they
will break the law and treat the risk of
enforcement actions for violations of
legal obligations as a mere cost of doing
business. Instead, legitimate entities
work in good faith to have protocols in
place aimed at ensuring compliance
with their legal obligations and
detecting and appropriately addressing
any legal violations that the entity may
commit.
While each of the three subparagraphs
of section 1024(b)(7) discussed above
operates as independent sources of
rulemaking authority, the subparagraphs
also overlap in several respects, such
that a particular rule may be (and, in the
case of this final rule, is) authorized by
more than one of the subparagraphs. For
example, rules requiring the generation,
provision, or retention of records
generally will be authorized under both
subparagraphs 1024(b)(7)(A) and (B).
That is so because subparagraph
1024(b)(7)(B) makes clear that the
Bureau’s authority under subparagraph
1024(b)(7)(A) to prescribe rules to
facilitate supervision and assessment
and detection of risks to consumers
extends to requiring covered persons
subject to the Bureau’s supervisory
authority ‘‘to generate, provide or retain
records for the purposes of facilitating
supervision of such persons and
assessing and detecting risks to
consumers.’’ 63
See the introduction to the section-bysection analysis of § 1092.204 below for
a discussion of certain comments
received by the Bureau about the
61 Obligation, Black’s Law Dictionary (11th ed.
2019).
62 Legitimate, Black’s Law Dictionary (11th ed.
2019) (defining ‘‘legitimate’’ as ‘‘[c]omplying with
the law; lawful’’); see also Legitimate, Webster’s
Second New International Dictionary (1934)
(defining ‘‘legitimate’’ as ‘‘[a]ccordant with law or
with established legal forms and requirements;
lawful’’); Legitimate, Webster’s Third New
International Dictionary (1981) (similar).
63 12 U.S.C. 5514(b)(7)(B); see also, e.g., Barton v.
Barr, 140 S. Ct. 1442, 1453 (2020) (‘‘redundancies
. . . in statutory drafting’’ may reflect ‘‘a
congressional effort to be doubly sure’’); Atlantic
Richfield Co. v. Christian, 140 S. Ct. 1335, 1350 n.5
(2020) (concluding that ‘‘Congress employed a belt
and suspenders approach’’ in statute); Marx v. Gen.
Revenue Corp., 568 U.S. 371, 383–85 (2013)
(statutory language is ‘‘not . . . superfluous if
Congress included it to remove doubt’’ about an
issue).
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proposal’s discussion of the Bureau’s
authorities under CFPA section 1024(b).
IV. Why the Bureau Is Issuing This
Final Rule
A. Overview
The Bureau is issuing this final rule
to require nonbanks to report certain
public agency and court orders because
the Bureau believes that not only the
Bureau, but also consumers, the public,
and other potential users of the Bureau’s
registry will benefit from the creation
and maintenance of a central public
repository for information regarding
certain public orders that have been
imposed upon nonbank covered
persons.
Agency and court orders are not
suggestions. They are legally binding
orders intended to prevent and remedy
violations of the law. When an agency
issues such an order, or seeks a court
order, it typically has determined that
the problems at the applicable entity are
sufficiently serious to merit the
expenditure of that agency’s limited
resources and perhaps the attention of
the courts.
By establishing an effective registry
for collecting public orders enforcing
the law across different sectors of entity
misconduct, the final rule will allow the
Bureau to more effectively monitor for
potential risks to consumers arising
from both individual instances and
broader patterns of recidivism. Persons
that are subject to one or more orders
that would require registration under
the final rule may pose greater risks to
consumers than others. And the
existence of multiple orders may serve
as a particular ‘‘red flag’’ with respect to
risks to consumers and as a signal of
potential recidivism. The existence of
multiple orders may also indicate
broader problems at the entity that pose
related risks to consumers—including
lack of sufficient controls related to the
offering and provision of consumer
financial products and services,
inadequate compliance management
systems and processes, and an
unwillingness or inability of senior
management to comply with laws
subject to the Bureau’s jurisdiction.
The Bureau also concludes that
collecting information regarding public
agency and court orders enforcing the
law will help it identify broader trends
related to risks to consumers in the
offering and provision of consumer
financial products and services. For
example, collecting this information
would inform the Bureau about
enforcement activity across geographic
or product markets with respect to
particular consumer protection laws,
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56033
increases and decreases over time in
such activity, and many other relevant
matters. Notably, by studying how laws
are being enforced across consumer
protection laws, jurisdictions, and
markets, the Bureau will be able to
identify indications of risks to
consumers. For example, the existence
of enforcement activity in multiple
jurisdictions among certain products,
services, or features, or related to certain
legal requirements, or concerning
certain consumer risks, could indicate
areas of heightened consumer risk that
warrant further attention by regulators.
Or such enforcement activity might be
an indication of appropriate attention by
other regulators, which might be an
indication that applicable nonbanks are
subject to adequate oversight, or that
risk to consumers in certain areas may
otherwise be reduced. By contrast, the
absence of enforcement activity in
certain areas could potentially indicate
less risk to consumers or could be
evidence of less attention by regulators
and a need to increase monitoring
activities. The Bureau thus concludes
that obtaining information regarding
such orders will enable it to better
monitor risks to consumers in the
offering or provision of consumer
financial products and services,
including developments in the markets
for such products and services, under its
authority at CFPA section 1022(c).64
As described further below, the
Bureau intends to make a registry of
these orders publicly available. The
Bureau anticipates that publishing such
a registry will, among other things,
allow other regulators at the Federal,
State, and local level tasked with
protecting consumers to realize many of
the same market-monitoring benefits
that the Bureau anticipates obtaining
from this rule. Publication will also
facilitate the ability of consumers to
identify the covered persons that are
registered with the Bureau. In addition,
publication will enhance the ability of
investors, research organizations, firms
conducting due diligence, and the
media to locate, review, and monitor
orders enforcing the law.
The final rule also will assist the
Bureau’s supervisory work by collecting
additional information in the form of a
written statement from certain entities
that are subject to the Bureau’s
supervision and examination authority.
As explained in greater detail below,
requiring certain supervised entities to
designate a senior executive officer with
knowledge of, and control over, the
entity’s efforts to comply with each
relevant order, and requiring that
64 12
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executive to submit the information
required to be contained in the written
statement, will facilitate Bureau
supervision efforts by providing
important information about the entity,
helping to prioritize the Bureau’s
supervisory activities, and otherwise
assisting the Bureau’s supervisory work.
These requirements will also help
ensure that the relevant entities are
‘‘legitimate’’ and ‘‘are able to perform
their obligations to consumers’’ under
CFPA section 1024(b)(7)(C), in part by
incentivizing entities who might
otherwise not take seriously their
obligations to instead endeavor to
comply with consumer protection laws
and by highlighting the designated
senior executive whose duties include
ensuring such compliance.65
General Comments Received
This section discusses certain general
comments received by the Bureau
regarding the proposal.
Various industry, consumer advocate,
and other commenters generally agreed
with the Bureau’s statements in the
proposal about the need for a new
Bureau registry for nonbank entities that
are subject to the Bureau’s jurisdiction
and that are subject to certain agency
and court orders. A consumer advocate
commenter stated that the registry
would be immensely useful for the
Bureau and other Federal and State
regulators alike, and agreed that the
proposed registry would advance a wide
variety of statutory objectives,
streamline regulatory processes, and
create efficiencies that will result in
greater consumer protection. An
industry commenter stated that the
proposed registry would help to
compile and track violations and
provide a basis from which to initiate
risk-based supervision of nonbanks.
Industry and consumer advocate
commenters stated that the proposed
registry would appropriately respond to
a dearth of information about nonbank
financial companies, including their
number and type and the practices they
engage in. Consumer advocate
commenters stated that the proposal
would, among other things, help unify
efforts across regulators, help regulators
and policymakers develop additional
reforms to consumer protection, and
help prevent future financial crises.
Other commenters objected to the
Bureau’s proposal on various grounds,
as discussed elsewhere in this preamble.
Among other things, commenters stated
the proposed registry would be
duplicative of the NMLS and overly
burdensome for registered entities.
65 12
U.S.C. 5514(b)(7)(C).
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Industry commenters stated that the
Bureau should either not finalize the
proposal, or should carefully consider
not finalizing the proposal, in light of
the Fifth Circuit’s decision in Consumer
Financial Protection Bureau (CFPB) v.
Community Financial Services
Association of America 66 and the U.S.
Supreme Court’s grant of the petition for
certiorari in that case.67
A consumer advocate commenter
stated that the Bureau should clarify in
the final rule the monetary penalties it
will seek for each day of noncompliance, and that these penalties
should be large. In the commenter’s
view, the failure to register as required
under the final rule also should be an
aggravating factor when assessing
monetary penalties against the entity for
other violations.
Response to General Comments
Received
The Bureau agrees with commenters
regarding the need for a new Bureau
registry for nonbank entities that are
subject to the Bureau’s jurisdiction and
that are subject to certain agency and
court orders. The final rule will
establish a valuable Bureau registry that
will provide the Bureau and other users
with important information regarding
such companies and the orders they are
subject to. Comments objecting to the
proposal are addressed elsewhere in this
preamble.
With respect to comments addressing
the U.S. Court of Appeals for the Fifth
Circuit’s decision regarding the
constitutionality of the Bureau’s funding
structure, the Supreme Court has
reversed that decision, holding that the
Bureau’s funding structure does not
violate the Appropriations Clause.68
The Bureau declines the consumer
advocate commenter’s suggestion to
establish special rules or remedies for
violation of the rule. The final rule is a
Federal consumer financial law under
the CFPA.69 Violation of the final rule
would be an independent violation of
Federal consumer financial law subject
to enforcement as provided in the
CFPA, and applicable remedies under
law, including potential civil money
penalties.70
66 See Cmty. Fin. Servs. Ass’n of Am., Ltd. v.
CFPB, 51 F.4th 616 (5th Cir. 2022).
67 No. 22–448 (U.S. argued Oct. 3, 2023).
68 See CFPB v. Cmty. Fin. Servs. Ass’n of Am.,
Ltd., 601 U.S. 416 (2024).
69 See 12 U.S.C. 5481(14) (defining term ‘‘Federal
consumer financial law’’ as including ‘‘any rule
. . . prescribed by the Bureau’’ under the CFPA).
70 Violation of the final rule may also violate 12
U.S.C. 5536(a)(2), which provides that it shall be
unlawful for ‘‘any covered person or service
provider to fail or refuse, as required by Federal
consumer financial law, or any rule or order issued
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B. Why the Bureau Is Issuing a Rule To
Monitor for Risks Associated With
Certain Agency and Court Orders
Requiring registration and
submissions regarding certain agency
and court orders as provided in the final
rule will assist the Bureau in monitoring
for risks to consumers in the offering or
provision of consumer financial
products or services, in accordance with
CFPA section 1022(c).71 The final rule’s
requirements to submit and update
information regarding such agency and
court orders related to the provision or
offering of consumer financial products
or services will provide important
support for a variety of Bureau
functions.
As the principal Federal regulator
responsible for administering the
Federal consumer financial laws, the
Bureau’s ability to effectively identify
and monitor for potential risks to
consumers arising out of apparent
violations of core Federal and State
consumer laws is important to the
Bureau achieving its statutory purposes
and objectives. Such information will
help the Bureau satisfy its statutory
obligation to monitor for risks to
consumers in the markets for consumer
financial products and services.72 For
example, the registry will enable the
Bureau to better identify an increase in
the number of orders in a particular
product market, in a particular
geographic market, addressing similar
consumer risks, or with other common
features. The Bureau will be able to use
this information to identify areas of
heightened consumer risk that warrant
further attention, as well as areas that
are receiving adequate attention from
other regulators. By contrast, the
absence of enforcement activity in
certain areas could indicate less risk to
consumers, or it potentially could be
evidence of less attention by regulators
and a need to increase monitoring and
other supervisory or regulatory
activities. Over time, the Bureau’s
collection and review of information
under the final rule will better enable
the Bureau to evaluate, assess, and
understand the relationship between
such matters and the consumer risk that
is related to covered orders. Thus, this
information would help to inform and
prioritize the Bureau’s other marketmonitoring efforts, including research
regarding particular markets and the
by the Bureau thereunder—[¶ ] (A) to permit access
to or copying of records; [¶ ] (B) to establish or
maintain records; or [¶ ] (C) to make reports or
provide information to the Bureau.’’
71 12 U.S.C. 5512(c).
72 See 12 U.S.C. 5512(c)(1).
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risks to consumers presented in such
markets.73
Likewise, the Bureau’s rulemaking
efforts will benefit from information
about such orders, so that the Bureau
might, for example, consider drafting
rules to address identified consumer
risks.74 The Bureau’s consumer
response function will be informed by
increased monitoring of risks and
trends, as the Bureau could direct
resources or investigate risks in a certain
area or on a certain topic.75 And the
Bureau may choose to direct its
consumer education efforts toward
educating consumers about risks
identified via the registry.76
The information that the Bureau will
obtain under the final rule will also be
valuable to the Bureau in exercising its
supervisory and enforcement
functions.77 Among other things, the
information may be informative when
the Bureau makes determinations
whether a covered person is engaging,
or has engaged, in conduct that poses
risk to consumers with regard to the
offering or provision of consumer
financial products or services under
CFPA section 1024(a)(1)(C), such that
the Bureau may determine to subject the
covered person to Bureau supervision
under that provision.78 The information
contained in the registry may also be
73 See 12 U.S.C. 5511(c)(3) (identifying as one of
the ‘‘primary functions of the Bureau . . .
collecting, researching, monitoring, and publishing
information relevant to the functioning of markets
for consumer financial products and services to
identify risks to consumers and the proper
functioning of such markets’’).
74 See 12 U.S.C. 5511(c)(5) (identifying as one of
the ‘‘primary functions of the Bureau . . . issuing
rules, orders, and guidance implementing Federal
consumer financial law’’).
75 See 12 U.S.C. 5511(c)(2) (identifying as one of
the ‘‘primary functions of the Bureau . . .
collecting, investigating, and responding to
consumer complaints’’); see also Consumer Fin.
Prot. Bureau, Consumer Response Annual Report:
January 1–December 31, 2021, at 5–8 (Mar. 2022),
https://files.consumerfinance.gov/f/documents/
cfpb_2021-consumer-response-annual-report_202203.pdf (describing the Bureau’s consumercomplaint process and how the Bureau uses
complaint information).
76 See 12 U.S.C. 5511(c)(1) (identifying as one of
the ‘‘primary functions of the Bureau . . .
conducting financial education programs’’).
77 See 12 U.S.C. 5511(c)(4) (identifying as one of
the ‘‘primary functions of the Bureau . . .
supervising covered persons for compliance with
Federal consumer financial law, and taking
appropriate enforcement action to address
violations of Federal consumer financial law’’). Part
IV(D) and the section-by-section discussion of
§ 1092.204 below contain additional discussion of
how the final rule will facilitate the Bureau’s
supervisory efforts.
78 See 12 U.S.C. 5514(a)(1)(C) (authorizing Bureau
orders subjecting nonbanks to supervision based
upon consumer complaints ‘‘or information from
other sources’’); 12 CFR part 1091 (Bureau
procedural rule to establish supervisory authority
over certain nonbank covered persons based on risk
determination).
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relevant in assessing civil penalties for
violations of Federal consumer financial
laws, given that Congress has provided
that such penalties should take into
account an entity’s ‘‘history of previous
violations’’ and ‘‘such other matters as
justice may require.’’ 79
Furthermore, there is a heightened
likelihood that entities that are subject
to public orders enforcing the law and
relating to the offering or provision of
consumer financial products and
services may pose risks to consumers in
the markets for those products and
services, and risk of consumer harm is
a significant factor that weighs heavily
in the Bureau’s decisions regarding the
general allocation of its resources.
Knowledge of whether a covered person
has engaged in previous violations of
consumer financial protection laws is
valuable information that the Bureau
considers when evaluating the risk of
consumer harm. In the Bureau’s
experience, entities that have previously
been subject to enforcement actions,
including those brought by local, State,
and other Federal authorities, present an
increased risk of committing violations
of laws subject to the Bureau’s
jurisdiction, and thus causing the
additional consumer harm associated
with such violations. Prior enforcement
actions are also likely to be a good
indication of continuing risks to
consumers present in a particular
market for consumer financial products
or services. Because the orders that
would be covered by the final rule are
regularly issued, modified, and
terminated, the Bureau needs to collect
this information regularly and on a
timely basis in order to stay abreast of
developments.
Although referrals from and other
information provided by other agencies
have been valuable to the Bureau’s
work, the Bureau currently often relies
on other agencies to take proactive steps
to contact it. As discussed in part IV(E)
below, under the final rule, nonbanks
that are subject to agency and court
orders that are published on the NMLS
Consumer Access website will have an
option to notify the Bureau and provide
information that will flag the relevant
order and nonbank for the Bureau’s
attention. Having access to targeted
information regarding relevant orders
entered against nonbanks, whether such
orders are listed on the Bureau’s own
registry or available through the NMLS,
will significantly increase the Bureau’s
ability to monitor markets so that the
79 See 12 U.S.C. 5565(c)(3)(D), (E). The Bureau
may consider certain matters identified in orders
collected under the final rule to be relevant under
these provisions.
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Bureau can identify, better understand,
and ultimately, prevent further
consumer harm, particularly from repeat
offenders.
Recidivism—whether in the form of a
company that repeatedly violates the
law and as a result becomes subject to
multiple orders, or in the form of a
company that violates the orders to
which it is subject—poses particular
risks to consumers. Companies that
repeatedly violate the law do more than
just deprive consumers of protections in
the marketplace; these companies may
also charge their customers more in
order to cover the costs of any fines or
other costs resulting from the company’s
legal violations. In other words,
consumers may end up subsidizing
corporate malfeasance. When
government orders fail to deter future
misconduct by a company, that
company’s operations are more likely to
present risk to consumers. Thus, the
existence of multiple orders may be
highly probative of heightened risks to
consumers in the markets for consumer
financial products and services,
including the risk of noncompliance
with laws subject to the Bureau’s
jurisdiction.
Collecting information about such
public orders across markets and
agencies as provided in the final rule
will improve the Bureau’s efforts to
determine where entities, either as a
group or individually, are repeatedly
violating the law. The Bureau
particularly needs to be made aware of
entities that become subject to multiple
orders, or that are found to be out of
compliance with existing orders, as well
as of trends in such developments.
Systematic or repeat violations of the
law may indicate broader problems
within a market for consumer financial
products and services. Such problems
might include lack of sufficient controls
related to the offering and provision of
certain consumer financial products and
services, inadequate compliance
management systems and processes
within a set of market participants, and
an unwillingness or inability of senior
management at certain entities to
comply with Federal consumer financial
laws. The registry established in the
final rule will provide a valuable
mechanism to help ensure that the
Bureau is rapidly made aware of such
repeat offenders across a range of
markets and enforcement agencies.
The Bureau believes that the registry
will be especially useful with respect to
the particular nonbank markets that are
subject to the Bureau’s supervision and
examination authority under CFPA
section 1024(a). In those markets, the
Bureau will be able to take account of
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risks identified through the registry in
conducting its risk-based supervisory
prioritization and enforcement work.
The existence of an order that would
require registration under the final rule
would be probative of a potential need
for supervisory examination, to the
extent that the nonbank is subject to the
Bureau’s supervision and examination
authorities. Under CFPA section
1024(b)(2), the Bureau is required to
exercise its supervisory authority in a
manner designed to ensure that such
exercise, with respect to persons
described in CFPA section 1024(a), is
based on the assessment by the Bureau
of the risks posed to consumers in the
relevant product markets and
geographic markets and taking into
consideration the factors enumerated at
CFPA section 1024(b)(2)(A)–(E).80
Depending upon the circumstances,
the Bureau may consider the existence
of an order requiring registration under
the final rule to be a risk factor under
these provisions for covered persons
subject to the rule. CFPA section
1024(b)(2)(C) refers to ‘‘the risks to
consumers created by the provision of
such consumer financial products or
services.’’ 81 The existence of one or
more orders that would require
registration under the final rule would
be probative of such risks to consumers
because it indicates that an entity may
not be willing or able to ensure
compliance with the law. CFPA section
1024(b)(2)(D) provides that the Bureau
shall also take into account ‘‘the extent
to which such institutions are subject to
oversight by State authorities for
consumer protection.’’ 82 The existence
of one or more orders issued or obtained
by the types of State agencies described
in the final rule in connection with
violations of law would provide
important and directly relevant
information regarding the extent to
which nonbanks are subject to oversight
by State authorities for consumer
protection. CFPA section 1024(b)(2)(E)
provides that the Bureau shall also take
into account ‘‘any other factors that the
Bureau determines to be relevant to a
class of covered persons.’’ 83 For the
classes of covered persons subject to the
final rule, the Bureau believes that the
existence of an order that would require
registration under the final rule would
be a relevant factor under this statutory
provision for the Bureau to take into
consideration when exercising its
supervisory authorities under CFPA
section 1024. Thus, for the reasons
described above, the existence of such
orders would be relevant information in
prioritizing and scoping the Bureau’s
supervisory activities under CFPA
section 1024(b) with respect to the
markets subject to that provision.
In crafting the final rule’s
requirements to register and submit
certain agency and court orders, the
Bureau has considered (among others)
the factors listed at CFPA section
1022(c)(2), to the extent relevant here to
the allocation of Bureau resources to
perform market monitoring. For
example, the Bureau considered the
‘‘likely risks and costs to consumers
associated with buying or using a type
of consumer financial product or
service.’’ 84 As discussed above, the
Bureau believes companies that violate
the law, especially repeatedly, generally
pose more risk to consumers. The final
rule will assist the Bureau in identifying
and evaluating such risks—and their
associated costs—across companies,
industries, products, and regions.
The Bureau also considered the
‘‘understanding by consumers of the
risks of a type of consumer financial
product or service.’’ 85 The Bureau is
concerned that consumers currently
may not adequately understand risks
posed by certain institutions, including
risks arising from recidivism. With a
clear window into nationwide trends
and gaps in nonbank covered persons’
compliance with consumer protection
laws, the Bureau can target its various
functions—including consumer
education—to ensure that consumers
understand the risks and associated
costs of such conduct on their use of
certain consumer financial products or
services.
The Bureau further considered ‘‘the
legal protections applicable to the
offering or provision of a consumer
financial product or service, including
the extent to which the law is likely to
adequately protect consumers.’’ 86 The
final rule will enhance the Bureau’s
ability to effectively assess whether and
to what extent the orders themselves, as
well as other relevant laws, in practice
adequately protect consumers.
Information collected in connection
with the final rule will aid the Bureau
in better understanding how effectively
the nation’s consumer protection laws
operate in practice, which should assist
the Bureau in determining (among other
things) how best to allocate its resources
to ensure consumers are adequately
protected from unlawful conduct.
U.S.C. 5514(a), (b)(2).
U.S.C. 5514(b)(2)(C).
82 12 U.S.C. 5514(b)(2)(D).
83 12 U.S.C. 5514(b)(2)(E).
The Bureau also considered ‘‘rates of
growth in the offering or provision of a
consumer financial product or
service.’’ 87 Commenters expressed
concern about a dearth of information
regarding nonbank financial companies
and stated that nonbanks may be
obtaining an increased market share in
certain markets for consumer financial
products and services. The Bureau
likewise believes that at least in certain
markets, there has been rapid growth in
consumer offerings by nonbanks. The
Bureau intends to use the information
obtained under the final rule in
assessing and monitoring the rates of
such growth and any associated risks, as
evidenced by information regarding
relevant consumer protection orders
issued against nonbanks.
The Bureau also considered ‘‘the
extent . . . to which the risks of a
consumer financial product or service
may disproportionately affect
traditionally underserved
consumers.’’ 88 The Bureau generally is
concerned that traditionally
underserved communities may be
disproportionately the target of
consumer protection violations—
particularly, unfair, deceptive, or
abusive acts or practices—in the offering
or provision of consumer financial
products or services. The information
collected should provide the Bureau
with robust nationwide data to identify
and evaluate the extent to which this is
the case.
Finally, the Bureau considered ‘‘the
types, number, and other pertinent
characteristics of covered persons that
offer or provide the consumer financial
product or service.’’ 89 For the reasons
discussed, law violator status—and
especially repeat law violator status—is
a highly pertinent characteristic. The
Bureau believes that risks to consumers
posed by law violators warrant market
monitoring. In particular, it will provide
greater visibility into nonbank covered
persons’ compliance with consumer
protection laws in the offering or
provision of consumer financial
products and services, in addition to
more generally aiding the Bureau’s
overall understanding of nonbank
covered persons and the products or
services they provide.
As discussed further below in part
IV(E), the Bureau is adopting a
modification to the proposed rule in
order to provide an option for one-time
registration of orders published on the
NMLS Consumer Access website
(except for orders issued or obtained by
80 12
81 12
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U.S.C. 5512(c)(2)(B).
86 12 U.S.C. 5512(c)(2)(C).
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87 12
85 12
88 12
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U.S.C. 5512(c)(2)(D).
U.S.C. 5512(c)(2)(E).
89 12 U.S.C. 5512(c)(2)(F).
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the Bureau). The Bureau will be notified
regarding such orders and the nonbank
entities that are subject to them, and,
using the information provided by the
nonbank via the registry, will be able to
obtain additional information from
applicable Federal, State, and local
authorities, including through the
NMLS. Thus, the Bureau will have
access to a comprehensive collection of
relevant orders and entities, accessible
either through the Bureau’s registry or
via the Bureau’s existing access to
NMLS and its ability to reach out to
other agencies.
The Bureau has concluded that
alternative means of collecting the
information subject to the final rule
would be inadequate.90 For example,
the Bureau considered requesting the
information on an ad hoc basis from
entities that are subject to relevant
orders through a Bureau order issued
pursuant to CFPA section
1022(c)(4)(B)(ii).91 However, the Bureau
concludes this alternative would be
inadequate. There is no existing
comprehensive list of covered persons
subject to Bureau regulation, so the
Bureau would be unable to issue a
standing order to such entities to
produce information. It is not clear how
the Bureau would obtain this
information without issuing a rule.
Also, the Bureau wishes to collect
information that changes over time—for
example, information regarding new
orders and changes to orders, as well as
with respect to changes in registration
information. An order that required
submission of information at a single
point in time—assuming that the Bureau
could identify the entities to which such
an order should be addressed—would
be inadequate to capture such changes
in information. While the Bureau might
issue frequently recurring orders under
its market-monitoring authority, such an
approach would be less reliable and
predictable for all parties than a rulebased approach.
The Bureau further considered using
its supervisory and examination
authority to obtain information solely
from entities that are subject to that
authority. However, there is no existing
comprehensive list of nonbank entities
subject to Bureau supervision, so the
Bureau would be unable to issue a
standing order to such entities to
produce such information. Moreover,
the Bureau has concluded that
collecting information from a wider
90 For additional discussion of comments
received in connection with other alternative means
of collecting this information, see the section-bysection discussion of §§ 1092.202(b) and
1092.203(a) below.
91 12 U.S.C. 5512(c)(4)(B)(ii).
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range of covered persons, including
those that are not subject to the Bureau’s
supervisory and examination authority,
is appropriate to achieve its marketmonitoring objectives.
C. Why the Bureau Has Identified
Orders Issued Under the Types of Laws
Described in the Proposal as Posing
Particular Risk
The final rule prescribes registration
requirements with reference to certain
types of ‘‘covered laws’’ that served as
the basis for an applicable order. As
discussed herein, the Bureau concludes
that orders issued under the types of
covered laws described in the proposal
are likely to be probative of risks to
consumers in the offering or provision
of consumer financial products or
services, including developments in
markets for such products or services.92
First, the Bureau is requiring
registration in connection with orders
issued under the Federal consumer
financial laws, to the extent that the
violation of law found or alleged arises
out of conduct in connection with the
offering or provision of a consumer
financial product or service. As
explained above, numerous Federal and
State agencies besides the Bureau have
authority to enforce Federal consumer
financial laws. In matters where an
agency other than the Bureau has issued
or obtained a final public order
concluding that a covered person has
violated Federal consumer financial
law, the Bureau also will generally have
jurisdiction over the conduct that
resulted in that order. Requiring
registration of such orders will facilitate
effective market monitoring by
providing the Bureau a tool to identify
and understand the nature of the risks
to consumers presented by the conduct
addressed in those orders, including the
risk that the conduct might continue
unabated outside of the particular
jurisdiction that issued the order. For
example, such information may inform
the Bureau’s supervisory or enforcement
activities, as the Bureau may consider
bringing its own action in connection
with the same or related conduct. Or the
conduct may be probative of a more
systemic problem with one or more
entities’ overall willingness or capacity
to comply with Federal consumer
financial law across different product
lines or aspects of their operations.
Likewise, requiring registration of
orders involving Federal consumer
financial law will facilitate effective
market monitoring by ensuring that the
92 See also the discussion of the definition of the
term ‘‘covered law’’ in the section-by-section
discussion of § 1092.201(c) below.
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Bureau can quickly and effectively
identify patterns of similar conduct
across multiple nonbank covered
persons. The identification of such
patterns may indicate a problem that the
Bureau could best address by engaging
in rulemaking to clarify or expand
available consumer protections to
address emerging consumer risk trends.
It may also prompt the Bureau to use
other tools, such as consumer
education, to address the identified
risks.
Second, the Bureau is requiring
registration of orders in connection with
a violation of any other law as to which
the Bureau may exercise enforcement
authority, to the extent such violation
arises out of conduct in connection with
the offering or provision of a consumer
financial product or service. The Bureau
may enforce certain laws other than
Federal consumer financial laws, as that
term is defined in CFPA section
1002(14).93 The Bureau concludes that
the registry should collect information
regarding orders issued under any law
that the Bureau may enforce, where the
violation of law found or alleged arises
out of conduct in connection with the
offering or provision of a consumer
financial product or service. By
definition, the conduct addressed in
such orders will generally fall within
the scope of the Bureau’s enforcement
authority. More generally, the Bureau
concludes that evidence of such
conduct could be probative of a broader
risk that the entity has engaged or will
engage in conduct that may violate
Federal consumer financial law. For
example, violations of the Military
Lending Act, as to which the Bureau has
enforcement authority, may overlap
with, or be closely associated with,
violations of the CFPA’s UDAAP
prohibitions 94 or the Truth in Lending
Act,95 among other Federal consumer
93 See, e.g., 10 U.S.C. 987(f)(6) (authorizing
Bureau enforcement of the Military Lending Act).
As the Bureau has explained in an interpretive rule,
it also has authority to supervise nonbanks subject
to its supervision regarding risks to consumers
arising from conduct that violates the Military
Lending Act. See Bureau Interpretive Rule,
Examinations for Risks to Active-Duty
Servicemembers and Their Covered Dependents, 86
FR 32723 (June 23, 2021). In this rulemaking,
however, the Bureau does not need to rely on the
authority described in that interpretive rule.
Instead, to the extent that the final rule would
collect information regarding orders issued under
laws described in § 1092.201(c)(2) for the purpose
of facilitating the Bureau’s supervisory activities,
the Bureau would do so because the Bureau
believes such orders may be probative of a broader
risk that an entity has engaged or will engage in
conduct that may violate Federal consumer
financial law.
94 15 U.S.C. 5531, 5536(a)(1)(B).
95 15 U.S.C. 1601 et seq.
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financial laws. In addition, in the
Bureau’s experience, a violation of one
law within the Bureau’s enforcement
authority may be indicative of broader
inadequacies in an entity’s compliance
systems that are resulting or could result
in other legal violations, including
violations of Federal consumer financial
laws. Furthermore, including in the
registry orders issued under any law
that the Bureau may enforce (where the
violation of law found or alleged arises
out of conduct in connection with the
offering or provision of a consumer
financial product or service) will further
the Bureau’s objective of creating a
cross-market registry that could serve as
a reference tool for use in monitoring for
risks to consumers, thereby increasing
the Bureau’s ability to use the registry
to monitor for patterns of risky conduct
of nonbank covered persons across
entities, industries, and product
offerings.
Third, the Bureau is requiring
registration in connection with orders
issued under the prohibition on unfair
or deceptive acts or practices under
section 5 of the FTC Act, 15 U.S.C. 45,
or any rule or order issued for the
purpose of implementing that
prohibition, to the extent that the
violation of law found or alleged arises
out of conduct in connection with the
offering or provision of a consumer
financial product or service. In matters
where a government agency has reached
a determination that an entity has
violated section 5 of the FTC Act in
connection with the offering or
provision of a consumer financial
product or service, the Bureau has
reason to be concerned that the entity
poses heightened risks to consumers in
financial markets. For one thing, the
conduct resulting in the order may have
violated Federal consumer financial
law. CFPA section 1031, for example,
authorizes the Bureau to take action ‘‘to
prevent a covered person or service
provider from committing or engaging
in an unfair, deceptive, or abusive act or
practice under Federal law in
connection with any transaction with a
consumer for a consumer financial
product or service, or the offering of a
consumer financial product or
service.’’ 96 And CFPA section
1036(a)(1)(B) provides that ‘‘[i]t shall be
unlawful’’ for a covered person ‘‘to
engage in any unfair, deceptive, or
abusive act or practice.’’ 97 Congress
modeled the CFPA’s prohibition of
unfair or deceptive acts or practices
after the similar prohibition in section 5
96 12
97 12
U.S.C. 5531(a).
U.S.C. 5536(a)(1)(B).
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of the FTC Act.98 Therefore, violations
of FTC Act section 5 in connection with
the provision or offering of a consumer
financial product or service are highly
probative of a heightened risk that
UDAAP violations subject to the
Bureau’s jurisdiction have occurred or
are occurring.
Moreover, the high probative value of
such orders is not simply a function of
the likelihood that underlying conduct
could violate Federal consumer
financial law. The Bureau concludes
that, where an entity has engaged in
conduct prohibited under FTC Act
section 5 in connection with offering or
providing a consumer financial product
or service, there is a significant risk that
upon closer inspection of the entity’s
activities it has engaged in other acts or
omissions that either violate Federal
consumer financial law or otherwise
present risks to consumers in the
consumer financial markets. For
example, inadequacies in compliance
systems are not likely limited to a
particular Federal or State consumer
protection law, and compliance-system
inadequacies that result in FTC Act
section 5 violations indicate a
heightened risk of similar inadequacies
related to the prevention of violations of
Federal consumer financial laws. And,
as described above, a registry of orders
is particularly useful because a core
purpose of the Bureau’s monitoring
efforts is to analyze patterns of risky
conduct across entities, industries,
product offerings, and jurisdictions.
Such patterns would help the Bureau
identify risks to consumers that warrant
further action, such as more monitoring,
increased supervisory attention in the
case of supervised persons, regulation,
or consumer education.
Fourth, the Bureau is requiring
registration in connection with orders
issued under State laws prohibiting
unfair, deceptive, or abusive acts or
practices that are identified in appendix
A to part 1092, to the extent that the
violation of law found or alleged arises
out of conduct in connection with the
offering or provision of a consumer
financial product or service.99 State
UDAP/UDAAP laws are generally
modeled after—or otherwise prohibit
conduct similar to that prohibited by—
FTC Act section 5 or CFPA sections
98 See 15 U.S.C. 45; see also, e.g., Consumer Fin.
Prot. Bureau v. ITT Educ. Servs., Inc., 219 F. Supp.
3d 878, 902–04 (S.D. Ind. 2015).
99 The Bureau is adopting a final version of
appendix A to part 1092 with certain changes to the
version in the proposal. For a discussion of these
changes to the proposal, see the section-by-section
discussion of § 1092.201(c) below.
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1031 and 1036(a)(1)(B).100 Therefore,
violations of State UDAP/UDAAP law in
connection with the provision or
offering of a consumer financial product
or service are similarly highly probative
of a heightened risk that UDAAP
violations subject to the Bureau’s
jurisdiction have occurred or are
occurring. In addition, violations of
State UDAP/UDAAP law may be
probative of the existence of violations
of other laws within the Bureau’s
jurisdiction.101
Obtaining a better understanding of
entities’ compliance with State UDAP/
UDAAP laws will assist the Bureau in
the assessment and detection of risks for
the same general reasons described with
respect to alleged or found violations of
FTC Act section 5—namely, that (i)
conduct that violates State UDAP/
UDAAP prohibitions commonly also
violates laws under the Bureau’s
jurisdiction; and (ii) the Bureau believes
that evidence of such conduct may be
highly probative of a broader risk that
the entity has engaged or will engage in
similar conduct that may violate laws
within the Bureau’s jurisdiction, either
as a result of a willingness to violate
such laws or a lack of sufficient
protections in place to prevent
violations. Registration of State UDAP/
UDAAP orders will facilitate effective
market monitoring by ensuring that the
Bureau can quickly and effectively
identify patterns of risky conduct across
entities, industries, consumer financial
product or service offerings, and
jurisdictions. The Bureau could then
decide which Bureau functions are best
suited to address the consumer risks
raised by the orders.102
100 15 U.S.C. 45; 12 U.S.C. 5531. See Request for
Information on Payday Loans, Vehicle Title Loans,
Installment Loans, and Open-End Lines of Credit,
81 FR 47781, 47783 (July 22, 2016) (‘‘In the 1960s,
States began passing their own consumer protection
statutes modeled on the [Federal Trade
Commission] Act to prohibit unfair and deceptive
practices.’’); see also Cal. Fin. Code sec. 90009(c)(3)
(providing that ‘‘the term ‘abusive’ shall be
interpreted consistent with Title X of the DoddFrank Wall Street Reform and Consumer Protection
Act of 2010’’); Michael Greenfield, Unfairness
Under Section 5 of the FTC Act and Its Impact on
State Law, 46 Wayne L. Rev. 1869, 1899 (2000)
(noting that ‘‘the state statutes actually were drafted
and promoted by the Federal Trade Commission,
which, one supposes, had a special interest in
uniform, nationwide interpretation of the
standards’’).
101 To take just one example, UDAAP violations
in connection with debt-collection efforts may also
violate the Fair Debt Collection Practices Act’s
prohibition against unfair, deceptive, or abusive
debt-collection practices. See 15 U.S.C. 1692d–
1692f.
102 For discussion of the final rule’s requirements
with respect to State laws amending or otherwise
succeeding a law identified in appendix A, and
rules or orders issued by State agencies for the
purpose of implementing State UDAP/UDAAP
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D. Why the Bureau Is Requiring
Supervised Nonbanks To Designate
Attesting Executives and Submit Written
Statements
The final rule will also require certain
entities that are subject to the Bureau’s
supervision and examination authority
to annually submit a written statement
signed by a designated attesting
executive regarding each covered order
to which they are subject. In the written
statement, the attesting executive will
be required to (i) generally describe the
steps that the executive has undertaken
to review and oversee the entity’s
activities subject to the applicable
covered order for the preceding calendar
year, and (ii) attest whether, to the
executive’s knowledge, the entity during
the preceding calendar year has
identified any violations or other
instances of noncompliance with any of
the obligations that were imposed in a
public provision of the covered order by
the applicable agency or court based on
a violation of a covered law. The final
rule further requires that the entity
designate as the attesting executive for
each covered order its highest-ranking
duly appointed senior executive officer
(or, if the entity does not have any duly
appointed officers, the highest-ranking
individual charged with managerial or
oversight responsibility for the entity)
whose assigned duties include ensuring
the entity’s compliance with Federal
consumer financial law, who has
knowledge of the entity’s systems and
procedures for achieving compliance
with the covered order, and who has
control over the entity’s efforts to
comply with the covered order. The
Bureau intends to publish the name and
title of that executive in the public
registry.
The Bureau concludes these
requirements will serve two sets of
distinct purposes relating to its exercise
of its supervisory and examination
authorities under CFPA section 1024.
First, the Bureau concludes the final
rule’s requirements that certain
supervised entities (which are referred
to in the rule as ‘‘supervised registered
entities’’) designate attesting executives
and provide written statements will
facilitate the Bureau’s supervision
efforts, including its efforts to assess
compliance with the requirements of
Federal consumer financial law, obtain
information about supervised entities’
activities and compliance systems or
procedures, and detect and assess risks
to consumers and to markets for
consumer financial products and
laws, see the section-by-section discussion of
§ 1092.201(c) below.
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services.103 As discussed, the existence
of one or more covered orders involving
a supervised registered entity already
raises red flags regarding the entity’s
compliance with Federal consumer
financial law and the overall risk posed
by such entity to consumers in the
offering or provision of consumer
financial products and services.
Submission of a written statement
regarding either compliance or
noncompliance with such an order will
provide the Bureau with important
additional information regarding risks to
consumers that may be associated with
the order and the applicable supervised
registered entity’s compliance systems
and procedures. Covered orders
frequently contain provisions aimed at
ensuring an entity’s future legal
compliance, such as reporting
requirements, recordkeeping
requirements, and provisions requiring
the entity to obtain the issuing agency’s
nonobjection before adopting or
amending relevant policies and
procedures. An entity’s sustained
compliance with such provisions may
mitigate the continuing risks to
consumers presented by the entity and
thus reduce the potential need for
current supervisory activities. By
contrast, an entity’s noncompliance
with the terms of an order may indicate
a heightened need for current
supervisory activities. And if an entity
is committing significant or repeated
violations of a covered order, or it is
failing to take appropriate steps to
address such violations and prevent
their recurrence, that may indicate that
the entity lacks the protocols and
institutional commitment necessary to
ensure compliance with legal
obligations aimed at protecting
consumers and ultimately with the
Federal consumer financial laws.
Entities that fail to comply with orders
enforcing the law may be at greater risk
of violating one or more laws within the
Bureau’s jurisdiction. Submission of the
proposed written statements will enable
the Bureau to conduct additional
supervisory reviews or to otherwise
investigate the matter in order to
identify any such violations and related
risks.
As a result, the final rule’s written
statements will be particularly relevant
when prioritizing the Bureau’s
supervisory activities under CFPA
section 1024(b). As discussed above at
part III(C) and below in the section-bysection discussion of § 1092.204, CFPA
section 1024(b)(2) requires that the
Bureau exercise its authority under
CFPA section 1024(b)(1) in a manner
designed to ensure that such exercise,
with respect to persons described in
section 1024(a), is based on the
assessment by the Bureau of certain
identified risks.104 For the reasons
discussed above, the final rule’s written
statements will inform the Bureau’s
risk-based prioritization of its
supervisory program under CFPA
section 1024(b)(2). The Bureau
anticipates that the written statements
would be particularly helpful in
assessing, among other things, ‘‘the risks
to consumers created by the provision of
. . . consumer financial products or
services’’ and ‘‘the extent to which such
institutions are subject to oversight by
State authorities for consumer
protection.’’ 105
The final rule’s written-statement
requirements also will improve the
Bureau’s ability to conduct its
supervisory and examination activities
with respect to the supervised nonbank,
when it does choose to exercise its
supervisory authority. The Bureau
exercises its supervisory authority with
respect to supervised nonbanks for
certain purposes, including assessing
compliance with the requirements of
Federal consumer financial law,
obtaining information about the
activities and compliance systems or
procedures of supervised nonbanks, and
detecting and assessing risks to
consumers and markets for consumer
financial products and services.106
Assessing whether entities have
adequate compliance management
systems in place is a long-standing and
standard component of the Bureau’s
examination process, and that
assessment depends in part on
understanding with whom certain
responsibilities lie and how a
compliance program is carried out.107
The Bureau concludes a supervised
nonbank’s written statements as
required under the proposal will
provide important information relevant
104 12
U.S.C. 5514(a), (b)(2).
U.S.C. 5514(b)(2)(C)–(D). See additional
discussion of the factors for risk-based supervisory
prioritization in part IV(B) above.
106 12 U.S.C. 5514(b)(1).
107 See CFPB Supervision and Examination
Manual at CMR 1 (‘‘To maintain legal compliance,
an institution must develop and maintain a sound
compliance management system . . . that is
integrated into the overall framework for product
design, delivery, and administration across their
entire product and service lifecycle.’’).
105 12
103 See 12 U.S.C. 5514(b)(1), (7)(A)–(B). As
explained in the ‘‘legal authority’’ section, 12 U.S.C.
5514(b)(7)(A) authorizes the Bureau to prescribe
rules to facilitate Bureau supervision and the
assessment and detection of risks to consumers, and
12 U.S.C. 5514(b)(7)(B) authorizes the Bureau to
require supervised registered entities to
‘‘generate’’—i.e., create—reports regarding their
activities (including the required written
statements) and then ‘‘provide’’ them to the Bureau.
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to all of these statutory purposes. As
explained below, a supervised
nonbank’s failure to comply with a
relevant order under a covered law
could indicate that the entity more
generally lacks the will or ability to
comply with its legal obligations,
including its obligations under Federal
consumer financial law. Such
noncompliance may also indicate that
the entity generally lacks adequate
compliance systems or procedures,
which in turn would create risks to
consumers and to the markets for
consumer financial products and
services that the entity participates in.
Conversely, written statements
indicating that the entity had not
identified any instances of
noncompliance with a relevant order
would also provide the Bureau with
similarly useful information about the
entity’s efforts to comply with such
orders and the entity’s compliance
systems and procedures related to the
entity’s offering and provision of
consumer financial products and
services. Thus, in cases where the
Bureau determines to exercise its
supervisory authorities with respect to a
supervised nonbank required to submit
written statements under the proposal,
the Bureau would expect those written
statements to be of value in conducting
its examination work. For example, the
Bureau may use the written statements
in determining what information to
require from a supervised nonbank, in
determining the content of supervisory
communications and recommendations,
or in making other decisions regarding
the use of its supervisory authority.108
Second, the final rule’s writtenstatement requirements will help ensure
that supervised registered entities ‘‘are
legitimate entities and are able to
perform their obligations to
consumers.’’ 109 As discussed in part
VIII below, the Bureau believes that
most supervised registered entities
subject to covered orders endeavor in
good faith to comply with consumer
protection laws and, accordingly, have
put in place some manner of systems
and procedures to help achieve such
compliance. But the Bureau also expects
that other supervised registered entities
108 As explained below in the section-by-section
discussion of § 1092.204(e), the Bureau is requiring
supervised registered entities to maintain records to
support their written statements. That
recordkeeping requirement will further facilitate the
Bureau’s supervisory and examination activities
because it will ensure the availability of records for
the Bureau to review regarding the matters
addressed in the written statements.
109 12 U.S.C. 5514(b)(7)(C). As explained in the
‘‘legal authority’’ section above, 12 U.S.C.
5514(b)(7)(A), (B), and (C) provide independent
sources of rulemaking authority.
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will not take their legal obligations
seriously, including their obligations
under Federal consumer financial
law.110 The final rule’s writtenstatement requirements will provide
information that would help the Bureau
assess in which category a particular
entity falls. If, after reviewing a written
statement, the Bureau concludes that an
entity is not working in good faith to
comply with its legal obligations, that
conclusion might provide grounds for
prioritizing the entity for supervisory
examinations to assess its compliance
with Federal consumer financial law.
The Bureau expects that the risk of such
increased supervisory scrutiny will
provide an incentive for some entities to
improve their compliance efforts so that
they can submit a written statement that
is less likely to result in increased
scrutiny from the Bureau. Thus, by
making it more difficult to quietly
disregard the law, the Bureau concludes
that the written-statement requirement
will likely motivate at least a few
supervised entities with substandard
compliance practices to enhance their
compliance efforts and comply with
their legal obligations, including their
obligations under Federal consumer
financial law. The Bureau likewise
believes that the final rule’s requirement
to designate an attesting executive with
knowledge of the entity’s systems and
procedures for achieving compliance
with the covered order and with control
over the efforts to comply with the
covered order will likely provide an
incentive to pay more attention to the
entity’s legal obligations.
To be clear, the final rule does not
establish any minimum procedures or
otherwise specify the steps the attesting
executive must take in order to review
and oversee the supervised registered
entity’s activities. Nor does the final
rule establish any minimum level of
compliance management or expectation
for compliance systems and procedures
at such entities, or purport to impose
any restrictions on the manner in which
supervised registered entities address
such matters. However, as explained
above, the Bureau expects that most
supervised registered entities will be at
least somewhat hesitant to repeatedly
report the absence of good faith efforts
to comply with covered orders. Also,
the rule will require supervised
registered entities to identify, on an
annual basis, a high-level executive
with knowledge and responsibility
regarding an entity’s efforts to comply
110 As explained above, in several cases, the
Bureau has found that entities have violated prior
orders that the Bureau has issued or obtained. See
supra note 7.
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with a covered order, which will
facilitate any Bureau supervisory efforts
related to the order or the matters
addressed therein.
The Bureau is finalizing its
preliminary findings that requiring
certain supervised nonbanks to
designate attesting executives and to
submit written statements relating to
compliance with reported orders will
facilitate the Bureau’s supervisory
efforts and better ensure that supervised
registered entities are legitimate entities
and are able to perform their obligations
to consumers.
E. Why the Bureau Is Adopting an
Option for One-Time Registration of
Orders Published on the NMLS
Consumer Access Website
The Bureau received multiple
comments on the proposal stating that
the proposed registry was redundant
with existing registries and other
published information, and in particular
with the NMLS. See the section-bysection analysis of § 1092.203 below for
a discussion of these comments and the
Bureau’s response. Some consulting
parties expressed similar concerns
during the Bureau’s interagency
consultation process, as discussed in
part V below. In light of those comments
and concerns, the Bureau is adopting a
one-time registration option for orders
that are published on the NMLS
Consumer Access website, which may
be exercised at the election of the
covered nonbank. Nonbanks that
exercise this option may submit a onetime registration regarding certain
agency and court orders that are
published on the NMLS Consumer
Access website maintained at
www.NMLSConsumerAccess.org (except
for orders issued or obtained by the
Bureau), in lieu of complying with other
requirements of the rule with respect to
the order. Such nonbanks will be
required to submit certain limited
information to the Bureau’s nonbank
registry regarding the order to enable the
Bureau to identify the relevant nonbank
and order and otherwise coordinate the
nonbank registry with the NMLS. Upon
exercising this option and submitting
the required information about the
relevant order, a nonbank will have no
further obligation under subpart B to
provide information to, or update
information provided to, the Bureau’s
nonbank registry regarding the order.
The one-time registration option
established in the final rule will ensure
that the Bureau is informed regarding
risks to consumers in the offering or
provision of consumer financial
products and services, including
developments in markets for such
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products and services, in a manner that
promotes coordination and cooperation
with the States while reducing potential
burden on the companies that are
required to register. This option is not
available for orders that are issued or
obtained at least in part by the Bureau
itself.
The one-time registration option is
consistent with § 1092.102(b), which
provides that in administering the
nonbank registry, the Bureau may rely
on information a person previously
submitted to the nonbank registry under
part 1092 and may coordinate or
combine systems in consultation with
State agencies as described in CFPA
sections 1022(c)(7)(C) and 1024(b)(7)(D).
Those statutory provisions provide that
the Bureau shall consult with State
agencies regarding requirements or
systems (including coordinated or
combined systems for registration),
where appropriate. As § 1092.102(b)
makes clear, the Bureau may develop or
rely on such systems as part of
maintaining the nonbank registry and
may also rely on previously submitted
information.
F. Why the Bureau Intends To Publish
Certain Information Collected Under the
Registration Requirements
The Bureau intends to publish a
registry that contains certain
information about nonbanks and orders
collected under the rule. However, the
Bureau is reserving the option not to
publish information based on
operational considerations, such as
resource constraints.111
While the orders subject to the rule
will already be public, information
about the orders may not be readily
accessible in a comprehensive and
collected manner, and some of the
information submitted to the registry
may not be readily available to the
public. The Bureau intends to publish
this information because it believes
publication will provide benefits to the
general public, other regulators, and to
consumers, and would be consistent
with Federal Government efforts to
make government data assets publicly
available.112 The Bureau has authority
to publish the registration information
under CFPA section 1022(c)(3)(B),
which authorizes it to publish
information obtained under section
1022 ‘‘as is in the public interest,’’ 113
and under CFPA section 1022(c)(7)(B),
111 For additional discussion regarding the
Bureau’s discretion not to publish information
under § 1092.205(a), see the section-by-section
discussion of that provision below.
112 See also the discussion of these issues in the
section-by-section discussion of § 1092.205 below.
113 12 U.S.C. 5512(c)(3)(B).
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which authorizes the Bureau to
‘‘publicly disclose registration
information to facilitate the ability of
consumers to identify covered persons
that are registered with the Bureau.’’ 114
As discussed further in the section-bysection discussion of § 1092.205(a)
below, the Bureau finds that, except
under certain circumstances, it will be
in the public interest to publish certain
information collected by the nonbank
registry.
A variety of Federal regulators,
including the prudential regulators, as
well as State attorneys general and other
State agencies, all have authority to
issue orders to address legal violations
in the provision or offering of consumer
financial products or services.
Consequently, similar conduct may be
addressed through separate orders, by
separate regulators, or across separate
lines of business. Again, the orders that
would be published under the proposal
would already be public. But such
orders, while public, are currently
subject to distinct publication regimes.
The distinct enforcement and
publication regimes for the various
agencies with authority over nonbank
covered persons make it more difficult
for the Bureau, consumers, and other
interested parties to identify entities
that engage in misconduct and
repeatedly violate the law. The final
rule will address that issue by creating
a registry of orders that relate to offering
or providing consumer financial
products or services and the nonbanks
that are subject to them. The registry
will enable users of the nonbank registry
to become better informed about those
orders and nonbanks and promote
transparency in the markets for
consumer financial products and
services.
The Bureau recognizes that much
public information about such orders
already exists. In particular, some
information is available to potential
users through the NMLS Consumer
Access website, which is owned and
operated by the State Regulatory
Registry LLC, which is a wholly owned
subsidiary of the Conference of State
Bank Supervisors. In addition, the
applicable Federal and State regulators
generally each publish their own orders
enforcing consumer financial law; thus,
potential users may be able to access
some of this information by means of
the various websites and other databases
maintained by individual agencies or
other multiagency websites. And still
other information is published and
maintained by private actors.
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U.S.C. 5512(c)(7)(B).
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As discussed in part IV(E) above and
in the section-by-section discussion of
§ 1092.203 below, the Bureau is
adopting a one-time registration option
with respect to orders that are published
on the NMLS Consumer Access website,
www.NMLSConsumerAccess.org (except
for orders issued or obtained by the
Bureau). This option will reduce burden
on eligible entities that are subject to the
rule, help avoid confusion, and promote
coordination with the States in
exercising the Bureau’s nonbank
registration authorities by leveraging
information already gathered and
published by the States. The Bureau
intends to publish certain limited
information collected under this onetime registration option for the purposes
of informing users of the registry of
particular orders published on the
NMLS Consumer Access website and
the applicable nonbanks subject to
them. The Bureau’s registry will alert
users of the NMLS that orders have been
issued against nonbanks subject to the
Bureau’s jurisdiction in connection with
the offering or provision of consumer
financial products or services. Where an
order has been registered with the
Bureau’s registry under the option
discussed in part IV(E) above, users may
also refer to the NMLS for additional
information about that order, to the
extent consistent with any terms of use
or other conditions of access that the
NMLS’s operator may impose.
The Bureau is authorizing the
establishment of its own public registry
in order to provide access to a new
centralized and publicly available
database containing information about
applicable nonbanks and the orders to
which they are subject, specifically in
connection with the offering and
provision of consumer financial
products and services. While certain
State regulators provide information
about certain public enforcement
actions through the NMLS, including in
some cases publishing related orders on
the NMLS Consumer Access website,
such information does not extend to all
of the orders and all of the agencies that
are addressed by the final rule,
including orders issued by Federal
agencies. It is also limited to only
certain industry sectors. Therefore, there
appears to be limited collective
information regarding all of the orders
that have been issued by multiple
regulators to particular entities across
multiple product markets and
geographic markets related to consumer
financial products and services. To the
Bureau’s knowledge, there is currently
no public government registry at the
Federal or State level for the collection
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of information about such orders across
the entities subject to the Bureau’s
jurisdiction (though privately
maintained databases may exist). No
government agency appears to maintain
a publicly available repository of such
orders and other related information
with respect to particular entities as
they relate to consumer financial
products and services. The Bureau
believes that consumers would benefit
from a registry that is maintained by the
Federal Government for the purpose of
providing information regarding such
orders.
The Bureau believes that there will be
significant value in creating a public
repository of information related to
public agency and court orders that
impose obligations based on violations
of consumer protection laws, and the
nonbanks under the Bureau’s
jurisdiction that are subject to them.115
Publication of certain data collected
pursuant to this rule is in the public
interest in a variety of ways. By
improving public transparency, the
Bureau intends to mitigate recidivism
and more effectively deter unlawful
behavior. Providing better tools to
monitor repeat law violators and
corporate recidivism is in the public
interest. Researchers will be able to use
published information to better
understand the markets regulated by the
Bureau and the participants in those
markets, and their efforts may result in
more thorough understanding and
promote compliance with the law. Nongovernment entities will likewise be
able to use published information in
conducting their work and in
identifying potential issues and risks
affecting consumers in the markets for
consumer financial protection and
services. Industry can use a public
registry as a convenient source of
information regarding regulator actions
and trends across jurisdictions, helping
industry actors to better understand
legal risks and compliance obligations.
A public registry will also provide
potential investors, contractual partners,
financial firms, and others that are
conducting due diligence on a registered
nonbank a consolidated source of
information regarding public orders.
Establishing a source for public data on
entity lawbreaking and recidivism will
promote tracking and awareness of such
matters by consumer groups, trade
associations, firms conducting due
diligence, the media, and other parties.
Government agencies—including, but
not limited to, the Bureau—will also
115 See also the discussion of these issues in the
section-by-section discussions of §§ 1092.202(b)
and 1092.205(a) below.
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benefit from the public registry. While
the orders that the Bureau intends to
publish under the rule will already be
public, every Federal, State, and local
agency with jurisdiction over a covered
nonbank will benefit from access to a
regularly maintained database providing
up-to-date information on relevant
public orders that have been issued
against such entities. Such information
will help agencies to detect risks to
consumers, and to coordinate and
maintain consistency with the Bureau
and other agencies in their enforcement
strategies and approaches. Agencies can
use the published information to better
identify registered nonbanks and
determine their legal structure and
organization, since the registry will
(subject to the option for NMLSpublished covered orders) require
registered nonbanks to submit and
maintain up-to-date identifying
information, including legal name and
principal place of business. Also,
publication of registration information
and information regarding orders will
assist other agencies in assessing the
potential risks to consumers that may be
posed by registered nonbanks and in
making their own determinations
regarding whether to conduct
examinations or investigations, bring
enforcement actions against nonbanks,
or engage in other regulatory activities.
For example, a State regulator
attempting to improve its assessments of
consumer risk trends among nonbank
payday lenders in its State should be
able to use the Bureau’s registry to
identify what other regulators of the
same or similar nonbank providers or
products have recently identified in
terms of such risks. In addition, the
Bureau believes that many agencies
would find the published information
useful in making other determinations
regarding the nonbanks registered under
the proposal. For example, an agency
may be able to use this information
when making determinations regarding
an application or license, or to ask
relevant questions regarding the
information that is published. Thus, the
Bureau believes that, with access to a
public Bureau registry of these orders,
those similarly tasked with protecting
consumers in the markets for consumer
financial products and services would
obtain many of the same powerful
market-monitoring benefits that the
Bureau anticipates obtaining from this
rule.116
116 As described in part V below, certain
consulting parties confirmed to the Bureau during
the interagency consultation process that they
would find the registry useful in conducting their
own operations, while certain other consulting
parties stated that they would not.
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In developing the proposal, the
Bureau considered whether it might be
better to use confidential channels, or
perhaps a private electronic portal, to
exchange this information with other
government agencies. However, the
Bureau believes that such an approach
likely would be impractical. Not every
agency that would be able to use the
information would be aware of the need
to request access to the information
from the Bureau or would necessarily be
able to expend the resources to maintain
access. The Bureau would need to
expend its own resources to establish
and maintain such channels. And the
Bureau believes that such a system
would not achieve the benefits of
disclosure to consumers and the public
discussed in this section. Publication
also would formally align the proposed
registry with Federal Government
standards calling for publishing
information online as open data.117
Consumers may also benefit from the
collection and publication of the
information collected by the registry,
including information about orders that
are already public. At least in certain
cases, publishing information about the
entity and its applicable orders in a
public registry as intended by the
Bureau will potentially help certain
consumers make informed decisions
regarding their choice of consumer
financial products or services. As
discussed at part VIII below, the Bureau
does not necessarily expect a wide
group of consumers to rely routinely on
the Bureau’s registry when selecting
consumer financial products or services.
However, the Bureau believes that the
registry will benefit certain consumers if
the information in the registry is
recirculated, compiled, or analyzed by
other users such as consumer advocacy
organizations, researchers, or the media.
For example, media outlets can use the
registry to report which entities have the
most government orders enforcing the
law against them, which would inform
consumers about such repeat offenders.
Publication of the registry as intended
by the Bureau will also facilitate private
enforcement of the Federal consumer
financial laws by consumers, to the
extent those laws provide private rights
of action, where consumers have been
harmed by a registered nonbank. Such
publication will be useful in helping
consumers understand the identity of a
company that has offered or provided a
particular consumer financial product
or service, and in determining whether
to file suit or otherwise make choices
117 See, e.g., Open, Public, Electronic, and
Necessary Government Data Act, in title II of Public
Law 115–435 (Jan. 14, 2019).
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regarding how to assert their legal
rights. And availability of this
information could lead consumers and
other persons to report to the Bureau
instances of similar conduct for the
Bureau to investigate.
Under the final rule, the Bureau will
not publish the written statement
submitted by a supervised registered
entity but will instead treat the written
statement as Bureau confidential
supervisory information subject to the
provisions of its rule on the disclosure
of records and information at 12 CFR
part 1070. The Bureau does intend to
publish the name and title of the
attesting executive(s) submitted by the
supervised registered entity. The Bureau
intends to disclose this name and title
information because it concludes that,
except as described in the section-bysection discussion of § 1092.205 below,
publication of this information will be
in the public interest. In particular, it
will help ensure accountability at the
entity for noncompliance. The Bureau
concludes that the publication of the
executive’s name and title will provide
an incentive to pay more attention to
covered orders. The Bureau believes
that designating an attesting executive
will prompt that executive to focus
greater attention on ensuring the entity’s
compliance with a covered order, and in
turn increase the likelihood of
compliance. Publication of this
designation as intended by the Bureau
will increase the likelihood of these
effects. Such publication of the
designation will identify for other
regulators (and the general public) the
highest-ranking executive at the
supervised registered entity who has
control over the entity’s efforts to
comply with the covered order and
otherwise satisfies the rule’s designation
requirements. Just as the possibility of
Bureau scrutiny of the attesting
executive’s conduct is likely to motivate
the executive to devote greater attention
to compliance efforts, the additional
scrutiny from others outside the Bureau
will further promote compliance.
Publishing the attesting executive’s
name and title thus dovetails with the
supervisory goals discussed above in
part IV(D).
Publishing the name and title of the
executive who has knowledge and
control of the supervised entity’s efforts
to comply with the covered order, as
intended by the Bureau, will benefit
users of the registry in other ways. For
example, publishing this information
may help certain consumers better
understand and monitor the conduct of
the entities with whom they do
business, including how the company
assigns responsibility for compliance
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with Federal consumer financial law.
Researchers, media, and other users of
the information may be able to detect
trends or patterns associated with such
information. Publication as intended by
the Bureau may also help
whistleblowers and consumers better
understand the operations and structure
of the supervised entity, such as to
which department or division of the
company to direct whistleblowing
complaints, information about
violations, or requests for information
with respect to the covered order in
order to ensure that their complaint,
information, or request is being sent to
the appropriate part of the organization.
Clients or other companies that do
business with the entity will also have
a better understanding of which areas of
the company are affected by a covered
order and who is responsible for
compliance with it.
Publishing such name and title
information will also facilitate
coordination and communication
regarding the order between the Bureau,
other government agencies, and the
nonbank entity. Other regulators,
especially those that have issued orders
regarding the supervised entity, would
likely benefit from understanding which
executive(s) have been tasked with
ensuring compliance with their orders.
And disclosure of this information
would increase transparency regarding
how the Bureau processes and verifies
information submitted as part of the
registry.
V. Summary of Rulemaking Process
A. Consultation With Other Agencies in
Exercising the Authorities Relied Upon
in the Proposal and Final Rule
One of the authorities cited as a basis
for components of the Bureau’s
proposed rule and final rule is CFPA
section 1022(c)(7), which provides that
the ‘‘Bureau may prescribe rules
regarding registration requirements
applicable to a covered person, other
than an insured depository institution,
insured credit union, or related
person.’’ 118 Congress provided that
‘‘[i]n developing and implementing
registration requirements under [section
1022(c)(7)], the Bureau shall consult
with State agencies regarding
requirements or systems (including
coordinated or combined systems for
registration), where appropriate.’’ 119
CFPA section 1024(b)(7)—the statutory
basis for the written-statement
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119 12
U.S.C. 5512(c)(7)(A).
U.S.C. 5512(c)(7)(C).
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requirement—includes a similar
consultation provision.120
Accordingly, the Bureau has
consulted with State agencies, including
State agencies involved in supervision
of nonbanks and State agencies charged
with law enforcement, in crafting the
proposal’s and final rule’s registration
requirements and system. In developing
the proposal and this final rule, the
Bureau considered the input it received
from State agencies, including concerns
expressed regarding possible
duplication between any registration
system the Bureau might build and
existing registration systems.
In addition, before proposing a rule
under the Federal consumer financial
laws, including CFPA sections 1022(b)–
(c) and 1024(b), and during the
applicable comment process, the Bureau
must consult with appropriate
prudential regulators or other Federal
agencies regarding consistency with
prudential, market, or systemic
objectives administered by such
agencies.121 In developing the proposal
and this final rule, the Bureau consulted
with prudential regulators and other
Federal agencies and considered the
input it received.
The Bureau also consulted with Tribal
governments regarding this rulemaking
pursuant to CFPA sections 1022(c)(7)(C)
and 1024(b)(7)(D).122 In addition, the
Bureau consulted with tribal
governments in accordance with
applicable Bureau policy.123 In
developing this final rule, the Bureau
considered the input of Tribal
governments, including concerns tribal
governments expressed regarding
maintaining Tribal sovereignty.
Each of the Bureau’s outreach efforts
is discussed in turn below.
B. Pre-Proposal Outreach
The Bureau received feedback from
external stakeholders in developing the
120 12 U.S.C. 5514(b)(7)(D) (‘‘In developing and
implementing requirements under this paragraph,
the Bureau shall consult with State agencies
regarding requirements or systems (including
coordinated or combined systems for registration),
where appropriate.’’).
121 12 U.S.C. 5512(b)(2)(B) (‘‘In prescribing a rule
under the Federal consumer financial laws . . . the
Bureau shall consult with the appropriate
prudential regulators or other Federal agencies prior
to proposing a rule and during the comment process
regarding consistency with prudential, market, or
systemic objectives administered by such agencies
. . . .’’).
122 See 12 U.S.C. 5512(c)(7)(C), 5514(b)(7)(D)
(requiring consultation with ‘‘State agencies’’); see
also 12 U.S.C. 5481(27) (term ‘‘State’’ includes ‘‘any
federally recognized Indian tribe, as defined by the
Secretary of the Interior under’’ 25 U.S.C. 5131(a)).
123 See Consumer Fin. Prot. Bureau, Policy for
Consultation with Tribal Governments, https://
files.consumerfinance.gov/f/201304_cfpb_
consultations.pdf.
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notice of proposed rulemaking. The
following is a summary of that effort.
1. State Agencies and Tribal
Governments
As required by CFPA sections
1022(c)(7) and 1024(b)(7),124 the Bureau
consulted with State agencies and Tribal
governments, including agencies
involved in supervision of nonbanks
and agencies charged with law
enforcement, in crafting the proposed
registration requirements and registry.
Among other meetings, the Bureau’s
consultation efforts included
presentations to State and Tribal
governments on October 13, October 20,
October 27, November 3, November 10,
November 17, and November 21, 2022,
explaining proposals then under
consideration and requesting feedback.
In addition, on October 31, 2022,
Bureau staff met with State financial
regulators and staff of the Conference of
State Bank Supervisors to discuss
technical questions to better understand
whether and how the Bureau could
combine or coordinate its proposed
registry with the NMLS.125 In
developing its proposed rule, the
Bureau considered the input it received
from State agencies and Tribal
governments. This input included
concerns State agencies expressed
regarding possible duplication between
any registration system the Bureau
might build and existing registration
systems. This input also included
concerns Tribal governments expressed
regarding maintaining Tribal
sovereignty.
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2. Federal Regulators
Before proposing a rule under the
Federal consumer financial laws,
including CFPA sections 1022(c) and
1024(b), the Bureau must consult with
appropriate prudential regulators or
other Federal agencies regarding
consistency with prudential, market, or
systemic objectives administered by
such agencies.126 In developing this
proposal, the Bureau consulted with
prudential regulators and other Federal
agencies and considered the input it
received.
C. Notice of Proposed Rulemaking
On December 12, 2022, the Bureau
issued its proposed rule to establish a
public registration system for nonbank
covered persons subject to certain
agency and court orders. The proposal
was published in the Federal Register
on January 30, 2023, and the public
comment period closed on March 31,
2023.127 The Bureau received more than
60 comments on the proposal during the
comment period. Commenters included
individual consumers, consumer
advocate commenters, tribes, the U.S.
Small Business Administration Office of
Advocacy (SBA Office of Advocacy),
industry, and others, including a joint
comment letter from State regulators.
In addition, the Bureau also received
three ex parte communications, one
from a journalist commenter, one from
a consumer advocate commenter, and
another from an industry commenter.128
Summaries of those ex parte
communications are available on the
public docket for this rulemaking.129
The Bureau also received a joint
comment letter from Members of
Congress related to the proposed rule,
which is also available on the public
docket.
Relevant information received via
comment letters, as well as ex parte
submissions, is discussed above in part
IV, as well as the section-by-section
analysis and subsequent parts of this
document, as applicable. The Bureau
considered all comments it received
regarding the proposal, made certain
modifications, and is adopting the final
rule set forth herein. Comments
regarding the Bureau’s impact analyses
are discussed in parts VIII and IX below.
D. Further Outreach
Before finalizing a proposed rule
under the Federal consumer financial
laws, including CFPA sections 1022(c)
and 1024(b), the Bureau must consult
with appropriate prudential regulators
or other Federal agencies regarding
consistency with prudential, market, or
systemic objectives administered by
such agencies.130 In developing this
final rule, the Bureau consulted with
prudential regulators and other Federal
agencies and considered the input it
received.
As required by CFPA sections
1022(c)(7) and 1024(b)(7),131 the Bureau
also consulted with State agencies and
Tribal governments, including agencies
involved in supervision of nonbanks
and agencies charged with law
127 88
124 12
U.S.C. 5512(c)(7)(C); 12 U.S.C.
5514(b)(7)(D).
125 In addition to the listed meetings, the Bureau
participated in other meetings with one or more
representatives of State financial regulators
regarding the Bureau’s proposed registry, including
meetings in August and September 2022.
126 12 U.S.C. 5512(b)(2)(B).
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FR 6088 (Jan. 30, 2023).
CFPB, Policy on Ex Parte Presentations in
Rulemaking Proceedings, 82 FR 18687 (Apr. 21,
2017).
129 See https://www.regulations.gov/docket/CFPB2022-0080.
130 12 U.S.C. 5512(b)(2)(B).
131 12 U.S.C. 5512(c)(7)(C); 12 U.S.C.
5514(b)(7)(D).
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enforcement, in crafting the registration
requirements and system.132 Among
other meetings, the Bureau’s
consultation efforts included
presentations to State agencies and
Tribal governments on February 21, 22,
and 23, 2024, explaining proposals then
under consideration and requesting
feedback, as well as a meeting between
representatives of the Bureau and State
agencies on April 18, 2024. In
developing the final rule, the Bureau
considered the public comments it
received from tribes and via a joint
comment letter from State regulators, as
well as the input it received from State
agencies and Tribal governments during
the consultation process.
In interagency consultations, several
consulting parties reasserted issues that
had been raised in the comment letters.
Those comments are addressed
elsewhere in the applicable sections of
this preamble.
Consistent with an approach
suggested by commenters, including in
a joint comment letter submitted by a
group of State regulators, the Bureau is
adopting a one-time registration option
for nonbanks to submit certain
information about orders published on
the NMLS Consumer Access website
(except for orders issued or obtained by
the Bureau), in lieu of complying with
the other requirements of the rule with
respect to such orders.133
Consulting partners also raised certain
additional issues that the Bureau
addresses in this section. During
consultation, some consulting parties
expressed concerns with aspects of the
final rule and stated that they would not
use the information collected by the
Bureau and potentially published as
provided in the rule.134 However, other
consulting parties expressed general
support for the Bureau’s adoption of the
final rule, and confirmed to the Bureau
during the interagency consultation
process that they would find the registry
useful in conducting their own
operations.
The Bureau satisfied all applicable
statutory requirements with respect to
interagency consultations, including
CFPA sections 1022(c)(7) and
132 As explained above, during the rulemaking
process for issuing rules under the Federal
consumer financial laws, Bureau policy is to
consult with appropriate Tribal governments. See
https://files.consumerfinance.gov/f/201304_cfpb_
consultations.pdf.
133 See part IV(E) and the section-by-section
discussion of § 1092.203 below.
134 For further discussion regarding the final
rule’s approach to authorizing publication of
registry information by the Bureau, including the
ability of other agencies to use such information,
see part IV(F) and the section-by-section discussion
of § 1092.205 below.
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1024(b)(7). As described in this section,
the Bureau engaged in oral and written
discussions with State regulators as it
developed the proposal, during the
notice-and-comment process, and before
finalizing the rule. Throughout the
consultation process, it has solicited the
views of State regulators regarding the
combination and coordination of
systems as well as other matters relating
to both the proposal and the final rule.
Some consulting parties sought further
engagement with the Bureau on aspects
of the rulemaking, which the Bureau
granted.
The Bureau also offered the States an
opportunity to give specific, concrete
feedback on the proposed registry,
including providing feedback regarding
how that system might be combined or
further coordinated with other
registration systems, as contemplated by
CFPA sections 1022(c)(7)(C) and
1024(b)(7)(D).
Certain consulting parties raised
questions about the one-time
registration option for NMLS-published
covered orders in § 1092.203, stating
that any final rule should strike
reporting and registration requirements
for any violations of State consumer
financial laws, rules, and agency orders.
As discussed in part IV(E) above and the
section-by-section discussion of
§ 1092.203 below, the Bureau concluded
that the option provided under
§ 1092.203 is an appropriate means of
furthering the purposes of the final rule,
including the final rule’s provisions
restricting the availability of that option
to ‘‘NMLS-published covered orders’’ as
that term is defined at § 1092.201(k). For
discussion of the application of the final
rule to State laws and orders, see the
section-by-section discussions of
§ 1092.201(c) and (d) below.
Certain consulting parties urged the
Bureau to exempt from its rule any
nonbank entity meeting the Small
Business Administration’s definition of
‘‘small business’’ because, in the
consulting parties’ view, the rule would
be overly expansive and particularly
burdensome for small nonbank entities
not subject to Bureau supervision. As
explained in parts VIII and IX below,
however, the Bureau has determined
that the rule will not impose significant
burdens on a substantial number of
small entities. The Bureau thus declines
to exempt all small businesses from the
rule’s requirements. As explained
below, however, entities with less than
$5 million in annual receipts resulting
from offering or providing all consumer
financial products and services
described in CFPA section 1024(a) 135
135 12
U.S.C. 5514(a).
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are not subject to the requirements
imposed in § 1092.204 of the rule.
One consulting party asserted that the
final rule’s treatment of Tribal
instrumentalities or entities wholly
owned by tribes was inconsistent with
the treatment proposed by the Bureau in
its 2023 proposed rule regarding
registration of nonbanks that use certain
terms and conditions.136 The Bureau
disagrees with the consulting party’s
characterization of its other proposal.
The present final rule does not adopt a
different or narrower approach to issues
related to tribally affiliated entities than
the Bureau proposed in its other
proposed rule. That proposed rule, like
the present final rule, did not propose
to exempt entities that are not part of
the tribe itself from its proposed
registration requirements. As discussed
further in the section-by-section
discussion of § 1092.201(d) below, the
Bureau declines to provide an express
exemption from the final rule for Tribal
instrumentalities or entities wholly
owned by tribes because the Bureau
does not choose to use this rulemaking
as the vehicle for determining the
circumstances under which tribally
affiliated entities qualify as part of the
tribe itself. As discussed in the sectionby-section discussion of §§ 1092.202(g)
and 1092.204(f) below, the Bureau
believes that the voluntary good-faith
filing option established in those
sections of the final rule provides a
satisfactory mechanism for tribally
affiliated entities to avoid the risk of an
enforcement action where they decide
not to register an order or submit a
written statement based on a good-faith
belief that they are not a covered
nonbank or a supervised registered
entity, such as on the grounds that they
qualify as part of a federally recognized
tribe and thus as a ‘‘State.’’
Consulting parties also expressed
concerns, including confidentiality and
privacy concerns, regarding the
notifications of non-registration
provided for in §§ 1092.202(g) and
1092.204(f) of the final rule. As
discussed in the section-by-section
discussion of those sections below, the
option to file notifications of nonregistration under these provisions is
voluntary and does not impose any
mandatory process or other obligation
on tribes or any other persons. Nor
would a decision not to file a voluntary
good-faith notification change or enlarge
the coverage of the rule. Certain
consulting parties stated that the Bureau
136 See Registry of Supervised Nonbanks That Use
Form Contracts To Impose Terms and Conditions
That Seek To Waive or Limit Consumer Legal
Protections, 88 FR 6906, 6937–38 (Feb. 1, 2023).
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56045
should adopt a more informal
mechanism for submitting such
notifications, such as via electronic mail
or regular mail to a designated Bureau
representative. The Bureau does not
believe that eliminating the voluntary
option to file notifications of nonregistration via the nonbank registry
under §§ 1092.202(g) and 1092.204(f), or
soliciting separate communications
from persons that may wish to notify the
Bureau of the type of information that
would be submitted to the Bureau under
those sections of the final rule, would
improve the confidentiality or privacy
of those communications. Nor would
such an informal approach enhance the
efficiency or effectiveness of the
nonbank registry. Instead, such an
approach would add complexity to the
process of notifying the Bureau about
issues relevant to the registry and thus
deter the submission of relevant
information to the Bureau. The Bureau
concludes that a system-based approach
to such matters will be more efficient
and effective in accomplishing the
purposes of the final rule. Nor is it clear
that it would be less burdensome for
either a tribe or the Bureau to engage in
such informal and ad hoc
communications than it would be for
the tribe to submit a succinct electronic
notification of non-registration under
§§ 1092.202(g) and 1092.204(f) via the
nonbank registry.
A consulting party stated that the
Bureau should specify whether or not,
in what level of detail, and how the
Bureau intends to make registry
information publicly available. For
discussions addressing these matters,
see part IV(F) and the section-by-section
discussion of § 1092.205(a) regarding
the information the Bureau intends to
publish under § 1092.205(a) of the final
rule.
See the section-by-section discussion
of §§ 1092.201(d), 1092.202(g), and
1092.204(f) below for additional
discussion of issues related to tribes and
the notifications of non-registration
provided for in the final rule.
VI. Section-by-Section Analysis
Part 1092
Subpart A—General
Section 1092.100
Purpose
Authority and
Proposed Rule
Proposed § 1092.100(a) would have
set forth the legal authority for proposed
12 CFR part 1092, including all
subparts. Proposed § 1092.100 would
have referred to CFPA sections 1022(b)
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and (c) and 1024(b),137 which were
discussed in section III of the proposal.
Proposed § 1092.100(b) would have
explained that the purpose of part 1092
is to prescribe rules regarding nonbank
registration requirements, to prescribe
rules concerning the collection of
information from registered entities, and
to provide for public release of that
information as appropriate.
Comments Received and Final Rule
The Bureau solicited comment on
proposed § 1092.100 and did not receive
any comments specifically regarding
proposed § 1092.100. See part III above
for a general discussion of several CFPA
provisions on which the Bureau relies
in this rulemaking. The Bureau is
finalizing § 1092.100 as proposed, with
minor technical changes.
Section 1092.101
General Definitions
Section 1092.101(a)
Proposed § 1092.101(a) would have
defined the terms ‘‘affiliate,’’
‘‘consumer,’’ ‘‘consumer financial
product or service,’’ ‘‘covered person,’’
‘‘Federal consumer financial law,’’
‘‘insured credit union,’’ ‘‘person,’’
‘‘related person,’’ ‘‘service provider,’’
and ‘‘State’’ as having the meanings set
forth in the CFPA, 12 U.S.C. 5481. The
Bureau solicited comment on this
proposed provision and received no
comments. The Bureau is finalizing
§ 1092.101(a) as proposed.
Section 1092.101(b)
Proposed § 1092.101(b) would have
defined the term ‘‘Bureau’’ as a
reference to the Consumer Financial
Protection Bureau. The Bureau solicited
comment on this proposed definition
and received no comments on this
proposed definition. The Bureau is
finalizing § 1092.101(b) as proposed.
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Section 1092.101(c)
Proposed § 1092.101(c) would have
clarified that the terms ‘‘include,’’
‘‘includes,’’ and ‘‘including’’ throughout
part 1092 would denote non-exhaustive
examples covered by the relevant
provision.138 The Bureau solicited
comment on proposed § 1092.101(c). No
commenters addressed proposed
§ 1092.101(c). The Bureau is finalizing
§ 1092.101(c) as proposed. As used in
the final rule, these terms should not be
construed more restrictively than the
ordinary usage of such terms so as to
137 12
U.S.C. 5512(b), (c); 12 U.S.C. 5514(b).
e.g., Christopher v. SmithKline Beecham
Corp., 567 U.S. 142, 162 (2012) (use of ‘‘includes’’
indicates that ‘‘the examples enumerated in the text
are intended to be illustrative, not exhaustive’’).
exclude any other thing not referred to
or described.139
Section 1092.101(d)
Proposed § 1092.101(d) would have
defined the term ‘‘nonbank registration
system’’ to mean the Bureau’s electronic
registration system identified and
maintained by the Bureau for the
purposes of part 1092. The Bureau
solicited comment on this proposed
definition and received no comments on
the proposed definition.
The Bureau is finalizing § 1092.101(d)
as proposed, with minor revisions to
change this term to ‘‘nonbank registry,’’
which as adopted in the final rule
means ‘‘the Bureau’s electronic registry
identified and maintained by the Bureau
for the purposes of part 1092.’’ The
Bureau is adopting the revised
definition for stylistic reasons, with no
change in meaning from the term
‘‘nonbank registration system’’ that was
used in the proposed rule. The Bureau
is also adopting corresponding changes
to the proposed rule to use the term
‘‘nonbank registry’’ instead of the term
‘‘nonbank registration system’’
throughout the final rule, including at
§§ 1092.102(a) through (c); 1092.201(a);
1092.202(b), (c), (f), (g); 1092.204(d), (f);
and 1092.205(a), (c) of the final rule.
Section 1092.101(e)
Proposed § 1092.101(e) would have
defined the term ‘‘nonbank registration
system implementation date’’ to mean,
for a given requirement or subpart of
part 1092, the date(s) determined by the
Bureau to commence the operations of
the nonbank registration (NBR) system
in connection with that requirement or
subpart. The Bureau anticipated that the
nonbank registration system
implementation date with respect to
proposed subpart B would occur
sometime after the effective date of the
final rule and no earlier than January
2024. The Bureau explained that the
actual nonbank registration system
implementation date would depend, in
significant part, upon the Bureau’s
ability to develop and launch the
required technical systems that would
support the submission and review of
applicable filings, and on feedback
provided by commenters regarding the
time registrants would need to
implement proposed part 1092’s
requirements. The Bureau proposed to
provide advance public notice regarding
the nonbank registration system
implementation date with respect to
subpart B to enable entities subject to
138 See,
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139 See 12 U.S.C. 5301(18)(A) (similarly defining
the term ‘‘including’’ for purposes of the DoddFrank Act by reference to 12 U.S.C. 1813).
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subpart B to prepare and submit timely
filings to the NBR system. No comments
addressed this proposal.
The Bureau is finalizing § 1092.101(e)
largely as proposed with two revisions
as follows.
First, for stylistic reasons, the Bureau
is adopting a revision to change this
term to ‘‘nonbank registry
implementation date’’ (without any
change in meaning). This revision
corresponds with the Bureau’s adoption
of the term ‘‘nonbank registry’’ in
§ 1092.101(d) as discussed above. The
Bureau is also adopting corresponding
changes to the proposed rule to use the
term ‘‘nonbank registry implementation
date’’ instead of the term ‘‘nonbank
registration system implementation
date’’ throughout the final rule,
including at §§ 1092.202(b) and
1092.204(a) of the final rule.
Second, the final rule provides that
the definition of the term ‘‘nonbank
registry implementation date’’ in
§ 1092.101(e) means, for a given
requirement or subpart of part 1092, or
a given person or category of persons,
the date(s) determined by the Bureau to
commence the operations of the
nonbank registry in connection with
that requirement or subpart. Thus, the
final rule clarifies that the nonbank
registry implementation date may be
different for different persons or
categories of persons.
Also, in connection with this change,
the Bureau is adopting a new section of
the final rule at § 1092.206 that specifies
the nonbank registry implementation
date in connection with the
requirements of subpart B for three
different categories of covered persons
subject to the final rule. While the
proposal would have provided for a
separate later determination by the
Bureau of the ‘‘nonbank registration
system implementation date,’’ the
Bureau concludes that specifying the
nonbank registry implementation date
in the final rule will provide registrants
and the Bureau with more information
and certainty regarding the timing of the
launch of the registry and the
requirements imposed under the final
rule. Section 1092.206 of subpart B
establishes different nonbank registry
implementation dates for covered
nonbanks that are larger participants in
supervised markets, other supervised
nonbanks, and other covered nonbanks
for registrations under subpart B. For
further information, see the section-bysection analysis of § 1092.206 below.
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Section 1092.102 Submission and Use
of Registration Information
Section 1092.102(a) Filing Instructions
Proposed Rule
Proposed § 1092.102(a) would have
provided that the Bureau shall specify
the form and manner for electronic
filings and submissions to the NBR
system that are required or made
voluntarily under part 1092. The Bureau
explained that it would issue specific
guidance for filings and submissions.
The Bureau anticipated that its filing
instructions may, among other things,
specify information that filers must
submit to verify that they have authority
to act on behalf of the entities for which
they are purporting to register. The
Bureau proposed to accept electronic
filings and submissions to the NBR
system only and did not propose to
accept paper filings or submissions.
Proposed § 1092.102(a) also would
have stated that the Bureau may provide
for extensions of deadlines or time
periods prescribed by the proposed rule
for persons affected by declared
disasters or other emergency situations.
The Bureau explained in the proposal
that such situations could include
natural disasters such as hurricanes,
fires, or pandemics, and also could
include other emergency situations or
undue hardships including technical
problems involving the NBR system. For
example, the Bureau could defer
deadlines during a presidentially
declared emergency or major disaster
under the Robert T. Stafford Disaster
Relief and Emergency Assistance Act
(42 U.S.C. 5121 et seq.) or a
presidentially declared pandemicrelated national emergency under the
National Emergencies Act (50 U.S.C.
1601 et seq.). The Bureau stated that it
would issue guidance regarding such
situations.
Comments Received and Final Rule
The Bureau did not receive comments
specifically about proposed
§ 1092.102(a). The Bureau is finalizing
§ 1092.102(a) as proposed.140
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Section 1092.102(b) Coordination or
Combination of Systems
Proposed Rule
Proposed § 1092.102(b) would have
provided that in administering the NBR
system, the Bureau may rely on
information a person previously
submitted to the NBR system under part
1092. This proposed section would have
clarified, for example, that the
140 See the section-by-section discussion of
§ 1092.101(d) above regarding the Bureau’s
adoption of the revised term ‘‘nonbank registry.’’
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registration process for proposed
subpart B may take account of
information previously submitted, such
as in a prior registration under subpart
B or, if applicable, a registration of
nonbanks that use certain terms and
conditions and related information
under subpart C.
Proposed § 1092.102(b) also would
have provided that in administering the
NBR system, the Bureau may coordinate
or combine systems in consultation with
State agencies as described in CFPA
sections 1022(c)(7)(C) and 1024(b)(7)(D).
Those statutory provisions provide that
the Bureau shall consult with State
agencies regarding requirements or
systems (including coordinated or
combined systems for registration),
where appropriate. The Bureau sought
comment on the types of coordinated or
combined systems that would be
appropriate and the types of information
that could be obtained from or provided
to State agencies.
Comments Received
In connection with proposed
§ 1092.102(b), the Bureau sought
comment on the types of coordinated or
combined systems that would be
appropriate under CFPA sections
1022(c)(7)(C) and 1024(b)(7)(D) and the
types of information that could be
obtained from or provided to State
agencies. For a discussion of certain
comments related to this topic, and the
Bureau’s response thereto, see the
section-by-section discussion of
§ 1092.203.
A consumer advocate commenter
agreed that the Bureau, in administering
the NBR system, should rely on
information an entity previously
submitted to the registry under part
1092 and coordinate or combine
systems with State agencies, as provided
in proposed § 1092.102(b). The
commenter stated that not only would
this provision allow for more efficient
implementation of the registry by
avoiding duplicative or redundant
efforts but would also reflect the
importance of this registry to both
Federal and State regulators, and that
the Bureau should consider
coordination with existing State
consumer financial protection agencies.
Response to Comments Received
As required by CFPA sections
1022(c)(7)(C) and 1024(b)(7)(D) and
described in part V, the Bureau has
consulted with State agencies on
requirements and systems related to the
nonbank registry. The Bureau also
intends to continue to consult with
State agencies in implementing the
nonbank registry. Under § 1092.203,
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with respect to any NMLS-published
covered order, a covered nonbank that
is identified by name as a party subject
to the order may elect to comply with
the one-time registration option
described in that section in lieu of
complying with the requirements of
§§ 1092.202 and 1092.204. As discussed
in the section-by-section discussion of
§ 1092.203, the Bureau is adopting this
option partly in recognition of the
statutory mandates to consult with State
agencies regarding combined or
coordinated systems for registration in
CFPA sections 1022(c)(7)(C) and
1024(b)(7)(D).
Final Rule
For the reasons discussed above, the
Bureau is finalizing § 1092.102(b) as
proposed.141
Section 1092.102(c) Bureau Use of
Information
Proposed Rule
Proposed § 1092.102(c) would have
provided that the Bureau may use the
information submitted to the NBR
system under this part to support its
objectives and functions, including in
determining when to exercise its
authority under CFPA section 1024 to
conduct examinations and when to
exercise its enforcement powers under
subtitle E of the CFPA.
The Bureau proposed to establish the
NBR system under its registration and
market-monitoring rulemaking
authorities under CFPA section
1022(b)(1), (c)(1)–(4) and (c)(7), and
under its supervisory rulemaking
authorities under CFPA section
1024(b)(7)(A), (B), and (C). The Bureau
explained in its proposal that it
intended to use the information
submitted under the NBR system to
monitor for risks to consumers in the
offering or provision of consumer
financial products or services, and to
support all of its functions as
appropriate, including its supervisory,
rulemaking, enforcement, and other
functions. The Bureau stated that it
may, among other things, rely on the
information submitted under part 1092
as it considers whether to initiate
supervisory activity at a particular
entity, in determining the frequency and
nature of its supervisory activity with
respect to particular entities or markets,
in prioritizing and scoping its
supervisory, examination, and
enforcement activities, and otherwise in
assessing and detecting risks to
consumers. In particular, the Bureau
141 See the section-by-section discussion of
§ 1092.101(d) above regarding the Bureau’s
adoption of the revised term ‘‘nonbank registry.’’
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explained that it could consider this
information in developing its risk-based
supervision program and in assessing
the risks posed to consumers in relevant
product markets and geographic markets
and the factors described in 12 U.S.C.
5514(b)(2) with respect to particular
covered persons, and for enforcement
purposes.142
Proposed § 1092.102(c) also would
have provided that part 1092, and
registration under that part, would not
alter any applicable process whereby a
person may dispute that it qualifies as
a person subject to Bureau authority. As
an example of such a process, the
Bureau cited in the proposal 12 CFR
1090.103, which establishes a Bureau
administrative process for assessing a
person’s status as a larger participant
under CFPA section 1024(a)(1)(B) and
(2) and 12 CFR part 1090. The Bureau
explained that, under proposed
§ 1092.102(c), a person could dispute its
status as a larger participant under 12
CFR 1090.103 notwithstanding any
registration or information submitted to
the NBR system under part 1092.
Submission of such a dispute regarding
larger participant status to the Bureau
under 12 CFR 1090.103, including the
Bureau’s processes regarding the
treatment of such disputes and the effect
of any determinations regarding the
person’s supervised status, would be
governed by the provisions of 12 CFR
part 1090. The Bureau explained that it
could use the information provided to
the NBR system in connection with
making any determination regarding a
person’s supervised status under 12 CFR
1090.103, along with the affidavit
submitted by the person and other
information as provided in that section.
However, the submission of information
to the NBR system would not have
prevented a person from also submitting
other information under 12 CFR
1090.103.
Comments Received and Final Rule
The Bureau received no comments on
proposed § 1092.102(c) and is finalizing
it as proposed.143
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142 See,
e.g., 12 U.S.C. 5514(b)(2)(C), (D), (E)
(providing that in prioritizing examinations the
Bureau shall consider ‘‘the risks to consumers
created by the provision of such consumer financial
products or services,’’ ‘‘the extent to which such
institutions are subject to oversight by State
authorities for consumer protection,’’ and ‘‘any
other factors that the Bureau determines to be
relevant to a class of covered persons’’); see also,
e.g., 12 U.S.C. 5565(c)(3)(D), (E) (providing that in
determining the amount of civil money penalties
the Bureau shall consider ‘‘the history of previous
violations’’ and ‘‘such other matters as justice shall
require’’).
143 See the section-by-section discussion of
§ 1092.101(d) above regarding the Bureau’s
adoption of the revised term ‘‘nonbank registry.’’
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Section 1092.102(d) Calculation of Time
Periods
The Bureau is finalizing
§ 1092.102(d), which the Bureau did not
propose, to clarify how dates and time
periods prescribed in part 1092 are
calculated.
In calculating dates and time periods,
the day of the event that triggers the
time period is excluded. Every day,
including intermediate Saturdays,
Sundays, and Federal holidays, is
included. If any provision of part 1092
would establish a deadline for an action
that is a Saturday, Sunday, or Federal
holiday, the deadline is extended to the
next day that is not a Saturday, Sunday,
or Federal holiday. The clarifications for
calculation of dates and time periods
apply to all such calculations in subpart
B.
Section 1092.103
Severability
Proposed Rule
Proposed § 1092.103 would have
provided that the provisions of the
proposed rule are separate and severable
from one another, and that if any
provision is stayed or determined to be
invalid, the remaining provisions shall
continue in effect. As the Bureau stated
in the proposal, this is a standard
severability clause of the kind that is
included in many regulations to clearly
express agency intent about the course
that is preferred if such events were to
occur. The Bureau explained that it
carefully considered the requirements of
the proposed rule, both individually
and in their totality, including their
potential costs and benefits to covered
persons and consumers. The Bureau
further explained that in the event a
court were to stay or invalidate one or
more provisions of the proposed rule as
finalized, the Bureau would have
wanted the remaining portions of the
rule as finalized to remain in full force
and legal effect.
Comments Received and Final Rule
The Bureau received no comments on
proposed § 1092.103. It is finalizing
proposed § 1092.103 with revisions to
clarify that applications of provisions
are also severable. The Bureau has
carefully considered the requirements of
the final rule, both individually and in
their totality, including their potential
costs and benefits to covered persons
and consumers. The Bureau intends
that, if any provision of this rule, 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.
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Subpart B—Registry of Nonbank
Covered Persons Subject to Certain
Agency and Court Orders
Section 1092.200
Scope and Purpose
Proposed Rule
Proposed § 1092.200(a) and (b) would
have described the scope and purpose of
proposed subpart B. Proposed subpart B
would have required nonbank covered
persons that are subject to certain public
agency and court orders enforcing the
law to register with the Bureau and to
submit copies of the orders to the
Bureau. It also would have described
the registration information the Bureau
would make publicly available.
Proposed § 1092.200(a) also explained
that subpart B would have required
certain nonbank covered persons that
are supervised by the Bureau to prepare
and submit an annual written statement.
The requirements regarding annual
written statements were described in
proposed § 1092.203.
Proposed § 1092.200(b) would have
explained that the purposes of the
information collection requirements in
proposed subpart B were to support
Bureau functions by monitoring for risks
to consumers in the offering or
provision of consumer financial
products or services, including
developments in markets for such
products or services, pursuant to CFPA
section 1022(c)(1); to prescribe rules
regarding registration requirements
applicable to nonbank covered persons,
pursuant to CFPA section 1022(c)(7);
and to facilitate the supervision of
persons described in CFPA section
1024(a)(1), to ensure that such persons
are legitimate entities and are able to
perform their obligations to consumers,
and to assess and detect risks to
consumers, pursuant to CFPA section
1024(b).
Comments Received and Final Rule
Comments addressing CFPA section
1024(b)(3) and (4) 144 are addressed in
the section-by-section discussion of
§ 1092.202(b).145 The Bureau received
no other comments specifically
addressing proposed § 1092.200.
The Bureau is finalizing § 1092.200(a)
and (b) as proposed, with a revision to
reflect the Bureau’s adoption of a
revised § 1092.205(a) that provides that
the Bureau ‘‘may’’ publish the
information submitted to the nonbank
registry pursuant to §§ 1092.202 and
1092.203.
144 12
U.S.C. 5514(b)(3), (4).
also the section-by-section discussion of
§§ 1092.201(e) and 1092.203(a) below.
145 See
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Section 1092.201
Definitions
In its proposal, the Bureau sought
comment on various definitions set
forth in proposed subpart B and any
suggested clarifications, modifications,
or alternatives.
The Bureau is finalizing a number of
definitions for terms used in subpart B
in § 1092.201. These definitions are
each discussed in detail below. These
definitions supplement the general
definitions for the entirety of part 1092
provided in § 1092.101.
Section 1092.201(a) Administrative
Information
Proposed Rule
Proposed § 1092.201(a) would have
defined the term ‘‘administrative
information’’ to mean contact
information regarding persons subject to
subpart B and other information
submitted or collected to facilitate the
administration of the NBR system. The
Bureau explained that administrative
information would have included
information such as date and time
stamps of submissions to the NBR
system, contact information for nonbank
personnel involved in making
submissions, filer questions and other
communications regarding submissions
and submission procedures,
reconciliation or correction of errors,
information submitted under proposed
§§ 1092.202(g) and 1092.203(f),146 and
other information that would be
submitted or collected to facilitate the
administration of the NBR system.
Proposed § 1092.204(a) would have
provided that the Bureau may determine
not to publish such administrative
information. The Bureau sought
comment on whether any other
information that might be collected
through the NBR system should also be
treated as administrative information.
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Comments Received
A trade association commenter stated
that the proposal’s definition of
‘‘administrative information’’ was
unclear and thus could include a
limitless breadth of information. As a
result, the commenter argued, the
proposal’s estimate of the rule’s burden
was inaccurate. In particular, the
commenter stated that entities would
need to hire outside legal counsel in
order to determine what constitutes
‘‘administrative information.’’
Several Tribal commenters
commented that good-faith notifications
to the Bureau under proposed
§§ 1092.202(g) and 1092.204(f) should
146 See discussion in the section-by-section
discussion of these provisions below.
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not be published, as publishing such
notifications would invite debate and
disagreement on the issues addressed in
those notifications, require the
utilization of limited Tribal resources to
support the tribe’s position, and invite
frivolous litigation.
Comments addressing the publication
of information more generally are
addressed in the section-by-section
discussion of § 1092.205 below.
Response to Comments Received
The Tribal commenters expressed
concern regarding publication of
information with respect to good faith
notifications submitted under proposed
§§ 1092.202(g) and 1092.204(f). Under
the final rule, the Bureau will not
publish under § 1092.205(a) the
administrative information collected
under subpart B; for a discussion of this
issue see the section-by-section
discussion of § 1092.205 below. In
addition, in the final rule, the Bureau
has codified in the text of § 1092.201(a)
its proposal to treat good faith
notifications submitted under
§§ 1092.202(g) and 1092.204(f) as
‘‘administrative information.’’ Thus,
under the final rule, the Bureau will not
publish the good faith notification
information described in § 1092.201(a)
under § 1092.205.
As discussed in the section-by-section
discussion of § 1092.202(d) below, the
Bureau is finalizing § 1092.202(d)(2)
without proposed § 1092.202(d)(2)(v),
under which the Bureau would have
collected and published the names of a
registered entity’s affiliates registered
under subpart B with respect to the
same covered order. Under the final
rule, however, the Bureau may still
collect such information under
§ 1092.202(c), which provides for the
collection of ‘‘administrative
information.’’ Should the Bureau
determine to collect such information
regarding affiliates, the Bureau’s filing
instructions under § 1092.102(a) will
categorize this information as
‘‘administrative information,’’ meaning
that the Bureau will not publish the
information under § 1092.205. For more
information, see the section-by-section
discussions of §§ 1092.202(d) and
1092.205(a) below.
The trade association commenter
expresses concern that it will not be
clear to covered nonbanks what
‘‘administrative information’’ they are
required to submit under the rule. That
comment, however, ignores that
§ 1092.202(c) only requires registered
entities to submit the specific
‘‘administrative information’’ that is
‘‘required by’’ the nonbank registry, and
the Bureau has made clear that it will
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56049
‘‘specify the types of . . . administrative
information registered entities would be
required to submit’’ in ‘‘filing
instructions . . . issue[d] under . . .
§ 1092.102(a).’’ 147 Therefore, covered
nonbanks should have no need to hire
outside legal counsel to ascertain what
information qualifies as ‘‘administrative
information’’ required to be submitted
under the rule. Instead, the Bureau’s
filing instructions will specify what
categories of information covered
nonbanks must submit as
‘‘administrative information.’’
Further reducing potential
uncertainty, the Bureau has identified
certain categories of information that it
currently intends to categorize as
‘‘administrative information’’ in its
filing instructions—e.g., ‘‘contact
information for nonbank personnel
involved in making submissions.’’ 148
And, as discussed above, the Bureau is
also finalizing the definition to
expressly treat as ‘‘administrative
information’’ good faith notification
information submitted under
§§ 1092.202(g) and 1092.204(f). Under
§ 1092.201(a), any new categories of
administrative information that the
Bureau might address in its filing
instructions, and which were not
already discussed in the Bureau’s notice
of proposed rulemaking and this
preamble, would include only contact
information regarding persons subject to
subpart B or other information
submitted or collected to facilitate the
administration of the nonbank registry.
For example, the Bureau may require
entities to comply with a login or
identity-authentication process, and the
Bureau may categorize information
submitted in connection with such a
process as ‘‘administrative
information.’’ 149 Submitting required
administrative information should not
impose significant substantive burdens
on covered nonbanks.
Final Rule
For the reasons discussed above and
as follows, the Bureau is finalizing
§ 1092.201(a) as proposed, with a
revision to expressly include
‘‘[i]nformation submitted under
§§ 1092.202(g) and 1092.203(f)’’ within
the definition of ‘‘administrative
147 88
FR 6088 at 6118.
FR 6088 at 6104.
149 The Bureau has retained the discretion to
adjust the contents of required administrative
information through filing instructions in order to
maintain the viability of the nonbank registry over
time. For example, if some new form of electronic
communication were to replace email as the
preferred method for business communications, the
Bureau’s filing instructions might designate as
required administrative information contact
information associated with that new medium.
148 88
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information.’’ 150 The Bureau’s filing
instructions under § 1092.102(a) will
also categorize this information as
‘‘administrative information.’’ The
Bureau has already identified this
information as information that it
intended to categorize as
‘‘administrative information’’ in its
filing instructions,151 but is finalizing
this provision in the text of the
regulation to provide further clarity that
the Bureau will treat this information as
‘‘administrative information.’’ In
addition to the notifications themselves,
the Bureau may also choose to collect
information to facilitate the
administration of the notification
process.
In addition, the Bureau does not
intend to publish under § 1092.205(a)
any Federal employer identification
numbers (EIN) that may be obtained
from covered nonbanks. The Bureau
will not collect this information from
covered nonbanks as ‘‘identifying
information,’’ as that term is defined at
§ 1092.201(g), but may determine to
collect this information as
‘‘administrative information’’ under
§ 1092.202(c). In filing instructions
issued under § 1092.102(a), the Bureau
will specify whether and how it will
collect such information. The Bureau
understands that EINs are not
commonly used to identify covered
nonbanks in covered orders and in
related public databases that are
maintained by relevant Federal, State,
and local agencies. Thus, as with other
administrative information, the
publication of EINs may not in all
instances be especially useful to
external users of the registry, although
the Bureau may find such information
useful in its administration of the
nonbank registry.
Section 1092.201(b) Attesting Executive
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Proposed Rule
Proposed § 1092.201(b) would have
defined the term ‘‘attesting executive’’
to mean, with respect to any covered
order regarding a supervised registered
entity, the individual designated by the
supervised registered entity to perform
the supervised registered entity’s duties
with respect to the covered order under
proposed § 1092.203. In the section-bysection discussion of proposed
§ 1092.203, the Bureau proposed
requirements regarding attesting
executives.
150 See also the section-by-section discussion of
§ 1092.101(d) above regarding the Bureau’s
adoption of the revised term ‘‘nonbank registry.’’
151 88 FR 6088 at 6104.
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Comments Received and Final Rule
The Bureau did not receive any
comments specifically regarding
proposed § 1092.201(b)’s definition of
‘‘attesting executive.’’ Comments
addressing the proposal’s approach to
the written statement, including
requirements regarding designation of
attesting executives and associated
criteria for such a designation, are
addressed in the section-by-section
discussion of § 1092.204 below.
The Bureau is finalizing § 1092.201(b)
as proposed, with a revision to reflect
the renumbering of § 1092.204 in the
final rule.
Section 1092.201(c) Covered Law
Proposed Rule
Proposed § 1092.201(c) would have
defined the term ‘‘covered law’’ to mean
one of several types of laws, as
described. The proposed term ‘‘covered
law’’ would have been central to
defining which orders and portions of
orders would be subject to the
requirements of proposed subpart B.
Proposed § 1092.201(e) would have
defined the term covered order to
include certain orders that impose
certain obligations on a covered
nonbank based on an alleged violation
of a covered law. Thus, the proposed
term ‘‘covered law’’ would have helped
determine the application of proposed
subpart B’s registration requirements.
Under the proposal, a law listed in
proposed § 1092.201(c)(1) through (6)
would have qualified as a covered law
only to the extent that the violation of
law found or alleged arose out of
conduct in connection with the offering
or provision of a consumer financial
product or service. The Bureau was
interested in registering orders that
relate to offering or providing consumer
financial products or services. The
Bureau recognized that the laws listed
in proposed § 1092.201(d)(1) through (6)
may apply to a wide range of conduct
not involving consumer financial
products or services. While the Bureau
believed that reporting on such
violations could still be probative of
risks to consumers in the markets for
consumer financial products and
services—as misconduct in one line of
business is not necessarily cabined to
that line of business—the Bureau
believed that a more limited definition
of covered law would strike the right
balance between ensuring that the
Bureau remains adequately informed of
risks to consumers in the offering or
provision of consumer financial
products and services and minimizing
the potential burden of the reporting
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requirements on nonbank covered
persons.
The proposal listed categories of laws
that would have constituted ‘‘covered
laws’’ to the extent that the violation of
law found or alleged arose out of
conduct in connection with the offering
or provision of a consumer financial
product or service. For the reasons
discussed in section V(C) of the
proposal, the Bureau believed that
orders issued under the types of covered
laws described in the proposal are likely
to be probative of risks to consumers in
the offering or provision of consumer
financial products or services, including
developments in markets for such
products or services.
First, proposed § 1092.201(c)(1)
would have defined the term ‘‘covered
law’’ to include a Federal consumer
financial law, as that term was defined
in proposed § 1092.101(a) and the
CFPA.152 The Bureau explained that it
is charged with administering,
interpreting, and enforcing the Federal
consumer financial laws, which include
the CFPA itself, 18 enumerated
consumer laws (such as the Fair Credit
Reporting Act and the Truth in Lending
Act),153 and the laws for which
authorities were transferred to the
Bureau under subtitles F and H of the
CFPA, as well as rules and orders issued
by the Bureau under any of these
laws.154
The Bureau believed that requiring
registration of covered nonbanks in
connection with certain orders issued
under Federal consumer financial laws
would further the purposes of proposed
subpart B. As the Bureau discussed in
section IV of the proposal, ‘‘to support
[the Bureau’s] rulemaking and other
functions,’’ Congress mandated that the
Bureau ‘‘shall monitor for risks to
consumers in the offering or provision
of consumer financial products or
services, including developments in
markets for such products or
services.’’ 155 The Bureau noted that, in
matters where an agency other than the
Bureau has issued or obtained a final
public order concluding that an entity
has violated Federal consumer financial
law in connection with the offering or
provision of a consumer financial
product or service, the Bureau will
generally have jurisdiction over the
conduct that resulted in that order. The
Bureau explained that it therefore has a
clear interest in identifying and
understanding the nature of the risks to
consumers presented by such conduct,
152 See
12 U.S.C. 5481(14).
12 U.S.C. 5481(12).
154 12 U.S.C. 5481(14).
155 12 U.S.C. 5512(c)(1).
153 See
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including the risk that the conduct
continues outside the particular
jurisdiction or in connection with other
consumer financial products or services
that are offered or provided by the
covered nonbank. A pattern of similar
alleged or found violations of Federal
consumer financial law across multiple
nonbank covered persons may indicate
a problem that the Bureau can best
address by engaging in rulemaking to
clarify or expand available consumer
protection to address emerging
consumer risk trends, or by using other
tools, such as consumer education, to
address the identified risks. And,
depending on the facts and
circumstances, the Bureau may consider
bringing its own supervisory or
enforcement action in connection with
the same or related conduct.156 Thus,
the Bureau believed that violations of
the Federal consumer financial laws,
and especially repeat violations of such
laws, may be probative of risks to
consumers and may indicate more
systemic problems at an entity or in the
relevant market related to the offering or
provision of consumer financial
products or services.
Second, proposed § 1092.201(c)(2)
would have defined the term ‘‘covered
law’’ to include any other law as to
which the Bureau may exercise
enforcement authority. As explained in
section IV(C) of the proposal, the Bureau
may enforce certain laws other than
Federal consumer financial laws, such
as the Military Lending Act.157
The Bureau believed that the
proposed registry should collect
information regarding agency and court
orders issued under any law that the
Bureau may enforce, where the violation
of law found or alleged arises out of
conduct in connection with the offering
or provision of a consumer financial
product or service. By definition, the
conduct addressed in such orders would
generally fall within the scope of the
Bureau’s enforcement authority. More
generally, the Bureau noted that in its
experience, evidence of such conduct
could be highly probative of a broader
risk that the entity has engaged or will
156 The Bureau also proposed to require
registration of orders that the Bureau has obtained
or issued for violations of Federal consumer
financial laws. In the proposal, the Bureau
explained that, while it is of course aware of such
orders, collecting all orders for violations of covered
laws—including those obtained or issued by the
Bureau—within the proposed registry would benefit
the Bureau, other regulators, and the general public
by providing a single point of reference for such
orders. The Bureau explained that it would also
benefit from receiving the written statements
required under proposed § 1092.203 with respect to
orders it obtains or issues.
157 10 U.S.C. 987(f)(6) (authorizing Bureau
enforcement of the Military Lending Act).
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engage in conduct that may violate
Federal consumer financial laws. For
example, violations of the Military
Lending Act may overlap with, or be
closely associated with, violations of the
CFPA’s UDAAP prohibitions 158 or the
Truth in Lending Act,159 among other
Federal consumer financial laws. In
addition, the Bureau noted that a
violation of one law within the Bureau’s
enforcement authority may be indicative
of broader inadequacies in an entity’s
compliance systems that are resulting in
or could result in other legal violations,
including violations of Federal
consumer financial laws. Furthermore,
the Bureau believed that including in
the registry orders issued under any law
that the Bureau may enforce (where the
violation of law found or alleged arises
out of conduct in connection with the
offering or provision of a consumer
financial product or service) would
further the Bureau’s objective of creating
a registry that could serve as a single,
consolidated reference tool for use in
monitoring for risks to consumers,
thereby increasing the Bureau’s ability
to use the registry to monitor for
patterns of risky conduct of nonbank
covered persons across entities,
industries, and product offerings.
Third, proposed § 1092.201(c)(3)
would have defined the term ‘‘covered
law’’ to include the prohibition of unfair
or deceptive acts or practices under
section 5 of the FTC Act, 15 U.S.C. 45,
or any rule or order issued for the
purpose of implementing that
prohibition. The proposal would not
have included within the definition of
‘‘covered law’’ FTC Act section 5’s
prohibition of ‘‘[u]nfair methods of
competition in or affecting commerce,’’
or rules or orders issued solely pursuant
to that prohibition.160 The Bureau
explained that it expected that entities
would be aware in any specific case
whether a provision of an applicable
order has been issued under FTC Act
section 5’s prohibition of unfair or
deceptive acts or practices (or a rule or
order issued for the purpose of
implementing that prohibition), as
opposed to section 5’s prohibition of
‘‘[u]nfair methods of competition in or
affecting commerce’’ (or a rule or order
issued thereunder), and thus whether
the order provision was issued under a
‘‘covered law’’ or not. The Bureau
understood that orders issued in
connection with violations of FTC Act
section 5 routinely distinguish between
these two authorities, and that orders
issued under FTC Act section 5’s
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U.S.C. 5531, 5536(a)(1)(B).
U.S.C. 1601 et seq.
160 15 U.S.C. 45(a)(1).
159 15
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prohibition of ‘‘[u]nfair methods of
competition in or affecting commerce’’
rarely, if ever, relate to UDAP violations
involving the offering or provision of a
consumer financial product or service.
As discussed further in section IV(C)
of the proposal, the Bureau believed that
an order issued under FTC Act section
5’s prohibition of unfair or deceptive
acts or practices may be probative of
violations of Federal consumer financial
law, including CFPA sections 1031 and
1036(a)(1)(B).161 Because the CFPA’s
prohibition of unfair or deceptive acts or
practices is modeled after FTC Act
section 5’s similar prohibition,162
conduct in connection with the offering
or provision of a consumer financial
product or service that constitutes a
UDAP violation under FTC Act section
5 also likely violates the CFPA’s
UDAAP provisions. The Bureau also
believed that FTC Act section 5
unfairness and deception violations
related to the offering or provision of
consumer financial products or services
may indicate more systemic problems at
an entity that may impact the offering or
provision of consumer financial
products or services other than those
issues specifically identified in the
order. The Bureau noted that it would
need to know about such findings so
that it can assess whether the violation
is indicative of a larger and potentially
more systemic problem at the covered
nonbank, or potentially throughout an
entire market. And, the Bureau
explained, information about such
violations would inform the Bureau’s
exercise of its various rulemaking,
supervisory, enforcement, consumer
education, and other functions.
‘‘Covered law’’ under the proposal
would have included not only FTC Act
section 5, but also any rules or orders
issued for the purpose of implementing
FTC Act section 5’s UDAP
prohibition.163 Section 18 of the FTC
Act, 15 U.S.C. 57a, authorizes the FTC
to prescribe ‘‘rules which define with
specificity acts or practices which are
unfair or deceptive acts or practices in
or affecting commerce’’ within the
meaning of FTC Act section 5(a)(1).164
These FTC rules, which are known as
‘‘trade regulation rules,’’ would have
been covered laws under the proposed
161 12
U.S.C. 5531, 5536(a)(1)(B).
e.g., Consumer Fin. Prot. Bureau v. ITT
Educ. Servs., 219 F. Supp. 3d at 902–04.
163 In certain circumstances, the Bureau may
enforce a rule prescribed under the FTC Act by the
FTC with respect to an unfair or deceptive act or
practice. See 12 U.S.C. 5581(b)(5)(B)(ii). Such an
FTC rule, where issued by the FTC to implement
FTC Act section 5, would be a covered law under
the proposed definition.
164 15 U.S.C. 57a(a)(1)(B).
162 See,
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definition to the extent the conduct
found or alleged to violate such rules
relates to the offering or provision of a
consumer financial product or service.
Violations of these rules generally
constitute violations of FTC Act section
5 itself.165 And the Bureau believed
that, like violations of FTC Act section
5 itself, violations of the rules issued
under FTC Act section 5, where they
arise out of conduct in connection with
the offering or provision of consumer
financial products or services, would
likely be probative of risks to consumers
and warrant attention by the Bureau.
The proposed definition of ‘‘covered
law’’ would also have included orders
issued by the FTC itself under FTC Act
section 5’s UDAP prohibition, as well as
by other agencies. The Bureau believed
that violations of such orders present
similar risks to consumers as those
presented by violations of FTC Act
section 5 and the rules issued
thereunder.
Fourth, proposed § 1092.201(c)(4)
would have defined the term ‘‘covered
law’’ to include a State law prohibiting
unfair, deceptive, or abusive acts or
practices that is identified in appendix
A to part 1092. Proposed appendix A
provided a list of State statutes that
prohibit unfair, deceptive, or abusive
acts or practices and that the Bureau
had reviewed and proposed to define as
a covered law under this provision. As
with the other laws described in
proposed § 1092.201(c), a State UDAAP
law would only have qualified as a
covered law to the extent the conduct
found or alleged to violate the State
UDAAP law relates to the offering or
provision of a consumer financial
product or service. The Bureau
reviewed the State statutes identified in
proposed appendix A, and as explained
below, it believed that requiring
registration of covered nonbanks that
are subject to covered orders issued
under such statutes would likely further
the purposes of proposed subpart B.
Proposed appendix A included State
laws of general applicability that
prohibit unfair, deceptive, or abusive
acts or practices and that might apply to
the offering or provision of consumer
financial products or services. Although
the scope and content of these State
laws may vary at the margin, the Bureau
explained that it believed these statutes
cover a core concept of unfairness,
deception, or abusiveness that makes
violations of them likely probative of
165 15 U.S.C. 57a(d)(3) (‘‘When any rule under
subsection (a)(1)(B) takes effect a subsequent
violation thereof shall constitute an unfair or
deceptive act or practice in violation of section
45(a)(1) of this title, unless the Commission
otherwise expressly provides in such rule.’’).
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risks to consumers in the offering or
provision of consumer financial
products and services. These statutes
may commonly be referred to as
‘‘UDAP’’ or ‘‘UDAAP’’ statutes, or ‘‘little
FTC Acts,’’ and are often labeled in
State statutes as State ‘‘consumer
protection acts’’ or as laws addressing
‘‘unfair’’ or ‘‘deceptive’’ ‘‘trade
practices.’’ State or local agencies may
use these statutes to bring cases or
actions with respect to practices that
injure consumers. While these State
statutes may also authorize private suits
by consumers and other persons, the
proposal would have only required
registration with respect to covered
orders issued at least in part in any
action or proceeding brought by any
Federal agency, State agency, or local
agency (as described further below in
the section-by-section discussion of
§ 1092.201(e)(1)(ii)).
The Bureau proposed to list these
statutes in appendix A, and thus to
include them in the proposed rule’s
definition of covered law, in part
because these statutes are generally
analogous to CFPA sections 1031 and
1036(a)(1)(B) and FTC Act section 5.166
Several of these State statutes
specifically provide that ‘‘it is the intent
of the legislature that in construing [the
State statute], the courts will be guided
by the interpretations given by the
Federal Trade Commission and the
Federal courts to section 5(a)(1) of the
Federal Trade Commission Act,’’ or
words to this effect.167 The Bureau
noted that obtaining a better
understanding of entities’ compliance
with State UDAP/UDAAP laws would
assist the Bureau in the assessment and
detection of risks for the same general
reasons described with respect to
alleged or found violations of FTC Act
section 5. The Bureau believed that
entities that have violated one of these
State statutes, and especially repeat
violators of such statutes, may pose
heightened risks to consumers in the
offering or provision of consumer
financial products and services,
including the risk that they have
engaged, and may continue to engage, in
unfair, deceptive, or abusive acts and
practices in violation of CFPA section
1031. The Bureau also explained that
information identifying patterns of such
risky conduct across entities, industries,
product offerings, or jurisdictions would
be highly informative to the Bureau’s
monitoring work. The Bureau attempted
to identify all of the applicable State
UDAP/UDAAP statutes of general
166 12
U.S.C. 5531, 5536(a)(1)(B); 15 U.S.C. 45.
Mass. Gen. Laws ch. 93A, sec. 2(b); Conn.
Gen. Stat. sec. 42–110b(b).
applicability in appendix A of the
proposal but requested comment on
whether it had comprehensively done
so. The Bureau proposed to include in
appendix A all such State statutes and
sought comment on any additions,
subtractions, or modifications to the
State UDAP/UDAAP statutes of general
applicability in appendix A.
The Bureau also proposed to include
in appendix A, and thus to include in
the definition of the term covered law,
certain other industry-specific State
statutes that prevent unfair, deceptive,
or abusive conduct in connection with
certain specific consumer financial
industries or markets. For example,
proposed appendix A included New
York Banking Law section 719(2),
regarding prohibited practices by
student loan servicers. This State
statutory provision prohibits
‘‘[e]ngag[ing] in any unfair, deceptive or
predatory act or practice toward any
person or misrepresent[ing] or
omit[ting] any material information in
connection with the servicing of a
student loan.’’ 168 The Bureau proposed
to include this New York State law and
others like it in appendix A, to the
extent that the conduct found or alleged
to violate such law relates to the offering
or provision of a consumer financial
product or service.
As with State UDAP/UDAAP laws of
general applicability, the Bureau
believed that violation of such industryspecific State statutes that prohibit
unfair, deceptive, or abusive acts or
practices in connection with consumer
financial industries or markets and in
connection with the offering or
provision of consumer financial
products or services would be probative
of potential violations of CFPA sections
1031 and 1036, and also of other related
risks to consumers within the scope of
the Bureau’s jurisdiction. The Bureau
believed that omitting these industryspecific statutes from the definition of
‘‘covered law’’ may cause the
information submitted to the proposed
registry to be incomplete. Among other
things, the Bureau understood that
many State agencies typically rely upon
such industry-specific statutes to
enforce prohibitions on conduct by
covered nonbanks that is similar to that
prohibited under UDAP/UDAAP laws of
general applicability. Thus, the Bureau
believed registration of orders issued
under such State statutes would provide
information that is probative of the
types of risks the Bureau believed to be
associated with orders issued under
State UDAP/UDAAP laws of general
applicability. The Bureau attempted to
167 E.g.,
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identify applicable State UDAP/UDAAP
statutes related to applicable consumer
financial industries or markets in
proposed appendix A but requested
comment on whether it had
comprehensively done so. The Bureau
proposed to include in appendix A all
such State statutes.
The Bureau proposed to require
registration of all orders issued under
State laws listed in appendix A, as long
as the conduct at issue related to the
offering or provision of a consumer
financial product or service, and the
order satisfied the definition of
‘‘covered order’’ in proposed
§ 1092.201(e). The Bureau recognized
that some State UDAP/UDAAP statutes
listed in appendix A may prohibit
conduct that regulated entities might
argue is not prohibited under CFPA
sections 1031 and 1036(a)(1)(B). For
example, State UDAP/UDAAP statutes
modeled after FTC Act section 5 may
include provisions that, in addition to
prohibiting ‘‘unfair’’ and ‘‘deceptive’’
conduct, also prohibit ‘‘unfair methods
of competition’’ in connection with
antitrust or anticompetition matters.
While the Bureau acknowledged that it
is possible that such orders might be
less probative than other orders, the
Bureau believed that limiting the scope
of such covered laws to those involving
the offering or provision of consumer
financial products and services would
sufficiently assure that most orders
reported would be valuable in
effectively monitoring for risks to
consumers in the offering or the
provision of such products and services.
Moreover, the Bureau anticipated that it
would not always be the case that an
agency or court order will clearly
distinguish whether it is issued under
State statutory provisions preventing
‘‘unfair,’’ ‘‘deceptive,’’ or ‘‘abusive’’ acts
and practices on the one hand, or
‘‘anticompetitive’’ acts or practices on
the other—especially in cases where a
State statute addresses all of them.
Unlike orders issued under FTC Act
section 5, it was not clear to the Bureau
that orders issued under such State laws
routinely distinguish between these two
types of authorities. Therefore, the
Bureau believed that attempting to carve
out portions of State UDAP/UDAAP
statutes that extend beyond the conduct
prohibited by CFPA sections 1031 and
1036(a)(1)(B) would be impracticable
and would risk undermining the
effectiveness of the rule. The Bureau
thus proposed to define the term
‘‘covered law’’ by listing specific State
statutes. Where a State statute was listed
in proposed appendix A and otherwise
satisfied proposed § 1092.201(c), the
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Bureau proposed to treat it as a covered
law, regardless of whether any specific
order issued under that law expressly
referred to the State law’s prohibition of
‘‘unfair,’’ ‘‘deceptive,’’ or ‘‘abusive’’ acts
and practices. In most cases, the Bureau
anticipated that violations of the listed
State statutes that relate to the offering
or provision of a consumer financial
product or service would be probative of
risks to consumers within the Bureau’s
jurisdiction.
The Bureau did not include laws of
Tribal governments in appendix A of
the proposal. While the Bureau believed
that many orders issued under such
laws may be highly probative of risks to
consumers and could assist the Bureau
in carrying out its market-monitoring
obligations—as well as assist the Bureau
in assembling an effective nonbank
registry—the Bureau preliminarily
concluded that considerations of
administrative efficiency favored
focusing on other orders.
Fifth, proposed § 1092.201(c)(5)
would have included in the definition
of the term ‘‘covered law’’ a State law
amending or otherwise succeeding a law
identified in appendix A, to the extent
that such law is materially similar to its
predecessor, and the conduct found or
alleged to violate such law relates to the
offering or provision of a consumer
financial product or service.
The Bureau proposed § 1092.201(c)(5)
in order to clarify that appendix A is
intended to capture certain future
changes made by States to the State laws
listed therein. As the Bureau explained
in the proposal, States may make
immaterial changes from time to time,
including renumbering or amending the
statutes listed in appendix A, in a
manner that could cause appendix A to
become technically ‘‘incorrect’’ or
‘‘obsolete’’ in the view of some
regulated entities. Proposed
§ 1092.201(c)(5) would have made clear
that is not the Bureau’s intent. To the
extent the amended or otherwise
succeeding law is materially similar to
its predecessor, proposed
§ 1092.201(c)(5) would have ensured
that it would still qualify as a ‘‘covered
law.’’ The proposed definition of
covered law thus would have captured
a successor to a law listed in appendix
A if, for example, the conduct found or
alleged to violate the successor law
would have constituted a violation of
the predecessor law were it still in
effect.
Finally, proposed § 1092.201(c)(6)
would have included in the definition
of the term ‘‘covered law’’ a rule or
order issued by a State agency for the
purpose of implementing a State law
described in proposed § 1092.201(c)(4)
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or (5), to the extent the conduct found
or alleged to violate such regulation
relates to the offering or provision of a
consumer financial product or service.
As the Bureau explained, various State
statutes authorize one or more State
agencies to issue regulations
implementing the terms of those
statutes, thereby authorizing the State
agency to further define specific unfair,
deceptive, or abusive acts or
practices.169 Proposed § 1092.201(c)(6)
would have included such State agency
regulations within the meaning of the
term ‘‘covered law.’’
Comments Received
A consumer advocate commenter
stated that the rule should clarify that,
under certain specific circumstances,
such as those involving certain
misrepresentations by schools, orders
would ‘‘arise out of conduct related to
consumer financial products and
services’’ as required under the
definition of the term ‘‘covered order.’’
An industry commenter stated that
the registry should not require
publication of orders or decisions
involving the FTC’s authority under
FTC Act section 5, on the grounds that
such orders are outside the Bureau’s
authority. Another industry commenter
and a consumer advocate commenter
supported including orders related to
violations of the prohibition of unfair or
deceptive acts or practices under FTC
Act section 5, on the grounds of
similarity to the CFPA’s UDAAP
prohibitions. The consumer advocate
commenter also supported the inclusion
of State UDAP laws and the Military
Lending Act, stating that violations of
the Military Lending Act may overlap
with, or be closely associated with,
violations of the CFPA’s UDAAP
prohibitions 170 or the Truth in Lending
Act.
Several commenters stated that the
definition of ‘‘covered law’’ should not
include State laws. Commenters
described the inclusion of such laws,
which were included in the definition
of ‘‘covered law’’ at proposed
§ 1092.202(c)(4) through (6), as an
improper attempt by the Bureau to
enforce laws that it lacks the authority
to enforce or otherwise administer. In
the opinion of the commenters,
requiring covered nonbanks to register
and submit information regarding orders
issued under State laws would usurp
the role of the appropriate State or local
agency in issuing, enforcing, publishing,
and interpreting its own State laws or its
own orders. Commenters stated that the
169 See,
170 15
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registry would lead to the Bureau
adjudicating whether a covered entity
was in compliance with an order issued
by another independent agency and
would violate principles of federalism.
Commenters—including an industry
commenter, a joint letter from State
regulators, and Members of Congress—
stated that imposing the writtenstatement requirements described in
proposed § 1092.203 would be
particularly inappropriate with respect
to orders issued under State laws for
these reasons.
Commenters stated that the Bureau’s
assertions that violations of State law
would be probative of risk to consumers
were not supported or were highly
speculative. An industry commenter
stated that the Bureau should consider
whether certain State laws are subject to
Federal preemption in determining
whether those laws should qualify as
‘‘covered laws.’’
Industry commenters stated that
including State or local laws as
‘‘covered laws’’ would improperly
distort or shift the focus of compliance
programs, which could result in other
aspects of compliance programs
becoming deprioritized, create
unnecessary risks for consumers, or
raise costs that would ultimately be
passed on to consumers.
Multiple consumer advocate
commenters supported including both
State and Federal laws because
violations of both types of laws are
probative of heightened risks to
consumers and markets. A consumer
advocate commenter stated that
violations of the State laws listed in the
proposal are almost certainly probative
of potential violations of CFPA sections
1031 and 1036, and that the registry
would be incomplete without their
inclusion.
A joint letter from State regulators
commented that the Bureau should
clarify whether violations of certain
administrative laws might be
interpreted by the Bureau to be
violations of ‘‘covered laws.’’ The
commenters voiced skepticism that this
question could be adequately addressed
in a final rule to the extent necessary for
covered nonbanks to understand their
obligations.
The notice of proposed rulemaking
sought specific comment on whether to
require registration, and to list in
appendix A, additional State statutes
that prohibit ‘‘unconscionable’’ conduct
but do not also contain a specific
reference to ‘‘unfair,’’ ‘‘deceptive,’’ or
‘‘abusive’’ conduct. A consumer
advocate commenter stated that such
‘‘unconscionability’’ laws should be
included, pointing to what it described
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as the similarity between the standards
of ‘‘unconscionability’’ and
‘‘unfairness’’ under UDAP law as
recognized by courts. An industry
commenter stated that the Bureau
should not include State
‘‘unconscionability’’ laws.
A joint comment letter from State
regulators stated that proposed
appendix A, which lists State laws that
are included as ‘‘covered laws’’ under
§ 1092.201(c)(4), did not adequately
represent State consumer protection
efforts, and contained laws that may be
inapplicable or outdated in certain
States. The comment did not specify
any inapplicable or outdated State laws,
but referred to payday lending laws in
States that have recently enacted usury
laws that cap rates at 36 percent. A
consumer advocate commenter stated
that proposed appendix A should be
expanded to include other laws,
specifically the Federal Racketeer
Influenced and Corrupt Organizations
Act (‘‘RICO’’) and State counterparts.
This consumer advocate commenter
also stated that the rule should require
that the Bureau periodically seek
comment and update appendix A. An
industry commenter stated that
proposed appendix A was
unmanageably large.
In the notice of proposed rulemaking
the Bureau specifically sought comment
on whether Tribal UDAP/UDAAP laws
should be included among the list of
‘‘covered laws,’’ and if so, which
specific Tribal UDAP/UDAAP laws
should be included in the list. A Tribal
commenter stated that proposed
appendix A should be expanded to
include laws that have been enacted or
may be enacted by federally recognized
Indian tribes on the grounds that doing
so would reflect the status of Tribal
governments as equals to State
governments under the Dodd-Frank Act.
The commenter did not state which
specific Tribal UDAP/UDAAP laws
should be included.
Response to Comments Received
For the reasons given in the
description of the proposal above, the
Bureau is finalizing § 1092.201(c)’s
requirement that a law listed in
§ 1092.201(c)(1) through (6) would
qualify as a covered law only to the
extent that the violation of law found or
alleged arises out of conduct in
connection with the offering or
provision of a consumer financial
product or service. The Bureau does not
choose to use the final rule as the
vehicle for determining the
circumstances under which violations
of covered laws arise out of conduct ‘‘in
connection with the offering or
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provision of a consumer financial
product or service.’’ The term
‘‘consumer financial product or service’’
has a well-established statutory
definition.171 While the question of
whether a legal violation related to the
offering or provision of a consumer
financial product or service depends on
the particular facts and circumstances
involved, the answer to that question
should be clear in most cases. The
Bureau declines to provide further,
general guidance on this issue in the
context of this rulemaking. If a person
has a good faith basis to believe that an
order issued against it does not qualify
as a ‘‘covered order’’ because it does not
arise out of conduct in connection with
the offering or provision of a consumer
financial product or service, the person
could choose not to register that order
and instead submit a notification under
§ 1092.202(g). As explained in the
section-by-section analysis of
§ 1092.202(g), in the event of a nonfrivolous filing under that provision, the
Bureau would not bring an enforcement
action against the person based on the
person’s failure to register the order
unless the Bureau first notifies the
person that the Bureau believes
registration is required and provides the
person with a reasonable opportunity to
comply with § 1092.202.
The Bureau is finalizing a definition
of ‘‘covered law’’ at § 1092.201(c)(3) that
includes the prohibition on unfair or
deceptive acts or practices under FTC
Act section 5, as well as any rule or
order issued for the purpose of
implementing that prohibition. As
described in part IV, among other
things, such orders may be probative of
violations of Federal consumer financial
law, including CFPA sections 1031 and
1036(a)(1)(B). Such orders also may
indicate more systemic problems at an
entity that may impact the offering or
provision of consumer financial
products or services, and will inform
the Bureau’s exercise of its various
rulemaking, supervisory, enforcement,
consumer education, and other
functions. The Bureau does not see the
force of any argument that including
FTC Act section 5 in the definition of
‘‘covered law’’ usurps the role of the
FTC in issuing, enforcing, or
interpreting the FTC’s public orders.
Rather, the Bureau’s rule is intended to
collect and potentially publish
information regarding such orders
where they are relevant to the Bureau’s
assessment of risks to consumers within
its jurisdiction, as well as information
about the covered nonbanks that are
171 See 12 U.S.C. 5481(5); see also 12 U.S.C.
5481(15) (defining ‘‘financial product or service’’).
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subject to such orders. The Bureau will
continue to coordinate with the FTC as
required by the CFPA, including CFPA
sections 1024(c)(3) and 1061(b)(5).172
The final rule requires registration in
connection with orders issued under
State laws prohibiting unfair, deceptive,
or abusive acts or practices that are
identified in appendix A to part 1092,
to the extent that the violation of law
found or alleged arises out of conduct in
connection with the offering or
provision of a consumer financial
product or service. The Bureau declines
to finalize a definition of ‘‘covered
laws’’ that does not include State laws.
The Bureau concludes, as stated by
consumer advocate commenters, that
violations of both Federal and State
consumer financial laws may be
probative of heightened risks for
consumers and borrowers. In particular,
the Bureau concludes that orders based
on violations of the State laws described
in § 1092.202(c)(4) through (6) are likely
to be probative of risk to consumers.
The final rule will not thereby
empower the Bureau to enforce or
interpret State laws (or orders). In
particular, the Bureau does not intend to
assert any jurisdiction to enforce the
State laws described in § 1092.201(c)(4)
through (6) and appendix A. For the
reasons described in more detail in part
IV(C), the Bureau concludes orders
based on violations of these State laws
are probative of the types of risks to
consumers that the CFPA authorizes the
Bureau to monitor, but the Bureau does
not assert that it may directly enforce
any of these laws. Rather, the final rule
includes these State laws within the
definition of ‘‘covered law’’ in order to
define the covered orders that will
require covered nonbanks to report
identifying, administrative, and order
information to the nonbank registry.
The Bureau finalizes its conclusion in
the notice of proposed rulemaking 173
that collecting and registering public
agency and court orders imposing
obligations based upon violations of
consumer law, including applicable
State laws, would assist with
monitoring for risks to consumers in the
offering or provision of consumer
financial products and services. The
CFPA does not confine the Bureau to
monitoring or supervising for risks
related to violations of Federal
consumer financial law. Neither the
Bureau’s authority to monitor for risks
to consumers in the offering or
provision of consumer financial
products or services under 12 U.S.C.
5512(c) nor the Bureau’s supervisory
172 12
173 88
U.S.C. 5514(c)(3), 5581(b)(5).
FR 6088 at 6094–6098.
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authorities under 12 U.S.C. 5514 are
limited solely to assessing entities’
compliance with Federal consumer
financial law. Instead, the Bureau is
charged with monitoring for risks to
consumers more broadly in the offering
or provision of consumer financial
products or services, including
developments in markets for such
products or services.174 In allocating its
resources to perform market monitoring,
the Bureau may consider ‘‘the legal
protections applicable to the offering or
provision of a consumer financial
product or service, including the extent
to which the law is likely to adequately
protect consumers.’’ 175 The types of
‘‘legal protections’’ to be considered by
the Bureau are not restricted to
protections under Federal law.
Likewise, the CFPA requires that the
Bureau prioritize the use of its
supervisory authority ‘‘in a manner
designed to ensure that such exercise
. . . is based upon the assessment by
the Bureau of the risks posed to
consumers in the relevant product
markets and geographic markets.’’ 176 In
addition, the Bureau is tasked with
requiring reports and conducting
examinations under 12 U.S.C. 5514 for
purposes not just of ‘‘assessing
compliance with the requirements of
Federal consumer financial law,’’ 177 but
also of ‘‘obtaining information about the
activities and compliance systems and
procedures of’’ persons described in 12
U.S.C. 5514(a) 178 and ‘‘detecting and
assessing risks to consumers and to
markets for consumer financial products
and services.’’ 179 And the CFPA
authorizes the Bureau to issue rules
under 12 U.S.C. 5514(b)(7)(A) to
‘‘facilitate supervision of persons
described in [12 U.S.C. 5514(a)(1)] and
assessment and detection of risks to
consumers,’’ and under 12 U.S.C.
5514(b)(7)(B) ‘‘for the purposes of
facilitating supervision of such persons
and assessing and detecting risks to
consumers.’’ None of these provisions
state or even imply that the Bureau may
not collect information regarding orders
issued under State law that are
probative of risks to consumers in the
offering or provision of consumer
financial products and services within
the scope of the Bureau’s jurisdiction.
The Bureau has its own expertise and
authorities with respect to such risks.
The Bureau needs to collect information
12 U.S.C. 5512(c)(1).
U.S.C. 5512(c)(2)(C).
176 12 U.S.C. 5514(b)(2). See the discussion of this
provision in parts II, III, and IV(B) above.
177 12 U.S.C. 5514(b)(1)(A).
178 12 U.S.C. 5514(b)(1)(B).
179 12 U.S.C. 5514(b)(1)(C).
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174 See
175 12
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56055
regarding such risks as relevant to its
own purposes and the exercise of its
own powers as provided under Federal
law.
The imposition of § 1092.204’s
written-statement requirements in
connection with orders issued under
State UDAP/UDAAP laws is similarly
appropriate and will further the
purposes of those requirements, as
described in part IV(D) above and the
section-by-section discussion of
§ 1092.204 below. Violations of such
orders may be probative of heightened
risks for consumers and borrowers that
are relevant to the Bureau’s exercise of
its supervisory authority; thus, for the
reasons discussed in part IV(D) above
and the section-by-section discussion of
§ 1092.204 below, the written-statement
requirements will facilitate the Bureau’s
supervision of supervised registered
entities subject to such orders. The
information collected under § 1092.204
regarding risks to consumers that may
be associated with the orders, including
potential violations of CFPA sections
1031 and 1036, and the applicable
supervised registered entity’s
compliance systems and procedures
will be relevant to the Bureau’s
supervisory authority even where those
risks are associated with orders issued
under State UDAP/UDAAP laws. In
addition, for the reasons discussed in
part IV(D) above and the section-bysection discussion below, § 1092.204’s
requirements with respect to orders
issued under State UDAP/UDAAP laws
will also help ensure that supervised
registered entities are legitimate entities
and are able to perform their obligations
to consumers. Contrary to commenters’
suggestions, the Bureau is not adopting
the written-statement requirements to
administer or enforce State laws or
orders issued under such laws, but
rather to further its statutory purposes
under CFPA section 1024(b)(7)(A)–(C)
with respect to risks to consumers that
are relevant under Federal law, that are
associated with entities that are subject
to the Bureau’s supervisory and
examination authority under CFPA
section 1024(a), and that arise in
connection with the offering or
provision of consumer financial
products and services subject to the
Bureau’s jurisdiction.
The Bureau concludes that the final
rule will not result in the Bureau
usurping the role of any State or local
agency in issuing, enforcing, or
interpreting State law or orders issued
or obtained by a State or local agency.
Nor will the final rule violate principles
of federalism or lead to the Bureau
supplanting the proper role of State or
other regulators with respect to such
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orders. The final rule requires that
covered nonbanks submit identifying
information and other specified
information related to such orders, but
the Bureau’s collection of that
information via the nonbank registry
will not interfere with any State or local
agency’s own actions related to
enforcement of such orders.180 To the
contrary, the Bureau concludes that
including the State laws described in
§ 1092.201(c)(4) through (6) within the
definition of ‘‘covered law’’ will
promote interagency coordination and
cooperation among the various Federal,
State, and local agencies that have an
interest in financial consumer
protection because the Bureau intends
to establish under the rule a public, upto-date, and easily accessible and
searchable registry that contains
relevant and useful information about
covered orders and the covered
nonbanks that are subject to them.
As discussed in part IV and in this
section-by-section discussion, violations
of covered laws are likely to be
probative of the type of risk to
consumers the Bureau is tasked with
monitoring. The Bureau does not intend
to utilize the final rule or the nonbank
registry established under subpart B as
a mechanism to opine regarding the
proper application of any particular
State law to covered nonbanks or any
legal defenses, such as preemption, that
might have been available to a covered
nonbank. The Bureau concludes that,
where all of the criteria established by
the rule for registration of a covered
order have been met, including that an
applicable agency or court has issued or
obtained a final and otherwise covered
order against a covered nonbank based
on one or more violations by the
covered nonbank of a State law
described at § 1092.201(c)(4) through
(6), registration in connection with that
covered order would serve the purposes
of the rule. If a covered nonbank
believes in good faith that any particular
order is not a covered order, it may
submit a notification under
§§ 1092.202(g) and 1092.204(f).
The Bureau concludes that the final
rule will not cause covered nonbanks to
pay inappropriate attention to
compliance with the types of State laws
identified at § 1092.201(c)(4) through
(6).181 First, an entity can (and should)
comply with the law whether or not the
Bureau is monitoring it, and other
agencies also monitor compliance with
covered orders issued or obtained under
these State laws. Thus, covered
nonbanks should already be dedicating
appropriate resources to ensure
compliance with such State laws, and
the Bureau does not agree that the
registration components of the rule will
distort compliance programs, lead to
compliance programs becoming
deprioritized, or lead to related
additional risks or costs for consumers.
Likewise, were the Bureau to publish
the information collected as described
under § 1092.205, the Bureau does not
believe such publication would provide
an inappropriate incentive to dedicate
unnecessary resources to compliance
with these State laws. By definition, the
covered orders that would be made
available on the registry are already
published or required to be published
(§ 1092.201(e) and (m)); therefore,
republication of those orders on the
nonbank registry by the Bureau will not
provide a meaningful incentive to
covered nonbanks to reallocate their
compliance resources.
Second, even if a covered nonbank
were to view the final rule as a reason
to dedicate additional resources to
complying with the State laws described
at § 1092.201(c)(4) through (6), so much
the better. Enhanced compliance with
those State laws, while not a goal of the
final rule, will also likely reduce risk to
consumers in the offering or provision
of consumer financial products and
services within the scope of the
Bureau’s jurisdiction. The Bureau does
not agree that it should refrain from
collecting or publishing information
that may help it monitor for risks to
consumers on the grounds that its
efforts might also have the ancillary
benefit of inducing covered nonbanks to
180 See 12 U.S.C. 5551(a)(1) (‘‘This title, other
than sections 1044 through 1048, may not be
construed as annulling, altering, or affecting, or
exempting any person subject to the provisions of
this title from complying with, the statutes,
regulations, orders, or interpretations in effect in
any State, except to the extent that any such
provision of law is inconsistent with the provisions
of this title, and then only to the extent of the
inconsistency.’’) (emphasis added); see also 12
U.S.C. 5552(d)(1) (‘‘No provision of this section
shall be construed as altering, limiting, or affecting
the authority of a State attorney general or any other
regulatory or enforcement agency or authority to
bring an action or other regulatory proceeding
arising solely under the law in effect in that
State.’’).
181 With respect to one commenter’s reference to
‘‘local laws,’’ § 1092.201(c)’s definition of ‘‘covered
law’’ refers to specific types of Federal and State
laws but does not include any laws issued by local
agencies. Therefore, an order that imposes
applicable obligations on the covered nonbank
based solely on alleged violations of a law issued
by a local agency that does not qualify as a ‘‘covered
law’’ under § 1092.201(c) would not satisfy
§ 1092.201(e)(1)(iv), and therefore would not be a
‘‘covered order’’ under the final rule. However, an
order issued by a local agency (as that term is
defined at § 1092.201(i)) under a State law that did
qualify as a ‘‘covered law’’ under § 1092.201(c)(4)
through (6) might constitute a ‘‘covered order’’
under § 1092.201(e) if the other elements of that
provision were also satisfied.
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comply with the described State
consumer protection laws.
The proposal’s requirements to
submit information in connection with
covered orders were specific to the
proposal and were not intended to
impose any requirements on a covered
nonbank’s compliance management
system or any of the covered nonbank’s
internal affairs, or to require any
particular approach of allocating
responsibility for complying with
covered orders or with the law
generally. The Bureau understands that
compliance management at covered
nonbanks will likely be managed
differently from entity to entity and that
compliance management systems will
and should be adapted to a covered
nonbank’s business strategy and
operations. The proposal did not
purport to impose any restrictions on
the manner in which covered nonbanks
address such matters.
The final rule clearly establishes
which laws are ‘‘covered laws.’’ The
Bureau has reviewed the State laws
described in appendix A to part 1092
and has assessed whether they are
probative of risk to consumers and
otherwise should be included in
appendix A at this time. State laws that
are not listed in appendix A to part 1092
and not otherwise described at
§ 1092.201(c)(4) through (6) are not
covered laws under the final rule.
Therefore, commenters’ concerns that
the Bureau might treat as covered laws
certain State ‘‘administrative’’ or other
laws not described in § 1092.201(c)(4)
through (6) are misplaced. As provided
at § 1092.202(e)(4), an order that does
not impose obligations that are
described in § 1092.202(e)(3) on the
covered nonbank based on an alleged
violation of a ‘‘covered law’’ is not a
‘‘covered order’’ under the final rule.
But an order that does impose such
obligations based on a violation of a
covered law may fall under
§ 1092.202(e)(3), even if the State agency
issued its order under authority granted
by other provisions of law. Additional
discussion regarding when obligations
are imposed ‘‘based on’’ violations of a
covered law is contained in the sectionby-section discussion of § 1092.201(e)
below.
Commenters did not provide any
citations for specific State laws that
should either be added to or deleted
from appendix A to part 1092. However,
the Bureau has reviewed appendix A as
proposed and is finalizing an appendix
A to part 1092 that contains both
additions and deletions from the version
proposed. The Bureau is listing these
additional statutes in appendix A, and
thus including them in the final rule’s
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definition of covered law, for the
reasons discussed in the description of
the proposal above with respect to the
inclusion of other State laws in the
proposed appendix A. As with the State
laws that were included in the version
of appendix A contained in the
proposed rule, the Bureau believes that
violation of the additional State UDAP/
UDAAP laws included in the final
appendix A to part 1092 that prohibit
unfair, deceptive, or abusive acts or
practices in connection with consumer
financial industries or markets and in
connection with the offering or
provision of consumer financial
products or services would be probative
of potential violations of CFPA sections
1031 and 1036, and also of other related
risks to consumers within the scope of
the Bureau’s jurisdiction. The Bureau
believes that omitting these industry
specific statutes from the definition of
‘‘covered law’’ may cause the
information submitted to the proposed
registry to be incomplete.
The Bureau is also finalizing several
minor revisions to appendix A to part
1092 in order to correct several clerical
errors in the proposed rule, such as
duplicate listings, and to reflect certain
changes to the State laws, such as the
renumbering and repeal of certain
provisions.
Other than these revisions, the Bureau
declines to finalize other changes to
appendix A at this time. The Bureau
concludes appendix A to the final rule,
as revised from the proposal in the ways
discussed above, is appropriate and is
not so large as to be unusable or
unwieldy. Covered nonbanks should be
able to quickly refer to appendix A in
order to help determine whether any
particular State law is a ‘‘covered law.’’
As the Bureau indicated in the notice
of proposed rulemaking, orders based
on conduct that violates State
unconscionability laws may be
probative of risk to consumers. But the
Bureau declines at this time to include
State unconscionability laws in
appendix A to the final rule. Likewise,
the Bureau declines at this time to
include RICO laws in appendix A to the
final rule. And the Bureau also declines
to include in appendix A State payday
lending laws imposing usury limits.
Violations of State unconscionability,
RICO, and usury laws may be indicative
of risk to consumers within the Bureau’s
jurisdiction, especially in situations
where the applicable violation of law
found or alleged arises out of conduct in
connection with the offering or
provision of a consumer financial
product or service. But unlike the State
UDAP/UDAAP laws included in
appendix A, State unconscionability,
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RICO, and usury laws are generally not
modeled after FTC Act section 5 or
CFPA sections 1031 and 1036(a)(1)(B),
and the Bureau at this time has not
determined whether such laws, as a
class, are generally sufficiently similar
in scope to FTC Act section 5 or CFPA
sections 1031 and 1036(a)(1)(B) to
warrant inclusion in appendix A.
Considering RICO laws in particular,
they often prohibit a wide range of
criminal activity, including kidnapping,
robbery, and dealing in narcotic
drugs.182 The Bureau is concerned that
including such laws as ‘‘covered laws’’
would result in an overinclusive and
thus less useful and more burdensome
registry.
Also, as the Bureau indicated in the
notice of proposed rulemaking, orders
based on conduct that violates certain
Tribal laws may be probative of risk to
consumers. But the Bureau declines at
this time to include such Tribal laws in
appendix A to the final rule. The Bureau
finalizes its preliminary conclusion in
the proposal 183 that considerations of
administrative efficiency favor focusing
on other orders.
The Bureau intends to monitor the
orders submitted under the final rule
and may determine at a later date to
expand appendix A to include the
categories of laws discussed above or
other laws. The Bureau also agrees that
it may prove useful to periodically
review and update appendix A in order
to enhance the usefulness and
effectiveness of the nonbank registry
and the information it collects.
However, the Bureau declines to adopt
such a requirement in the final rule
obligating itself to do so. Among other
things, such a requirement is
unnecessary and would complicate the
Bureau’s administration of the nonbank
registry.
Comments regarding the scope of the
written-statement requirements are
addressed in the section-by-section
discussion of § 1092.204 below.
Final Rule
For the reasons set forth above, the
Bureau is finalizing § 1092.201(c) as
proposed, with minor technical edits. In
addition, for the reasons described
above, the Bureau is finalizing appendix
A to part 1092 with several changes
from the proposed version. Section
1092.201(c)(4) defines the term
‘‘covered law’’ to include a State law
prohibiting unfair, deceptive, or abusive
acts or practices that is identified in
appendix A.
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182 See,
183 See
e.g., 18 U.S.C. 1961.
88 FR 6088 at 6107.
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56057
Section 1092.201(d) Covered Nonbank
Proposed Rule
The proposal would have defined the
term ‘‘covered nonbank’’ to mean a
covered person 184 that does not fall into
one of five categories. First, the Bureau
proposed to exclude from the definition
insured depository institutions, insured
credit unions, or related persons. The
Bureau considered proposing to collect
information about relevant orders in
place against such persons under its
authority to issue rules mandating
collection of information set forth in
CFPA section 1022(c)(4)(B)(ii). While
the Bureau noted that it might at some
point consider collecting or publishing
the information described in the
proposal from such persons, the Bureau
believed that there is currently greater
need to collect this information from the
nonbanks under its jurisdiction. Among
other things, the identity and size of all
insured depository institutions and
insured credit unions is known to the
Bureau due to registration regimes
maintained by the prudential regulators,
which track and make public such
information. Also, there are only four
prudential regulators, and they regularly
publish their consumer financial
protection orders. In contrast, the
Bureau explained that comprehensive,
readily accessible information is
currently lacking about the identity of,
and orders issued against, nonbanks
subject either to the Bureau’s marketmonitoring authority or to its
supervisory authority across the various
markets for consumer financial products
and services. As a result, the Bureau
believed that there is a unique need to
identify nonbanks subject to orders
through this proposed registry. In
addition, the proposal would have
conformed with the Bureau’s
registration authority under CFPA
section 1022(c)(7), which states that the
Bureau may impose registration
requirements applicable to a covered
person, other than an insured
184 As provided in proposed § 1092.101(a), the
proposal would have defined the term ‘‘covered
person’’ to have the same meaning as in 12 U.S.C.
5481(6). The proposal would not have defined
‘‘service providers,’’ as defined in 12 U.S.C.
5481(26), as covered nonbanks per se. Entities that
are service providers, however, may nevertheless
also be covered persons under the CFPA. Among
other things, a person that is a service provider
shall be deemed to be a covered person to the extent
that such person engages in the offering or
provision of its own consumer financial product or
service. See 12 U.S.C. 5481(26)(C). And a service
provider that acts as a service provider to its
covered person affiliate is itself deemed to be a
covered person as provided in 12 U.S.C. 5481(6)(B).
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depository institution, insured credit
union, or related person.185
Second, the proposal would have
excluded from the definition of the term
‘‘covered nonbank’’ a ‘‘State,’’ as
defined in CFPA section 1002(27)—a
term that includes ‘‘any federally
recognized Indian tribe, as defined by
the Secretary of the Interior’’ under
section 104(a) of the Federal Recognized
Indian Tribe List Act of 1994, 25 U.S.C.
5131(a).186 The Bureau has other
avenues of collaborating with State
partners (including Tribal partners) and,
out of considerations of comity, did not
seek to subject them to an information
collection requirement in the proposal.
Third, the proposal excluded natural
persons from the definition of ‘‘covered
nonbank.’’ The Bureau was not
proposing to impose subpart B’s
registration requirements on natural
persons, even though natural persons
may be covered persons and may be
subject to the types of orders described
in the proposal. (For example, a sole
proprietor not incorporated as a legal
entity could qualify as a covered
person.) Under the proposed exclusion,
for example, natural persons subject to
orders issued under FTC Act section 5,
removal and prohibition orders or
orders assessing civil money penalties
issued by an appropriate Federal
banking agency under section 8 of the
Federal Deposit Insurance Act,187 or
State licensing orders or orders issued
under the S.A.F.E. Mortgage Licensing
Act of 2008 188 would not be subject to
the proposal’s registration requirements.
The ‘‘natural person’’ exception in
proposed § 1092.201(c)(3) was intended
only to exclude individual human
beings from the definition of ‘‘covered
nonbank.’’ The definition of ‘‘covered
nonbank’’ would have included trusts
and other entities that meet the
definition of ‘‘covered person’’ under
CFPA section 1002(6).189 The Bureau
was primarily interested in obtaining
information regarding orders that apply
to entities because it believed such
orders will be most useful in identifying
relevant risks to consumers. The Bureau
believed that many of the agency and
court orders enforcing the law issued
185 The Bureau explained that an affiliate of an
insured depository institution, insured credit
union, or related person could be subject to the
proposed rule if it is not itself an insured depository
institution, insured credit union, or related person.
186 12 U.S.C. 5481(27).
187 12 U.S.C. 1818.
188 12 U.S.C. 5101 et seq.
189 See 12 U.S.C. 5481(6). See also 12 U.S.C. 5481
(defining the term ‘‘person’’ to include, in addition
to individuals, any ‘‘partnership, company,
corporation, association (incorporated or
unincorporated), trust, estate, cooperative
organization, or other entity’’).
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against individuals are highly specific to
the facts and circumstances relevant to
the individual’s conduct and are less
likely to implicate broader risks to
consumers and markets. In addition, the
Bureau was primarily interested in
obtaining and publishing registration
information regarding nonbank entities
that are subject to its jurisdiction, which
among other things would enable
consumers to better identify such
entities and would provide information
to the public and other regulators. The
Bureau was concerned that, if the
Bureau should extend the registration
requirement to natural persons, the
information provided would be less
relevant to consumers and the other
users of the registry. Therefore, the
Bureau believed that the potential
benefit of extending the registration
requirement to natural persons likely
would not justify the additional Bureau
resources that would need to be
allocated to implement and administer
such an expansion of the Bureau’s
registry. The Bureau also believed that
proposed § 1092.203’s requirements to
designate one or more attesting
executives and submit written
statements would not be appropriate for
natural persons.
Fourth, the proposal excluded from
the definition of ‘‘covered nonbank’’ a
motor vehicle dealer that is
predominantly engaged in the sale and
servicing of motor vehicles, the leasing
and servicing of motor vehicles, or both,
within the meaning of 12 U.S.C. 5519(a),
except to the extent such a person
engages in functions that are excepted
from the application of 12 U.S.C.
5519(a) as described in 12 U.S.C.
5519(b). CFPA section 1029 provides an
exclusion from the Bureau’s rulemaking
authority for certain motor vehicle
dealers.190 However, CFPA section
1029(b) exempts certain persons from
this exclusion. Persons covered by
section 1029(a) would have qualified as
‘‘covered nonbanks’’ under the proposal
so long as they engage in the functions
described in section 1029(b)—in which
case they would be ‘‘covered
nonbanks.’’ Proposed § 1092.201(e),
discussed below, would have further
provided that the only orders issued to
such motor vehicle dealers that would
require registration would be those
issued in connection with the functions
that are excepted from the application of
12 U.S.C. 5519(a) as described in 12
U.S.C. 5519(b).
Fifth, the proposal excluded a person
from the definition of ‘‘covered
nonbank’’ if the person qualifies as a
covered person based solely on conduct
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U.S.C. 5519 (‘‘Exclusion for Auto Dealers’’).
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that is the subject of, and that is not
otherwise exempted from, an exclusion
from the Bureau’s rulemaking authority
under 12 U.S.C. 5517.191 This provision
would have clarified that persons whose
activities are wholly excluded from the
rulemaking authority of the Bureau
under one or more of the provisions of
section 1027 of the CFPA are not
‘‘covered nonbanks.’’ However, where
the CFPA provides that any of the
activities engaged in by such persons
are subject to the Bureau’s rulemaking
authority, this limitation would not
have excluded the person from
qualifying as a ‘‘covered nonbank.’’ For
example, the Bureau explained, CFPA
section 1027(l)(1) provides an exclusion
from the Bureau’s rulemaking authority
for certain persons engaging in certain
activities relating to charitable
contributions.192 Under the proposal, a
covered person would not have been
deemed a ‘‘covered person’’ if it
qualifies for this statutory exclusion and
is not otherwise exempt from it. But
CFPA section 1027(l)(2) exempts certain
activities from this statutory exclusion
by providing that ‘‘the exclusion in
[CFPA section 1027(l)(1)] does not apply
to any activities not described in [CFPA
section 1027(l)(1)] that are the offering
or provision of any consumer financial
product or service, or are otherwise
subject to any enumerated consumer
law or any law for which authorities are
transferred under subtitle F or H.’’ 193 As
proposed, persons described in CFPA
section 1027(l)(1) engaging in the
activities described therein would have
qualified as ‘‘covered nonbanks’’ so long
as they engage in any of the activities
described in CFPA section 1027(l)(2),
and they would thus be subject to all of
the information-collection requirements
of the rule applicable to ‘‘covered
nonbanks,’’ regardless of whether the
applicable ‘‘covered order’’ addressed
the conduct subject to the statutory
exclusion.
Among other things, the Bureau
sought comment regarding the overall
scope of the proposed definition of
‘‘covered nonbank,’’ including whether
the definition should be expanded or
limited in light of the purposes and
objectives of subpart B. The Bureau
further sought comment on whether a
more limited or expanded approach to
the registration of covered persons
would be appropriate instead of the
proposed requirements, whether it
should consider any other modifications
to the scope of the rule, and how such
191 12
U.S.C. 5517.
U.S.C. 5517(l)(1) (‘‘Exclusion for Activities
Relating to Charitable Contributions’’).
193 12 U.S.C. 5517(l)(2).
192 12
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modifications would match the Bureau’s
policy goals.
Comments Received
The Bureau specifically sought
comment as to whether it should adopt
an alternative approach that would limit
all of the proposal’s registration
requirements to covered persons that are
subject to the Bureau’s supervision and
examination authority under CFPA
section 1024(a). An industry commenter
supported limiting the registration
requirements to entities with annual
receipts of more than $10 million,
which is the Bureau’s larger participant
threshold for the consumer debt
collection market under section
1024(a).194 While conceding that this
approach would limit the number of
orders subject to the rule, the
commenter stated that it would greatly
reduce the compliance burden on small
businesses.
A consumer advocate commenter
stated that the proposal should be
modified in order to clarify that schools
and State-affiliated student loan
servicers satisfy the definition of
‘‘covered nonbanks.’’ The commenter
stated that such clarification was
particularly desirable in light of the
exception for States from the definition
of ‘‘covered nonbank,’’ as according to
the commenter, certain entities accused
of illegal conduct often falsely assert
that they are agents or appendages of
States.
The Bureau specifically requested
comment on whether to include natural
persons in the term ‘‘covered nonbank,’’
even though natural persons may be
covered persons and may be subject to
the types of orders described in the
proposal. A consumer advocate
commenter stated that the proposal
should be modified in order to include
natural persons who otherwise meet the
definition of ‘‘covered person.’’ The
commenter stated that including natural
persons would provide consumers with
an additional resource to identify bad
actors in consumer financial services.
Commenters, including the SBA
Office of Advocacy, stated that the
proposal was insufficiently clear with
respect to affiliates of insured
depository institutions and insured
credit unions. Commenters noted that
certain bank holding companies and
other nonbank affiliates of such entities
meet the CFPA’s definition of ‘‘covered
person,’’ 195 but they would not have
fallen within the exemptions to the term
‘‘covered nonbank’’ provided in
proposed § 1092.201(d). Commenters
194 See
195 12
12 U.S.C. 5514(a)(1)(B); 12 CFR 1090.105.
U.S.C. 5481(6).
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requested clarification as to which
affiliates of banks and credit unions
would qualify as ‘‘covered nonbanks’’
under the proposal. One industry
commenter stated that the Bureau
should ensure that the regulatory text
expressly clarified the application of
this definition to bank affiliates.
Industry commenters also stated that the
Bureau should exempt some or all of
these bank-affiliated ‘‘covered persons’’
from the scope of the definition, and
industry commenters stated that if the
Bureau were to include affiliates of
insured depository institutions and
insured credit unions in the definition
of the term ‘‘covered nonbank,’’ the
Bureau should issue a supplementary
proposal in order to provide for
additional notice and comment on that
approach. A consumer advocate
commenter stated that the Bureau
should take an expansive approach in
addressing this question.
Several industry and consumer
advocate commenters approved of the
proposal to collect and publish
information about nonbanks, stating that
the proposed registry would shed light
on the large and growing nonbank
financial sector. An industry commenter
and a consumer advocate commenter
stated that the proposed registry would
help the Bureau identify nonbanks to
bring under Bureau supervision.
Industry commenters and a joint
comment letter from members of
Congress agreed that excepting banks
and insured credit unions from the
proposal was appropriate, although
some commenters objected to the
proposal’s statement that the Bureau
might consider including banks and
credit unions in a future registry, stating
that the Bureau lacked authority to do
so or that collecting information from
banks or credit unions would be unduly
burdensome and duplicative. On the
other hand, several commenters stated
that the Bureau should not exempt
banks and credit unions from the
proposed rule’s requirements. Industry
commenters stated that this exemption
was contrary to the proposal’s rationale,
and unfairly targeted nonbanks and put
them at a competitive disadvantage. A
consumer advocate commenter stated
that the exemption was inconsistent
with the publication of certain orders
regarding nonbanks, and that nonbanks
might attempt to evade the proposed
rule’s registration requirements by
acquiring a banking charter.
A joint letter from State regulators
stated that States have not witnessed
widespread issues with or a growing
trend of recidivism among nonbanks
that would necessitate the creation of
the proposed nonbank registry, and
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stated that previous remarks by the
Bureau’s Director had not emphasized a
recidivism problem among nonbanks.
However, consumer advocate
commenters stated that recidivism by
nonbanks did pose risks to consumers
and that the registry would help users
identify such risks and would otherwise
help prevent recidivism.
While noting the exclusion of
federally recognized tribes from the
proposed definition, Tribal commenters
suggested that the proposal’s use of the
term ‘‘State’’ to define the exemption
from proposed § 1092.201(d)’s
definition of ‘‘covered nonbank’’ was
inadequate to protect Tribal sovereignty,
and stated that the rule should adopt a
more specific and clear exclusion for
economic arms of the tribe, or for Tribal
instrumentalities or entities wholly
owned by tribes. These commenters
asserted that tribes, as self-determining
bodies, are the only ones competent to
determine the status of an entity as
enjoying Tribal sovereignty. Thus, in
their view, U.S. government
institutions—whether the Bureau, other
U.S. regulators, or U.S. courts—lack
competence to make such
determinations. Tribal commenters also
stated that application of the rule to
Tribal instrumentalities would expose
Tribal treasuries to unfounded attacks
that the registry would generate.
Industry commenters stated that in
addition to the exemption in proposed
§ 1092.201(d)(1) for insured credit
unions, the Bureau should also exempt
from the definition of ‘‘covered
nonbank’’ credit union service
organizations (CUSOs). The commenters
stated that CUSOs must register with the
National Credit Union Administration
(NCUA) and report financial activity,
with annual affirmations and updates,
that NCUA and State regulators
regularly exercise established authority
to request information regarding CUSO
activity, that requiring registration of
CUSOs would be duplicative and
burdensome, and that consumers would
be unlikely to find such registration
useful.
An industry commenter stated that
the Bureau should exempt institutions
that are supervised by the Farm Credit
Administration from the definition of
‘‘covered nonbank.’’ The commenter
stated that the reasons the proposal
gives for excluding depository
institutions and credit unions apply
equally to Farm Credit institutions, and
that such an exemption would be
consistent with the unique treatment of
such institutions under the CFPA.
An industry commenter stated that
the Bureau should exempt attorneys and
law firms from the scope of the proposal
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on the grounds that regulation of
lawyers is properly placed not with the
Bureau but with the judiciary and State
bar associations, because of concerns
that covered nonbanks that are attorneys
or law firms could be required to
divulge privileged communications
between the lawyer and their client as
well as information regarding their
clients’ confidential and proprietary
business practices, and on the grounds
that they are already heavily regulated
and should otherwise not be subject to
the rule.
Two industry commenters stated that
the Bureau should exempt mortgage
lenders and mortgage services from the
scope of the proposal, or at a minimum,
exempt such entities where they have
satisfied the existing NMLS
requirements for mortgage lenders/
servicers to disclose such agency and
court orders to the NMLS. These
commenters stated that the proposed
rule would have a disproportionate
burden on such entities and would be
largely duplicative of the orders that
such entities report to the NMLS.
Response to Comments Received
Under the final rule, the Bureau will
collect information under the nonbank
registry in order to be informed about
risks regarding a wide range of nonbank
covered persons, and not just regarding
the entities that are subject to its
supervisory jurisdiction under CFPA
section 1024(a). The Bureau finalizes its
conclusion in the proposal 196 that
collecting information from a wider
range of covered persons is appropriate
to achieve its market-monitoring
objectives. The Bureau declines to
finalize the alternative approach
discussed in the notice of proposed
rulemaking that would have limited the
scope of the definition to covered
persons that are subject to the Bureau’s
supervision and examination authority
under CFPA section 1024(a). The
Bureau’s market-monitoring information
collection authority under CFPA section
1022(c)(4)(B)(ii) applies to ‘‘covered
persons’’ and ‘‘service providers’’ as
defined at CFPA section 1002,197 and
the Bureau’s registration authority
under CFPA section 1022(c)(7) applies
to all covered persons ‘‘other than an
insured depository institution, insured
credit union, or related person.’’ 198 The
Bureau concludes that the information
that will be collected under the nonbank
registry will be useful for purposes
beyond conducting its supervisory
196 See
88 FR 6088 at 6109.
12 U.S.C. 5481(6), (26); 12 U.S.C.
5512(c)(4)(B)(ii).
198 See 12 U.S.C. 5512(c)(7).
197 See
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work, and that it should collect
information in order to inform its
regulatory, enforcement, and other
functions, where the Bureau’s authority
extends to numerous entities that are
not subject to its supervisory
jurisdiction. Even with respect to
informing the Bureau’s supervisory
work, it will be necessary to collect
information from entities that are not
subject to Bureau supervision under
CFPA section 1024(a). For example, the
Bureau could use information submitted
to the nonbank registry to inform its
decisions regarding whether to issue
new larger participant rules under CFPA
section 1024(a)(2) or whether to exercise
its authority to designate a covered
person for supervision because the
Bureau has reasonable cause to
determine that the covered person is
engaging or has engaged in conduct that
poses risk to consumers.199 Thus, the
Bureau will need to be informed about
risks to consumers arising with respect
to entities that are not presently
supervised.
The Bureau declines to adopt a
registration threshold or other exception
from the rule’s registration requirements
based upon annual receipts or other size
considerations. That approach would
lead to the omission of relevant covered
nonbanks from the registry, which
would mean that the Bureau would not
be notified regarding the existence of
such entities and would not learn that
they were subject to a covered order.
Such an exception would unnecessarily
limit the information that is provided to
the Bureau and provide the Bureau with
only a partial view of related risks. The
Bureau concludes that the limited
burden that will be imposed on such
entities due to such informationcollection requirements is warranted in
light of the benefits to the Bureau and
other users of the nonbank registry.200
The Bureau declines to use this
rulemaking as an opportunity to finalize
a position regarding whether any
particular type of entity is a covered
person or otherwise falls under the
regulatory definition of the term
‘‘covered nonbank.’’ The Bureau expects
all entities subject to its jurisdiction to
assess their own compliance obligations
and to comply with the law. An entity
that believes it has a good faith basis
that it is not a covered nonbank or
supervised registered entity, or that an
order is not a covered order, but has
concerns about whether the Bureau
would agree, may file a good faith
199 See 12 U.S.C. 5514(a)(1)(B), (C), (a)(2); 12 CFR
part 1091.
200 See also the section-by-section discussion of
§ 1092.201(q) below.
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notification under § 1092.202(g) or
§ 1092.204(f).
The Bureau declines at this time to
include natural persons in the term
‘‘covered nonbank.’’ For the reasons
discussed in the proposal, the Bureau is
primarily concerned about the risk to
consumers that is presented by entities
that are not natural persons, although it
may consider expanding the registry in
future. As the Bureau discussed in its
proposal, the ‘‘natural person’’
exception in § 1092.201(c)(3) is
intended only to exclude individual
human beings from the definition of
‘‘covered nonbank.’’ The definition of
‘‘covered nonbank’’ would include
trusts and other entities that meet the
definition of ‘‘covered person’’ under
CFPA section 1002(6).
The Bureau declines to finalize an
exemption for affiliates of insured
depository institutions or insured credit
unions from § 1092.201(d)’s definition
of the term ‘‘covered nonbank.’’ (As
discussed in the section-by-section
discussion of § 1092.201(q) below, that
section’s definition of the term
‘‘supervised registered entity’’ will not
apply to an affiliate of an insured
depository institution or insured credit
union with total assets of more than $10
billion as described in CFPA section
1025(a).201 Therefore, such affiliates,
even if they are ‘‘covered nonbanks,’’
are not subject to the final rule’s
written-statement requirements.) As the
notice of proposed rulemaking
indicated,202 an affiliate of an insured
depository institution or insured credit
union could be subject to the proposed
rule if it is not itself an insured
depository institution or insured credit
union. While proposed § 1092.201(d)(1)
would have excluded from the
definition of ‘‘covered nonbank’’
insured depository institutions and
insured credit unions (as well as
‘‘related persons,’’ a term defined in
CFPA section 1002(25)), the proposal
did not contain an exemption from the
definition of ‘‘covered nonbank’’ for
affiliates of such persons where they
otherwise would meet that definition.
Like other covered nonbanks, such an
affiliate would only be subject to the
rule if it qualified as a ‘‘covered
nonbank’’ under the criteria established
in § 1092.201(d), including the
requirement that the affiliate satisfy the
CFPA definition of the term ‘‘covered
person.’’ With respect to the application
of the final rule’s written-statement
requirements to such an affiliate, see the
201 12
202 88
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section-by-section discussion of
§ 1092.201(q) below.
The Bureau finalizes the approach
described in the proposal. The Bureau
acknowledges that, like the insured
depository institutions and insured
credit unions that are exempt from the
definition of ‘‘covered nonbank’’ under
§ 1092.201(d)(1), affiliates of those
entities are subject to certain
requirements imposed by the prudential
regulators. And those regulators make
certain information available to the
public regarding such affiliates,
including information regarding their
identity and certain orders to which
such affiliates are subject. Nevertheless,
the Bureau concludes that requiring
such affiliates that otherwise meet the
definition of ‘‘covered nonbank’’ to
submit information to the nonbank
registry as required under § 1092.202
will serve the purposes of the final rule
described in part IV above. Covered
nonbanks that are affiliates of insured
depository institutions and insured
credit unions present a different set of
risks to consumers than do insured
depository institutions and insured
credit unions. For example, they are
generally neither chartered nor insured
by the Federal Government; they are
generally subject to a general corporate
or business charter as opposed to a more
restrictive banking or credit union
charter; and they are generally not
subject to the same restrictions on
corporate form and powers that apply to
insured depository institutions and
insured credit unions.203
The Bureau concludes that it is
appropriate to distinguish affiliated
nonbanks engaged in the offering or
provision of consumer financial
products and services from their
affiliates that hold a bank or credit
203 See, e.g., 12 U.S.C 24a (authorizing financial
subsidiaries of national banks to engage in
nonbanking activities); 12 U.S.C. 1843 (authorizing
bank holding company interests in nonbanking
organizations), 1864 (authorizing bank service
companies to engage in nonbanking activities). See
also, e.g., Patricia A. McCoy, 1 Banking Law
Manual: Federal Regulation of Financial Holding
Companies, Banks, and Thrifts (3rd ed. 2023)
§§ 5.02–5.03 (discussing powers of national banks,
bank holding companies, and financial holding
companies). In addition, such affiliates are not
subject by statute to the same frequency of
examination by a Federal agency as are insured
depository institutions. See 12 U.S.C. 1820(d)
(generally requiring a ‘‘full-scope, on-site
examination of each insured depository institution’’
either annually or, for certain small institutions,
every 18 months). And certain affiliates are subject
to a different system of ratings and supervision by
the prudential regulators than are insured
depository institutions. See, e.g., Large Financial
Institution Rating System; Regulations K and LL, 83
FR 58724 (Nov. 21, 2018) (adopting ratings system
for certain holding companies). See also the
discussion below regarding credit union service
organizations (CUSOs).
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union charter, are federally insured, and
are engaged directly in the business of
banking or providing credit union
services, and to register and collect
additional information from affiliated
nonbanks for the purposes of identifying
and assessing risk to consumers.
Furthermore, the approach taken in
the final rule is consistent with CFPA
section 1022(c)(7),204 which does not
exempt such affiliate covered persons
from the nonbank registration
requirements that may be imposed by
the Bureau under that statutory
provision. In this case, Congress made a
determination to extend the Bureau’s
registration authority over such persons,
which are nonbanks subject to the
Bureau’s jurisdiction. Among other
things, the Bureau needs to monitor
risks to consumers presented by such
nonbank affiliates in order to exercise
its broad enforcement, supervisory, and
regulatory authority over such persons.
For example, Congress provided
supervisory authority over nonbanks to
the Bureau in order to ensure that the
Bureau could exercise consistent
Federal oversight of nondepository
institutions based upon its assessment
of the risk they pose to consumers.205
With respect to the affiliates of very
large insured depository institutions
and insured credit unions, Congress
intended to address the preexisting
‘‘fragmented regulatory structure’’ by
creating ‘‘one Federal regulator with
consolidated consumer protection
authority’’ that would monitor such
entities.206 Consistent with this goal, the
final rule will create a unified registry
that will identify covered nonbanks that
themselves participate in the markets
for consumer financial products and
services, as well as the orders to which
they are subject, whether or not those
covered nonbanks happen to be
affiliates of banks or credit unions.
The Bureau is adopting an exception
for insured depository institutions,
insured credit unions, and related
persons in § 1092.201(d)’s definition of
the term ‘‘covered nonbank.’’ 207 For the
reasons stated in the proposal, the
Bureau concludes that there is currently
U.S.C. 5512(c)(7).
S. Rep. No. 111–176, at 167 (2010) (‘‘The
authority provided to the Bureau in this section will
establish for the first time consistent Federal
oversight of nondepository institutions, based on
the Bureau’s assessment of the risks posed to
consumers and other criteria set forth in this
section.’’).
206 See S. Rep. No. 111–176, at 168 (2010).
207 As explained below, the Bureau has adopted
a revision to the proposed rule to clarify that a
related person is excluded from the definition of
‘‘covered nonbank’’ only if the person qualifies as
a ‘‘covered person’’ solely due to its related-person
status.
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greater need to collect information from
the nonbanks under its jurisdiction than
from insured depository institutions,
insured credit unions, and related
persons, that there is a unique need to
identify nonbanks subject to orders
through the nonbank registry, and that
the final rule will conform with the
Bureau’s registration authority under
CFPA section 1022(c)(7), which states
that the Bureau may impose registration
requirements applicable to a covered
person, other than an insured
depository institution, insured credit
union, or related person.208 As
discussed at parts III and IV above, the
Bureau is issuing this rule under
separate authorities under CFPA
sections 1022 and 1024. However, for
clarity, the final rule will not cover
persons who are not subject to the
Bureau’s CFPA section 1022(c)(7)(A)
authority.
In addition, the Bureau concludes that
the final rule will facilitate the purposes
of the nonbank registry described in part
IV above even without registering
insured depository institutions, insured
credit unions, or related persons at this
time. In light of the modest obligations
imposed under the final rule, the
Bureau does not think that the final rule
will cause nonbanks to undergo the
expense and effort involved in obtaining
a banking charter to avoid their
registration obligations under the final
rule. The Bureau chooses at this time
not to collect information from banks
not only because orders against insured
depository institutions and insured
credit unions are public or required to
be public—as are all covered orders, as
provided at § 1092.201(e)—but also
because the insured depository
institutions and insured credit unions
themselves are already subject to a
comprehensive public Federal
registration regime that identifies them
to the public and is kept up to date.209
These requirements generally serve to
distinguish orders issued against
insured depository institutions and
insured credit unions from orders
issued against the covered nonbanks
that the Bureau will register under the
final rule.210
204 12
205 See
Frm 00035
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208 12
U.S.C. 5512(c)(7).
e.g., 12 U.S.C. 1786(s) (insured credit
unions), 1818(u) (insured depository institutions).
210 In addition, for the reasons discussed above
and in the section-by-section discussion of
§ 1092.201(q), affiliates of insured depository
institutions and insured credit unions may qualify
as ‘‘covered nonbanks’’ subject to the final rule, and
affiliates of insured depository institutions and
insured credit unions with total assets of $10 billion
or less may qualify as ‘‘supervised registered
entities’’ subject to § 1092.204. As discussed in
those sections, the Bureau is concerned that such
209 See,
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As discussed in part IV above, the
registry will accomplish a number of
goals, with a particular focus on
monitoring for risks to consumers
related to repeat offenders of consumer
protection law. As discussed above,
recidivism poses particular risks to
consumers, and the Bureau believes that
adoption of the final rule is appropriate
for the purposes of monitoring for
recidivism and publishing information
that may help potential users of the
nonbank registry identify recidivism by
nonbanks. The joint comment letter
from State regulators neither asserts nor
demonstrates that recidivism by
nonbanks does not present risks to
consumers, and consumer advocate
commenters stated that recidivism by
nonbanks does present risks to
consumers. The Bureau intends to use
the information collected via the
nonbank registry to help detect and
assess relevant risks to consumers
related to recidivism by nonbanks. In
addition, the Bureau is adopting the
final rule not just to monitor and deter
recidivism by nonbanks but also more
generally to serve all of the purposes
described under part IV, pursuant to its
legal authorities as described in part III.
For example, as discussed in the
section-by-section discussion of
§ 1092.205(a) below and elsewhere in
this preamble, even one covered order
may be probative of significant risk to
consumers, and the written-statement
requirements will serve the purposes
described in part IV(D) whether or not
an applicable supervised registered
entity is subject to multiple covered
orders. Thus, the Bureau believes its
adoption of the final rule is appropriate
even if recidivism among nonbanks
currently presents only limited risks to
consumers.
Section 1092.201(d)(2) excludes from
the definition of the term ‘‘covered
nonbank’’ a ‘‘State,’’ as defined in CFPA
section 1002(27)—a term that includes
‘‘any federally recognized Indian tribe,
as defined by the Secretary of the
Interior’’ under section 104(a) of the
Federal Recognized Indian Tribe List
Act of 1994, 25 U.S.C. 5131(a). The
Bureau declines to provide an express
exemption from the final rule for Tribal
instrumentalities or entities wholly
owned by tribes because the Bureau
does not choose to use this rulemaking
as the vehicle for determining the
circumstances under which tribally
affiliated entities qualify as part of the
tribe itself or are appropriately exempt
from covered laws. At a minimum,
affiliates may present different types of risks to
consumers than insured depository institutions and
insured credit unions do.
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where a covered nonbank becomes
subject to a final court or agency order
enforcing a covered law and otherwise
satisfies the requirements of the rule,
the Bureau believes that it is appropriate
to register the entity and the order. The
Bureau acknowledges that certain
tribally affiliated entities may from time
to time believe a court or agency has
erred in imposing a covered order on
them, based on grounds of sovereign
immunity or otherwise. However, the
Bureau believes that providing a blanket
exemption for all such cases would
improperly omit covered orders that are
in fact probative of risk to consumers
posed by entities subject to the Bureau’s
jurisdiction and thus should be
registered under the final rule.
In requiring registration in connection
with such orders, the Bureau takes no
position on the merits of the underlying
case, proceeding, or order, or any
related arguments, including any
arguments regarding sovereign
immunity or Tribal status. As discussed
in the section-by-section discussion of
§§ 1092.202(g) and 1092.204(f) below,
the Bureau believes that the voluntary
good-faith filing option provides a
satisfactory mechanism for tribally
affiliated entities to avoid the risk of an
enforcement action where they decide
not to register an order or submit a
written statement based on a good-faith
belief that they are not a covered
nonbank or a supervised registered
entity, such as on the grounds that they
qualify as part of a federally recognized
tribe and thus as a ‘‘State,’’ or that an
order is not a covered order. Also as
discussed in those sections, an entity
may choose whether or not it wishes to
submit such a filing, and the Bureau
will treat such filings as ‘‘administrative
information’’ that it will not publish
under § 1092.205(a). Thus, the Bureau
does not agree that application of the
rule to tribally affiliated entities would
expose Tribal treasuries to unfounded
attacks.
The Bureau declines to finalize an
exemption for CUSOs in § 1092.201(d)’s
definition of ‘‘covered nonbank.’’ 211
211 Like other covered nonbanks, a CUSO would
only be subject to the rule if it qualified as a
‘‘covered nonbank’’ under the criteria established in
§ 1092.201(d), including the requirement that the
CUSO satisfy the CFPA definition of the term
‘‘covered person.’’ And a CUSO would only be
subject to § 1092.204’s written-statement
requirements if it qualified as a ‘‘supervised
registered entity’’ under the criteria established in
§ 1092.201(q). Under § 1092.201(q)(1), a CUSO that
is subject to Bureau examination and supervision
solely in its capacity as a service provider and that
is not otherwise subject to Bureau supervision and
examination will not be deemed to be a ‘‘supervised
registered entity’’ under § 1092.201(q).
As discussed above, entities that are service
providers may nevertheless also be covered persons
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Unlike insured credit unions, which are
exempt from the definition, CUSOs are
not directly subject to the NCUA’s full
examination and enforcement authority,
and are not chartered or insured by the
NCUA.212 And while presently the
NCUA requires a federally insured
credit union investing in or lending to
a CUSO to obtain a written agreement
requiring the applicable CUSO to
‘‘provide the NCUA with complete
access to its books and records and the
ability to review the CUSO’s internal
controls’’ and to supply the NCUA with
‘‘operational and financial information’’
via a CUSO Registry,213 the NCUA
nevertheless has previously emphasized
in Congressional testimony that ‘‘this
does not provide access to examine all
of the CUSO’s operations.’’ 214 The
Bureau concludes that requiring covered
nonbanks that are CUSOs to register will
provide valuable information to the
Bureau and others regarding risks such
covered nonbanks may present to
consumers. Among other things, if—as
the Bureau intends—the Bureau
publishes registry information, requiring
CUSOs that qualify as covered nonbanks
to register with the nonbank registry
will facilitate credit union due diligence
in using a CUSO to provide services to
the credit union in connection with the
offering or provision of consumer
financial products and services.
The Bureau also notes that the credit
union exemption provided under
§ 1092.201(d)(1) applies only to insured
credit unions, as that term is defined by
§ 1092.101(a), which in turn defines the
term ‘‘insured credit union’’ to have the
meaning given to that term in the
CFPA.215 Thus, this exemption does not
apply to credit unions, such as certain
uninsured or privately insured credit
unions, that do not meet the definition
of ‘‘insured credit union’’ under the
CFPA and the final rule. Such credit
unions must comply with the rule’s
under the CFPA. For example, a CUSO, such as a
CUSO wholly owned by a credit union, that acts as
a service provider under the CFPA to its covered
person credit union affiliate would itself be deemed
to be a covered person as provided in 12 U.S.C.
5481(6)(B), and thus would qualify as a ‘‘covered
nonbank’’ under § 1092.201(d) if the other criteria
of that definition are satisfied.
212 See NCUA Office of Inspector General, Report
#OIG–20–07, ‘‘Audit of the NCUA’s Examination
and Oversight Authority Over Credit Union Service
Organizations and Vendors’’ 4 (Sept. 1, 2020),
https://ncua.gov/files/audit-reports/oig-audit-cusosvendors-2020.pdf (OIG Report) (‘‘CUSOs are not
directly subject to NCUA regulation or examination
and are not chartered or insured by the NCUA.’’).
213 OIG Report at 6–8; see also 12 CFR 712.3;
CUSO Registry, https://ncua.gov/regulationsupervision/regulatory-reporting/cuso-registry.
214 OIG Report at 16 (describing NCUA testimony
seeking additional statutory authority from
Congress).
215 See 12 U.S.C. 5481(17).
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registration and other provisions with
respect to covered nonbanks and
supervised registered entities where
they would otherwise be applicable.216
The Bureau declines to adopt an
express exemption from the definition
of ‘‘covered nonbank’’ for institutions
supervised by the Farm Credit
Administration. The industry
commenter that requested such an
exemption has not shown that it is
necessary or appropriate.217 The
commenter discusses one category of
orders that institutions regulated by the
Farm Credit Administration might
register under the rule—namely, orders
from the Farm Credit Administration
enforcing compliance with certain
Federal consumer financial laws. Under
current Farm Credit Administration
policy, however, the agency does not
‘‘identify the institution and/or persons
involved’’ when it issues an order
enforcing the law against an institution
it regulates.218 An order that does not
publicly ‘‘[i]dentif[y] a covered nonbank
by name as a party subject to the order’’
would not qualify as a ‘‘covered order’’
required to be registered under the final
rule.219 Moreover, in the event a person
regulated by the Farm Credit
Administration has concerns that it may
be deemed a covered nonbank or that
any particular order may be deemed a
covered order notwithstanding its goodfaith belief to the contrary, it may file
one or more good-faith notifications
under § 1092.202(g) or § 1092.204(f), as
applicable.
The Bureau also does not choose to
finalize an express exemption for
attorneys or law firms in the final rule.
Individual attorneys already fall outside
216 Likewise, the exemption at § 1092.201(d)(1)
would not apply to any bank or savings association
that is not an ‘‘insured depository institution’’ or
‘‘insured credit union’’ as defined in the final rule.
See § 1092.101(a), 201(h) of the final rule.
217 The industry commenter states that
institutions regulated by the Farm Credit
Administration do not fall within other exclusions
from the definition of ‘‘covered nonbank’’ in
§ 1092.202(d), such as the exclusion for a ‘‘person
that qualifies as a covered person based solely on
conduct that is the subject of, and that is not
otherwise exempted from, an exclusion from the
Bureau’s rulemaking authority under 12 U.S.C.
5517.’’ Cf. 12 U.S.C. 5517(k) (providing that the
Bureau ‘‘shall have no authority to exercise any
power to enforce this title with respect to a person
regulated by the Farm Credit Administration,’’ but
not referring to the Bureau’s rulemaking authority
(emphasis added)).
218 Farm Credit Administration, Policy Statement:
Disclosure of the Issuance and Termination of
Enforcement Documents (effective Jan. 27, 2005),
https://ww3.fca.gov/readingrm/Handbook/_layouts/
15/WopiFrame.aspx?sourcedoc={920F0A1E-1839493C-BE19-E13751EA460D}&file=Disclosure%20
of%20the%20Issuance%20
and%20Termination%20of%20Enforcement%20
Documents.docx&action=default.
219 See § 1092.201(e)(1)(i) of the final rule.
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the definition of covered nonbank under
the § 1092.201(d)(4) exclusion for
natural persons. Where a law firm
satisfies the final rule’s definition of the
term ‘‘covered nonbank,’’ the Bureau
concludes that entry of a covered order
against such a covered nonbank is likely
to be probative of risk to consumers, and
that it is appropriate to require
registration under such circumstances,
consistent with the Bureau’s statutory
jurisdiction and authority. In addition,
the final rule does not require the
submission of any information to the
nonbank registry that is protected by the
attorney-client privilege or any other
legal privilege. As stated in part III(B),
the Bureau’s registry is designed to not
collect any protected proprietary,
personal, or confidential consumer
information, and thus, the Bureau will
not publish, or require public reporting
of, any such information. Further
discussion of the publication provisions
of the final rule is provided in the
section-by-section discussion of
§ 1092.205 below.
With respect to commenters’ requests
for exemptions for mortgage lenders and
servicers, the Bureau is finalizing a onetime registration option for NMLSpublished covered orders at § 1092.203;
this provision is discussed in more
detail in part IV(E) and the section-bysection discussion of § 1092.203 below.
Under the final rule, with respect to any
NMLS-published covered order, a
covered nonbank that is identified by
name as a party subject to the order may
elect to comply with the one-time
registration option described in
§ 1092.203 in lieu of complying with the
requirements of §§ 1092.202 and
1092.204. The Bureau is adopting this
provision in part to address the
concerns of commenters that requiring
mortgage lenders and servicers to
register orders that are already available
on the public NMLS Consumer Access
website would be duplicative and
burdensome.
The Bureau declines to finalize an
additional express exemption from
§ 1092.202(d) for covered nonbanks that
are mortgage lenders or mortgage
servicers. The CFPA expressly subjects
these entities to the Bureau’s
supervisory authority,220 and the
legislative history of the CFPA indicates
that Congress viewed this authority as
integral to the Bureau’s mandate.221 In
12 U.S.C. 5514(a)(1).
e.g., S. Rep. No. 111–176 at 11–14 (2010)
(discussing the ‘‘mortgage crisis’’ that began in the
2000s), 167 (‘‘Specifically, the Bureau will have the
authority to supervise all participants in the
consumer mortgage arena, including mortgage
originators, brokers, and servicers and consumer
mortgage modification and foreclosure relief
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220 See
221 See,
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addition, the Bureau is the only Federal
regulator with supervisory and
enforcement jurisdiction over all of
these entities, which are chartered by
the various States. The option provided
at § 1092.203 will help eliminate
redundant filings by nonbank mortgage
lenders and mortgage servicers while
notifying the nonbank registry when an
applicable order has been issued or
obtained against a covered nonbank.
Thus, the Bureau believes that requiring
such entities to register covered orders,
subject to the one-time registration
option described in § 1092.203 for
NMLS-published covered orders where
it applies, would serve the purposes of
the final rule described in part IV above.
Final Rule
For the reasons set forth above and as
follows, the Bureau is finalizing
§ 1092.201(d) as proposed, with
revisions to clarify the treatment of
‘‘related persons.’’ The final rule
renumbers the items in § 1092.201(d)
accordingly.
The Bureau had proposed to exclude
‘‘related persons,’’ as that term is
defined at § 1092.101(a) and CFPA
section 1002(25), from the proposed
definition of ‘‘covered nonbank.’’ 222
Final § 1091.201(d)(1) and (2) have been
revised to retain this exclusion, but to
clarify these provisions to provide that
the final rule does not include within
the definition of ‘‘covered nonbank’’ a
person who is a covered person solely
by virtue of being a related person as
defined in CFPA section 1002(25).
Under CFPA section 1002(25), certain
persons are ‘‘deemed to [be] a covered
person for all purposes of any provision
of Federal consumer financial law[.]’’ 223
However, CFPA section 1022(c)(7)(A)
excludes related persons from the type
of covered persons covered by Bureau
rules regarding registration issued under
CFPA section 1022(c)(7) authority.224 As
discussed at parts III and IV above, the
Bureau is issuing this rule under
separate authorities under CFPA
sections 1022 and 1024. However, for
clarity, the final rule will not cover
persons who are not subject to the
services. These entities contributed to the housing
crisis that led to the near collapse of the financial
system.’’), 229 (‘‘The CFPB would have been able
to head off the subprime mortgage crisis that
directly led to the financial crisis, because the CFPB
would have been able to see and take action against
the proliferation of poorly underwritten mortgages
with abusive terms.’’). As discussed in part II(A)
above, the Bureau was created in the wake of the
2008 financial crisis, which was caused by a variety
of overlapping factors including systemic
malfeasance in the mortgage industry.
222 88 FR 6088 at 6108.
223 12 U.S.C. 5481(25)(B).
224 12 U.S.C. 5512(c)(7)(A).
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Bureau’s CFPA section 1022(c)(7)(A)
authority. Therefore, the final rule
excludes related persons from the
definition of ‘‘covered nonbank,’’ to the
extent that they are not covered persons
for any other reason than being deemed
covered persons pursuant to CFPA
section 1002(25). For example, this
exclusion generally would not apply to
a nonbank entity that qualifies as a
covered person because it offers or
provides a consumer financial product
or service,225 even if that entity also
happens to be a related person.
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Section 1092.201(e) Covered Order
Proposed Rule
The Bureau proposed § 1092.201(e) to
define the term ‘‘covered order.’’ The
proposal would have defined the term
to include only orders that are both
public and final. The term ‘‘public’’ was
defined at proposed § 1092.201(k). The
proposed term ‘‘covered order’’ was
intended to cover only final settlement
or consent orders, or final agency or
court orders resulting from litigation or
adjudicated agency proceedings. By
‘‘final’’ order, the proposal meant to
exclude such orders as preliminary
injunctions, temporary restraining
orders, orders partially granting and
partially denying motions to dismiss or
summary-judgment motions, and other
interlocutory orders.226 The proposed
term would also have excluded
temporary cease-and-desist orders that
come into effect pending the resolution
of an underlying contested matter but
would have included a related final
cease-and-desist or other order resolving
the matter. The proposed term would
have also excluded notices of charges,
accusations, or complaints that are part
of disciplinary or enforcement
proceedings but do not constitute a final
order. The Bureau proposed to include
orders that are final by their own terms
or under applicable law, even where
Federal, State, or local law allows for
the appeal of such orders. Proposed
§ 1092.201(f), defining the term
‘‘effective date,’’ would have addressed
situations where an order is subject to
a stay following issuance. The Bureau
sought comment on whether the term
‘‘final’’ should be further defined in the
regulatory text.
The proposed definition included
orders issued by either an agency or a
court. The proposal would have
clarified that the definition would
include an otherwise covered order
whether or not issued upon consent.
225 See
12 U.S.C. 5481(6)(A).
e.g., Gelboim v. Bank of Am. Corp., 574
U.S. 405, 408–09 (2015) (discussing the meaning of
‘‘final decision’’ under 28 U.S.C. 1291).
226 See,
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Accordingly, under the proposal,
‘‘covered orders’’ could have been
issued upon consent or settlement. They
could also have been issued after the
filing of a lawsuit or complaint and a
process of litigation or adjudication. The
proposed term would not have included
corporate resolutions adopted by an
entity and not issued by an agency or
court. Nor would the proposed term
have generally included licenses,
including conditional licenses; but the
term would have included an order
suspending, conditioning, or revoking a
license based on a violation of law. Nor
would the proposed term have included
related stipulations or consents, where
those documents are not incorporated
into or otherwise made part of the order.
Proposed § 1092.201(e)(1) would also
have included, as a component of the
definition of the term ‘‘covered order’’
for a given covered nonbank, a
requirement that the order identify the
covered nonbank by name as a party
subject to the order. Thus, for example,
orders that indirectly refer to a covered
nonbank as an ‘‘affiliate’’ of a named
party, but do not name the covered
nonbank as itself a party subject to the
order, would not have been covered
orders under proposed § 1092.201(e)
with respect to the covered nonbank.
Nor would orders that apply to a
covered nonbank only as a ‘‘successor
and assign’’ of a named party, where the
order does not expressly identify the
covered nonbank by name as a party
subject to the order. The proposal would
have included in the definition a
covered nonbank that is listed by name
as a party somewhere within the body
of the order, even if the covered
nonbank is not listed in the order’s title
or caption. In other words, to fall within
the proposed § 1092.201(e) definition, it
would have been sufficient that the
order identifies the covered nonbank by
name as a party subject to the order
even if the covered nonbank is not listed
in the title or caption of the order, or as
the primary respondent, defendant, or
subject of the order. A covered nonbank
may have satisfied the proposed
definition even if the issuing agency or
court did not list the covered nonbank
as a party in related press releases or
internet links.
Proposed § 1092.201(e)(2) would have
included, as a component of the
definition of the term ‘‘covered order,’’
a requirement that the order have been
issued at least in part in any action or
proceeding brought by any Federal
agency, State agency, or local agency.
The Bureau believed that limiting the
registration requirement to orders
involving such agencies would provide
sufficient information to support Bureau
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functions. This proposed requirement
would have included orders issued by
the Bureau itself, the ‘‘prudential
regulators,’’ as that term is defined at
CFPA section 1002(24),227 and any
‘‘Executive agency,’’ as that term is
defined at 5 U.S.C. 105. The proposed
requirement would have also included
orders issued by ‘‘State agencies’’ as
defined at proposed § 1092.201(n) and
‘‘local agencies’’ as defined at proposed
§ 1092.201(i). An order issued by a local
agency would have satisfied this
proposed requirement, but such an
order would not have satisfied the
requirement set forth in proposed
§ 1092.201(e)(4) (described below)
unless the order imposed the obligations
described in proposed § 1092.201(e)(3)
on the covered nonbank based on one or
more violations of a covered law. While
certain Federal and State laws were
included in the § 1092.201(c) definition
of the term covered law, local laws were
not.
Proposed § 1092.201(e)(3) further
would have included, as a component of
the definition of the term ‘‘covered
order,’’ a requirement that the order
contain public provisions that impose
obligations on the covered nonbank to
take certain actions or to refrain from
taking certain actions. Such obligations
may have included, for example,
injunctions or other obligations to cease
and desist from violations of the law; to
pay civil money penalties, refunds,
restitution, disgorgement, or other
money; to amend certain policies and
procedures, including but not limited to
instances where the order requires
submission of the proposed
amendments to policies and procedures
for nonobjection; to maintain records or
to provide them upon request; or to take
or to refrain from taking other actions.
An order suspending, conditioning, or
revoking a license based on a violation
of law would have met this requirement.
An order that lacks any public provision
imposing such an obligation on the
covered nonbank would not have met
the requirement in proposed
§ 1092.201(e)(3). The Bureau explained
that an example of the type of orders
that might not have satisfied this
requirement would be a declaratory
judgment order finding that an entity
has violated the law, but not imposing
any remedial obligations. Other
examples, the Bureau explained, might
include orders whose only public
provisions are releases and general
contractual terms frequently contained
in consent orders, such as severability
and counterpart signature provisions,
but only to the extent these provisions
227 12
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do not impose any other obligations
described by proposed § 1092.201(e)(3).
The proposed § 1092.201(e)(3)
requirement would have excluded order
provisions that are not ‘‘public’’ as that
term was defined in proposed
§ 1092.201(k). For example, obligations
imposed by non-public provisions that
constitute confidential supervisory
information of another agency would
not have been considered when
determining whether a particular order
satisfies this proposed requirement.
Proposed § 1092.201(e)(3) would have
also excluded orders that lack any
public provision imposing an obligation
on the covered nonbank to take certain
actions or to refrain from taking certain
actions. The Bureau explained that, for
example, an order that describes
unlawful conduct but does not contain
any such public provisions imposing
obligations described at proposed
§ 1092.201(e)(3) would not have
satisfied this requirement. The Bureau
proposed to exclude from the rule’s
information-collection requirements
nonpublic orders and portions of orders
in order to help protect the confidential
processes of other agencies, including
their supervisory processes. The Bureau
was concerned that requiring
registration of confidential supervisory
information might have interfered with
the functions and missions of other
agencies and did not believe that
requiring such registration was
necessary to accomplish the purposes of
the proposed rule. The Bureau noted
that, to the extent that it has a need to
review nonpublic orders or nonpublic
portions of orders, the Bureau may seek
access to relevant information through
inter-agency information sharing that
protects applicable privileges and
confidentiality. In addition, as
discussed in the section-by-section
discussion of § 1092.201(m) below, the
Bureau believed that publication of
nonpublic information, including but
not limited to confidential supervisory
information of the Bureau or other
agencies, would be inappropriate.
Proposed § 1092.201(e)(4) would have
also included, as a component of the
definition of the term covered order, a
requirement that the order impose one
or more of the obligations described in
proposed § 1092.201(e)(3) on the
covered nonbank based on an alleged
violation of a covered law. The Bureau
explained that, under the proposal, a
covered order need not have included
an admission of liability or any
particular factual predicate. The Bureau
anticipated that agency and court orders
would vary widely in form and content,
depending in part on such matters as
the relevant individual laws being
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enforced, the historical practices of the
various enforcement agencies, and the
negotiations and facts and
circumstances underlying specific
orders. Because of these expected
variations in form and content in the
orders that the Bureau expected to be
registered under the proposal, the
Bureau believed that requiring
registration only of orders that contain
an admission of liability, or a statement
setting forth certain types of findings or
other factual predicates underlying the
order, would omit relevant orders. The
Bureau believed that an order that
contains neither an admission of
liability nor a statement setting forth the
factual predicate underlying the order
may nevertheless be probative of risks to
consumers of the type that the Bureau
is obligated to monitor.
The Bureau explained that, for
purposes of this proposed definition, an
obligation would have been ‘‘based on’’
an alleged violation where the order
identifies the covered law in question,
asserts or otherwise indicates that the
covered nonbank has violated it, and
imposes the obligation on the covered
nonbank at least in part as a result of the
alleged violation.228 This would have
included, for example, obligations
imposed as ‘‘fencing-in’’ or injunctive
relief, so long as those obligations were
imposed at least in part as a result of the
entity’s violation of a covered law. This
element of the proposed definition
would also have been satisfied, for
example, by any obligation imposed as
part of other legal or equitable relief
granted with respect to the violation, as
well as by any obligation imposed in
order to prevent, remedy, or otherwise
address a violation of a covered law, or
the conditions resulting from the
violation. The Bureau noted, however,
that an order that does not identify a
covered law as at least one of the legal
bases for the obligations it imposes on
a covered bank would not satisfy the
requirement set forth at proposed
§ 1092.201(e)(4). The Bureau explained
that an order may identify a covered law
as a legal basis for the obligations
imposed by referencing another
document, such as a written opinion,
stipulation, or complaint, that shows
that a covered law served as the legal
basis for the obligations imposed in the
order. The Bureau, however, stated that
the requirements of proposed
228 The Bureau explained that an obligation
imposed based on multiple violations, some of
covered laws and some of other laws, would qualify
as an ‘‘obligation[ ] . . . based on an alleged
violation of a covered law’’ within the meaning of
proposed § 1092.201(e)(4), even if the violations of
the non-covered laws would themselves have
sufficed to warrant the imposition of the obligation.
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§ 1092.201(e)(4) would not have been
satisfied where the legal basis for the
obligations imposed is specified only in
extrinsic documents not referenced in
the order at issue, such as a press
release or blog post.
The Bureau explained that the
proposed § 1092.201(e)(4) requirement
would have included an order issued by
an agency exercising any powers
conferred on such agency by applicable
law to enforce a covered law, so long as
the order imposes one or more of the
obligations described in proposed
§ 1092.201(e)(4) on the covered nonbank
based on an alleged violation of a
covered law. For example, the Bureau
noted, certain Federal agencies may
issue an order predicated on violation of
a Federal consumer financial law under
the authority of another enabling
enforcement or licensing statute. Among
other examples, an appropriate Federal
banking agency may issue orders in
connection with certain violations of
Federal consumer financial law under
section 8 of the Federal Deposit
Insurance Act (12 U.S.C. 1818), the
Administrator of the National Credit
Union Administration may issue such
orders under the Federal Credit Union
Act (12 U.S.C. 1751 et seq.), and the
Securities and Exchange Commission
may issue such orders under the Federal
securities laws. The Bureau noted that
such an order issued in connection with
violations of Federal consumer financial
law would satisfy the requirement set
forth in proposed § 1092.201(e)(4) in
cases where the order imposes the
obligations described in proposed
§ 1092.201(e)(3) on the covered nonbank
based on one or more violations of
Federal consumer financial law (or
another covered law).
The Bureau noted that other agencies
also may rely upon their enforcement
authorities under other laws in issuing
orders in connection with violations of
FTC Act section 5 (and rules and orders
issued thereunder). For example, an
appropriate Federal banking agency may
issue orders in connection with
violations of FTC Act section 5 by
relying on its enforcement authorities
under section 8 of the Federal Deposit
Insurance Act (12 U.S.C. 1818). The
Bureau explained that such an
appropriate Federal banking agency
order would have satisfied the
requirement set forth in proposed
§ 1092.201(e)(4) in cases where the
order imposed the obligations described
in proposed § 1092.201(e)(3) on the
covered nonbank based on one or more
violations of the prohibition on unfair or
deceptive acts or practices under FTC
Act section 5 (or a rule or order issued
for the purpose of implementing that
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prohibition) or another covered law.
The order, the Bureau explained, would
satisfy the requirement provided in
proposed § 1092.201(e)(4) even though
the FTC Act does not expressly
authorize the Federal banking agencies
to enforce FTC Act section 5.
Similarly, the Bureau considered an
obligation to be ‘‘based on’’ an alleged
violation of a covered law where: (i) a
State agency issues an order pursuant to
certain State statutes that treat
violations of Federal or State laws as
violations of the State statute; 229 and (ii)
the order (or, as discussed above, an
extrinsic document referenced in the
order) states that one or more violations
of a covered law (e.g., a Federal
consumer financial law) served as the
legal basis for imposing the obligations
under such statute. In such cases, while
the majority of these State laws would
not themselves have qualified as
covered laws under proposed subpart
B—and therefore were not captured in
appendix A—the underlying law
violation would have so qualified. The
Bureau believed including such
instances was important, as it
understood that State agencies
sometimes issue orders in connection
with violations of Federal consumer
financial law relying on their authorities
under these State licensing and other
statutes that do not themselves satisfy
the definition of covered law.
Importantly, however, such an order
would not have met the proposed
definition of ‘‘covered order’’ unless the
order itself (or, as discussed above, an
extrinsic document referenced in the
order) stated that a covered law served
as the legal basis for the obligations
imposed in the order. A State order that
relied upon such a statute, but that did
not identify a covered law as the legal
basis for the obligations imposed
thereunder, would not have satisfied the
requirement set forth in proposed
§ 1092.201(e)(4).230 Nor would an order
that imposed obligations solely based on
violations of other laws, even laws that
are analogous to covered laws but do
not themselves qualify as covered laws
under proposed subpart B. Section
229 See, e.g., Wash. Rev. Code sec.
19.146.0201(11).
230 The Bureau explained that the obligations
imposed in an order issued or obtained by a State
agency under a State law that incorporates Federal
law may be ‘‘based on’’ an alleged violation of
Federal consumer financial law under proposed
§ 1092.201(e)(4), even if the Federal consumer
financial law itself does not expressly authorize that
State agency to enforce it. The Bureau noted that,
so long as the State agency states that the relevant
order provisions are based on one or more
violations of the Federal consumer financial law, it
would be a covered order under the proposed
definition.
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1092.201(e)(4), the Bureau explained,
was intended to capture only orders that
impose obligations based upon an
agency’s or court’s determination that
the applicable covered nonbank has
actually violated the covered law itself.
Under proposed § 1092.201(e)(5), the
proposal would also have defined
‘‘covered order’’ to mean an order that
has an effective date on or later than
January 1, 2017. The Bureau believed
that limiting the registration
requirement to orders with more recent
effective dates would provide sufficient
information to support Bureau
functions. The Bureau explained that
many orders issued by Federal, State,
and local agencies do not have
expiration dates or do not expire until
after the passage of many years. While
the Bureau believed that many earlierin-time orders remain highly probative
of ongoing risks to consumers and could
assist the Bureau in carrying out its
market-monitoring obligations—as well
as assist the Bureau in assembling an
effective nonbank registry—the Bureau
preliminarily concluded that
considerations of administrative
efficiency favored focusing on orders
issued within approximately the first
several years preceding any final rule.
The Bureau sought comment on this
proposed approach.
Finally, proposed § 1092.201(e) would
have provided that the term ‘‘covered
order’’ would not include an order
issued to a motor vehicle dealer that is
predominantly engaged in the sale and
servicing of motor vehicles, the leasing
and servicing of motor vehicles, or both,
within the meaning of CFPA section
1029(a),231 except to the extent such
order is in connection with the
functions that are excepted from the
application of CFPA section 1029(a) as
described in CFPA section 1029(b).232
This provision would have excluded
certain orders issued to motor vehicle
dealers that are described in CFPA
section 1029(a), and would have
incorporated the definitions provided at
CFPA section 1029(f).233 CFPA section
1029(a) establishes a statutory exclusion
from the Bureau’s authority; CFPA
section 1029(b) excepts certain
functions of motor vehicle dealers from
that exclusion.234 The Bureau noted,
therefore, that an order that is issued to
a motor vehicle dealer that relates to the
functions described in section 1029(a)—
that is, the sale and servicing of motor
vehicles, the leasing and servicing of
motor vehicles, or both—generally
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231 12
U.S.C. 5519(a).
U.S.C. 5519(b).
233 12 U.S.C. 5519(f).
234 12 U.S.C. 5519(a), (b).
would not have been a ‘‘covered order’’
under the proposed definition.
However, if the order related at least in
part to a function excepted from the
application of CFPA section 1029(a) as
described in CFPA section 1029(b), this
limitation would not apply, and the
order would have qualified as a
‘‘covered order.’’ The functions
described in 1029(b) include:
‘‘provid[ing] consumers with any
services related to residential or
commercial mortgages or self-financing
transactions involving real property;’’
‘‘operat[ing] a line of business—(A) that
involves the extension of retail credit or
retail leases involving motor vehicles;
and (B) in which—(i) the extension of
retail credit or retail leases are provided
directly to consumers; and (ii) the
contract governing such extension of
retail credit or retail leases is not
routinely assigned to an unaffiliated
third party finance or leasing source;’’
and ‘‘offer[ing] or provid[ing] a
consumer financial product or service
not involving or related to the sale,
financing, leasing, rental, repair,
refurbishment, maintenance, or other
servicing of motor vehicles, motor
vehicle parts, or any related or ancillary
product or service.’’ 235
Comments Received
The Bureau specifically sought
comment on whether certain types of
orders should be categorically excluded
from registration.236 Commenters stated
that the registry should not collect or
publish information regarding consent
orders. Commenters stated that
including consent orders would unfairly
include orders that do not involve any
adjudication of wrongdoing; that such
orders often are based on errors or
inaccurate or contested allegations, or
result from a change in a regulator’s
interpretation of the law; and that such
orders often contain provisions clearly
stating that the entity does not concede
or admit liability. Commenters also
stated that companies often only settle
matters in order not to incur the cost,
delay, and uncertainty of litigation, that
consent orders often involve matters
that might not have been determined to
be violations if fully litigated, and that
regulators are often uncertain about
whether they can prove the violations
alleged. Industry commenters stated that
consent orders represent only a crude
predictor of risk, and including them
would provide an inaccurate,
inconsistent, or misleading picture of
risk to consumers. Industry commenters
stated that including consent orders
232 12
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235 12
U.S.C. 5519(b).
88 FR 6088 at 6110.
236 See
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would penalize companies that have
agreed to settle matters instead of
litigating them, and that including
consent orders would be unfair because
it would lead to registering only those
businesses who are not able to afford
defending themselves from government
attacks.
Commenters, including the SBA
Office of Advocacy, specifically
objected to the Bureau’s publication of
consent orders, stating that such
publication would be unfair because it
would have negative reputational
consequences and lead to a decrease of
business; would prejudice the entities
involved; would otherwise provide
inaccurate information to the Bureau
and to consumers; would lead to higher
compliance costs; would likely
encourage class action lawsuits and
spurious litigation claims; and could
result in unintended consequences.
Commenters stated that, in particular,
publication of consent orders would
deter covered nonbanks from consenting
to covered orders in future. Commenters
stated that the deleterious effects of
being identified on the registry would
have a chilling effect on consents and
would discourage settlement in future
proceedings, including those brought by
agencies other than the Bureau, and
would induce covered nonbanks to
litigate enforcement or civil actions
instead of settling. Thus, commenters
argued, the registry would prolong
litigation, raise costs, and worsen
outcomes, and could be disruptive to
the State and local oversight process, in
particular as regulators might become
less likely to bring enforcement actions.
Commenters stated that these effects
would be especially pronounced for
smaller settlements. The joint letter
from State regulators stated the
imposition of the proposed writtenstatement requirements, in particular,
could frustrate a State regulator’s ability
to effectively resolve supervisory
matters or to finalize enforcement
matters. An industry commenter stated
that the proposed registry would create
a disincentive for entities to self-report
violations, for fear of becoming subject
to the proposed rule’s registration
requirements. Commenters stated that
because of these effects, the registry
would lead to additional harm to
consumers. But a consumer advocate
commenter stated that the argument that
the registry will deter entities from
being cooperative or forthcoming is an
inappropriate threat not to cooperate
that should not be rewarded with lax
oversight.
Industry commenters stated that the
proposed registry would be unfair
because other companies are likely
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engaging in conduct similar to the
conduct that resulted in a covered order
but are not getting caught.
An industry commenter objected to
the Bureau’s proposal to register orders
issued or obtained by the Bureau itself,
stating that an additional registry of
such orders would be superfluous.
Commenters objected to the Bureau’s
proposal to register orders issued by
State agencies and local agencies, and
by State courts, and to impose writtenstatement requirements in connection
with such orders. Commenters stated
that the Bureau lacks authority,
expertise, and knowledge of relevant
circumstances applicable to such orders,
and has no legitimate interest in them.
An industry commenter indicated that
the proposal would give the Bureau
enforcement power over other agencies’
orders for violations of State and
Federal laws that the Bureau has no
jurisdiction to enforce. A Tribal
commenter stated that including such
orders in a public database would
interfere with the other government’s
sovereign decision regarding whether
and how to publish its own orders. An
industry commenter stated that orders
issued by local agencies should not be
included because local regulatory and
enforcement agencies may be subject to
more local, provincial issues, local
control, and local political trends, and
be less likely to produce orders that are
based on broader consumer financial
protection issues.
A Tribal commenter stated that the
definition of ‘‘covered order’’ should be
amended to require that the order be
‘‘enforceable’’ in addition to final and
public. The Tribal commenter also
stated that the rule should clarify when
an order is issued ‘‘at least in part’’ in
an action or proceeding brought by an
applicable agency.
An industry commenter stated that it
was unclear under the proposed
definition whether nonpublic NCUA
letters of recommendation would be
covered.
An industry commenter stated the
Bureau should further clarify the
definition of ‘‘covered order’’ because
State agencies vary in their approaches
to enforcing and interpreting orders.
The commenter stated that one State
agency may consider a final order that
involves a corrected issue to be closed,
while another State may not.
The Bureau specifically sought
comment on the scope of proposed
§ 1092.201(e)(1), which included a
requirement that the covered order
identify a covered nonbank by name as
a party subject to the order, and whether
proposed § 1092.201(e)(1) should also
include affiliates, successors and
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56067
assigns, or other methods of identifying
entities subject to orders, even though
they are not expressly named in the
order. A consumer advocate commenter
stated that the rule should apply to
successors and assigns, not just named
parties as provided under proposed
§ 1092.201(e)(1).
Commenters stated generally that the
proposed registry was overbroad and too
prescriptive. Industry commenters
suggested that the Bureau attempt to
limit those covered orders that require
registration to orders that involve more
serious or direct consumer harm, as
opposed to those that involve only
clerical or administrative errors, or that
do not meet a minimum threshold of
harm to consumers. Commenters stated
that the proposed registry should not
lump small orders together with large
important orders. Commenters stated
that the proposal’s approach would
result in overreporting of minor
infractions that would confuse or
mislead the public, overwhelm the
nonbank registry, or render the nonbank
registry less useful, and would
improperly impose reputational harm.
Under proposed § 1092.201(e)(5), the
proposal would have defined ‘‘covered
order’’ to mean an order that has an
effective date on or later than January 1,
2017. A consumer advocate commenter
stated that the term ‘‘covered order’’
should include all orders for 10 years
prior to the effective date of the final
rule. The commenter stated that this
change would correspond with
proposed § 1092.202(e), which would
have provided that a covered order shall
cease to be a covered order for purposes
of this subpart as of the later of: (1) ten
years after its effective date; or (2) if the
covered order expressly provides for a
termination date more than ten years
after its effective date, the expressly
provided termination date.
An industry commenter stated that
the 2017 date should be moved forward
to 2019 or later to better distinguish
nonbanks with only a few consent
orders, or that have taken appropriate
remedial steps related to the order, from
actors with a clear record of consistent
consumer or other abuse.
Industry commenters stated that the
nonbank registry should not apply to
prior orders at all, but only to orders
issued after the effective date of the rule.
An industry commenter stated that the
proposal would violate the right to due
process, as entities would not have
agreed to consent to covered orders if
they had been aware of the Bureau’s
registry. Another commenter stated that
the proposal’s registration of existing
orders contravened legal tradition
barring ex post facto laws.
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Tribal and industry commenters
stated that orders should not be
considered ‘‘final’’ as provided under
proposed § 1092.201(e) until all avenues
of appeal have been exhausted.
A joint letter by State regulators stated
that the proposal introduced other
complexities and confusion for covered
entities and consumers due to
ambiguities relating to the rule’s
registration requirement, and that these
ambiguities could not be satisfactorily
addressed because most covered orders
will not be issued by the Bureau. In
particular, the joint comment letter
questioned how the same or similar
violations across different business lines
would be treated, and how the
registration requirements would apply if
multiple States take unilateral action for
a firm’s violation of the same consumer
financial law. The comment expressed
concern that nonbanks would be unable
to understand or comply with the
obligations of the rule due to questions
about if, when, and how a nonbank
might be required to report an order to
the Bureau.
An industry commenter stated that
the Bureau should clarify that an
affiliate of a covered person need not
register with respect to a covered order
unless it is itself named in the covered
order.
The Bureau received a question in
interagency consultation regarding
whether ‘‘assurances of voluntary
compliance’’ would be covered orders.
Response to Comments Received
The Bureau is finalizing the definition
of ‘‘covered order’’ to include an
otherwise covered order whether or not
issued upon consent. Accordingly,
‘‘covered orders’’ may be issued upon
consent or settlement. The Bureau is
adopting this approach for several
reasons. First, under
§ 1092.201(e)(1)(iv), the final rule will
only apply to orders in which an agency
or court has imposed applicable
obligations on the covered nonbank
based on an alleged violation of a
covered law. Where a court or agency
makes a decision to issue an order based
on one or more violations of a covered
law, such an order is clearly relevant to
and probative of risk to consumers
(including risks related to developments
in markets for consumer financial
products and services), whether or not
the entity agrees with the issuing agency
or court’s determination. The Bureau
acknowledges that certain covered
nonbanks may from time to time believe
a court or agency has erred in issuing or
obtaining a covered order against them,
even in cases where the entity has
consented to the imposition of the
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order. For example, the entity may
believe that the order is based on
inaccurate or contested allegations of
fact or law, or that it resulted from an
improper change in a regulator’s
interpretation of the law. The Bureau
concludes that a covered order is likely
probative of risk to consumers even in
such cases. In most cases, the fact that
an agency has devoted its limited
resources to an action to enforce a
covered law, and a covered nonbank has
agreed to take on obligations based on
the alleged violation rather than litigate
the issue, indicates a heightened
likelihood that the covered nonbank
may present risks to consumers that
may warrant the Bureau’s attention,
even if the covered nonbank believes
that it had arguments for why it was not
liable. Excluding consent orders or
orders that do not contain an admission
of liability from the rule would unduly
restrict the information that would be
collected regarding many orders that are
highly probative of risk to consumers,
such as orders based upon clearly
established and significant violations of
covered laws, and would limit the rule’s
usefulness. Collecting information about
consent orders also will assist the
Bureau in identifying and evaluating
patterns of risks associated with orders
across companies, industries, products,
and regions. For example, in conducting
its assessments of consumer risk, the
Bureau will often find it useful to know
whether a covered nonbank, or type of
nonbank, has (or has not) become
subject to multiple orders across a
period of time, or from multiple
agencies, or based on violations of
multiple covered laws, or across
product lines, or in particular
geographic regions, even where such
orders were entered into upon consent.
Thus, it is appropriate to collect
information about such orders and the
entities subject to such orders, and to
publish such information as provided
under § 1092.205.
Second, the Bureau’s collection of
information regarding consent orders,
and its potential republication of those
consent orders, does not imply any
admission of fault or additional liability
by the applicable covered nonbank. The
Bureau acknowledges that many
consent orders do not contain
admissions of wrongdoing, and that
entities may consent to the imposition
of such orders while disagreeing with
the findings of the agency or court. Such
orders may contain provisions clearly
stating that the entity does not concede
or admit liability. However, the final
rule is intended to provide the Bureau
with the ability to monitor relevant
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orders and to inform relevant nonbank
registry users and the public about
them. As stated in the notice of
proposed rulemaking,237 the Bureau
believes that requiring registration only
of orders that contain an admission of
liability, or a statement setting forth
certain types of findings or other factual
predicates underlying the order, would
omit relevant orders. The Bureau
believes that an order that contains
neither an admission of liability nor a
statement setting forth the factual
predicate underlying the order may
nevertheless be probative of risks to
consumers of the type that the Bureau
is obligated to monitor. Just as entities
may consent to an order in order not to
incur the cost, delay, and uncertainty of
litigation, so to a Federal agency, State
agency, or local agency may accept an
entity’s consent to an order without
requiring an admission of liability, for
similar reasons. Therefore, the final rule
includes as ‘‘covered orders’’ consent
orders as well as orders obtained after
a contested or litigated hearing, lawsuit,
or other process. As discussed in the
description of the proposal above, for
purposes of this definition, an
obligation is ‘‘based on’’ an alleged
violation where the order identifies the
covered law in question, asserts or
otherwise indicates that the covered
nonbank has violated it, and imposes
the obligation on the covered nonbank
at least in part as a result of the alleged
violation, even where the order contains
provisions clearly stating that the entity
does not concede or admit liability. But
the Bureau’s collection and potential
publication of information about a
consent order does not somehow imply
that the covered nonbank admits
liability with respect to the order. Nor
does the final rule otherwise affect the
entity’s obligations under the order or
any other liability that may result from
the matters addressed by the order.
Third, the Bureau concludes that its
potential publication of information
related to consent orders as described at
§ 1092.205 will not impose unfair costs
on consenting entities. As discussed in
part VIII, the final rule will not make
public any non-public orders, limiting
the likely costs on covered nonbanks of
publishing consent orders. Nor will the
Bureau’s potential publication of
information relating to consent orders as
described at § 1092.205 provide
inaccurate, inconsistent, or misleading
information to consumers, as the Bureau
will simply be collecting and presenting
factual information regarding such
orders that are already published (or
required to be published) elsewhere. For
237 88
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further discussion of publication, see
the section-by-section discussion of
§ 1092.205 below.
Fourth, the Bureau disagrees with the
assertions by commenters that the
potential deleterious effects of being
listed on the registry will materially
deter entities from agreeing to consent
orders or otherwise impair the ability of
other agencies to administer and enforce
the laws subject to their jurisdiction.
Covered orders are already public. The
Bureau expects that the disincentive
effect of the additional visibility for
these orders via the nonbank registry
would be minimal and would be
outweighed by benefits of the registry.
Likewise, the Bureau does not believe
that the additional burden associated
with either the information-collection or
the written-statement requirements of
the final rule is so great as to deter a
covered nonbank from self-reporting, or
from entering into a consent agreement
or stipulation that would otherwise be
in its best interests.
Covered orders are probative of risk to
consumers (including risks related to
developments in markets for consumer
financial products and services), even if
it may be true that not all violations of
covered laws result in covered orders.
The Bureau still has an interest in
collecting and publishing information
regarding such covered orders, and in
imposing the other requirements of the
rule in connection with such orders,
even if there are other violations of
covered laws occurring that the
nonbank registry does not detect.
The Bureau is finalizing the definition
of the term ‘‘covered order’’ to include
orders issued or obtained by the Bureau
itself. The Bureau believes the final
rule’s requirements will provide
additional useful information in
connection with such orders. The
identifying information submitted by
covered nonbanks, and the final rule’s
obligation to update that information in
the event of changes, could provide new
and useful information to the Bureau
and the registry. For example, a
company that moves or changes its
name will be required to update the
registry. Also, § 1092.204’s writtenstatement requirements will provide
new information on an annual basis
about the Bureau’s orders and the
applicable supervised registered entity’s
compliance with them, including the
name and title of the supervised
registered entity’s attesting executive. In
addition, including orders issued or
obtained by the Bureau will contribute
to the registry’s comprehensiveness,
which in turn will make the registry a
more useful resource for the Bureau and
others in conducting research regarding
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general trends in the enforcement of
consumer financial protection laws.238
Final § 1092.201(e) includes orders
issued or obtained by State or local
agencies. As also discussed in the
section-by-section discussion of
§ 1092.201(c) above, the final rule will
not provide the Bureau with
enforcement power over other agencies’
orders or with authority with respect to
violations of Federal and State laws that
the Bureau lacks jurisdiction to enforce.
The Bureau defers to other agencies’ and
courts’ interpretations of the orders they
have issued or obtained under their own
authority against persons subject to their
jurisdiction, and to those agencies’ and
courts’ decisions about whether and
how to enforce such orders. The Bureau
has not and does not assert that it may
enforce all covered orders or covered
laws, nor is the final rule a mechanism
for it to do so. (To be sure, the definition
of ‘‘covered order’’ does encompass
certain orders that the Bureau may
enforce, such as its own orders issued
under Federal consumer financial law
or the other laws described in
§ 1092.201(c)(2). But the final rule does
not affect the Bureau’s authority to do
so.) 239
Instead, the purposes of the final rule
are as described herein, including to
inform the Bureau regarding risks
related to covered orders issued or
obtained by State agencies and local
agencies.240 The Bureau has a legitimate
interest in learning about such orders
and the entities that are subject to them.
Collecting and registering such orders
will assist with monitoring for risks to
consumers in the offering or provision
of consumer financial products and
services. The Bureau concludes that the
information that will be provided via
the nonbank registry regarding orders
issued or obtained by State agencies and
local agencies will inform the Bureau’s
functions even though the Bureau may
lack jurisdiction to enforce the order
and may not be involved in the issuance
or implementation of the order. For the
reasons described in part IV, covered
orders are nevertheless probative of risk
to consumers (including risks related to
developments in markets for consumer
238 See also the section-by-section discussion of
§ 1092.201(k) below regarding the exclusion of
orders issued or obtained by the Bureau from the
final rule’s definition of the term ‘‘NMLS-published
covered order.’’
239 Excluding orders issued or obtained by State
agencies from the definition of ‘‘covered order’’
would also improperly exclude orders issued or
obtained by State attorneys general and State
regulators under 12 U.S.C. 5552.
240 For discussion of the purposes of the final
rule’s written-statement requirements, see part
IV(D) and the section-by-section discussion of
§ 1092.204 below.
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financial products and services) that is
of concern to the Bureau, and the
Bureau has a legitimate interest in
becoming informed regarding such
orders even where they have been
issued or obtained by State or local
agencies (as opposed to Federal
agencies). And the identifying
information submitted to the nonbank
registry will help the Bureau identify
and monitor the covered nonbanks that
are subject to such orders, which will
also inform the Bureau’s functions.
Nothing in the CFPA confines the
risks to consumers that must be
monitored by the Bureau to risks related
solely to the Federal Government, or
solely to orders issued or obtained by
Federal agencies. To the contrary, the
Bureau is tasked with monitoring a wide
range of sources to inform its
assessments of risks to consumers,
specifically including matters within
the jurisdiction of State agencies and
local agencies. For example, as
discussed in part IV(B), CFPA section
1024(b)(2)(D) provides that the Bureau,
in making risk-based supervisory
prioritization determinations, shall take
into account ‘‘the extent to which . . .
institutions are subject to oversight by
State authorities for consumer
protection.’’ 241 The existence of one or
more orders issued or obtained by the
types of State agencies described in the
final rule in connection with violations
of covered law would provide important
and directly relevant information
regarding the extent to which nonbanks
are subject to oversight by State
authorities for consumer protection.242
Likewise, in allocating its resources to
perform market monitoring, the Bureau
may consider ‘‘the legal protections
applicable to the offering or provision of
a consumer financial product or service,
including the extent to which the law is
likely to adequately protect
consumers.’’ 243 As the types of ‘‘legal
241 12
U.S.C. 5514(b)(2)(D).
addition, as discussed in part IV(B), the
Bureau concludes that the existence of an order
issued or obtained by a State agency or a local
agency requiring registration under the final rule
would be probative of risks to consumers as
described in 12 U.S.C. 5514(b)(2)(C) (referring to
‘‘the risks to consumers created by the provision of
such consumer financial products or services’’), and
determines that the existence of such an order is a
relevant factor for the class of covered persons
subject to the final rule under 12 U.S.C.
5514(b)(2)(E) (providing that the Bureau shall also
take into account ‘‘any other factors that the Bureau
determines to be relevant to a class of covered
persons’’). Thus, knowledge of such orders issued
or obtained by State agencies or local agencies will
be relevant information in prioritizing and scoping
the Bureau’s supervisory activities under CFPA
section 1024(b) with respect to the covered persons
subject to that provision.
243 12 U.S.C. 5512(c)(2)(C).
242 In
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protections’’ to be considered by the
Bureau are not restricted solely to
protections related to Federal agencies,
the Bureau concludes that it may
consider the information that will be
obtained under the final rule regarding
covered orders issued or obtained by
State agencies or local agencies under
this provision. Another provision, CFPA
section 1024(b)(3), requires coordination
with State supervisory authorities with
respect to nonbanks supervised by the
Bureau.244 The final rule will enhance
the Bureau’s ability to stay informed
and up to date regarding recent covered
orders issued or obtained by State
agencies and local agencies against
covered nonbanks that are subject to its
jurisdiction, and thus will facilitate
coordination with relevant State
authorities.
For similar reasons, the Bureau
concludes that it is appropriate to
impose the final rule’s written-statement
requirements in connection with
covered orders issued or obtained by
State agencies and local agencies against
supervised registered entities. The
Bureau disagrees with commenters’
assertions that the Bureau lacks
authority to impose these requirements
with respect to such State agency and
local agency orders or that such
imposition is otherwise inappropriate.
As discussed above, such orders are
probative of the risks to consumers that
the Bureau is tasked with detecting and
assessing as part of its supervisory work.
Violations of such orders may be
probative of heightened risks for
consumers and borrowers that are
relevant to the Bureau’s exercise of its
supervisory authority; thus, for the
reasons discussed in part IV(D) above
and the section-by-section discussion of
§ 1092.204 below, the written-statement
requirements will facilitate the Bureau’s
supervision of supervised registered
entities subject to such orders. The
information collected under § 1092.204
regarding risks to consumers that may
be associated with the orders, including
potential violations of CFPA sections
1031 and 1036, and the applicable
supervised registered entity’s
compliance systems and procedures
will be relevant to the Bureau’s
supervisory authority even where those
risks are associated with State agency
and local agency orders. For the reasons
discussed in part IV(D) and the sectionby-section discussion of § 1092.204,
imposing § 1092.204’s requirements
with respect to orders issued or
obtained by State or local agencies also
will help ensure that the supervised
registered entities subject to such orders
244 12
U.S.C. 5514(b)(3).
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are legitimate entities and are able to
perform their obligations to consumers.
Contrary to commenters’ suggestions,
the Bureau is not adopting the writtenstatement requirements to administer or
enforce orders issued or obtained by
State or local agencies, but rather to
further its statutory purposes under
CFPA section 1024(b)(7)(A)–(C) with
respect to risks to consumers that are
relevant under Federal law, that are
associated with entities that are subject
to the Bureau’s supervisory and
examination authority under CFPA
section 1024(a), and that arise in
connection with the offering or
provision of consumer financial
products and services subject to the
Bureau’s jurisdiction.
In the proposal, the Bureau described
a number of types of orders that would
and would not be considered ‘‘final’’
orders under the proposal. The Bureau
finalizes these descriptions, which are
recounted in the summary of the
proposed rule above. The Bureau’s
discussion of examples of non-final
orders, however, was not intended to be
exhaustive. Other orders that are not
final orders are also excluded from
§ 1092.201(e)’s definition of the term
‘‘covered order.’’
The Bureau is finalizing § 1092.201(e)
to include orders issued or obtained by
local agencies. Even if, as a commenter
suggests, such agencies are less likely
than are other agencies to issue or
obtain relevant consumer protection
orders,245 information about such
covered orders as they do issue will be
relevant and informative to the Bureau.
As stated in the description of the
proposal above, some local agencies
have authority to enforce State
consumer protection laws, and the
Bureau believes it is important to
include orders issued or obtained by
such local agencies in the definition.
Also, as discussed in part IV(B), it is
important for the Bureau to collect
information about such public orders
across markets and agencies as provided
in the final rule, which will improve the
Bureau’s efforts to determine where
entities, either as a group or
individually, are repeatedly violating
the law. The registry will provide a
valuable mechanism to help ensure that
the Bureau is rapidly made aware of
such repeat offenders across a range of
markets and enforcement agencies,
including State agencies and local
agencies. Confining the orders collected
245 The Bureau does not express an opinion on
this question. The Bureau intends to use the
information it obtains through the final rule to
better understand the quantity and content of
covered orders and the types of agencies that issue
them.
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to those issued or obtained only by
Federal agencies would unnecessarily
limit the information that is provided to
the Bureau and provide the Bureau with
only a partial view of such risks.
With respect to publication, final
§ 1092.201(e) requires that a ‘‘covered
order’’ be ‘‘public’’ as defined at
§ 1092.201(m). Thus, the covered orders
issued or obtained by a State agency or
local agency that may be published by
the nonbank registry under § 1092.205
will have already been published, or are
required to be published under
governing laws, rules, or orders. As a
result, the registry will not interfere
with but rather reflect the decisions of
State or local agencies in that regard.
The Bureau is finalizing the definition
of ‘‘covered order’’ without a
requirement that the order be
‘‘enforceable.’’ Such a requirement
would lead to confusion and
imprecision as to the final rule’s
submission requirements, as it will not
always be clear whether any particular
covered order is ‘‘enforceable.’’ The
Bureau does not wish to invite
arguments from covered nonbanks as to
whether any particular covered order is
or is not actually ‘‘enforceable.’’ For
example, an entity may consent to the
imposition of an order while privately
believing that the order may not
properly be enforced against it under
the correct understanding of the law.
The Bureau concludes that the nonbank
registry should collect and potentially
publish information about such orders
and that they should not be excepted
from the final rule’s definition of
‘‘covered order.’’ Moreover, as discussed
in the section-by-section discussion of
§ 1092.202(f) below, a covered nonbank
must submit a final filing to the
nonbank registry if a covered order is
terminated, modified, or abrogated
(whether by its own terms, by action of
the applicable agency, or by a court).
Amending the definition of ‘‘covered
order’’ to require that the order be
‘‘enforceable’’ would reduce the
information provided by these final
filings, at least under certain
circumstances. For example, where a
covered nonbank has registered a
covered order with the nonbank registry
and the order is subsequently
terminated, modified, or abrogated by
action of the applicable agency or court,
the order would at least theoretically no
longer satisfy the ‘‘enforceability’’
requirement and would therefore no
longer qualify as a ‘‘covered order.’’
Thus, the covered nonbank would not
be required to submit the final filing
required by § 1092.202(f), which is a
valuable mechanism to clarify the
current status of covered orders to the
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Bureau and other users of the nonbank
registry.
Section 1092.201(e)(1)(ii) includes, as
a component of the definition of the
term ‘‘covered order,’’ a requirement
that the order have been issued at least
in part in any action or proceeding
brought by any Federal agency, State
agency, or local agency. By requiring
that the order be issued ‘‘at least in
part’’ in such an action or proceeding,
the Bureau will require registration of
orders that may include certain
elements that are not directly related to
the action or proceeding brought by the
agency. For example, an order may
impose obligations on a covered
nonbank in a lawsuit brought by both an
agency and a set of private plaintiffs. So
long as the agency brought the action or
proceeding, and the order was issued at
least in part in that action or
proceeding, this component of the
definition would be satisfied with
respect to the entire order.
The commenter’s question about
nonpublic NCUA letters of
recommendation appears to refer to a
type of confidential NCUA supervisory
communication. First, ‘‘insured credit
unions’’ as that term is defined at
§ 1092.101(a) are not covered nonbanks
and thus are not subject to any of the
requirements of the rule. Second, only
‘‘public’’ orders, as the term ‘‘public’’ is
defined at § 1092.201(k), are covered
orders. To the extent an entity receives
a confidential letter or other
communication from the NCUA that is
not ‘‘public’’ as defined, the
communication would not be a covered
order. This would include any order (or
portion of any order) that constitutes
confidential supervisory information of
any Federal or State regulator.
One industry commenter stated the
definition of ‘‘covered order’’ should be
clarified because State agencies vary in
their approaches to enforcing and
interpreting orders. While the Bureau
does not necessarily disagree with the
latter statement, the Bureau does not
believe these differences among State
agencies require modification of the
definition. The Bureau does not believe,
and does not intend by finalizing the
rule to suggest, that all covered orders
are somehow equivalent. The Bureau
has considered the types of orders that
it believes are probative of risk to
consumers and require registration. The
final rule contains a number of
elements, each of which must be
satisfied in order to cause an order to
require registration. An order that
satisfies the definition of the term
‘‘covered order’’ is subject to the final
rule’s requirements with respect to such
orders, to the extent they apply. It is not
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clear how any differences among State
interpretations or approaches would be
relevant to determining whether an
entity must comply with the rule’s
requirements. Nor does the Bureau
believe that any such differences would
render publication of such orders or the
other registration information required
by the rule to be misleading or
inappropriate. Differences among State
treatment of when orders are resolved or
closed should not affect filing
obligations under the final rule. Under
§ 1092.202(f)(1), if a covered order is
terminated, modified, or abrogated
(whether by its own terms, by action of
the applicable agency, or by a court), the
applicable covered nonbank should
submit a final filing under that section.
The covered nonbank should not submit
such a final filing based solely on a
State supervisory or other
communication that does not result in
the termination, modification, or
abrogation of the order. Finally, where
an entity believes in good faith it is not
subject to a covered order, but is not
certain the Bureau would agree with its
interpretation, it may file a good faith
notification under § 1092.202(g).
The Bureau is finalizing
§ 1092.201(e)(1) (renumbered as
§ 1092.201(e)(1)(i)) without revisions
that would have the effect of requiring
successors or assigns who are not
named as parties in an order to continue
satisfying the rule’s requirements with
respect to that order. The Bureau
finalizes its preliminary conclusion in
the proposal 246 that the approach
described in the proposed rule will
effectively achieve the Bureau’s marketmonitoring objectives with greater
administrative ease. The Bureau is
concerned that in many cases the
application of covered orders to
successors and assigns may be unclear,
and that registration of new entities that
are not expressly named in the order
may cause confusion for the Bureau and
other users. Also, the Bureau anticipates
that, at least in some cases, the issuing
agency or court will modify its order to
ensure that a successor or assignee
entity will remain subject to the order,
and that the new entity would then be
required to register under § 1092.202.
However, the Bureau notes that while a
new successor or assignee entity would
not be subject to the rule’s requirements
with respect to an order that did not
expressly identify it by name as a party
subject to the order, the Bureau does not
intend to exclude entities that simply
change their legal name or doingbusiness-as name following the issuance
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Fmt 4701
of the order, so long as the same legal
entity remains subject to the order.247
The Bureau is finalizing § 1092.201(e)
without narrowing the definition to
encompass only orders that involve
direct consumer harm, as opposed to
those that involve only clerical or
administrative errors. The Bureau also
declines to adopt any specific minimum
quantitative or other thresholds for
consumer harm with respect to the
covered orders that require registration
under the final rule. While the Bureau
agrees that not every covered order will
represent an equivalent amount of risk,
the Bureau is finalizing the rule in a
manner designed to capture relevant
risks. As explained above, when an
agency issues an order, or seeks a court
order, enforcing the law, it typically has
determined that the problems at the
applicable entity are sufficiently serious
to merit the expenditure of that agency’s
limited resources and perhaps the
attention of the courts. Further, in the
Bureau’s experience, the existence of an
order identifying a legal violation is
often probative of broader potential
inadequacies in an entity’s compliance
systems, even if the violation addressed
in the order might be described as
‘‘clerical,’’ ‘‘administrative,’’ or
otherwise technical in nature. The
Bureau thus concludes that covered
orders as defined at § 1092.201(e) are
likely to be probative of relevant risk to
consumers. The final rule establishes
multiple criteria for an order to be a
‘‘covered order’’ that is subject to the
rule’s requirements. The Bureau
believes these criteria are sufficient to
identify and distinguish certain kinds of
orders that are likely to be probative of
risk to consumers and that the Bureau
has the authority to monitor. The
Bureau declines to adopt additional
criteria that would further narrow this
definition.
In addition, the Bureau is concerned
that adopting the types of distinctions
commenters propose would not be
administrable. It is not clear what would
constitute a violation of law that only
amounted to a ‘‘clerical’’ or
‘‘administrative’’ error, as opposed to a
more ‘‘serious’’ violation of a covered
law. The Bureau believes that the final
rule appropriately describes and
encapsulates orders that are likely to be
probative of risk to consumers without
adding a carveout for ‘‘clerical’’ or
‘‘administrative’’ violations. Thus, the
collection and publication of
information about such orders, even
ones that address matters that could
appear to some audiences as
247 See also the section-by-section discussion of
§ 1092.202(b) below.
FR 6088 at 6117.
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comparatively ‘‘minor,’’ will serve the
purposes of the final rule described in
part IV above. Providing for a minimum
threshold would also add undue
complexity to the final rule, depending
upon the criteria that might be adopted,
and could make compliance more
difficult or burdensome. For example, if
the Bureau were to impose registration
only with respect to orders where a
minimum dollar threshold of consumer
harm or number of consumers affected
was related to the order, it is not clear
that such dollar amounts or numbers
would be calculated in all cases. Even
where such an amount might be
determined, the full extent of related
consumer harm might not be known for
some time after the issuance of the
order, or might be confidential
supervisory information or otherwise
confidential (and the Bureau does not
intend to reveal such confidential
information to the public via the
nonbank registry). The Bureau declines
to introduce such complexities into the
final rule. While such questions might
be reasonably answerable with respect
to certain types of orders, and many
individual orders may be structured to
permit calculation and public disclosure
of such threshold amounts, the Bureau
intends the requirements of the final
rule to be sufficiently flexible to collect
information regarding a wide range of
agency and court orders that may
provide evidence regarding risk to
consumers. The Bureau also declines to
impose materiality requirements as to
the type of violations that must be
declared in written statements
submitted under § 1092.204; see the
section-by-section discussion of this
section below for additional discussion
of these issues.
Publication of information collected
by the registry as intended by the
Bureau will enable users of the registry
to access relevant and accurate
information about covered orders,
including the violations that may be
associated with such orders, and will
not cause but rather help prevent
confusion and the distribution of
misleading information. See the sectionby-section discussion of § 1092.205
below for additional discussion of
related issues involving the potential
publication of registry information.
The Bureau finalizes § 1091.201(e)(5)
(renumbered as § 1091.201(e)(1)(v)) as
proposed. For the reasons stated in the
proposal, the Bureau believes that
registering orders with an effective date
on or after January 1, 2017, is likely to
lead to collecting useful information
and otherwise will best serve the
purposes of the final rule described in
part IV above. The Bureau declines at
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this time to amend the definition of
covered order to include orders with an
effective date prior to January 1, 2017.
While, as discussed in the proposal, the
Bureau believes earlier orders are highly
probative of consumer risk, the Bureau
finalizes its preliminary conclusion in
the proposal 248 that considerations of
administrative efficiency favor focusing
on orders issued within approximately
the first several years preceding the final
rule.
The Bureau also declines to finalize a
later date for this provision. This
approach would lead to the omission of
covered orders that are recent enough to
be relevant to risk to consumers, and
would impair the ability of the Bureau
and others to identify trends and
patterns in the information collected.
The Bureau acknowledges that in the
intervening time following the issuance
of a covered order and before
registration, it is possible that many
entities will have taken steps to address
the violations and other issues
identified in the covered order. The
Bureau encourages covered nonbanks to
take the steps necessary to protect
consumers and comply with covered
orders and other laws. Nevertheless, the
Bureau concludes that registration of
such orders will serve the purposes of
the final rule described in part IV above.
Information regarding the existence of
past covered orders will inform the
Bureau regarding risk to consumers
posed by the applicable covered
nonbank. The issuance of a covered
order, and the information that will be
collected under the final rule about the
covered nonbank and the order, such as
the violations of covered law and
related obligations identified in such an
order, are not rendered irrelevant for the
purposes of the final rule simply
because a covered nonbank has taken
steps to address the underlying
violations or issues. In some cases, the
existence of a past covered order might
prompt the Bureau to seek additional
information, from the covered nonbank
itself or other sources, to assess whether
the remedial steps taken by the covered
nonbank have been successful. In other
cases, the Bureau might include the past
covered order in a more general research
project aimed at assessing trends in
orders enforcing the law over time. See
the section-by-section discussion of
§ 1092.205 below for additional
discussion of related issues involving
the potential publication of registry
information.
The Bureau disagrees with
commenters’ suggestions that the
registry would impose an unlawfully
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FR 6088 at 6112.
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retroactive effect or is incompatible with
constitutional principles relating to ex
post facto laws. The mere fact that the
Bureau is requiring registration based on
previously issued public orders does not
render that requirement impermissibly
retroactive.249 ‘‘[T]he judgment whether
a particular [law] acts retroactively
should be informed and guided by
familiar considerations of fair notice,
reasonable reliance, and settled
expectations.’’ 250 Taking into account
those considerations, the registration
and publication provisions of
§§ 1092.202, 1092.203, and 1092.205 do
not operate in an impermissibly
retroactive manner. The Bureau is
requiring covered nonbanks
prospectively to register information
with the Bureau. Going forward, the
Bureau plans to use that information as
a source of market intelligence to use in
identifying areas of greater—or
reduced—risk to consumers, to inform
the allocation of the Bureau’s own
resources, and to better understand the
entities’ compliance management
systems and processes. Further,
§ 1092.202 merely requires covered
nonbanks to report covered orders that
are already published (or required by
law, rule, or order to be published).
Requiring covered nonbanks to submit
to the Bureau information about such
public orders imposes little meaningful
burden, and thus does not present
significant concerns regarding fair
notice or upsetting reasonable reliance
or settled expectations. Nor would any
publication by the Bureau of registration
information as provided at § 1092.205
impose a meaningful additional burden
on entities, given that registered orders
would already be a matter of public
record. It is therefore highly unlikely
that covered nonbanks would have
made different decisions with respect to
past enforcement actions—e.g., whether
to settle or vigorously litigate such
actions—had they known that the
enforcement actions could one day
subject them to such a low-burden
registration requirement. As a result, the
imposition of the registration
requirement does not have
impermissible retroactive effect.251
249 See Landgraf v. USI Film Prods., 511 U.S. 244,
269 n.24 (1994) (‘‘[A] statute ‘is not made
retroactive merely because it draws upon
antecedent facts for its operation.’’’ (quoting Cox v.
Hart, 260 U.S. 427, 435 (1922)).
250 INS v. St. Cyr, 533 U.S. 289, 321 (2001)
(citation omitted).
251 Commenters do not appear to argue that
§ 1092.204’s written statement requirements would
have impermissible retroactive effect. Nor could
they. As discussed in the section-by-section
discussion of § 1092.204 below, that section’s
written statement requirements apply only to
covered orders with an effective date after the
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Nor does the Bureau believe the U.S.
Constitution’s prohibition on ex post
facto laws would apply to the rule,
which is adopted under the Bureau’s
civil rulemaking authorities in the
CFPA. Under longstanding precedent,
civil laws generally are not within the
protective reach of the Ex Post Facto
Clause.252
For the reasons discussed in the
proposal, the final rule includes orders
that are final by their own terms or
under applicable law, even where
Federal, State, or local law allows for
the appeal of such orders. The Bureau
declines to exempt a broader category of
orders as to which Federal, State, or
local law allows for an appeal. Section
1092.201(f) states, ‘‘If the issuing agency
or a court stays or otherwise suspends
the effectiveness of the covered order,
the effective date [of the covered order]
shall be delayed until such time as the
stay or suspension of effectiveness is
lifted.’’ The requirements set forth in
§ 1092.202(b)(2) with respect to any
applicable covered order are tied to the
order’s effective date as defined. Thus,
§ 1092.202 already adequately addresses
situations where a reviewing agency or
court has issued a stay or has otherwise
suspended the effectiveness of a covered
order. In such cases, the covered
nonbank will not be required to register
the covered order until 90 days after its
new effective date. In contrast, the
Bureau believes that a covered order
that has not been stayed by the issuing
agency or a court, and has been allowed
to come into effect, is likely to be
probative of risk to consumers, even if
applicable nonbank registry implementation date
(and thus after the final rule’s effective date as
well). While some covered orders with an effective
date after the applicable nonbank registry
implementation date might relate to violations of
covered laws committed before the final rule’s
effective date, the Bureau does not believe that the
prospect of becoming subject to the writtenstatement requirements would have had a
significant marginal impact on a supervised
registered entity’s decision whether to engage in
conduct that risked violating covered laws, given
the negative consequences already associated with
committing such legal violations.
252 See, e.g., Smith v. Doe, 538 U.S. 84, 92 (2003);
Calder v. Bull, 3 U.S. (3 Dall.) 386, 391 (1798); see
also U.S. CONST. art. I, sec. 9, cl. 3 (prohibiting
Congress from enacting ex post facto laws). While
the Bureau believes that the final rule neither is
unlawfully retroactive nor violates the Ex Post
Facto Clause, if a court were to conclude that the
Bureau cannot apply the rule’s registration
requirements to previously issued covered orders
‘‘that remain in effect as of the effective date’’ of
subpart B, as § 1092.202(a) provides, the Bureau
intends for that language in § 1092.202(a) to be
severable under § 1092.103. Under the remaining
language of § 1092.202(a), the rule’s registration
requirements would apply after severance ‘‘only
with respect to covered orders with an effective
date on or after the effective date’’ of subpart B.
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avenues of appeal remain available.253
For that reason, the Bureau has
determined not to exempt such orders
from the rule’s requirements. A covered
nonbank should register such an order
within 90 days of its effective date as
required by § 1092.202(b)(2)(i). Should
the covered order be terminated,
modified, or abrogated, including by a
reviewing court’s decision that renders
the order ineffective or void, the
covered nonbank should submit a final
filing under § 1092.202(f)(1), after which
it would have no further obligation to
update its registration information. The
Bureau is also finalizing a revision to
§ 1092.204(a) to clarify that a supervised
registered nonbank is not required to
comply with § 1092.204’s writtenstatement requirements in cases where
the applicable covered order has not
been registered under § 1092.202 due to
a stay or other agency or court action.254
The Bureau does not share the
concern expressed in the joint letter
from State regulators that covered
nonbanks will be unable to understand
or comply with the final rule. With
respect to the comment that ambiguities
in the rule’s registration requirements
could not be satisfactorily addressed
because most covered orders will not be
issued by the Bureau, the Bureau agrees
that covered nonbanks will need to
apply § 1092.201(e)’s definition of
‘‘covered order’’ in connection with a
wide range of orders, many of which
will not be drafted by the Bureau.
However, the Bureau believes that, in
the vast majority of cases, entities
subject to the final rule will be able to
clearly discern whether they must
comply with the registration and
written-statement requirements in
connection with any particular order,
and that such registration will serve the
purposes of the rule as stated. Moreover,
in the event a covered nonbank has
concerns that any particular order may
be deemed a covered order
notwithstanding its good-faith belief to
the contrary, it may file one or more
good-faith notifications under
§ 1092.202(g) or § 1092.204(f) with
respect to that order.
253 The Bureau’s determination on this issue
accords with the general principle that an unstayed
judgment can be enforced even while an appeal is
pending. See, e.g., Acevedo-Garcia v. Vera-Monroig,
368 F.3d 49, 58 (1st Cir. 2004) (‘‘The federal rules
contemplate that, absent a stay, a victorious
plaintiff may execute on the judgment even while
an appeal of that judgment is pending.’’); 16A
Catherine T. Struve, Federal Practice and Procedure
§ 3949.1 (5th ed. 2023) (‘‘Unless the judgment is
stayed, the district court may (pending appeal) act
to enforce the judgment . . . .’’).
254 See the section-by-section discussion of
§ 1092.204(a) below.
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Regarding the comments in the joint
letter questioning how the same or
similar violations across different
business lines would be treated as well
as how the registration requirements
would apply if multiple States take
unilateral action for a firm’s violation of
the same consumer financial law, a
covered nonbank must satisfy the rule’s
requirements with respect to all
applicable covered orders that satisfy
§ 1092.201(e)’s definition. For a
discussion of the final rule’s treatment
of multiple orders, see the section-bysection discussion of § 1092.201(l)
below.
If the public portions of an order do
not ‘‘identify [the applicable] covered
nonbank by name as a party subject to
the order’’ as provided at
§ 1092.201(e)(1)(i), then the order is not
a covered order with respect to that
covered nonbank. Thus, under the final
rule, an affiliate of a covered person
need not register with respect to a
covered order unless it is itself named
as a party in the public portions of the
covered order. As discussed in the
proposal,255 orders that indirectly refer
to a covered nonbank as an ‘‘affiliate’’ of
a named party, but do not name the
covered nonbank as itself a party subject
to the order, would not be covered
orders under final § 1092.201(e) with
respect to the covered nonbank. While
§ 1092.202(c) provides that the Bureau’s
filing instructions may require joint or
combined submissions to the nonbank
registry by covered nonbanks that are
affiliates as defined in § 1092.101(a), the
final rule will not require an affiliate to
submit information to the nonbank
registry under this provision in
connection with a covered order unless
public portions of the order identify the
affiliate by name as a party subject to
the order.
Under § 1092.201(e), the term
‘‘covered order’’ may include legally
enforceable written agreements under
sections 8 and 50 of the Federal Deposit
Insurance Act 256 or any State
counterparts, as well as assurances of
discontinuances embodied in orders or
judgments issued by agencies or courts.
Likewise, an ‘‘assurance of voluntary
compliance’’ (AVC) accepted by a State
agency under State law may qualify as
a ‘‘covered order’’ where it satisfies all
of the criteria established under
§ 1092.201(e), including that the AVC
contains public provisions that impose
obligations on the covered nonbank to
take certain actions or to refrain from
taking certain actions, and imposes such
obligations on the covered nonbank
255 88
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based on an alleged violation of a
covered law. As with other orders, an
AVC is not excepted from the definition
of ‘‘covered order’’ solely because it
contains neither an admission of
liability nor a statement setting forth the
factual predicate underlying the order.
A State agency’s acceptance of a legally
enforceable AVC, as with an agency’s
acceptance of a legally enforceable
written agreement, would generally
occur in an ‘‘action or proceeding
brought by any Federal agency, State
agency, or local agency’’ for purposes of
§ 1092.201(e)(1)(ii).
Final Rule
For the reasons discussed above, the
Bureau is finalizing § 1092.201(e) as
proposed, with minor technical edits.
The Bureau finalizes its preliminary
conclusion in the proposal that these
categories of public orders would assist
with monitoring for risks to consumers
in the offering or provision of consumer
financial products and services.
Section 1092.201(f) Effective Date
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Proposed Rule
The proposal would have defined the
term ‘‘effective date’’ to mean, in
connection with a covered order, the
effective date as identified in the
covered order; however, if no other
effective date is specified, then the date
on which the covered order was issued
would have been treated as the effective
date for purposes of subpart B of the
proposal. The Bureau anticipated that
the effective date for many covered
orders would be evident from the face
of the order, and in nearly all cases
should be relatively easy to identify.
Proposed § 1092.201(f) would also
have provided that if the issuing agency
or a court stays or otherwise suspends
the effectiveness of the covered order,
the effective date shall be delayed until
such time as the stay or suspension of
effectiveness is lifted. Thus, the
registration obligations under proposed
subpart B would also have been delayed
accordingly. The Bureau anticipated
that such situations would be rare and
sought comment on whether this
proposal would adequately address
them.
Comments Received and Final Rule
The Bureau did not receive any
comments specifically regarding
proposed § 1092.201(f)’s definition of
the term ‘‘effective date.’’ See the
section-by-section discussion of
§ 1092.201(e) above for a discussion of
comments addressing which orders
should be included in the term ‘‘covered
orders.’’ For the reasons set forth in the
description of the proposed rule above,
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the Bureau is finalizing § 1092.201(f) as
proposed.
Section 1092.201(g) Identifying
Information
Proposed Rule
Proposed § 1092.201(g) would have
defined the term ‘‘identifying
information.’’ This term would have
described the scope of identifying
information a covered nonbank may be
required to submit pursuant to proposed
§ 1092.202(c). Proposed § 1092.201(g)
would have limited this information to
information that is already available to
the covered nonbank, and which
uniquely identifies the covered
nonbank. As described in proposed
§ 1092.201(g), this information would
have included, to the extent already
available to the covered nonbank, legal
name, State of incorporation or
organization, principal place of business
address, and any unique identifiers
issued by a government agency or
standards organization. The Bureau
explained that examples of the latter
identifiers that entities might have been
required to provide under proposed
§ 1092.202(c) would include an NMLS
identifier, a Home Mortgage Disclosure
Act (HMDA) Reporter’s Identification
Number, the Legal Entity Identifier (LEI)
issued by a utility endorsed by the LEI
Regulatory Oversight Committee or
endorsed or otherwise governed by the
Global LEI Foundation (GLEIF, or any
successor of the GLEIF),257 and a
Federal Tax Identification number.
The Bureau believed that this
information would help it to identify
covered nonbanks with specificity,
including ensuring that the Bureau can
identify covered nonbanks’ submissions
to other registries and databases where
applicable, such as the NMLS, and
HMDA submissions. Furthermore, the
Bureau believed that, upon publication,
this information would facilitate the
ability of consumers to identify covered
persons that are registered with the
Bureau. The proposal would not have
required the entity to obtain an
identifier. Thus, for example, if the
proposed NBR system were to have
asked about a particular type of
identifier and that type of identifier had
not been assigned to the covered
nonbank, then under the proposal, the
covered nonbank would have been able
to indicate the identifier is not
applicable.
Comments Received
A nonprofit commenter supported the
inclusion of the legal entity identifier
257 See 12 CFR 1003.4(a)(1)(i)(A) (addressing
LEIs).
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(LEI) in proposed § 1092.201(g) and the
inclusion of the LEI as a public data
element in the nonbank registry. The
commenter suggested that the Bureau,
when an LEI is submitted, could also
obtain the applicable covered nonbank’s
legal name, legal address, and
headquarters address from the Global
LEI System.
Response to Comments Received
In response to the comment about
using LEI information, the Bureau may
require covered nonbanks to submit
such information to the registry and will
consider further opportunities to obtain
relevant information from other sources
including the Global LEI System.
Final Rule
For the reasons set forth above, the
Bureau is finalizing § 1092.201(g) as
proposed, with revisions as described
below.
The proposal would have collected
information regarding a covered
nonbank’s State of incorporation or
organization. The Bureau is adopting a
revision to provide that the Bureau may
require a covered nonbank that is not
incorporated or organized in a State to
submit to the registry the names of any
other jurisdiction in which it is
incorporated or organized. For example,
a covered nonbank that is incorporated
or organized under Federal law or the
laws of a foreign government should
provide that information. If collected,
such information would be categorized
as ‘‘identifying information’’ under
filing instructions issued under
§ 1092.102(a). The Bureau concludes
that since certain covered nonbanks
may not be incorporated or organized
under State law, collecting and
potentially publishing such information
may be useful to the Bureau and to other
potential users of the registry
information that the Bureau intends to
publish under § 1092.205(a).258 Under
the final rule, where applicable, this
information will include information
regarding the State or other jurisdiction
where a covered nonbank that is not
organized as a corporation was
formed—for example, where a covered
nonbank organized as a partnership
filed its partnership agreement, where a
covered nonbank organized as a limited
liability company was organized, or
where the covered nonbank was
otherwise formed.
The Bureau is adopting a revision to
provide that the Bureau may require a
258 As discussed in the section-by-section
discussion of § 1092.205(a) below, the Bureau is
retaining the discretion not to publish information
under § 1092.205 based on operational
considerations.
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covered nonbank to submit to the
registry any doing business as or
fictitious business names, which if
collected would be categorized as
‘‘identifying information’’ under filing
instructions issued under § 1092.102(a).
The Bureau concludes that collecting
and potentially publishing doing
business as or fictitious business names
(including trade names or previouslyused names) as ‘‘identifying
information’’ under § 1092.202(c) may
be useful to the Bureau and to other
potential users of the registry
information that the Bureau intends to
publish under § 1092.205(a). Since some
companies may use different names in
different contexts, and it may not
always be obvious whether a particular
doing business as or fictitious business
name may apply to a covered nonbank,
such information may help the Bureau
and other potential users identify the
covered nonbanks that are registered
with the nonbank registry as well as the
covered orders to which they are
subject.
In filing instructions adopted under
§ 1092.102(a), the Bureau will specify
the ‘‘unique identifiers issued by a
government agency or standards
organization’’ that will be collected
under § 1092.202(c). As discussed in the
proposal, examples of the latter
identifiers that entities may be required
to provide under proposed § 1092.202(c)
include an NMLS identifier, a HMDA
Reporter’s Identification Number, and
LEI information. The Bureau may also
specify other unique identifiers in filing
instructions in addition to the examples
discussed in the proposal. The Bureau
also may collect, for example, an RSSD
ID, a unique identifier assigned to
financial institutions by the Federal
Reserve System, and an Electronic Data
Gathering, Analysis, and Retrieval
system (EDGAR) Central Index Key
(CIK), a unique identifier assigned by
the Securities and Exchange
Commission (SEC) to persons that
submit filings to the SEC.
Under the final rule, the Bureau will
not collect or publish Federal employer
identification numbers (EIN) from
covered nonbanks as ‘‘identifying
information’’ as that term is defined at
§ 1092.201(g), but may determine to
collect this information under
§ 1092.202(c) as ‘‘administrative
information’’ that the nonbank registry
will not publish under § 1092.205(a). In
filing instructions issued under
§ 1092.102(a), the Bureau will specify
whether and how it will collect such
information. In addition, a registered
entity should not submit any Social
Security numbers, individual taxpayer
identification numbers, or other similar
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personally identifying tax information
to the nonbank registry, even if the
registered entity uses an individual’s
Social Security number in tax
documents filed by or associated with
the entity. As stated in part III(B), the
Bureau’s registry is designed to not
collect any protected proprietary,
personal, or confidential consumer
information, and thus, the Bureau will
not publish, or require public reporting
of, any such information.
information about these orders would
support Bureau functions.
Section 1092.201(h) Insured Depository
Institution
Proposed Rule
The proposal did not contain an
exemption for covered orders published
on the NMLS Consumer Access website.
Proposed Rule
The proposal would have defined the
term ‘‘insured depository institution’’ to
have the same meaning as in 12 U.S.C.
5301(18)(A). Section 5301(18)(A), in
turn, incorporates the meaning of
‘‘insured depository institution’’
provided in section 3 of the Federal
Deposit Insurance Act, 12 U.S.C.
1813.259
Comments Received and Final Rule
The Bureau did not receive any
comments specifically regarding
proposed § 1092.201(h)’s definition of
‘‘insured depository institution.’’ See
the section-by-section discussion of
§ 1092.201(d) above for a discussion of
the final rule’s treatment of such
institutions and their affiliates. For the
reasons set forth above, the Bureau is
finalizing § 1092.201(h) as proposed.
Section 1092.201(i) Local Agency
Proposed Rule
The proposal would have defined the
term ‘‘local agency’’ to mean a
regulatory or enforcement agency or
authority of a county, city (whether
general law or chartered), city and
county, municipal corporation, district,
or other political subdivision of a State,
other than a State agency. The term
would not have included State agencies.
The Bureau proposed to require
registration in connection with
applicable orders issued or obtained by
local agencies. The Bureau understood
that local agencies do issue or obtain
public orders under covered laws.260
For the reasons described above with
respect to orders issued by Federal and
State agencies, the Bureau believed that
such orders may indicate risk to
consumers, and that obtaining
259 See 12 U.S.C. 1813(c)(2) (defining ‘‘insured
depository institution’’ as ‘‘any bank or savings
association the deposits of which are insured by the
[Federal Deposit Insurance] Corporation pursuant to
this chapter’’).
260 See, e.g., Cal. Bus. & Prof. Code sec. 17204
(authorizing enforcement of Cal. Bus. & Prof. Code
sec. 17200 by certain county counsel and city
attorneys).
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Comments Received and Final Rule
The Bureau did not receive any
comments specifically regarding
proposed § 1092.201(i)’s definition of
‘‘local agency.’’ For the reasons set forth
in the description of the proposed rule
above, the Bureau is finalizing
§ 1092.201(i) as proposed.
Section 1092.201(j) NMLS
Comments Received
See the section-by-section discussion
of § 1092.203(a) below for a discussion
of comments received regarding
duplication of the proposed registry
with the NMLS and discussing or
requesting an exemption for orders that
are already published or available via
NMLS, and the Bureau’s responses
thereto.
Final Rule
The Bureau is finalizing a new
paragraph (j) to § 1092.201 and is
renumbering the remainder of the
paragraphs accordingly. Section
1092.201(j) provides that the term
‘‘NMLS’’ means the Nationwide
Multistate Licensing System. As the
NMLS’s website explains, the NMLS is
the system of record for non-depository
financial services licensing or
registration for participating State
agencies.261 The NMLS is overseen and
operated by the State Regulatory
Registry LLC, which was established by
the Conference of State Bank
Supervisors in cooperation with the
American Association of Residential
Mortgage Regulators.262
Section 1092.201(k) NMLS-Published
Covered Order
Proposed Rule
The proposal did not contain an
express alternative registration option
for covered orders published on the
NMLS Consumer Access website.
Comments Received
See the section-by-section discussion
of § 1092.203(a) below for a discussion
of comments received regarding
duplication of the proposed registry
with the NMLS and discussing or
requesting an exemption for orders that
261 NMLS Resource Center, About NMLS, https://
mortgage.nationwidelicensingsystem.org/about/
Pages/default.aspx.
262 Id.
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are already published on NMLS
Consumer Access or otherwise available
to other regulators via NMLS, and the
Bureau’s responses thereto.
Final Rule
The Bureau is finalizing a new
paragraph (k) to § 1092.201 and is
renumbering the remainder of the
paragraphs accordingly. Section
1092.201(k) provides that the term
NMLS-published covered order
generally means a covered order that is
published on the NMLS Consumer
Access website,
www.NMLSConsumerAccess.org.
For the reasons discussed in the
section-by-section discussion of
§ 1092.203 below, this section would
further provide that no covered order
issued or obtained at least in part by the
Bureau shall be an NMLS-published
covered order. Thus, where the Bureau
has issued a covered order, or has
obtained a covered order from a court,
that covered order will not be an NMLSpublished covered order under the final
rule. Covered nonbanks must comply
with the requirements of § 1092.202 and
(where applicable) § 1092.204 with
respect to such Bureau orders, and may
not elect to comply with the one-time
registration option described in
§ 1092.203 with respect to such Bureau
orders.
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Section 1092.201(l) Order
Proposed Rule
The proposal would have defined the
term ‘‘order’’ to include any written
order or judgment issued by an agency
or court in an investigation, matter, or
proceeding. The Bureau explained that
the term would have included orders or
judgments issued after trials or agency
hearings. It would also have included
default judgments or orders issued after
an entity fails to properly respond to
charges or claims made against it. In
addition, it would have included orders
or judgments issued to resolve matters
without the need for further litigation,
including stipulated or consent orders,
decrees, or judgments, as well as
settlements, multistate settlements, or
assurances of discontinuances
embodied in orders or judgments issued
by agencies or courts. Furthermore, the
term would have included cease-anddesist orders and orders suspending,
conditioning, or revoking a license
based on a violation of law. The
proposed definition would also have
included legally enforceable written
agreements under sections 8 and 50 of
the Federal Deposit Insurance Act 263 or
any State counterparts.
263 12
The Bureau explained that the
proposed definition of the term ‘‘order’’
would have included an order or
judgment issued by one agency or a
single order or judgment jointly issued
by multiple agencies. However, where
more than one agency issues a distinct
order under its own authority, or a court
issues distinct orders with respect to the
different parties in connection with
various actions or proceedings, even
where the orders involve the same
subject matter or laws, each order would
have been considered a separate order
under the proposed definition.
Comments Received
An industry commenter stated that
the Bureau should limit the number of
times a single instance of a violation
needs to be reported where multiple
agencies issue orders based on the same
facts. The commenter stated that entities
should only need to submit to the NBR
system one order per violation to avoid
reporting multiple listings for one
incident in a multi-State enforcement
action, and that this approach would
not deprive the public or the Bureau of
any information, since under the
proposed rule registered entities would
already need to identify the government
entity that issued the order.
Response to Comments Received
In response to the industry
commenter, if multiple agencies join a
single order, that order would be the
only ‘‘covered order’’ requiring
registration under the final rule.
However, if multiple agencies issue
distinct and different orders in
connection with the same facts or
matter, each such order (if it satisfies the
other criteria established by the final
rule) would be a distinct ‘‘covered
order’’ that would require separate
registration (and, where applicable,
designation of an attesting executive
and submission of a written statement
under § 1092.204).
The Bureau declines to adopt the
commenter’s suggestion to treat
multiple orders as a single order under
certain circumstances. As stated in the
notice of proposed rulemaking, the
Bureau ‘‘anticipates that agency and
court orders will vary widely in form
and content, depending in part on such
matters as the relevant individual laws
being enforced, the historical practices
of the various enforcement agencies,
and the negotiations and facts and
circumstances underlying specific
orders.’’ 264 The Bureau anticipates that
such orders will often contain different
findings of fact and law, impose
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different obligations, and otherwise
contain meaningful differences such
that requiring registration of each such
order would be useful to the Bureau and
other users of the nonbank registry.
Also, permitting certain orders to be
treated as a single order would create
unnecessary complexity and confusion
for registrants and other users of the
nonbank registry. Among other things,
the final rule would have to establish
which orders would be sufficiently
similar to warrant such treatment. The
Bureau declines to require such
determinations as part of the registration
process.
Final Rule
For the reasons set forth above, the
Bureau is finalizing § 1092.201(j)
(renumbered as § 1092.201(l)) as
proposed.
Section 1092.201(m) Public
Proposed Rule
The proposal would have defined the
term ‘‘public’’ to mean, with respect to
a covered order or any portion thereof,
published by the issuing agency or
court, or required by any provision of
Federal or State law, rule, or order to be
published by the issuing agency or
court. The proposal would have
clarified that the term ‘‘public’’ does not
include orders or portions of orders that
constitute confidential supervisory
information of any Federal or State
agency.
The Bureau explained that the
proposed term would have included
orders that are actually published by the
issuing agency or court, as well as
orders that are required by any
provision of Federal or State law, rule,
or order to be published by the issuing
agency or court. For example, section
8(u) of the Federal Deposit Insurance
Act 265 requires the publication of
certain types of Federal banking agency
orders. The proposed definition was
intended to include those orders, as
well as those required to be published
by any other similar Federal or State
law.
The Bureau explained that, under the
proposal, an order would only be
‘‘public’’ if it has been released or
disseminated (or is required to be
released or disseminated) in a manner
such that the order is accessible by the
general public—for example, by posting
the order on a publicly accessible
website or by publishing it in a written
format generally available to members of
the public. The proposed term,
however, would not have included
documents that are not made generally
265 12
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available but are disclosed to specific
persons, such as in response to Federal
or State Freedom of Information Act or
open records law requests or as part of
litigation discovery proceedings. Under
the proposal, an order also would have
only qualified as ‘‘public’’ if it is
published (or required to be published)
‘‘by the issuing agency or court.’’
Therefore, independent publication by a
third party, such as publication that
may occur in connection with a covered
person’s securities disclosures, would
not make an order ‘‘public’’ within the
meaning of the proposal.266 The Bureau
did not anticipate that requiring
registration of orders disclosed only
through such methods as freedom-ofinformation requests or securities
disclosures would materially improve
the quantity and quality of the
information provided to the nonbank
registry. To the contrary, the Bureau
anticipated that third-party disclosures
in the securities context, or pursuant to
freedom-of-information requests, may
sometimes fail to capture all significant
aspects of an order. The Bureau was also
concerned that if such types of
disclosures were included in the final
rule, subpart B’s registration
requirements might affect an entity’s
decisions regarding securities or
litigation disclosures in a manner not
intended by the Bureau.
The proposed term would have
excluded orders or portions of orders
that constitute confidential supervisory
information of any Federal or State
agency. The Bureau was concerned that
requiring registration and disclosure of
confidential supervisory information
might interfere with the functions and
missions of other agencies and did not
believe that requiring such registration
and disclosure was necessary to
accomplish the purposes of the
proposed rule. The Bureau noted that
such agencies may rely on confidential
communications with covered nonbanks
in order to, for example, foster full
cooperation between those institutions
and their regulators and to protect those
institutions and the public from harm
that could result from the disclosure of
agency concerns regarding the integrity
and security of these institutions. The
proposed definition would have
therefore expressly excluded
confidential supervisory information.
Where an order is not clearly marked or
otherwise designated by the regulator as
confidential supervisory information,
266 By contrast, the Bureau explained, an order
would qualify as ‘‘public’’ where the issuing agency
or court makes the order available to a third-party
printing service or reporter for the purpose of
publishing the order in a publicly available format.
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the Bureau would have expected the
entity to have confirmed the
confidential supervisory information
status of any order or portion of an order
with its regulator before relying on that
status in connection with the proposed
subpart B’s registration requirements.
Comments Received
A Tribal commenter stated that
although many State agency orders are
publicly available, this is not the case
for State court orders, and requested
that the Bureau clarify this proposed
definition.
An industry commenter stated that
the proposal’s requirement to submit
redacted orders would confuse the
public, and that in cases where a
portion of a covered order is redacted or
confidential, the whole order should
stay off the registry.
Response to Comments Received
In response to the Tribal commenter,
the Bureau believes that this definition
clearly describes the term ‘‘public’’ with
respect to orders that are issued by State
courts as well as other orders that may
be issued or obtained by a Federal
agency, State agency, or local agency, as
described in § 1092.201(e)(1)(i). As
detailed in the above description of the
proposal, an order (or a portion of an
order) issued by a State court would
only be ‘‘public’’ if it has been released
or disseminated (or is required to be
released or disseminated) in a manner
such that the order (or portion thereof)
is accessible by the general public—for
example, by posting the order (or
portion thereof) on a publicly accessible
website or by publishing it in a written
format generally available to members of
the public. If the issuing court
(including a State court) or agency does
not publish an order (or portion thereof)
in this way, and the order (or portion
thereof) is not required to be so
published, then the order (or portion
thereof) is not ‘‘public’’ under the
definition. On the other hand, if the
issuing court or agency does publish an
order (or portion thereof) in this way, or
the order (or portion thereof) is required
to be so published, then the order (or
portion thereof) is ‘‘public’’ under the
definition. The Bureau declines to
further narrow or otherwise amend this
definition, as it concludes the definition
as finalized will help ensure that the
registry will obtain adequate
information regarding relevant orders to
achieve the registry’s objectives.
Under the final rule, registrants
should submit only the public portions
of covered orders. The Bureau believes
that both submission of and publication
of public portions of such orders, and
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56077
only public portions of such orders, will
best serve the purposes of the registry.
The Bureau disagrees that either the
submission of or the publication of
redacted orders will confuse the public
or other users of the nonbank registry,
especially considering that the
unredacted portions of orders submitted
to the Bureau will, by definition,
already be published (or required to be
published) elsewhere. As discussed in
the section-by-section discussion of
§ 1092.201(e) above, the Bureau is
excluding from the rule’s information
collection requirements nonpublic
portions of orders in order to help
protect the confidential processes of
other agencies, including their
supervisory processes. But the Bureau
believes that the other portions of such
orders remain relevant and should be
collected and potentially published
under the final rule.267
Final Rule
For the reasons set forth below above
and as follows, the Bureau is finalizing
§ 1092.201(k) (renumbered as
§ 1092.201(m)) as proposed, with
revisions to provide that the term
‘‘public’’ (1) encompasses covered
orders required to be published by the
issuing agency or court under any
provision of local law, rule, or order,
and (2) does not include orders or
portions of orders that constitute
confidential supervisory information of
any local agency. The Bureau is
finalizing these revisions to reflect that
under § 1092.201(e)(1)(i), covered orders
can be issued or obtained by local
agencies, which may operate under
local laws, rules, or orders regarding
publication requirements, and which
might claim to have ‘‘confidential
supervisory information.’’
201(n) Registered Entity
Proposed Rule
The proposal would have defined the
term ‘‘registered entity’’ to mean any
person registered or required to be
registered under proposed subpart B.
The Bureau explained that, under the
proposal, entities that fail to comply
267 In the proposal, the Bureau considered
requiring covered nonbanks to submit to the Bureau
portions of orders that constitute confidential
supervisory information under proposed
§ 1092.202, but then exempting those confidential
portions from publication under proposed
§ 1092.204. See 88 FR 6088 at 6114. The Bureau
finalizes its preliminary conclusion in the proposal
that the administrative burden associated with
implementing such an approach likely outweighs
the advantage of collecting such confidential
portions of orders under the proposed rule. See id.
The Bureau notes that it can use other mechanisms
to obtain confidential supervisory information from
other regulators in appropriate cases.
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with a requirement to register under
proposed subpart B would have
nonetheless still been subject to all of
the requirements applicable to
registered entities under proposed
subpart B. If such an entity were a
supervised registered entity, it would
have also been subject to the
requirements applicable to a supervised
registered entity under proposed
subpart B.
Comments Received and Final Rule
The Bureau did not receive any
comments specifically regarding
proposed § 1092.201(l)’s definition of
‘‘registered entity.’’ For the reasons set
forth in the description of the proposed
rule above, the Bureau is finalizing
§ 1092.201(l) (renumbered as
§ 1092.201(n)) as proposed.
Section 1092.201(o) Remain(s) In Effect
Proposed Rule
The proposal would have defined the
terms ‘‘remain in effect’’ and ‘‘remains
in effect’’ to mean, with respect to any
covered order, that the covered nonbank
remains subject to public provisions
that impose obligations on the covered
nonbank to take certain actions or to
refrain from taking certain actions based
on an alleged violation of a covered law.
Proposed § 1092.202(a) would have
used this proposed term in defining the
scope of proposed § 1092.202’s
registration requirement. Proposed
§ 1092.202(f) would have used this
proposed term in specifying when a
covered nonbank would be required to
submit a final filing to the NBR system
and would be permitted to cease
updating its registration information
and filing written statements with
respect to a covered order.
Comments Received and Final Rule
The Bureau did not receive any
comments specifically regarding
proposed § 1092.201(m)’s definition of
‘‘remain(s) in effect.’’ For the reasons set
forth in the description of the proposed
rule above, the Bureau is finalizing
§ 1092.201(m) (renumbered as
§ 1092.201(n)) as proposed.
Section 1092.201(p) State Agency
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Proposed Rule
The proposal would have defined the
term ‘‘State agency’’ to mean the
attorney general (or the equivalent
thereof) of any State and any other State
regulatory or enforcement agency or
authority. The Bureau intended this
definition to encompass all State
government officials and regulators
authorized to bring actions to enforce
any covered law, including actions to
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enforce the CFPA’s provisions or
regulations issued under the CFPA
pursuant to CFPA section 1042(a)(1).268
The term would also have included
regulatory or enforcement agencies of
certain Tribal governments that are
included in the CFPA’s definition of the
term ‘‘State.’’ 269
Comments Received and Final Rule
The Bureau did not receive any
comments specifically regarding
proposed § 1092.201(n)’s definition of
‘‘State agency.’’ For the reasons set forth
in the description of the proposed rule
above, the Bureau is finalizing
§ 1092.201(n) (renumbered as
§ 1092.201(o)) as proposed.
Section 1092.201(q) Supervised
Registered Entity
Proposed Rule
The proposal would have defined the
term ‘‘supervised registered entity’’ to
mean a registered entity that is subject
to supervision and examination by the
Bureau pursuant to CFPA section
1024(a),270 with certain exceptions.271
The Bureau explained that the CFPA
authorizes the Bureau to require reports
and conduct examinations of certain
persons, as described in CFPA section
1024(a)(1)(A)–(E); the proposed term
would have referred to a registered
entity that is subject to supervision and
examination by the Bureau pursuant to
any of those provisions.272
For purposes of proposed
§ 1092.201(o), the proposal would have
clarified that the term ‘‘subject to
supervision and examination by the
Bureau pursuant to CFPA section
1024(a)’’ would include an entity that
qualifies as a larger participant of a
market for consumer financial products
or services under any rule issued by the
Bureau pursuant to CFPA section
1024(a)(1)(B) and (a)(2) (providing
Bureau supervisory authority over larger
participants in certain markets as
defined by Bureau rule), or that is
U.S.C. 5552(a)(1).
12 U.S.C. 5481(27) (defining ‘‘State’’ to
include ‘‘any federally recognized Indian tribe, as
defined by the Secretary of the Interior under’’ 25
U.S.C. 5131(a)).
270 12 U.S.C. 5514(a).
271 The Bureau explained that an affiliate of an
insured depository institution that is subject to
examination and supervision by the Bureau under
12 U.S.C. 5515(a) would not be included in the
proposed definition of supervised registered entity,
where the affiliate is not subject to examination and
supervision by the Bureau under 12 U.S.C. 5514(a).
See 12 U.S.C. 5514(a)(3)(A) (providing that 12
U.S.C. 5514 shall not apply to persons described in
12 U.S.C. 5515(a) or 5516(a)).
272 The Bureau explained that the proposal would
not increase the number of entities subject to
Bureau examinations or otherwise modify the scope
of the Bureau’s supervisory jurisdiction.
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269 See
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subject to an order issued by the Bureau
pursuant to CFPA section 1024(a)(1)(C)
(providing Bureau supervisory authority
over certain nonbank covered persons
based on risk determination). The
Bureau proposed this language only to
clarify and make express that such
persons would be included in the
proposed definition of the term
supervised registered entity. The Bureau
explained that it was not proposing by
means of this language to limit the
scope of the term ‘‘supervised registered
entity.’’
Under the proposed definition of
‘‘supervised registered entity,’’ the
Bureau explained that it need not have
previously exercised its authority to
require reports from, or conduct
examinations of, a particular registered
entity for that entity to qualify as a
supervised registered entity. A
registered entity would have qualified
as a supervised registered entity if the
Bureau could require reports from, or
conduct examinations of, that entity
because it is a person described in CFPA
section 1024(a)(1). Such an entity would
have been ‘‘subject to supervision and
examination’’ within the meaning of the
proposal even if the Bureau has never
previously exercised its authority to
require reports or conduct examinations
with respect to that entity.
The Bureau explained that persons
would be subject to the proposal’s
requirements applicable to ‘‘supervised
registered entities’’ so long as they
satisfy the proposed definition of that
term. The Bureau recognized that
certain entities may, in certain
circumstances, satisfy the definition
only for a limited period of time. For
example, the Bureau noted that an
entity’s activity levels may change in
such a manner as to cause the entity to
cease to qualify as a larger participant of
a market for consumer financial
products and services as defined by
CFPA section 1024(a)(1)(B) and 12 CFR
part 1090,273 or an entity may cease to
be a person subject to Bureau
supervision under CFPA section
1024(a)(1)(C) and 12 CFR part 1091.274
An entity would have been required to
comply with the proposal’s
273 The Bureau explained that such a
determination would be made under the provisions
of 12 CFR part 1090. See, e.g., 12 CFR 1090.102
(providing that ‘‘[a] person qualifying as a larger
participant under subpart B of [12 CFR part 1090]
shall not cease to be a larger participant under [12
CFR part 1090] until two years from the first day
of the tax year in which the person last met the
applicable test under subpart B’’).
274 The Bureau explained that such a
determination would be made under the provisions
of 12 CFR part 1091. See, e.g., 12 CFR 1091.113
(regarding petitions for termination of an order
issued under 12 CFR 1091.109).
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requirements applicable to ‘‘supervised
registered entities’’ so long as it qualifies
as such an entity, but not once it ceases
to so qualify. Thus, for example, the
Bureau explained that depending upon
the timing of events, a supervised
registered entity might be required to
register with, and submit information to,
the NBR system under proposed
§ 1092.202 but not subsequently submit
a written statement under proposed
§ 1092.203 if it ceases to qualify as a
supervised registered entity before
§ 1092.203(d)’s submission deadline.
The Bureau believed that applying
proposed § 1092.203’s requirements to
supervised registered entities so long as
they satisfy the proposed definition of
that term, even if they do so for limited
periods of time, would serve its goals in
imposing such requirements, as
described in section IV(D) of the
proposal. The Bureau did not believe
that it should exempt, or otherwise
distinguish for purposes of the proposal,
entities that are subject to supervision
under CFPA section 1024(a) for limited
periods of time. The Bureau believed
that it is important to obtain reports
from such supervised registered entities
under proposed § 1092.203 for the
reasons discussed in section IV(D) of the
proposal, including to ensure they are
legitimate entities and able to perform
their obligations to consumers, to detect
and assess risks to consumers related to
entities subject to Bureau supervision,
and to facilitate its assessments in
connection with its risk-based
supervisory program under CFPA
section 1024(b)(2). In addition, the
Bureau explained that requiring regular
submission of written statements from
such entities would assist the Bureau in
determining whether the entity should
continue to be subject to Bureau
supervision under CFPA section
1024(a)(1)(C), for example. However, the
Bureau preliminarily concluded that
obtaining such written statements from
entities that are no longer subject to the
Bureau’s supervision and examination
authority under CFPA section 1024(a) is
not necessary to serve these
purposes.275
The Bureau explained that its
proposed approach to applying the term
‘‘supervised registered entity’’ would
also have extended to the recordkeeping
requirements proposed in § 1092.203(e).
Proposed § 1092.203(e) would have
required a supervised registered entity
to maintain certain documents and
other records for five years after the
submission of a written statement is
required, and to make such documents
and other records available to the
Bureau upon request. The Bureau
explained that, once a supervised
registered entity ceased to qualify as a
supervised registered entity under
proposed § 1092.201(o), it would no
longer have been subject to
§ 1092.203(e)’s requirement to maintain
and provide such records. (The Bureau
noted that the entity may nevertheless
be subject to other requirements to
maintain and provide such records,
where such requirements are imposed
by Federal consumer financial law or
other applicable law.) The Bureau
further explained that if, because of a
change in circumstances, the entity later
once again qualifies as a supervised
registered entity, the entity would once
again have become subject to proposed
§ 1092.203(e)’s recordkeeping
requirement, but only as to conduct
undertaken to comply with proposed
§ 1092.203 that occurs after the entity
requalifies as a supervised registered
entity.
The proposal would have provided
that the term ‘‘supervised registered
entity’’ would not include a service
provider that is subject to Bureau
examination and supervision solely in
its capacity as a service provider and
that is not otherwise subject to Bureau
supervision and examination. The
Bureau noted that CFPA section 1024(e)
authorizes the Bureau to exercise
supervisory authority with respect to a
service provider to a person described
in CFPA section 1024(a)(1).276
Additionally, CFPA sections 1025(d)
and 1026(e) authorize the Bureau to
exercise supervisory authority with
respect to certain other service
providers.277 The Bureau explained that
this provision of the proposed definition
clarifies that the term ‘‘supervised
registered entity’’ would not have
included a registered entity that is
subject to Bureau examination and
supervision solely in its capacity as a
service provider under any of these
provisions. However, the Bureau
explained, the term supervised
registered entity would have included a
registered entity if the registered entity
is otherwise subject to Bureau
supervision and examination under
CFPA section 1024(a)—i.e., if the
registered entity is a person that is
described in CFPA section 1024(a)(1)—
even if the registered entity is also a
service provider for some purposes
275 The Bureau is adopting the proposal’s
approach to this issue in the final rule and finalizes
its preliminary conclusion to this effect.
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277 12
U.S.C. 5514(e).
U.S.C. 5515(d), 5516(e).
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under the CFPA.278 The Bureau
preliminarily concluded that, at least in
the first instance, the requirements set
forth in proposed § 1092.203 are best
directed at persons described in CFPA
section 1024(a). The Bureau believed
that it could achieve the anticipated
benefits described above without
extending its coverage to service
providers subject to supervision under
CFPA section 1024.
Proposed § 1092.201(o)(2) would have
provided that the term ‘‘supervised
registered entity’’ would not include a
motor vehicle dealer that is
predominantly engaged in the sale and
servicing of motor vehicles, the leasing
and servicing of motor vehicles, or both,
within the meaning of 12 U.S.C. 5519(a),
except to the extent such a person
engages in functions that are excepted
from the application of CFPA section
1029(a) as described in CFPA
1029(b).279 Proposed § 1092.201(e),
discussed above, would have further
provided that the only orders issued to
such motor vehicle dealers that would
subject the dealer to the requirements of
proposed §§ 1092.202 and 1092.203
would be those issued in connection
with the functions that are excepted
from the application of CFPA section
1029(a) as described in CFPA 1029(b).
Proposed § 1092.201(o)(3) would have
provided that the term ‘‘supervised
registered entity’’ would not include a
person that qualifies as a covered person
based solely on conduct that is the
subject of, and that is not otherwise
exempted from, an exclusion from the
Bureau’s supervisory authority under
CFPA section 1027.280 The Bureau
explained that this proposed component
of the term ‘‘supervised registered
entity’’ would have been similar to a
component in the proposed definition of
the term ‘‘covered nonbank,’’ as
discussed in more detail in the sectionby-section discussion of proposed
§ 1092.201(d), above. However, while
proposed § 1092.201(d) would have
278 As discussed above, entities that are service
providers may nevertheless also be covered persons
under the CFPA.
279 12 U.S.C. 5519 (‘‘Exclusion for Auto Dealers’’).
The Bureau explained that, as with other
supervised registered entities, the motor vehicle
dealer would only qualify as a ‘‘supervised
registered entity’’ if it were subject to the Bureau’s
supervisory jurisdiction under 12 U.S.C. 5514(a).
Technically, the Bureau noted, the exclusion in
proposed § 1092.201(o)(2) should be unnecessary
because it is identical to the proposed exclusion
from the definition of ‘‘covered nonbank’’ in
proposed § 1092.201(d)(4), and only covered
nonbanks can qualify as supervised registered
entities. Nevertheless, the Bureau proposed
§ 1092.201(o)(2) to reiterate that the exclusion
described in proposed § 1092.201(d)(4) also limits
which entities qualify as ‘‘supervised registered
entities.’’
280 12 U.S.C. 5517.
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described exclusions from the Bureau’s
rulemaking authority, proposed
§ 1092.201(o)(3) would have described
exclusions from the Bureau’s
supervisory authority. This provision
would have clarified that persons
excluded from the supervisory authority
of the Bureau under one or more of the
provisions of section 1027 of the CFPA
would not be ‘‘supervised registered
entities.’’ However, where the CFPA
provides that any of the activities
engaged in by such persons are subject
to the Bureau’s supervisory authority,
the Bureau noted that this limitation
would not have excluded the person
from qualifying as a ‘‘supervised
registered entity.’’ For example, the
Bureau noted, CFPA section 1027(l)(1)
provides an exclusion from the Bureau’s
supervisory authority for certain
persons engaging in certain activities
relating to charitable contributions.281
Under the proposal, a person would not
have been deemed a ‘‘supervised
registered entity’’ if it qualifies for this
statutory exclusion and is not otherwise
exempt from it. But CFPA section
1027(l)(2) exempts certain activities
from this statutory exclusion by
providing that ‘‘the exclusion in [CFPA
section 1027(l)(1)] does not apply to any
activities not described in [CFPA
section 1027(l)(1)] that are the offering
or provision of any consumer financial
product or service, or are otherwise
subject to any enumerated consumer
law or any law for which authorities are
transferred under subtitle F or H.’’ 282
Under proposed § 1092.201(o), an entity
described in CFPA section 1027(l)(1)
engaging in the activities described
therein would have qualified as a
‘‘supervised registered entity’’ so long as
it also engages in any of the activities
described in CFPA section 1027(l)(2).
And, as a ‘‘supervised registered entity’’
under the proposed § 1092.201(o), such
entity would have been subject to all of
proposed § 1092.203’s requirements
applicable to ‘‘supervised registered
entities’’ with respect to any ‘‘covered
order,’’ regardless of whether the
applicable ‘‘covered order’’ addressed
conduct subject to the statutory
exclusion in CFPA section 1027(l)(1).
Finally, proposed § 1092.201(o)(4)
would have provided that the term
‘‘supervised registered entity’’ would
not include a person with less than $1
million in annual receipts. The
exclusion would have been based on the
receipts resulting from offering or
providing all consumer financial
products and services described in
281 12 U.S.C. 5517(l)(1) (‘‘Exclusion for Activities
Relating to Charitable Contributions’’).
282 12 U.S.C. 5517(l)(2).
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CFPA section 1024(a).283 The Bureau
proposed to define the term ‘‘annual
receipts’’ to have the same meaning as
it has in § 1090.104(a) of the Bureau’s
regulations, including the provisions of
that definition at paragraph (i) regarding
receipts, paragraph (ii) regarding period
of measurement, and paragraph (iii)
regarding annual receipts of affiliated
companies.284 The Bureau proposed the
exclusion in proposed § 1092.201(o) for
two reasons. First, the Bureau noted that
providers of consumer financial
products and services with significantly
lower levels of receipts generally pose
lower risks because they engage with
fewer consumers, obtain less money
from those consumers, or both. Second,
the Bureau explained that the
information collection burdens on
entities with receipts of $1 million or
less, on a relative basis, generally would
be higher than for larger entities.
The Bureau noted that the proposed
exclusion from the definition of
‘‘supervised registered entity’’ based on
volume of annual receipts would have
also been consistent with the CFPA’s
requirement that the Bureau take entity
size into account as part of its risk-based
supervision program.285 Accordingly,
the Bureau proposed to exclude persons
with less than $1 million in annual
receipts from the proposed annual
reporting requirements applicable to
supervised registered entities under
proposed § 1092.203.
However, the Bureau did not propose
to exclude such smaller entities from
the information-collection requirements
provided in proposed § 1092.202. The
Bureau believed that the limited burden
that would be imposed on such entities
due to such information-collection
requirements would be warranted in
light of the market-monitoring benefits
to the Bureau and other users of the
NBR system. The Bureau explained that
it could evaluate the need for additional
supervisory attention related to a
smaller supervised nonbank based on its
submissions under proposed § 1092.202
and any additional information at its
disposal. As discussed in section IV of
the proposal and the section-by-section
discussion of proposed § 1092.202,
those submissions would have provided
additional information relevant to the
Bureau’s assessments of risk in
connection with its prioritization efforts
under CFPA section 1024(b)(2).286
U.S.C. 5514(a).
CFR 1090.104(a).
285 See 12 U.S.C. 5514(b)(2)(A), (B) (requiring the
Bureau to take into consideration ‘‘the asset size of
the covered person’’ and ‘‘the volume of
transactions involving consumer financial products
or services in which the covered person engages’’).
286 12 U.S.C. 5514(b)(2).
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Comments Received
A consumer advocate commenter
objected to proposed § 1092.201(o)(1),
which would have provided that the
term ‘‘supervised registered entity’’ does
not include a service provider that is
subject to Bureau examination and
supervision solely in its capacity as a
service provider and that is not
otherwise subject to Bureau supervision
and examination. The consumer
advocate commenter stated that third
party service providers can present risk
even when they are not supervised by
the Bureau.
Industry commenters stated that the
Bureau should raise the $1 million
amount described in proposed
§ 1092.201(o)(4), which would have
excluded from the definition of
‘‘supervised registered entity’’ a person
with less than $1 million in annual
receipts resulting from offering or
providing all consumer financial
products and services described in 12
U.S.C. 5514(a). Commenters stated that
the proposed $1 million annual receipts
amount was essentially meaningless
because it would not exclude most
nonbanks, and in particular that the
proposed $1 million annual receipts
amount was unlikely to exclude a
meaningful number of mortgage lenders
and mortgage servicers. An industry
commenter also stated that the proposed
$1 million annual receipts amount was
contrary to CFPA section 1024(b)(2)’s
requirements regarding the Bureau’s
risk-based supervision program for
nonbanks.287
A consumer advocate commenter
stated that the Bureau should eliminate
the exception described at proposed
§ 1092.201(o)(4) and instead require
written statements from all entities that
otherwise would qualify as ‘‘supervised
registered entities.’’ The commenter
stated that the Bureau had not explained
why the written-statement requirements
should not be as expansive as the
Bureau’s supervisory authority, that
smaller companies were likely to
present risks to consumers, and that
they were less likely to have
sophisticated internal controls.
Commenters stated that the proposal
was insufficiently clear with respect to
the obligations of affiliates of insured
depository institutions and insured
credit unions to comply with the
proposed rule’s written-statement
requirements. Industry commenters
stated that such affiliates should not be
required to comply with such
requirements, and an industry
commenter requested that the text of the
287 12
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final rule include an express exception
for affiliates subject to Bureau
supervision under CFPA section
1025(a).288 A consumer advocate
commenter stated that the rule should
clearly include banks and bank
affiliates, including holding companies
and the nonbank subsidiaries of bank
holding companies, and that the Bureau
should take as expansive of a view as
possible of the registry’s reach.
Response to Comments Received
The Bureau declines to extend the
written statement requirement to service
providers that are subject to Bureau
examination and supervision solely in
their capacity as service providers and
that are not otherwise subject to Bureau
supervision and examination.289 The
Bureau also declines to extend the rule’s
requirements, including the written
statement requirement, to service
providers that do not qualify as
‘‘covered persons’’ under CFPA section
1002(6). The Bureau finalizes its
preliminary conclusion in the notice of
proposed rulemaking 290 that, at least in
the first instance, the requirements of
the rule are best directed at covered
persons, and the written-statement
requirements set forth in § 1092.204 are
best directed at persons described in
CFPA section 1024(a). The Bureau
currently believes that it likely can
achieve the anticipated benefits detailed
in the description of the proposed rule
above without extending the final rule’s
coverage to service providers per se.291
The Bureau notes that the scope of the
final rule would also need to be
modified significantly from the
proposed rule in order to require service
providers that do not qualify as
‘‘covered persons’’ to register with the
nonbank registry and file written
statements. Among other things, many
of the service providers subject to the
Bureau’s jurisdiction are not ‘‘covered
persons’’ as defined by CFPA section
1002(6), and therefore would be neither
‘‘covered nonbanks’’ as defined by
§ 1092.201(d) nor ‘‘supervised registered
entities’’ as defined by § 1092.201(q).
Further, the Bureau is likely to obtain
information regarding service providers
from the information that will be
288 12
U.S.C. 5515(a).
U.S.C. 5481(26) defines the term ‘‘service
provider’’ for the purposes of the CFPA.
290 88 FR 6088 at 6115.
291 As discussed above, entities that are service
providers may nevertheless also be covered persons
under the CFPA. For example, a service provider
that acts as a service provider to its covered person
affiliate would itself be deemed to be a covered
person as provided in 12 U.S.C. 5481(6)(B), and
thus would qualify as a ‘‘covered nonbank’’ under
§ 1092.201(d) if the other criteria of that definition
are satisfied.
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collected under the final rule as well as
its supervisory reviews of supervised
registered entities. To the extent the
Bureau becomes aware of service
providers that may present risk to
consumers, it may obtain additional
information under its existing statutory
authorities, including its supervisory
authorities with respect to service
providers that are subject to the
Bureau’s supervisory and examination
authority under the CFPA.292
The Bureau is adopting a revision to
proposed § 1092.201(q)(4), which will
exclude from the rule’s definition of
‘‘supervised registered entity,’’ and thus
from the rule’s written-statement
requirements under § 1092.204, persons
with less than $5 million in annual
receipts resulting from offering or
providing all consumer financial
products and services described in 12
U.S.C. 5514(a). This revised $5 million
amount described at § 1092.201(q)(4)
represents an increase from the $1
million annual receipts amount for this
exclusion that was described in the
proposed rule. The Bureau concludes
that increasing the amount of the
exclusion, while still imposing the
written-statement requirements
described at § 1092.204 on supervised
registered entities with $5 million or
more in annual receipts as described,
will allow the Bureau to achieve the
objectives of the written-statement
requirements while reducing burden on
smaller entities.
The Bureau declines to adopt the
consumer advocate commenter’s
suggestion to eliminate the
§ 1092.201(q)(4) exception entirely from
the definition of ‘‘supervised registered
entity.’’ As described above and in the
notice of proposed rulemaking,293
providers of consumer financial
products and services with significantly
lower levels of receipts generally pose
lower risks overall because they engage
with fewer consumers, obtain less
money from those consumers, or both.
And the information-collection burdens
on entities with applicable annual
receipts of less than $5 million, on a
relative basis, generally would be higher
than for larger entities. In addition,
imposing the annual written-statement
requirements on such smaller entities
would impose additional administrative
costs on the Bureau. The Bureau
believes that applying the writtenstatement requirements to ‘‘supervised
registered entities’’ as defined at
§ 1092.201(q) will strike the appropriate
balance in terms of obtaining
information that is useful to the Bureau
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293 88
12 U.S.C. 5514(e), 5515(d), 5516(e).
FR 6088 at 6116.
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without imposing undue burdens on
either industry or the Bureau. However,
for the reasons stated in the description
of the proposal above and the sectionby-section discussion of § 1092.201(d)
above, the final rule does not exclude
such smaller entities from the
information-collection requirements
provided in § 1092.202.
As described above and in the notice
of proposed rulemaking,294 the Bureau
had proposed the § 1092.201(o)
exclusion from the definition of
‘‘supervised registered entity’’ based on
volume of applicable annual receipts
precisely because such an exclusion
would also be consistent with the
CFPA’s requirement that the Bureau
take entity size into account as part of
its risk-based supervision program
under CFPA 1024(b)(2).295 The $5
million annual receipts amount for the
exclusion adopted in the final rule will
likewise be consistent with this CFPA
requirement.
With respect to the industry
commenters’ specific concerns
regarding burden on mortgage lenders
and mortgage servicers, the Bureau
further notes that, under the final rule,
such supervised registered entities will
no longer be required to file written
statements with respect to NMLSpublished covered orders as defined at
§ 1092.201(k) if they elect the one-time
registration option set forth in
§ 1092.203. In addition to the change
being adopted to § 1092.201(q)(4),
§ 1092.203 will further reduce, perhaps
substantially, the number of mortgage
lenders and mortgage servicers that will
294 88
FR 6088 at 6116.
12 U.S.C. 5514(b)(2)(A), (B) (requiring the
Bureau to take into consideration ‘‘the asset size of
the covered person’’ and ‘‘the volume of
transactions involving consumer financial products
or services in which the covered person engages’’).
Furthermore, while the Bureau does not believe that
it needs to rely on its authority under 12 U.S.C.
5512(b)(3) to exempt classes of covered persons
from rules in proposing this small-entity exclusion,
the Bureau believes that the exclusion would be
warranted as an exercise of its section 1022(b)(3)
exemption authority, to the extent that provision is
applicable. See 12 U.S.C. 5512(b)(3). As under 12
U.S.C. 5514(b)(2), an entity-size-based exclusion
accords with 12 U.S.C. 5512(b)(3)(B)(i) and (ii),
which instruct the Bureau to consider ‘‘the total
assets of the class of covered persons’’ and ‘‘the
volume of transactions . . . in which the class of
covered persons engage’’ in issuing exemptions. 12
U.S.C. 5512(b)(3)(B)(i)–(ii). In addition, given the
relatively smaller scope of the harm to consumers
that entities with annual receipts not exceeding $5
million would generally be able to cause when
compared with entities with annual receipts
exceeding that threshold, the Bureau does not
believe that on balance the factor articulated in 12
U.S.C. 5512(b)(3)(B)(iii) (‘‘existing provisions of law
which are applicable to the consumer financial
product or service and the extent to which such
provisions provide consumers with adequate
protection’’) weighs against adopting the proposed
small-entity exclusion.
295 See
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be required to comply with the rule’s
written-statement requirements.
See below for discussion of the
application of § 1092.201(q) to affiliates
of insured depository institutions and
insured credit unions.
Final Rule
For the reasons set forth above and
below, the Bureau is finalizing
§ 1092.201(o) (renumbered as
§ 1091.201(q)) as proposed, with minor
technical edits and a clarification
described below regarding the
application of this section to affiliates of
an insured depository institution or
insured credit union with total assets of
more than $10,000,000,000 ($10 billion),
as well as a revision to clarify how
annual receipts are calculated under
§ 1091.201(q)(4).
In response to comments, the Bureau
clarifies the application of
§ 1092.201(q)’s definition of ‘‘supervised
registered entity’’ to affiliates of insured
depository institutions and insured
credit unions. The final rule defines the
term ‘‘supervised registered entity’’ as
‘‘a registered entity that is subject to
supervision and examination by the
Bureau pursuant to 12 U.S.C. 5514(a)’’
(subject to certain exceptions). CFPA
section 1024(a)—which is codified as 12
U.S.C. 5514(a)—encompasses section
1024(a)(3)(A), which provides that
‘‘[t]his section shall not apply to persons
described’’ in section 1025(a) or
1026(a).296 Section 1025(a) grants the
Bureau supervisory authority over
insured depository institutions and
insured credit unions with more than
$10 billion in total assets, as well as
‘‘any affiliate thereof.’’ 297 Therefore,
because affiliates of such very large
insured depository institutions and
insured credit unions are included
within the scope of section 1025(a), and
thus are excluded from the scope of
section 1024(a) via section
1024(a)(3)(A), affiliates of insured
depository institutions and insured
credit unions with more than $10
billion in total assets do not qualify as
‘‘supervised registered entities’’ under
the final rule. That is the case even if
the affiliate offers or provides consumer
financial products and services
described in CFPA section 1024(a)(1).
For example, a bank holding company,
savings and loan holding company, or
subsidiary of a bank or savings
association that is an affiliate of an
insured depository institution or
insured credit union with total assets of
more than $10 billion is not covered by
the definition of ‘‘supervised registered
296 12
297 12
U.S.C. 5514(a)(3)(A).
U.S.C. 5515(a).
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entity,’’ even if it offers or provides
consumer financial products or services
described in CFPA section 1024(a)(1),
such as mortgage lending. Such an
affiliate is not subject to the final rule’s
written-statement requirements even if
it is a ‘‘covered nonbank.’’ 298
By contrast, CFPA section 1026(a),
which addresses Bureau authority over
insured depository institutions and
insured credit unions with $10 billion
or less in total assets, makes no mention
of ‘‘affiliates’’ of such entities. Section
1024(a)(3)(A) thus does not exclude
affiliates of insured depository
institutions and insured credit unions
with $10 billion or less in total assets
from the scope of section 1024(a). As a
result, affiliates of such entities may
qualify as ‘‘supervised registered
entities,’’ unless an exception set forth
in § 1092.201(q)(1) through (4) applies.
With the above clarification of how the
interlocking texts of § 1092.201(q) and
CFPA sections 1024(a), 1025(a), and
1026(a) operate with respect to affiliates
of insured depository institutions and
insured credit unions, the Bureau
concludes that no revisions to the text
of § 1092.201(q) are required to address
this issue.
The Bureau is finalizing this approach
to affiliates of insured depository
institutions and insured credit unions
for several reasons. First, the Bureau is
issuing the final rule in part based on its
authority under CFPA section
1024(b)(7)(A)–(C). As explained above,
CFPA section 1024(a)(3)(A) provides
that CFPA section 1024 shall not apply
to persons described in CFPA section
1025(a), including affiliates of insured
depository institutions or insured credit
unions with more than $10 billion in
assets. Therefore, excluding such
affiliates from the definition of
‘‘supervised registered entity’’ will help
ensure that the written statement
provisions of the final rule are
consistent with the scope of CFPA
section 1024. Second, while the Bureau
might at some point consider collecting
information from covered persons other
than those described at CFPA section
1024(a), the Bureau believes that there
is currently greater need to collect this
information from such persons. The
Bureau acknowledges the consumer
advocate commenter’s concerns
regarding risks that may be posed to
consumers by affiliates of insured
depository institutions and insured
credit unions, including affiliates of
298 Such an affiliate would still be subject to the
final rule’s other requirements applicable to
covered nonbanks, including § 1092.202’s
requirements to register covered orders. See the
section-by-section discussion of § 1092.201(d)
above.
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insured depository institutions and
insured credit unions with total assets
of more than $10 billion. These affiliate
entities remain subject to the Bureau’s
supervisory and examination authority
under CFPA section 1025, as well as
other applicable Bureau authorities, and
the Bureau may choose to utilize its
supervisory and other authorities in
monitoring and assessing such risks.
Third, the Bureau concludes that
exempting the affiliates of such very
large insured depository institutions
and insured credit unions from the final
rule’s written-statement requirements is
consistent with its rationale for
exempting insured depository
institutions and insured credit unions
from the scope of subpart B at this time.
The Bureau has also added to the final
rule the new § 1092.201(q)(4)(ii). That
provision clarifies that a person’s
receipts from offering or providing a
consumer financial product or service
subject to a larger participant rule under
CFPA section 1024(a)(1)(B) count as
receipts for purposes of the $5 million
exclusion in § 1092.201(q)(4), regardless
of whether the person qualifies as a
larger participant. As described in the
proposal, under § 1092.201(q)(4), the
exclusion is based on the receipts
resulting from offering or providing all
consumer financial products and
services described in CFPA section
1024(a). The new provision makes clear
that such receipts include the receipts
resulting from offering or providing any
of the consumer financial products and
services subject to a rule defining larger
participant covered persons issued
under CFPA section 1024(a)(1)(C) and
(2), which for purposes of this exclusion
are consumer financial products and
services described in CFPA section
1024(a). For purposes of this exclusion,
receipts that count toward determining
larger participant status under a larger
participant rule would count toward
this exclusion, even if the person
ultimately did not qualify as a larger
participant. For example, a person may
engage in offering or providing both
consumer mortgages, private student
loans, or payday loans, on the one hand,
and consumer financial products or
services identified in a larger participant
rule, on the other hand. In that example,
even if the person did not meet the
threshold for larger participant status
under the applicable larger participant
rule, the receipts from offering or
providing the consumer financial
product or service covered by the larger
participant rule still would count as
receipts for purposes of this exclusion.
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Section 1092.202 Registration and
Submission of Information Regarding
Covered Orders
Proposed § 1092.202 would have
required covered nonbanks to register
with the NBR system by timely
submitting information to the NBR
system regarding covered orders. The
proposed section would have
established requirements regarding the
timing and content of information to be
submitted.
The Bureau believed that requiring
covered nonbanks to register with the
NBR system would further the
objectives of proposed subpart B even in
the event the Bureau were not to finalize
proposed requirements that supervised
registered entities submit written
statements as described in proposed
§ 1092.203. Proposed § 1092.202 would
have applied to a broader set of entities
than would proposed § 1092.203, and
the Bureau believed that requiring
registration of entities under proposed
§ 1092.202 would have provided
independent benefit to the Bureau and
to consumers.
The Bureau is finalizing § 1092.202
largely as proposed, with certain
changes discussed in the analysis of
particular paragraphs below. Below, the
Bureau first addresses comments
regarding the Bureau’s legal authority to
impose the requirements in § 1092.202
and then discusses § 1092.202’s
individual paragraphs.
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Certain Comments Received Regarding
the Bureau’s Authority Under CFPA
Section 1022 To Impose the
Requirements in the Final Rule
Some commenters expressed the view
that the Bureau is pursuing a novel and
legally impermissible approach to its
authorities under CFPA section 1022.
Other commenters stated that the
Bureau has statutory authority to issue
the proposed rule under section 1022.
The Bureau finalizes its conclusion that
section 1022 authorizes the rule’s
registration and publication
requirements. The Bureau discusses and
responds to some of these comments
together in this part for ease of
reference. For further discussion of the
market-monitoring requirements in the
final rule and the Bureau’s responses to
comments received, see the section-bysection analysis below.
Commenters stated that the proposed
registry was inconsistent with the
Bureau’s past practices, and that the
Bureau’s purported invocation of its
CFPA section 1022(c) authority was
actually for the purpose of using it to
expand its supervisory authority over
market participants under CFPA section
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1024(a)(1)(C). An industry commenter
argued that the proposal represented an
attempt to eliminate a clear statutory
firewall between the Bureau’s marketmonitoring authority and its
enforcement function, and that it
improperly relied upon the Bureau’s
authority under CFPA section 1022 to
support its enforcement functions. The
industry commenter stated that the
CFPA distinguished the Bureau’s
enforcement powers under subtitle E of
the CFPA from its market-monitoring
authority under CFPA section 1022, and
that unlike information gathered under
CFPA 1022, information collected for
enforcement purposes is subject to
procedural safeguards under CFPA
section 1052 and contemplates the use
of civil investigative demands (CIDs) to
determine whether there has been a
violation of a law.
An industry commenter stated that
the proposal did not provide any
evidence that covered orders are
probative of risk to consumers, stating
that the proposal’s statements about
such risk were conclusory and not
backed by documented research and
facts, and that companies might actually
present less risk because of the scrutiny
that comes with being subject to an
order. The industry commenter further
stated that the proposal would
effectively put covered nonbanks in a
permanent penalty box, and that the
proposal’s premise that past violations
are evidence of current risk of harm
contravenes a fundamental rule of
evidence under American law as
established at Federal Rule of Evidence
404, which prohibits certain use of
evidence of prior crimes.
A joint comment letter from State
regulators stated that the proposal did
not quantify the potential benefit to the
Bureau’s consumer education efforts,
and suggested that the Bureau’s belief
that most consumers will not change
their behavior due to the publication of
the registry was inconsistent with the
existence of such a benefit.
The Bureau’s Response to Certain
Comments Received Regarding the
Bureau’s Authority Under CFPA Section
1022 To Impose the Requirements in the
Final Rule
The Bureau proposed to rely, in part,
on its authorities in sections 1022(c)(1)–
(4) and (7) for the collection and
publication of applicable orders. As the
Bureau stated in the notice of proposed
rulemaking, the Bureau considers
violations of consumer protection laws
probative of ‘‘risks to consumers in the
offering and provision of consumer
financial products or services,’’ and that
entities subject to public orders ‘‘may
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56083
pose heightened and ongoing risks to
consumers in the markets for those
products and services.’’ 299 More
specifically, monitoring for such orders
would allow the Bureau ‘‘to track
specific instances of, and more general
developments regarding, potential
corporate recidivism,’’ which poses its
own unique risks to consumers, and
would improve the Bureau’s ability to
track enforcement trends by other
regulators, enabling it to more
efficiently deploy resources vis-à-vis
other regulators.300 Parts III(B) and
IV(A)–(C) above discuss in detail how
this information will support the
allocation of resources and detection of
risks to consumers.
Some commenters argued for a
narrower interpretation of section
1022(c)(4), contending that the Bureau’s
market-monitoring authorities cannot be
used to impose a substantive
requirement or are limited to gathering
information about particular products,
services and practices, or to one-off
information gathering. In the view of
some commenters, by requiring entities
to provide information to the Bureau on
an ongoing basis, the registry is
inconsistent with past Bureau practice.
One commenter pointed to section 1071
to argue that, had Congress wanted the
Bureau to create a new database, it
would have explicitly and clearly done
so.
The narrow view of marketmonitoring urged by these commenters
is inconsistent with the text and
structure of section 1022. First, contrary
to commenters’ suggestion that the
Bureau’s market-monitoring authority is
limited to gathering information about
particular products, services, and
practices, nothing in CFPA section
1022(c) confines the Bureau to
exercising its market-monitoring
authority only on a piecemeal, productby-product or service-by-service basis.
In fact, section 1022 specifically
commands the Bureau to monitor
‘‘developments in markets for . . .
products or services,’’ not simply
developments regarding particular
products or services themselves.301
Further, section 1022(c)(4)(A) explicitly
authorizes the Bureau to gather
information ‘‘regarding the organization,
business conduct, markets, and
activities of covered persons and service
providers.’’ Commenters rest their
argument on the language of section
1022(c)(2), which contains an openended list of factors that the Bureau
‘‘may consider, among other factors,’’
299 88
FR 6088 at 6091–6092.
at 6092.
301 12 U.S.C. 5512(c)(1) (emphasis added).
300 Id.
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when ‘‘allocating its resources to
perform . . . monitoring.’’ 302 Although
these discretionary considerations are
identified by reference to ‘‘consumer
financial products or services,’’ this
language does not function as a
procedural requirement for the Bureau
to proceed on a product-by-product,
service-by-service, or even market-bymarket basis when it uses its marketmonitoring authority.
One commenter argues that the rule
exceeds the Bureau’s authority under
section 1022(c)(4)(A) to gather
information ‘‘from time to time.’’ The
Bureau, however, is acting in accord
with its statutory authority to ‘‘prescribe
by rule’’ that covered persons must
‘‘from time to time’’ file ‘‘annual or
special reports.’’ 303 The rule here does
exactly that: It requires reports ‘‘from
time to time’’—i.e., ninety days after a
covered order’s effective date (or the
applicable nonbank registry
implementation date), as well as ninety
days after the covered order’s
amendment, modification, termination,
abrogation, or cessation of covered-order
status, or after changes to other
registration information. There are
indications elsewhere in the CFPA that
‘‘from time to time’’ may include regular
intervals. For example, section 1014,
which establishes the Bureau’s
Consumer Advisory Board, directs the
Board to meet ‘‘from time to time . . .
but, at a minimum, . . . at least twice
in each year.’’ 304 In addition, in other
statutory contexts, courts have
recognized that the phrase ‘‘from time to
time’’ contemplates ‘‘an ongoing
process’’ rather than a one-off action.305
In section 1022, Congress imposed on
the Bureau an obligation to monitor
markets; as a practical matter, doing so
often requires repeated or periodic
information collections in order to
understand how the consumer financial
marketplace is developing. An atextual
reading of section 1022(c)(4) that would
limit the Bureau to one-off information
gathering efforts would significantly
undermine the Bureau’s ability to fulfill
its congressionally assigned obligations
and runs counter to the notion of market
monitoring ‘‘by rule’’ under the
statute.306
Contrary to commenters’ suggestion,
this is not the first time that the Bureau
has relied on section 1022(c)(4) to create
302 12
U.S.C. 5512(c)(2).
U.S.C. 5512(c)(4).
304 12 U.S.C 5494(c).
305 In re A Community Voice, 878 F.3d 779, 784
(9th Cir. 2017); see also Earth Island Institute v.
Wheeler, 464 F. Supp. 3d 1138, 1145 (N.D. Cal.
2020) (concluding that ‘‘from time to time’’
statutory language reflected an ‘‘ongoing duty’’).
306 12 U.S.C. 5512(c)(4)(B)(ii).
303 12
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an ongoing requirement for covered
persons to submit information for the
purposes of carrying out market
monitoring. For example, as part of its
final rule to extend consumer
protections over prepaid accounts under
Regulation E, which implements the
Electronic Fund Transfer Act, and
Regulation Z, which implements the
Truth in Lending Act, the Bureau also
utilized its authority under CFPA
section 1022(c)(4) to require prepaid
card issuers to submit prepaid account
agreements to the Bureau.307 The
Bureau initially proposed requiring
prepaid card issuers to submit new and
amended agreements to the Bureau on a
quarterly basis for posting on a website
maintained by the Bureau.308 In the
final rule, the Bureau ultimately chose
to require submission on a rolling basis
to reduce compliance burden.309
Requiring ongoing submissions in this
final rule is not a novel or unique
interpretation of the Bureau’s authority
under section 1022(c)(4).
Commenters appear to be relying on
the expressio unius est exclusio alterius
canon of statutory interpretation in
claiming that the data collection
authorized by section 1071 of the CFPA,
which amended the Equal Credit
Opportunity Act (ECOA),310 implies
limitations on the Bureau’s marketmonitoring authority in section 1022 of
the CFPA. But the Supreme Court has
‘‘long held that the expressio unius
canon does not apply ‘unless it is fair to
suppose that Congress considered the
unnamed possibility and meant to say
no to it.’ ’’ 311 Courts have observed that
the canon is a ‘‘feeble helper in an
administrative setting,’’ where Congress
often employs expansive statutory
language to leave room for exercises of
reasonable agency discretion, and is a
‘‘poor indicator’’ of congressional intent
‘‘when countervailed by a broad grant of
authority contained within the same
statutory scheme.’’ 312
Commenters do not point to anything
in the legislative history of the CFPA to
support their claim that Congress
‘‘meant to say no’’ to requirements like
those contemplated by this rule. Indeed,
the authority to collect information in
section 1022(c)(4) is precisely the kind
307 Prepaid Accounts Under the Electronic Fund
Transfer Act (Regulation E) and the Truth in
Lending Act (Regulation Z), 81 FR 83934 (Nov. 22,
2016).
308 Id. at 83957.
309 Id. at 83963.
310 15 U.S.C. 1691 et seq.
311 Marx v. General Rev. Corp., 568 U.S. 371, 381
(2013) (quoting Barnhardt v. Peabody Coal Co., 537
U.S. 149 (2003)).
312 Adirondack Med. Ctr. v. Sebelius, 740 F.3d
692, 697 (D.C. Cir. 2014) (quoting Cheney R.R. Co.
v. I.C.C., 902 F.2d 66, 68–69 (D.C. Cir. 1990)).
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of broad authority with respect to which
courts have found the expressio unius
canon to be a ‘‘poor indicator’’ of
congressional intent. The Bureau has an
extensive obligation, covering the entire
marketplace for consumer financial
products and services, to monitor for
risks to consumers; the informationcollection authority at section 1022(c)(4)
is necessarily broad in order to satisfy
that obligation.
In addition, interpreting section 1071
to imply some limit on the authorities
in section 1022 is inappropriate
because, among other reasons, section
1071 amends another statute, ECOA,
and serves purposes specific to that
statute, which are to ‘‘facilitate
enforcement of fair lending laws’’ and to
‘‘enable communities, governmental
entities, and creditors to identify
business and community development
needs and opportunities of womenowned, minority-owned, and small
businesses.’’ 313 Sections 1022 and 1071
should be interpreted in light of their
distinct and specified purposes.
Regarding the industry commenters’
statements that the final rule improperly
relies upon section 1022 authority to
support the Bureau’s determinations
under CFPA section 1024(a)(1)(C), or to
support the Bureau’s enforcement
functions, CFPA section 1022(a)(1)
provides that the CFPB may use its
market-monitoring authority to ‘‘support
its rulemaking and other functions.’’ 314
The Bureau understands this provision
to mean that all of the Bureau’s
functions, including supervision and
enforcement, can be informed by
information it gathers through market
monitoring. While the Bureau’s marketmonitoring authority does not replace
its supervision and enforcement
authorities (which are established by
and subject to other provisions of the
CFPA), there is no question that the
Bureau can use its market-monitoring
work to generally ‘‘support’’ those
functions as well as its other functions,
such as rulemaking and conducting
financial education programs.315
The Bureau is finalizing its
preliminary conclusion in the proposal
that collecting and registering public
agency and court orders imposing
obligations based upon violations of
consumer law would assist with
monitoring for risks to consumers in the
offering or provision of consumer
financial products and services. As
explained in part IV above, when an
agency issues such an order, or seeks a
court order, it typically has determined
313 15
U.S.C. 1691c–2(a).
12 U.S.C. 5512(c)(1).
315 See part IV(B) above.
314 See
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that the problems at the applicable
entity are sufficiently serious to merit
the expenditure of that agency’s limited
resources and perhaps the attention of
the courts. As discussed in part IV,
conduct that constitutes a violation of a
covered law may also indicate that the
covered nonbank has engaged in
violations of laws that the Bureau
administers. And, notwithstanding the
issuance of the covered order, the
violations of covered law or other
problems that led the agency to pursue
enforcement action may persist after an
order has been issued. Such orders may
also be indicative of the existence of
broader problems at the entity that pose
related risks to consumers—including
lack of sufficient controls related to the
offering and provision of consumer
financial products and services,
inadequate compliance management
systems and processes, and an
unwillingness or inability of senior
management to comply with laws
subject to the Bureau’s jurisdiction.
Information regarding the absence of
covered orders will also be informative
to the Bureau. The existence of covered
orders may also in some cases be
indicative of lesser, and not greater, risk
to consumers. For example, the
presence of enforcement activity may
indicate that particular risks, markets, or
companies are receiving adequate
enforcement attention and oversight
from regulators.316 But while less
enforcement activity in certain areas
could indicate less risk to consumers, it
potentially also could be evidence of
less attention by regulators and a need
to increase monitoring and other
supervisory or regulatory activities.
Enforcement patterns and trends may
vary depending on any number of
factors, including the agency issuing or
obtaining the order, the type of entity
subject to the order, the consumer
protection law being enforced, the
applicable geographic or product
market, and other variables. The Bureau
will use the information it collects
under the final rule to evaluate, assess,
and understand the consumer risk
posed by or otherwise related to covered
orders, including patterns in such
orders and developments in the markets
for consumer financial products and
services.
As discussed in part IV above,
collecting and evaluating such marketmonitoring information relevant to the
offering and provision of consumer
financial products and services is
316 See 12 U.S.C. 5514(b)(2)(D) (requiring the
Bureau to consider in conducting risk-based
supervisory prioritization ‘‘the extent to which
[nonbanks] are subject to oversight by State
authorities for consumer protection’’).
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appropriate to inform the Bureau’s
functions, including its supervision and
enforcement functions. Thus, the
Bureau may consider all of this
information regarding enforcement
activity, including patterns in such
activity, in assessing risks to consumers
as part of, among other things,
exercising its market-monitoring
authority under CFPA section 1022(c),
conducting its supervisory prioritization
under CFPA section 1024(b)(2), and
determining the amount of civil money
penalties it may seek or assess under
CFPA section 1055(c). However, such
use by the Bureau of this information as
authorized under the CFPA does not
represent an attempt to improperly
penalize covered nonbanks for prior
acts. Likewise, as discussed in the
section-by-section discussion of
§ 1092.205(a) below, any publication by
the Bureau of the information collected
through the registry as authorized under
§ 1092.205 would not be intended to
punish companies or individuals for
their past acts. Collection and
publication of such information as
provided in the final rule is authorized
by the CFPA and does not violate
evidentiary or other fundamental
principles of American law.
Industry commenters also stated that
the proposed registry’s purpose was
incompatible with the Bureau’s
authorities to prescribe rules regarding
registration requirements under CFPA
section 1022(c)(7). A joint letter from
members of Congress stated CFPA
section 1022(c)(7) does not grant the
Bureau authority to establish such a
robust set of registration requirements,
nor a database for a particular category
of information, and stated that when
Congress intends to create a database, it
explicitly and clearly does so. One
industry commenter also stated that
CFPA section 1022(c)(7) does not
contemplate the creation of a
registration requirement and bespoke
database for a particular category of
information, but rather outlines a path
for registering a covered entity with the
Bureau and sharing basic identifying
information about the entity with the
public. Another industry commenter
stated that the proposed registry
represented an attempt to obscure the
Bureau’s failure to create a registry that
would identify legitimate companies for
the use of consumers and others, as
required by law, and that the Bureau
should instead develop and publicize an
accessible list of legitimate debt
collectors.
Commenters do not specify how the
final rule’s particular registration
requirements exceed the authority
contained in CFPA section 1022(c)(7),
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and the Bureau believes that the final
rule is consistent with the Bureau’s
authority under that provision. As
discussed in part III(B) above, CFPA
section 1022(c)(7)(A) expressly
authorizes the Bureau to ‘‘prescribe
rules regarding registration
requirements applicable to a covered
person, other than an insured
depository institution, insured credit
union, or related person.’’ The registry
will provide a mechanism for the
Bureau to gather information about the
nonbank entities that are subject to its
jurisdiction. The CFPB has designed its
rule to be consistent with limitations
contained in CFPA section
1022(c)(7)(A), including by excluding
insured depository institutions, insured
credit unions, and related persons from
the scope of the rule’s registration
requirements.317 As explained in more
detail in parts III and IV, the Bureau is
adopting the final rule to fulfill the
general purposes and objectives
established for the Bureau in CFPA
sections 1021, 1022(b) and (c), and
1024(b)(7)(A)–(C), as authorized under
those sections. The Bureau disagrees
that more specific statutory
authorization is required.
Section 1022(c)(7)(B) also provides
that ‘‘[s]ubject to rules prescribed by the
Bureau, the Bureau may publicly
disclose registration information to
facilitate the ability of consumers to
identify covered persons that are
registered with the Bureau.’’ 318 The
Bureau interprets CFPA section
1022(c)(7)(B) as authorizing it to publish
registration information required by
Bureau rule under CFPA section
1022(c)(7)(A) so that consumers may
identify the nonbank covered persons
on which the Bureau has imposed
registration requirements. Contrary to a
commenter’s suggestion, this provision
does not imply that the Bureau is
precluded from publishing registration
information in database or other
searchable form, or from publishing
identifying information or other
registration information in a manner
that highlights specific information or
categories of information. As further
explained in part IV(F) and the sectionby-section discussion of § 1092.205(a),
publication of registry information
under § 1092.205 in an online public
registry will implement the provisions
of Federal consumer financial law in a
manner fully consistent with the
Bureau’s obligations under the CFPA.
An industry commenter questioned
the Bureau’s authority to make the
market-monitoring data public under
317 See
318 12
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CFPA section 1022(c)(3). Section
1022(c)(3)(B), however, authorizes the
Bureau to release information through
aggregated reports or ‘‘other appropriate
formats.’’ The only limitations on
‘‘format’’ that section 1022 imposes are
that the format be ‘‘appropriate’’ and
that it be ‘‘designed to protect
confidential information in accordance
with paragraphs (4), (6), (8), and (9).’’
The proposed registry complies with
these restrictions.
Section 1022(c)(3)(B) is not limited by
section 1022(c)(3)(A), on which the
industry commenter focused. Section
1022(c)(3)(A) requires the Bureau to, at
minimum, publish one ‘‘report of
significant findings of its monitoring
required by this subsection [i.e.,
subsection 1022(c)] in each calendar
year.’’ It sets a floor, not a ceiling, and
it does not restrict the Bureau to only
publishing ‘‘report[s] of significant
findings’’ related to its marketmonitoring work.
In addition, section 1022(c)(3)(B)
authorizes the Bureau to publish
information obtained ‘‘under this
section [i.e., section 1022]’’ in
‘‘appropriate formats.’’ By its own
terms, this provision applies to any
category of information collected under
section 1022 (see, e.g., CFPA sections
1022(c)(6)(C), 1022(c)(7), 1022(d)), and
so cannot reasonably be limited by
section 1022(c)(3)(A), which only
concerns the Bureau’s ‘‘monitoring’’
work under ‘‘subsection’’ (c).
The commenter’s assertion is also in
tension with laws requiring Federal
agencies to make data and information
available to the public. The Foundations
for Evidence-Based Policymaking Act
requires agencies to disclose data if it
would otherwise be made available
under the Freedom of Information
Act.319 Similarly, the Freedom of
Information Act imposes proactive
disclosure requirements when records
are likely to be requested by the
public.320
As discussed in part IV(B) above, the
information collected under the final
rule will inform the Bureau’s exercise of
its consumer education functions,
among other functions.321 For example,
the Bureau may consider the
319 44
U.S.C. 3504(b)(6)(F).
U.S.C. 552(a)(2)(D).
321 See 12 U.S.C. 5493(d) (establishing the
Bureau’s Office of Financial Education); 12 U.S.C.
5511(b)(1) (‘‘The Bureau is authorized to exercise its
authorities under Federal consumer financial law
for the purposes of ensuring that, with respect to
consumer financial products and services . . .
consumers are provided with timely and
understandable information to make responsible
decisions about financial transactions’’); 12 U.S.C.
5511(c)(1) (‘‘The primary functions of the Bureau
are . . . conducting financial education programs’’).
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information it has collected in
determining what harmful practices
may be prevalent in the markets for
consumer financial products and
services, in monitoring and assessing
the enforcement actions that are being
issued in connection with such harmful
practices and the content of covered
orders, and in identifying patterns of
similar alleged or found violations of
Federal consumer financial law across
multiple nonbank covered persons.
Such information about risk to
consumers in the offering and provision
of consumer financial products and
services will help the Bureau determine
how to conduct its own consumer
education efforts. The Bureau may
choose to direct its consumer education
efforts toward educating consumers
about risks identified via the registry,
and can help consumers understand the
risks and associated costs of such
conduct with respect to their use of
certain consumer financial products or
services. While, as discussed in parts
VIII and IX below, the Bureau believes
that most consumers will not change
their behavior due to the publication of
the registry as authorized under
§ 1092.205(a), the Bureau will be able to
utilize the information collected under
the final rule to inform its own
consumer education functions.
Section 1092.202(a) Scope of
Registration Requirement
Proposed Rule
Proposed § 1092.202(a) would have
defined the scope of the registration
requirement. To maximize the value of
subpart B’s registration requirements,
while taking into consideration
administrative costs to the Bureau and
covered nonbanks in keeping the
registry updated, the Bureau proposed
to limit § 1092.202 to covered orders (as
that term is defined at proposed
§ 1092.201(e)) that have an effective date
(as that term is defined at proposed
§ 1092.201(f)) on or after the effective
date of subpart B, or that remain in
effect (as that term is defined at
proposed § 1092.201(m)) as of the
effective date of subpart B. The Bureau
preliminarily concluded that this
limitation of the registration
requirement’s scope would help ensure
that the most relevant orders are
submitted into the NBR system.322 The
Bureau recognized in its proposal that
there is potential value in requiring
registration with respect to older orders
that no longer remain in effect. Among
322 The Bureau is adopting the proposal’s
approach to this issue in the final rule and finalizes
its preliminary conclusion to this effect; see the
discussion of § 1092.202(a) of the final rule below.
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other things, the Bureau believed that
such registration would have helped
inform the Bureau and consumers
regarding older orders and help to
identify an even larger number of repeat
offenders than could be identified
through the registration requirement as
proposed in § 1092.202. On the other
hand, the Bureau recognized that
requiring covered nonbanks to identify
and register older orders to which they
were once subject, but that no longer
impose any present obligations, may be
burdensome. In addition, extending the
registration requirement to older orders
would have imposed additional
administrative costs on the Bureau. The
Bureau believed that limiting the
registration requirement to covered
orders with an effective date on or after
the effective date of subpart B, or that
remain in effect as of subpart B’s
effective date, would strike the
appropriate balance in terms of
establishing an informative and useful
registry without imposing undue
burdens on either industry or the
Bureau. To maximize the value of
subpart B’s registration requirements,
while taking into consideration
administrative costs to the Bureau and
covered nonbanks in keeping the
registry updated, the Bureau therefore
proposed to limit § 1092.202 to covered
orders (as that term is defined at
proposed § 1092.201(e)) that have an
effective date (as that term is defined at
proposed § 1092.201(f)) on or after the
effective date of subpart B, or that
remain in effect (as that term is defined
at proposed § 1092.201(m)) as of the
effective date of subpart B.
Comments Received and Final Rule
The Bureau did not receive any
comments specifically regarding
proposed § 1092.202(a). For the reasons
set forth in the description of the
proposed rule above, the Bureau is
finalizing § 1092.202(a) as proposed.
Section 1092.202(b) Requirement To
Register and Submit Information
Regarding Covered Orders
Proposed Rule
Proposed § 1092.202(b) would have
established subpart B’s requirements for
covered nonbanks to register with the
NBR system and to provide and
maintain certain registration
information.
Proposed § 1092.202(b)(1) would have
provided that each covered nonbank
that is identified by name as a party
subject to a covered order described in
paragraph (a) shall register as a
registered entity with the NBR system in
accordance with proposed § 1092.202(b)
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if it is not already so registered, and
shall provide or update, as applicable,
the information described in subpart B
in the form and manner specified by the
Bureau. As discussed in connection
with proposed § 1092.201(e)(1), a
covered nonbank that is identified by
name as a party subject to the order
would have been required to register
under this paragraph even if the covered
nonbank is not listed in the title or
caption of the order, or as the primary
respondent, defendant, or subject of the
order. A covered nonbank may have
been subject to the requirements of
proposed § 1092.202 even if the issuing
agency or court does not list the covered
nonbank as a party in related press
releases or internet links.
The Bureau considered but did not
propose alternative approaches,
including applying the requirements of
this section to any covered nonbank
alleged or found in a covered order to
have violated a covered law, even if
such party were not expressly named.
This alternative would have captured
circumstances where, for instance, a
covered order applies to a category of
entities, such as all affiliates of a
particular named covered nonbank, but
the order does not specifically name all
of the entities that fall within that
category (e.g., does not specifically list
the names of all of the affiliates of the
named covered nonbank). While this
alternative would have potentially
widened the scope of information the
Bureau would have obtained relevant to
its market-monitoring objectives, it
preliminarily concluded that the
proposed approach would effectively
achieve those objectives with greater
administrative ease.
As provided at § 1092.102(a), the
Bureau proposed to specify the form
and manner for electronic filings and
submissions to the NBR system that are
required or made voluntarily under part
1092, including §§ 1092.202 and
1092.204. The Bureau would have
issued specific guidance for filings and
submissions.
Proposed § 1092.202(b)(2)(i) would
have required each covered nonbank
that is required to register under
proposed § 1092.202 to submit a filing
containing the information described in
proposed § 1092.202(c) and (d) to the
NBR system within the later of 90 days
after the applicable nonbank registration
system implementation date or 90 days
after the effective date of any applicable
covered order. Thus, a covered nonbank
would not have been required under
proposed subpart B to register any
covered orders to which it may be
subject until 90 days after the nonbank
registration system implementation date
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for this provision. For covered orders
with effective dates after the nonbank
registration system implementation
date, an applicable covered nonbank
would have been required to register the
covered order within 90 days after the
covered order’s effective date, as that
term is defined at proposed
§ 1092.201(f). The Bureau believed the
90-day period would give sufficient
time for a covered nonbank to collect
and submit the applicable information
to the NBR system and would also
generally permit a sufficient length of
time for any relevant agency or court
stays to take effect.
As discussed above regarding
proposed § 1092.101(e), the Bureau
estimated that the nonbank registration
system implementation date for
proposed §§ 1092.202 and 1092.203
would have been no earlier than January
2024 and may be substantially later. The
Bureau explained in its proposal that
the exact nonbank registration system
implementation date would depend
upon, among other things, the
comments received to this proposal and
the Bureau’s ability to launch the
registration system.
Proposed § 1092.202(b)(2)(ii) would
have required each covered nonbank
that is required to register under
proposed § 1092.202 to submit a revised
filing amending any information
described in paragraphs (c) and (d) to
the NBR system within 90 days after any
amendments are made to the covered
order or any of the information
described in paragraphs (c) or (d)
changes. The Bureau believed that
requiring entities to maintain up-to-date
information with the NBR system would
significantly enhance the usefulness of
the NBR system for the Bureau,
consumers, and other users of the NBR
system.
Comments Received
Commenters stated that the Bureau is
pursuing a novel and legally
impermissible approach to its
authorities under CFPA section 1022.
For a discussion of these issues, see the
Bureau’s response above to comments
received regarding the Bureau’s
authority under CFPA section 1022.
Commenters also stated that the
proposal was not compatible with CFPA
section 1024. Industry commenters
stated that the proposed registry would
conflict with the requirement at CFPA
section 1024(b)(4) 323 for the Bureau, in
exercising its nonbank supervisory
authority, to use reports that have
already been provided to Federal and
323 12 U.S.C. 5514(b)(4); see also 12 U.S.C.
5515(b)(3), 5516(b)(1).
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State agencies and information that has
been reported publicly. An industry
commenter also stated that the proposed
registry would conflict with the
requirement at CFPA section
1024(b)(3) 324 for the Bureau, in
exercising its nonbank supervisory
authority, to ‘‘coordinate its supervisory
activities with the supervisory activities
conducted by prudential regulators, the
State bank regulatory authorities, and
the State agencies that license,
supervise, or examine the offering of
consumer financial products or services,
including . . . requirements regarding
reports to be submitted by such
persons.’’ 325
The joint comment from State
regulators stated that, because in the
commenters’ view the discrepancy
between the number of nonbank entities
licensed by States through NMLS and
the number of firms subject to Bureau
supervisory authority appears
negligible, the proposed Bureau registry
would likely be largely duplicative of
NMLS and provide little new insight for
risk-based supervision purposes,
particularly for the mortgage and money
services business industries.
An industry commenter stated the
proposal did not comply with CFPA
section 1024(b)(2) and did not properly
assess the impact of the rule on
attorneys and law firms under that
statutory provision. The commenter
stated that creditors’ rights attorneys
and law firms already are heavily
regulated at the State level, the Bureau
should have considered the unique
characteristics of creditors’ rights law
firms, and such firms should be exempt
from the proposed rule. Another
industry commenter stated that the
proposed written-statement
requirements were inconsistent with
section 1024(b)(2) since the $1 million
amount in proposed § 1092.201(q)’s
definition of ‘‘supervisory registered
entity’’ should be increased.
Consumer advocate commenters
generally supported the Bureau’s
proposal to collect information as
described in the proposal. A consumer
advocate commenter stated that in light
of the large number of nonbanks subject
to Bureau oversight, the self-reporting
requirements in the proposed rule
would assist the Bureau’s supervisory
prioritization efforts and would help the
Bureau identify wider trends in relevant
markets. A consumer advocate
commenter stated that it would not be
a substantial burden for companies to
identify covered orders, since they
would presumably have these orders on
324 12
U.S.C. 5514(b)(3).
id.
325 See
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hand for their own in-house compliance
purposes.
An industry commenter stated that
the Bureau should establish a minimum
threshold of five non-expired covered
orders before requiring registration, in
order to better distinguish nonbanks
with only a few consent orders from
‘‘repeat offenders’’ and reduce consumer
confusion.
The SBA Office of Advocacy stated
that the Bureau should issue clear
guidance to assist small entities with
compliance with the rule’s submission
and other requirements.
See the section-by-section discussion
of § 1092.201(e) regarding a comment
related to the final rule’s treatment of
parties not expressly named in the
covered order.
Response to Comments Received
The Bureau is finalizing a new section
at § 1092.203 that will provide that,
with respect to any covered order that
is published on the NMLS Consumer
Access website, a covered nonbank that
is identified by name as a party subject
to the order may elect to comply with
the one-time registration option
described in that section in lieu of
complying with the requirements of
§§ 1092.202 and 1092.204. To the extent
that CFPA section 1024(b)(4) may apply
to Bureau rulemakings under section
1024(b)(7), § 1092.203 will ensure that
the requirements in the Bureau’s rule
reflect, to the fullest extent possible,
‘‘reports pertaining to persons described
in [section 1024(a)(1)] that have been
provided or required to have been
provided to a Federal or State agency’’
and ‘‘information that has been reported
publicly.’’ 326 In particular, covered
nonbanks with NMLS-published
covered orders can opt for a streamlined
registration process designed to provide
notice that information regarding such
covered orders is available through the
NMLS. After the existence of NMLSpublished covered orders has been
directed to the Bureau’s attention
through a streamlined registration under
§ 1092.203, the Bureau can use any
information available through the NMLS
to help inform its risk-based supervisory
prioritization determinations under
CFPA section 1024(b)(2) and its
supervisory activities under section
1024(b)(1).
To the extent these industry
commenters suggest that additional
changes would be required in order to
satisfy the Bureau’s obligations under
CFPA section 1024(b)(4)—for example,
by not collecting information that is also
published by an individual State
326 12
U.S.C. 5514(b)(4).
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agency—the Bureau declines to make
such changes. First, a central purpose of
the rule’s registration requirements is to
ensure that the Bureau is made aware
and provided with copies of
‘‘information that has been reported
publicly’’—i.e., information related to
public enforcement orders—in a manner
that is usefully associated with covered
nonbanks. Second, the Bureau views the
registry as a means to increase its ability
to obtain and use such information and
thus promote Congress’s intent in
adopting these statutory provisions.
CFPA section 1024(b)(4) requires that
the Bureau use such information ‘‘to the
fullest extent possible,’’ and collecting
this information makes it more
‘‘possible’’ for the Bureau to use this
information.
Likewise, to the extent that CFPA
section 1024(b)(3) may apply to Bureau
rulemakings under section 1024(b)(7),
the Bureau has satisfied any obligation
to coordinate with prudential regulators
and relevant State authorities through
the consultations described in part V of
this preamble. Further, the Bureau is
finalizing § 1092.203 in part to facilitate
coordination with the State authorities
described in CFPA section 1024(b)(3), as
well as to facilitate adoption of the
‘‘coordinated or combined systems for
registration’’ with State agencies
discussed in CFPA sections
1022(c)(7)(C) and 1024(b)(7)(D).327
As discussed further in part IV(E)
above and the section-by-section
discussion of § 1092.203 below, the
Bureau does not believe that the
existence of the NMLS renders the new
Bureau registry unnecessary, including
with respect to supervised registered
entities. However, the Bureau is
finalizing § 1092.203 to provide that
applicable entities may comply with the
one-time limited registration option
described in that section in lieu of
complying with the requirements of
§§ 1092.202 and 1092.204. The
information obtained by the Bureau
under the final rule, including
§ 1092.203, will inform the Bureau’s
risk-based supervisory prioritization
efforts as well as its other functions.
The Bureau does not agree that the
final rule is inconsistent with CFPA
section 1024(b)(2), whether with respect
to attorneys and law firms or any other
broad category of covered nonbanks that
can be identified in advance of
collecting information under the final
rule. As an initial matter, CFPA section
1024(b)(2) does not govern this
rulemaking. As the Bureau has
explained, it relies on CFPA sections
1022(b), 1022(c), and 1024(b)(7) in
issuing this rule.328 By its own terms,
CFPA section 1024(b)(2) applies only to
exercises of the Bureau’s supervisory
authority under a different provision,
CFPA section 1024(b)(1). Section
1024(b)(2) does not govern rulemakings;
instead, it governs the Bureau’s
prioritization of entities for
examinations and other supervisory
activities under section 1024(b)(1).
Therefore, the Bureau is not required to
account for the risk-based prioritization
factors set forth in section 1024(b)(2) in
determining this rulemaking’s scope.
Moreover, as the Bureau discussed in
the proposed rule, one of the purposes
of this registry is to provide the Bureau
with additional information to use for
its prioritization of examinations and
other supervisory activities under
section 1024(b)(2).329 Requiring an
assessment under section 1024(b)(2) for
rulemakings under section 1024(b)(7)
would, in fact, limit the Bureau’s ability
to make informed assessments of
individual entities for supervisory
activities.
In any event, even if the Bureau were
exercising authority under section
1024(b)(1) here, and thus section
1024(b)(2) applied, that would not affect
the rulemaking’s outcome. The Bureau
believes that the risk associated with
covered orders is significant and that a
consideration of the factors set forth in
section 1024(b)(2) supports imposing
the rule’s requirements. As discussed in
part IV(B), depending upon the
circumstances, the Bureau may consider
the existence of an order requiring
registration under the final rule to be a
risk factor under these provisions for
covered persons subject to the final
327 One of the authorities cited as a basis for
components of the final rule is 12 U.S.C. 5512(c)(7),
which provides that the ‘‘Bureau may prescribe
rules regarding registration requirements applicable
to a covered person, other than an insured
depository institution, insured credit union, or
related person.’’ Congress provided that ‘‘[i]n
developing and implementing registration
requirements under [12 U.S.C. 5512(c)(7)], the
Bureau shall consult with State agencies regarding
requirements or systems (including coordinated or
combined systems for registration), where
appropriate.’’ 12 U.S.C. 5514(b)(7)—the proposed
statutory basis for the written-statement
requirement—includes a similar consultation
provision.
328 See, e.g., 88 FR 6088 at 6103 (‘‘The Bureau
proposes to establish the NBR system under its
registration and market-monitoring rulemaking
authorities under CFPA section 1022(b)(1), (c)(1)–
(4), and (c)(7), and under its supervisory rulemaking
authorities under CFPA section 1024(b)(7)(A), (B),
and (C).’’).
329 Id. at 6095 (‘‘The Bureau believes that the
proposed registry would be especially useful with
respect to the particular nonbank markets that are
subject to the Bureau’s supervision and
examination authority under CFPA section 1024(a).
In those markets, the Bureau would be able to take
account of risks identified through the proposed
registry in conducting its risk-based supervisory
prioritization and enforcement work.’’).
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rule—in particular, under CFPA section
1024(b)(2)(C)–(E). Moreover, the
information that the Bureau obtains
under the rule will inform its
supervisory prioritization efforts with
respect to individual entities and will
otherwise facilitate its supervision of
covered nonbanks that are described in
CFPA section 1024(a)(1). In addition,
consistent with CFPA sections
1024(b)(2)(A)–(B), the Bureau has
effectively accounted for asset size and
transaction volume by excluding
persons with less than $5 million in
annual receipts (as described in
§ 1092.201(q)(4)) from § 1092.204’s
annual reporting requirements. For
additional discussion of that exclusion,
see the section-by-section discussion of
§ 1092.201(q).
The Bureau is finalizing
§ 1092.202(b)(2)(i)’s requirement for
covered nonbanks to register each
covered order within 90 days of the
order’s effective date (or, in the initial
phase of the registry, the applicable
nonbank registry implementation date).
The Bureau declines to establish a
minimum number of covered orders to
which a covered nonbank must be
subject before requiring registration.
That approach would lead to the
omission of many covered orders that
are relevant to risk to consumers, and
would impair the ability of the Bureau
and others to identify trends and
patterns in the information collected. It
would also lead to the omission of
relevant covered nonbanks and
supervised registered entities from the
registry, which would mean that the
Bureau would not be notified regarding
the existence of such entities and would
not learn that they were subject to a
covered order. The approach would
limit the Bureau’s ability to seek
additional information about the
covered order and the covered nonbank
and otherwise monitor risks to
consumers as appropriate to inform the
Bureau’s functions. While, as discussed
elsewhere in this preamble, the Bureau
is very concerned about the risks to
consumers presented by repeat
offenders, even one covered order may
be probative of significant risk to
consumers. In addition, the Bureau
would be less able to understand where
covered orders are not being issued or
obtained, depriving it of important
information regarding the absence of
covered orders. And supervised
registered entities would not be subject
to the rule’s written-statement
requirements until the threshold had
been reached, unduly limiting the
effectiveness of those requirements. The
Bureau concludes that registration of
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each covered order will serve the
purposes of the final rule described in
part IV above. The Bureau disagrees that
requiring registration of each covered
order will lead to consumer confusion,
as consumers and other users of the
registry will have access to accurate
information about the orders and
nonbank. See the section-by-section
discussion of § 1092.205(a) below for
additional discussion of related issues
involving the potential publication of
registry information.
As provided in § 1092.102(a), the
Bureau will issue filing instructions that
will provide covered nonbanks with
specific information regarding their
filing obligations under the final rule.
The Bureau may consider issuing
additional rules and guidance as may be
necessary or appropriate.
Final Rule
For the reasons discussed above and
in the proposal, the Bureau is finalizing
§ 1092.202(b) as proposed, with minor
technical edits and a minor revision to
reflect the renumbering of § 1092.206 in
the final rule.330
Section 1092.202(c) Required
Identifying Information and
Administrative Information
Proposed Rule
Proposed § 1092.202(c) would have
required a registered entity to provide
all identifying information and
administrative information required by
the NBR system. In filing instructions
the Bureau would have issued under
proposed § 1092.102(a), the Bureau
would have specified the types of
identifying information and
administrative information registered
entities would be required to submit.
Proposed § 1092.201(a) would have
defined the term ‘‘administrative
information,’’ and proposed
§ 1092.201(g) would have defined the
term ‘‘identifying information.’’
Proposed § 1092.202(c) also would have
clarified that the Bureau’s filing
instructions may require joint or
combined submissions to the NBR
system by covered nonbanks that are
affiliates as defined in proposed
§ 1092.101(a).
The Bureau requested comment on
the general requirements of proposed
§ 1092.202(c), including the requirement
to register and update identifying
information and administrative
information within the timeframes
described in proposed § 1092.202(b).
330 See also the section-by-section discussions of
§ 1092.101(d) and (e) above regarding the Bureau’s
adoption of the revised terms ‘‘nonbank registry’’
and ‘‘nonbank registry implementation date.’’
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The Bureau requested comment on
whether registration of updates with
respect to this information should be
required more or less often, and if so,
why and in what circumstances. The
Bureau also sought comment on the
proposed distinctions between
identifying information and
administrative information, and
whether collection of other types of
information would help in the
administration of the NBR system or
benefit its users.
Comments Received
An industry commenter asked that the
Bureau clarify that entities would only
be required to report, and only be
publicly affiliated with, orders wherein
they are named.
Comments addressing the proposal’s
approach to the written statement,
including requirements to designate and
submit the names and titles of attesting
executives and associated criteria for
such a designation, are addressed in the
section-by-section discussion of
§ 1092.204 below.
Response to Comments Received
As provided in § 1092.201(e)(1)(i), in
order to qualify as a ‘‘covered order’’
under the final rule, an order must
among other things ‘‘[i]dentif[y] a
covered nonbank by name as a party
subject to the order.’’ Where a covered
nonbank is not identified by name as a
party subject to an order, the order will
not be a covered order with respect to
that covered nonbank, and the covered
nonbank will not be subject to any of
the requirements of the final rule with
respect to the covered order. A covered
nonbank is not subject to the
requirements of the rule with respect to
a covered order on the sole grounds that
its affiliated covered nonbank is subject
to those requirements. However, as
provided at § 1092.202(c), the Bureau
may require, via filing instructions
issued pursuant to § 1092.102(a), two or
more affiliated covered nonbanks to
submit a joint or combined filing
statement with respect to a covered
order, where those affiliated covered
nonbanks are each subject to the
requirements of § 1092.202 with respect
to such covered order. Also, as
discussed in the section-by-section
discussion of §§ 1092.201(a) and
1092.202(d) above, for any covered
order that a covered nonbank must
register under § 1092.202, the Bureau
may via filing instructions require the
registered covered nonbank to identify
to the Bureau, as administrative
information required under
§ 1092.202(c), the names of any of the
registered covered nonbank’s affiliates
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registered under subpart B with respect
to the same covered order.
Final Rule
For the reasons set forth above, the
Bureau is finalizing § 1092.202(c) as
proposed.331
See also the discussion regarding the
final rule’s treatment of affiliates of
insured depository institutions and
insured credit unions in the section-bysection discussions of § 1092.201(d) and
(q) above.
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Section 109.202(d) Information
Regarding Covered Orders
Proposed Rule
Proposed § 1092.202(d) would have
required a registered entity to provide
additional types of information more
specifically related to each covered
order subject to proposed § 1092.202.
First, proposed § 1092.202(d)(1) would
have required a registered entity to
provide a fully executed, accurate, and
complete copy of the covered order, in
a format specified by the Bureau. This
information would have helped the
Bureau more clearly identify the
covered orders to which the registered
entity is subject, as well as the terms of
those orders, and would provide access
to updated copies of those orders. The
information would have provided
similar benefits to other regulators,
consumers, and other users of the NBR
system upon publication.
This proposed section would have
also provided that any portions of a
covered order that are not public must
not be submitted. These nonpublic
portions would have been required to be
clearly marked on the copy submitted,
to promote ease of use. For example, a
nonpublic section could have been
redacted and marked as nonpublic. As
discussed above regarding proposed
§ 1092.201(e)(3) and (k), the Bureau was
concerned that requiring registration
and disclosure of confidential
supervisory information or other
nonpublic information might interfere
with the functions and missions of other
agencies and did not believe that
requiring such registration and
disclosure is necessary to accomplish
the purposes of the proposed rule. The
Bureau sought comment on this aspect
of the proposed rule. The Bureau also
sought comment on whether it should
permit covered nonbanks to submit only
select portions of covered orders, and if
so, what portions of such orders should
be submitted, and which should be
331 See also the section-by-section discussions of
§ 1092.101(d) and (e) above regarding the Bureau’s
adoption of the revised terms ‘‘nonbank registry’’
and ‘‘nonbank registry implementation date.’’
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excluded from the submission
requirement.
Proposed § 1092.202(d)(2) would have
required a registered entity to provide
five additional types of data regarding
each covered order subject to
§ 1092.202. The Bureau believed all of
the described data fields would be
useful to the Bureau in locating,
understanding, organizing, and using
the information submitted. The Bureau
also explained in its proposal that upon
publication, the data fields would be
similarly useful to other users of the
NBR system as well. In addition, the
Bureau believed that requiring covered
nonbanks to identify and submit these
fields would help ensure accuracy and
lower administrative costs for the
Bureau.
First, proposed § 1092.202(d)(2)(i)
would have required a registered entity
to identify the government entity that
issued the covered order. Second,
proposed § 1092.202(d)(2)(ii) would
have required a registered entity to
provide the covered order’s effective
date, as that term is defined at proposed
§ 1092.201(f). Third, proposed
§ 1092.202(d)(2)(iii) would have
required a registered entity to provide
the date of expiration, if any, of the
covered order, or a statement that there
is none. The Bureau explained in its
proposal, for example, where a covered
order expires by its own terms after
perhaps five or some other term of
years, the registered entity would be
required to provide that information.
The Bureau requested comment on
whether the date of expiration of
covered orders would be sufficiently
clear to comply with this provision or
whether additional specification on this
point from the Bureau would be useful.
Fourth, proposed § 1092.202(d)(2)(iv)
would have required a registered entity
to identify all covered laws found to
have been violated or, for orders issued
upon the parties’ consent, alleged to
have been violated, in the covered
order. The Bureau would have expected
that registered entities would satisfy this
requirement by providing accurate
Federal or State citations for the
applicable covered laws. The Bureau
believed this information would
increase the usefulness of the NBR
system. It would have better enabled the
Bureau to identify and assess any risks
to consumers relating to the violations,
and once published would have also
enabled users of the registry to more
easily search and review filings.
Fifth, proposed § 1092.202(d)(2)(v)
would have required a registered entity
to provide the names of any of the
registered entity’s affiliates registered
under subpart B with respect to the
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same covered order. The Bureau
anticipated that this information would
be useful in identifying affiliate
relationships between registered entities
that are registered with the NBR system,
which might not otherwise be obvious
or apparent. Proposed § 1092.101(a)
would have defined the term ‘‘affiliate’’
to have the meaning given to that term
in the CFPA, which would have
included any person that controls, is
controlled by, or is under common
control with another person.332
Proposed § 1092.202(d)(3) would have
required a registered entity, if the
registered entity is a supervised
registered entity, also to file the name
and title of its attesting executive for
purposes of proposed § 1092.203 with
respect to the covered order. The
benefits of designating an attesting
executive were discussed in detail in
proposed section IV(D). In addition, the
Bureau believed that its collection (and
ultimate publication) in the registry of
the name and title of a supervised
registered entity’s attesting executive
would be important to the Bureau and
other users of the NBR system. The
Bureau believed that requiring the entity
to identify the name and title of the
attesting executive designated in
connection with each covered order
would assist the Bureau in
administering the requirements in
proposed § 1092.203 regarding annual
written statements. In addition, as
discussed below regarding proposed
§ 1092.203(b), the Bureau explained that
collecting information regarding the
name and title of the attesting executive
for a given covered order would provide
the Bureau with insight into the entity’s
organization, business conduct, and
activities, and would inform the
Bureau’s supervisory work, including its
risk-based prioritization process. The
Bureau also believed that publishing
this information would have also
provided benefits to the public and
other users of the proposed NBR system,
as discussed further below in
connection with proposed § 1092.204(a).
The Bureau would have relied on two
separate statutory grants of authority in
collecting the attesting executive’s name
and title, each of which would provide
an independent statutory basis for
proposed § 1092.202(d)(3). The Bureau
would have collected this information
under its market-monitoring authority
under CFPA section 1022(c)(1) and (4)
to ‘‘gather information regarding the
organization, business conduct, markets,
and activities’’ of supervised registered
entities.333 The Bureau would have also
332 See
333 12
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12 U.S.C. 5481(1).
U.S.C. 5512(c)(1), (4).
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collected this information under its
CFPA section 1024(b)(7) authority to
prescribe rules regarding registration,
recordkeeping, and other requirements
for covered persons subject to Bureau
supervision under CFPA section
1024.334
The Bureau requested comment on
whether proposed § 1092.202(d) should
identify additional or different
categories of information collected by
the NBR system, including but not
limited to information regarding
covered orders or the registered entity.
Comments Received
An industry commenter stated that
the proposal’s requirement to submit
redacted orders would confuse the
public, and that in cases where a
portion of a covered order is redacted or
confidential, the whole order should
stay off the registry.
A consumer advocate commenter
stated that the treatment of nonpublic
information under proposed
§ 1092.202(d) demonstrated that the
Bureau was taking steps to protect
confidential and otherwise nonpublic
information relevant to orders.
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Response to Comments Received
See the section-by-section discussion
of § 1092.201(m) above regarding the
treatment of nonpublic portions of
orders under the final rule.
See the section-by-section discussion
of § 1092.201(l) above regarding an
industry commenter’s suggestion to treat
multiple orders as a single order under
certain circumstances.
See the section-by-section discussion
of §§ 1092.204(b) and 1092.205(a) below
for discussions regarding the final rule’s
requirements to designate an attesting
executive for each covered order and the
Bureau’s reasons for collecting and
potentially publishing that information.
Final Rule
For the reasons set forth below and in
the description of the proposed rule
above, the Bureau is finalizing
§ 1092.202(d) as proposed, with several
revisions.
First, as discussed further below in
the section-by-section discussion of
§ 1092.205(a), the Bureau has
determined not to mandate with respect
to every covered order the collection of
information regarding the names of the
person’s affiliates registered under
subpart B with respect to the same
covered order in the final rule. Under
the final rule, § 1092.202(d)(2)(v) as
proposed has been deleted, but the
Bureau may determine to collect this
334 12
U.S.C. 5514(b)(7).
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information as ‘‘administrative
information’’ under § 1092.202(c). In
filing instructions issued under
§ 1092.102(a), the Bureau will specify
whether and how it will collect such
information. As described in the
section-by-section discussion of
§ 1092.205(a) below, the Bureau will not
publish such information under
§ 1092.205(a) if it is collected.
Second, the Bureau is finalizing a
clarification at § 1092.202(d)(2)(i) to
provide that a registered entity shall
provide to the nonbank registry, for each
covered order subject to § 1092.202,
information regarding the agency (or
agencies) and court(s) that issued or
obtained the covered order, as
applicable. The Bureau is finalizing this
change to the proposed rule in order to
clarify that covered orders may be
issued or obtained by more than one
agency or court, and to collect more
accurate and comprehensive
information about covered orders. In
general, for covered orders that are
issued by a court of law, the nonbank
registry will collect information
regarding the court that issued the order
as well as the agency or agencies that
brought the applicable proceeding and
obtained the order. For covered orders
issued directly by agencies in an
administrative action or other agency
proceeding, the nonbank registry
generally will collect information
regarding the issuing agency or
agencies.
Third, the Bureau is finalizing a new
provision at § 1092.202(d)(2)(v) to
provide that a registered entity shall
provide to the nonbank registry, for each
covered order subject to § 1092.202,
information regarding any docket, case,
tracking, or other similar identifying
number(s) assigned to the covered order
by the applicable agency(ies) or court(s).
Collecting and potentially publishing
this information will better enable the
Bureau and other users of the registry to
identify the applicable covered order, to
distinguish it from other orders, and to
understand any connections between
the order and the covered nonbank with
other information about the covered
order and covered nonbank that the
Bureau may possess or that may be
otherwise available. As with the other
required data fields, this information
will be useful to the Bureau in locating,
understanding, organizing, and using
the information submitted and will be
similarly useful to other users of the
nonbank registry as well. In addition,
requiring covered nonbanks to identify
and submit such information will help
ensure accuracy and lower
administrative costs for the Bureau.
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56091
Fourth, the Bureau is finalizing a
minor revision at § 1092.202(d)(3) to
reflect the renumbering of § 1092.204.
Section 1092.202(e) Expiration of
Covered Order Status
Proposed Rule
Proposed § 1092.202(e) would have
provided for an outer limit on the time
period during which the existence of a
covered order would subject a registered
entity to the requirements of proposed
subpart B. The Bureau explained in its
proposal that in circumstances where a
covered order terminates (or otherwise
ceases to remain in effect) within ten
years after the order’s effective date, the
registered entity’s obligations to update
its filing under proposed § 1092.202 or
to file written statements with respect to
the covered order under proposed
§ 1092.203 would cease after its final
filing under proposed
§ 1092.202(f)(1).335 The Bureau,
however, recognized that some covered
orders may not terminate (or otherwise
cease to remain in effect) within ten
years of the orders’ effective dates. In
such circumstances, proposed
§ 1092.202(e) would have provided that
a covered order shall cease to be a
covered order for purposes of subpart B
as of the later of: (1) ten years after its
effective date; or (2) if the covered order
expressly provides for a termination
date more than ten years after its
effective date, the expressly provided
termination date.
The Bureau preliminarily concluded
that, in most cases, it may be less likely
to obtain meaningful information in
connection with existing orders after ten
years have passed since their effective
dates. The Bureau also preliminarily
concluded that maintaining the
proposal’s registration and writtenstatement requirements for at least ten
years after the effective date of covered
orders that remain in effect would have
provided useful information to the
Bureau and other uses of the registry, as
described in this proposal. Among other
things, the Bureau believed that
maintaining the obligation to update
registration information for ten years
would better enable the Bureau to
identify covered nonbanks in the event
a subsequent covered order requires
additional registration. The Bureau also
believed that limiting registration
obligations to more recent orders would
also help limit the burden imposed by
proposed subpart B’s requirements on
covered nonbanks. However, where a
covered order expressly provides for a
later termination date, the Bureau
335 See
E:\FR\FM\08JYR2.SGM
the discussion of § 1092.202(f) below.
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believed that it should continue to
collect and publish information on the
order under the provisions of proposed
§§ 1092.202 through 1092.204. The
Bureau sought comment on all aspects
of proposed § 1092.202(e). In particular,
the Bureau sought comment on whether
to adopt a different approach to setting
and determining the sunset period for
orders, and on whether the proposed
baseline ten-year period should be
longer or shorter. The Bureau also
sought comment on whether registered
entities would benefit from additional
guidance in determining whether a
covered order expressly provides for a
termination date more than ten years
after its effective date, and what
constitutes the expressly provided
termination date of such a covered
order.
The Bureau also sought comment on
whether the applicable sunset period
should depend upon the content of the
order. The Bureau explained in its
proposal that, for example, it considered
whether the sunset period for a covered
order should be shorter where the only
obligations based on alleged violations
of covered laws and imposed in the
public provisions of such order were to
pay money (such as payment of a civil
money penalty or fine, or payment of
refunds, restitution, or disgorgement).
Under this alternative approach, for
such covered orders without express
termination dates, the orders would
have ceased being covered orders for
purposes of subpart B after some period
shorter than the ten-year sunset
proposed here. The Bureau did not
propose this approach for reasons of
simplicity and administrative efficiency,
and because the Bureau believes that the
sunset provision in proposed
§ 1092.202(e) would generally be
preferable for most such covered orders.
However, the Bureau sought comment
on this proposed alternative and, more
generally, on whether and why it should
adopt a shorter sunset period for these
orders. The Bureau also sought
comment on other approaches that
would establish different sunset periods
depending on the content of the order,
and other types of orders that might
have different sunset periods.
The Bureau further considered
requiring registered entities to continue
treating an order that would otherwise
sunset under the proposal as a covered
order for purposes of the proposed rule
if the Bureau determined, after
providing the entity notice and an
opportunity to respond, that continuing
to do so was necessary for the Bureau
to fulfill its monitoring or supervisory
responsibilities. For example, as the
Bureau explained in the proposal, based
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on information supplied by another
agency or otherwise in its possession,
the Bureau may have cause to believe
that the nonbank continued to be in
violation of the order. For such cases,
the Bureau considered requiring
continued compliance with the
requirements of proposed subpart B
beyond the expiration period if the
Bureau ultimately concluded doing so
was necessary for the Bureau to fulfill
its monitoring or supervisory
responsibilities. The Bureau did not
propose this approach for reasons of
simplicity and administrative efficiency,
and because the Bureau believed that
the proposed sunset provision would be
likely to provide sufficient information
regarding most covered orders.
However, the Bureau sought comment
on whether it should include this
additional requirement in the final rule
and whether any additions or
subtractions to it would better achieve
its intended purpose. The Bureau also
sought comment on whether, if it
included this additional requirement in
a final rule, it should specify any
alternative or additional criteria that the
Bureau might consider in reaching its
determination whether a particular
covered order should remain subject to
the requirements of subpart B.
Comments Received
Some comments incorrectly referred
to proposed § 1092.202(e)’s sunset
provisions as specifying when
information regarding covered orders or
covered nonbanks would be removed
from the registry.
An industry commenter agreed with
the proposal’s establishment of a sunset
date for registration of covered orders
under § 1092.202(e). Another industry
commenter stated that the Bureau
should establish a process for entities to
be removed from the public registry
after a specific set of criteria is met, and
that the Bureau should also establish an
appeals process that would permit
entities to contest their inclusion on the
registry.
Industry commenters also stated the
text of 1092.202(e)(1) was unclear and
proposed specific revisions.
Commenters stated that information
regarding covered orders (and related
covered nonbanks) should be removed
from the registry earlier than after ten
years after its effective date. One
industry commenter stated that most
regulatory and supervisory agencies are
reluctant to agree to termination dates.
Another industry commenter stated that
there would be few instances in which
a consent order does not contain an
expiration date, thereby making the
timing set out in § 1092.202(e)(1) almost
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entirely irrelevant. This commenter
stated that the sunset period established
under proposed § 1092.201(e) should be
the later of five years or the express
termination period of the covered order.
Another industry commenter stated that
covered orders that have no termination
date should be subject to the proposed
registry for a period of three years, not
ten, in part because information
contained in the proposed registry
associated with older covered orders
would be inaccurate, outdated or
obviated and would pollute the registry.
This commenter also stated that
proposed § 1092.202(e) could be
interpreted to mean that all covered
orders are subject to updates or written
statements for ten years, and proposed
a revision that would state that if a
covered order expressly provides for a
termination date ten (or five) years or
less after its effective date,
§ 1092.201(e)’s sunset provision would
apply on the expressly provided
termination date. Another industry
commenter proposed an alternative
timeframes of two years after an order’s
effective date. The SBA Office of
Advocacy expressed concern that
requiring an order to be a covered order
for ten years after its effective date was
overly punitive and stated that such an
order should no longer be considered a
covered order when it is no longer in
effect.
Response to Comments Received
The Bureau is adopting § 1092.202(e)
of the final rule, which provides for an
outer limit on the time period during
which the existence of a covered order
would subject a registered entity to the
registration requirements. In
circumstances where a covered order
terminates (or otherwise ceases to
remain in effect) within ten years after
the order’s effective date, the registered
entity’s obligations to update its filing or
to file written statements with respect to
the covered order would cease after its
final filing under § 1092.202(f). Where a
covered order does not terminate (or
otherwise cease to remain in effect)
within ten years of the order’s effective
date, the covered order would no longer
require registration as of the later of: (1)
ten years after its effective date; or (2)
if the covered order expressly provides
for a termination date more than ten
years after its effective date, the
expressly provided termination date.
The Bureau finalizes its preliminary
conclusions in the proposal 336 that, in
most cases, it may be less likely to
obtain meaningful information in
connection with existing orders after ten
336 88
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FR 6088 at 6119.
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years have passed since their effective
dates, and that maintaining the
proposal’s registration and writtenstatement requirements for at least ten
years after the effective date of covered
orders that remain in effect will provide
useful information to the Bureau and
other uses of the registry, as described
in part IV.
In response to comments incorrectly
suggesting that proposed § 1092.202(e)’s
sunset provisions would have specified
when information regarding covered
orders or covered nonbanks would be
removed from the Bureau’s registry, the
Bureau clarifies that, under the final
rule, § 1092.202(e) and (f) together
establish when, with respect to a
particular covered order, a covered
entity’s obligations to submit updated
filings under § 1092.202(b)(2)(ii) and to
comply with § 1092.204’s writtenstatement requirements expire. These
provisions of the final rule do not
address when the Bureau intends to
remove information from the nonbank
registry or otherwise to cease
publication of such information as
provided at § 1092.205. Under the final
rule, the Bureau may maintain any
information about covered orders and
the covered nonbanks that are subject to
them that may be published under the
nonbank registry on a public website
indefinitely, subject to the Bureau’s
discretion and pursuant to § 1092.205
and other applicable law.
With respect to the industry
commenter’s suggestion to establish a
process to allow covered nonbanks to
petition for removal from the registry
before the sunset date established in
§ 1092.201(e), the Bureau declines to
adopt this suggestion. The Bureau
believes that it is important to collect
information regarding covered orders,
including the annual written statement
described in § 1092.204 where
applicable, on an ongoing basis for the
periods of time described in the final
rule. The Bureau declines to adopt
criteria for determining whether covered
nonbanks would no longer need to
comply with these obligations with
respect to particular covered orders.
While the Bureau agrees that many
covered nonbanks are likely to take
steps to address issues relating to
covered orders, such orders are
nevertheless likely to remain probative
of risk to consumers (including risks
related to developments in markets for
consumer financial products and
services), and the Bureau concludes
they should continue to be subject to
these requirements. Also, the Bureau
believes that engaging in an ongoing
case-by-case assessment of entities’
compliance efforts with respect to
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covered orders in order to determine
whether particular covered orders are
deserving of an exemption from
registration requirements would invite
frivolous petitions, increase the
complexity involved in maintaining the
nonbank registry, and would not be a
good use of the Bureau’s resources.
Likewise, the Bureau disagrees that an
appeals process for the nonbank registry
is necessary. As with any other Federal
consumer financial law, the Bureau
expects covered nonbanks themselves to
identify their responsibilities under the
final rule and to comply with those
obligations. Where an entity believes in
good faith the final rule does not require
registration, but is not certain the
Bureau would agree with its
interpretation, it may file an applicable
good faith notification under
§ 1092.202(g) or § 1092.204(f).
The Bureau believes that the final rule
is sufficiently clear for entities to
comply with the final rule’s
requirements and that a modification to
the proposed text is unnecessary.
Section 1092.202(e) and (f) together
address the variety of situations that
may arise where a covered order does or
does not expressly provide for a
termination date, as well as situations
where a covered order is modified or
otherwise does not actually terminate
according to its original terms. Under
the final rule, a covered order that does
not expressly provide for a termination
date will cease to be a covered order ten
years after its effective date pursuant to
§ 1092.202(e), and the applicable
covered nonbank must submit a final
filing under § 1092.202(f)(1) at that
time—unless the order terminates
earlier, in which case the covered
nonbank must submit its final filing at
that earlier time. Under § 1092.201(e), a
covered order that expressly provides
for a termination date of ten years or
less after its effective date will remain
a covered order for a period of ten years
from its effective date. Such an order
may in fact terminate before the
expiration of the ten-year period, in
which case the applicable covered
nonbank would submit a final filing
under § 1092.202(f)(1) upon termination
of the order, whenever it occurs, and
would have no further obligation to
update its registration information or to
file written statements with respect to
the order. If, however, the order is
extended or for some other reason does
not terminate as originally provided,
those obligations will continue until the
order actually terminates or the ten-year
period expires. And a covered order that
expressly provides for a termination
date more than ten years after its
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effective date will remain a covered
order, and thus subject to the rule’s
registration and (if applicable) writtenstatement requirements, until it
terminates, at which time the covered
nonbank must submit a final filing
notice under § 1092.202(f)(1).
Where a covered order terminates
under its own terms or otherwise, under
§ 1092.202(f)(2), such obligations
(including the obligation to submit an
annual written statement) with respect
to such a covered order will terminate
following the filing of the final
submission described in
§ 1092.202(f)(1). Thus, although the
Bureau is not finalizing a modification
to the sunset period established under
proposed § 1092.201(e) to directly
reflect the termination of a covered
order as requested by the industry
commenters and the SBA Office of
Advocacy, § 1092.202(f)(1) and (2)
provide that upon termination of the
order a covered nonbank may submit a
final filing and be relieved of its further
obligations under appropriate
circumstances, which essentially
accomplishes the same result.
The Bureau is adopting the proposal’s
approach to the amount of time for
which such requirements are imposed
for non-terminated orders under
§ 1092.202(e). The Bureau finalizes its
preliminary conclusions in the
proposal 337 that, in most cases, it may
be less likely to obtain meaningful
information in connection with existing
orders after ten years have passed since
their effective dates, and that
maintaining the proposal’s registration
and written-statement requirements for
at least ten years after the effective date
of covered orders that remain in effect
will provide useful information to the
Bureau and other uses of the registry.
The Bureau believes that, on average,
covered orders that have not been
terminated are likely to remain
probative of risk to consumers for at
least the period of time specified in
§ 1092.202(e). While the Bureau agrees
that it is possible that entities that are
subject to such covered orders may have
taken significant steps to address
violations of law or other problems
identified in the order, or otherwise
taken steps to prevent or remedy related
issues, the Bureau believes that the
existence of such covered orders
remains probative of risk to consumers
(including risks related to developments
in markets for consumer financial
products and services) notwithstanding
such subsequent developments and
merits continued imposition of the
related registration and written337 88
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statement requirements. The final rule’s
obligations for registered entities to
update their identifying and other
information will help ensure that the
information contained in the registry
remains accurate and up to date. When
such an order terminates, the covered
nonbank may submit a final filing under
§ 1092.202(f)(1).
Final Rule
For the reasons set forth above and in
the description of the proposal, the
Bureau is finalizing § 1092.202(e) as
proposed.
Section 1092.202(f) Requirement To
Submit Revised and Final Filings With
Respect to Certain Covered Orders
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Proposed Rule
Proposed § 1092.202(f) would have
addressed situations where a covered
order is terminated, modified, or
abrogated (whether by its own terms, by
action of the applicable agency, or by a
court). It would have also addressed
situations where an order ceases to be
a covered order for purposes of subpart
B by operation of proposed
§ 1092.202(e). In all such cases,
proposed § 1092.202(f)(1) would have
required the registered entity to submit
a revised filing to the NBR system
within 90 days after the effective date of
the order’s termination, modification, or
abrogation, or after the date the order
ceases to be a covered order. The Bureau
believed that this requirement would
help in administering the registry, and
supporting the Bureau’s monitoring
work by ensuring that the registry is up
to date.
Proposed § 1092.202(f)(2) would have
addressed situations where a covered
order no longer remains in effect or no
longer qualifies as a covered order due
to the covered order’s termination,
modification, or abrogation, or the
application of § 1092.202(e). In such
cases, proposed § 1092.202(f)(2) would
have clarified that following its final
filing under paragraph (f)(1) with
respect to the covered order, the
registered entity would have no further
obligation to update its filing or to file
written statements with respect to such
covered order under proposed subpart
B. However, the Bureau explained that
it expected to make historical
information publicly available via the
NBR registration system. As provided at
proposed § 1092.201(m), the proposal
would have defined the term ‘‘remains
in effect’’ to mean that the covered
nonbank remains subject to public
provisions of the order that impose
obligations on the covered nonbank to
take certain actions or to refrain from
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taking certain actions based on an
alleged violation of a covered law. The
Bureau explained that, once a covered
nonbank no longer remains subject to
such public provisions, proposed
§ 1092.202(f)(2) would permit the
covered nonbank to cease updating its
registration information and filing
written statements with respect to the
order.
Comments Received and Final Rule
An industry commenter expressed
support for proposed § 1092.202(f)’s
treatment of covered orders containing
termination dates. The Bureau did not
receive any other comments specifically
regarding § 1092.202(f). Comments
addressing the proposal’s approach to
the sunset period established in
§ 1092.202(e) are addressed in the
section-by-section discussion of
§ 1092.202(e) above.
For the reasons set forth in the
description of the proposed rule above,
the Bureau is finalizing § 1092.202(f) as
proposed, with minor technical edits.338
Section 1092.202(g) Notification by
Certain Persons of Non-Registration
Under This Section
Proposed Rule
Proposed § 1092.202(g) would have
provided that a person may submit a
notice to the NBR system stating that it
is not registering pursuant to this
section because it has a good-faith basis
to believe that it is not a covered
nonbank or that an order in question
does not qualify as a covered order. The
Bureau explained that such a filing
could be combined with any similar
filing under proposed § 1092.203(f).339
Proposed § 1092.202(g) would have also
required the person to promptly comply
with § 1092.202 upon becoming aware
of facts or circumstances that would not
permit it to continue representing that it
has a good-faith basis to believe that it
is not a covered nonbank or that an
order in question does not qualify as a
covered order. The Bureau proposed to
treat information submitted under this
paragraph as ‘‘administrative
information’’ as defined by proposed
§ 1092.201(a).
While the Bureau believed the
reporting and registration requirements
under proposed § 1092.202 would
impose very minimal burden on
nonbank covered persons, and that
determining an entity’s status as a
338 See also the section-by-section discussions of
§ 1092.101(d) and (e) above regarding the Bureau’s
adoption of the revised terms ‘‘nonbank registry’’
and ‘‘nonbank registry implementation date.’’
339 See also the section-by-section discussion of
§ 1092.204(f), which provides a similar option with
respect to § 1092.204.
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covered nonbank (or an order’s status as
a covered order) should be a
straightforward task for the vast majority
of relevant persons, the Bureau
proposed § 1092.202(g) as an additional
means of providing flexibility to those
few entities where uncertainty in some
respect raises good-faith concerns that
they do not meet the definition of a
covered nonbank (or an order does not
meet the definition of a covered order).
Under the proposal, such persons could
elect to file a notice under proposed
§ 1092.202(g). The Bureau explained in
its proposal that when a person makes
a non-frivolous filing under proposed
§ 1092.202(g) stating that it has a good
faith basis to believe that it is not a
covered nonbank (or that an order is not
a covered order), the Bureau would not
bring an enforcement action against that
person based on the person’s failure to
comply with proposed § 1092.202
unless the Bureau has first notified the
person that the Bureau believes the
person does in fact qualify as a covered
nonbank (or that an order does qualify
as a covered order) and has
subsequently provided the person with
a reasonable opportunity to comply
with proposed § 1092.202.
Among other things, the Bureau
would have permitted entities to file
notifications under proposed
§ 1092.202(g) when they have a goodfaith basis to believe that they do not
qualify as a ‘‘covered nonbank’’ because
they constitute part of a ‘‘State,’’ as that
term is defined in CFPA section
1001(27).340 Under proposed
§ 1092.102(c), the filing of such a
notification would not have affected the
entity’s ability to dispute more generally
that it qualifies as a person subject to
Bureau authority.341
The Bureau anticipated that, in most
cases, it would not respond to
§ 1092.202(g) notices with the Bureau’s
views on whether filers in fact qualify
as covered nonbanks (or whether orders
in fact qualify as covered orders). The
Bureau also emphasized that a nonresponse from the Bureau should not be
misapprehended as Bureau
acquiescence in the filer’s assertions in
the notice (or in the legitimacy of the
filer’s assertion of good faith). The
Bureau, however, preliminarily
340 12 U.S.C. 5481(27). As discussed above,
§ 1092.201(d)(3) of the final rule excludes States
from the definition of ‘‘covered nonbank.’’
341 The Bureau noted that, as an alternative to
filing a notification under proposed § 1092.202(g),
an entity could simply choose to register under the
proposal, even though it has a good faith basis for
believing that it does not qualify as a covered
nonbank (or that its order does not qualify as a
covered order). Under proposed § 1092.102(c), such
registration would not prejudice the entity’s ability
to dispute the Bureau’s authority over it.
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concluded that obtaining these
notifications may assist the Bureau in
better understanding how potentially
regulated entities interpret the scope of
proposed § 1092.202.
The Bureau considered alternatives to
proposed § 1092.202(g), including an
alternative whereby entities would not
file a notice of non-registration with the
Bureau, but could avoid penalties for
non-registration if in fact they could
establish a good-faith belief that they
did not qualify as covered nonbanks
subject to § 1092.202 (or their orders did
not qualify as covered orders). The
Bureau explained in its proposal that
under this alternative, entities would
maintain such good-faith belief so long
as the Bureau had not made clear that
§ 1092.202 would apply to them (or
their orders). Although the Bureau
preliminarily concluded that this
alternative was not preferable to
requiring entities to actually file a notice
of non-registration, the Bureau sought
comment on whether it should finalize
this alternative instead. It also sought
comment on whether, if it finalized this
alternative, entities would require
additional guidance on the
circumstances pursuant to which an
entity could no longer legitimately
assert a good-faith belief that § 1092.202
would not apply to its conduct. While
the Bureau anticipated that such
circumstances would certainly include
entity-specific notice from the Bureau
that § 1092.202 applies, the Bureau did
not believe such notice should be
required to terminate a good-faith
defense to registration. Among other
circumstances, the Bureau anticipated
that at least formal Bureau
interpretations of (for example) the
definition of a ‘‘covered person’’ under
the CFPA, or published Bureau
interpretations specific to the scope of
the proposed registration requirements,
would generally suffice to terminate
such belief.
Comments Received
Tribes commenting on the proposal
generally opposed proposed
§§ 1092.202(g) and 1092.203(f) as
unworkable or inappropriate in the
context of determining the rule’s
coverage of entities affiliated or
potentially affiliated with tribes. These
commenters asserted that tribes, as selfdetermining bodies, are the only ones
competent to determine the status of an
entity as enjoying Tribal sovereignty.
Thus, in their view, U.S. government
institutions—whether the Bureau, other
U.S. regulators, or U.S. courts—lack
competence to make such
determinations. For these reasons, these
commenters generally opposed the
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notion that the Bureau would be
evaluating the legal foundation for goodfaith notifications under proposed
§§ 1092.202(g) and 1092.203(f) by
entities affiliated with tribes. In their
view, rather than collecting and
reviewing such notifications, the Bureau
should consult with relevant tribes if it
has questions about the relationship of
a particular entity with a tribe. Tribal
commenters also stated that requiring
tribe-affiliated entities to submit goodfaith notifications was itself a violation
of Tribal sovereignty.
Tribal commenters stated that these
good-faith notification provisions
confuse the issue as to whether tribes
are exempt, and that they were
unnecessary and should be removed.
As described above, the Bureau
specifically sought comment on an
alternative to proposed § 1092.202(g)
whereby entities would not file a notice
of non-registration with the Bureau, but
could avoid penalties for nonregistration if in fact they could
establish a good-faith belief that they
did not qualify as covered nonbanks
subject to § 1092.202 (or their orders did
not qualify as covered orders). Tribal
commenters stated that the Bureau
should adopt this alternative.
Several Tribal commenters also stated
that publication of §§ 1092.202(g) and
1092.203(f) notifications could expose
the tribe to costly, frivolous private
litigation, as well as force the Bureau to
take a position in connection with thirdparty claims regarding the sovereign
status of a tribe-affiliated entity.
Proposed §§ 1092.202(g) and
1092.203(f) would have required a
person to promptly comply with
applicable requirements upon becoming
aware of facts or circumstances that
would not permit it to continue
representing that it has a good-faith
basis to believe that it is not a covered
nonbank or supervised registered entity,
as applicable, or that an order in
question does not qualify as a covered
order. A Tribal commenter stated that
this requirement’s reference to
unspecified facts and circumstances was
vague and overbroad, and stated that the
last sentence of proposed §§ 1092.202(g)
and 1092.203(f) should be deleted.
Response to Comments Received
The Bureau disagrees with the tribes’
comments to the extent they suggest the
Bureau cannot evaluate the legal
significance of relationships that
nonbank covered persons providing
consumer financial products or services
claim to have with tribes.342 The Bureau
342 See, e.g., CFPB v. Cash Call, 35 F.4th 734,
743–45 (9th Cir. 2022) (upholding district court
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56095
also notes that if an entity is a federally
recognized Indian tribe, it is excluded
from the definition of the term ‘‘covered
nonbank’’ under § 1092.201(d)(3) 343
and thus from the requirements of the
final rule. Thus, the Bureau disagrees
with commenters’ conclusion that
proposed § 1092.202(g) or § 1092.203(f)
would be unworkable or inappropriate
in the context of determining coverage
of entities affiliated or potentially
affiliated with tribes. In any event, if
entities are excluded from the definition
of ‘‘covered nonbank’’ because they are
part of a State and thus not subject to
the rule,344 they are not required to file
notifications of that status under either
good-faith notification provision in the
final rule (§ 1092.202(g) or renumbered
§ 1092.204(f)). Nor would a decision not
to file a voluntary good-faith
notification change or enlarge the
coverage of the rule. The entity has the
choice to file such a notice, knowing
that if its filing is not frivolous, then, as
described above, it will not be subject to
enforcement action on a retroactive
basis if the Bureau later disagrees with
the entity’s good-faith position.345
Moreover, the Bureau disagrees that
this rulemaking is the appropriate
context in which to issue a
determination as to the scope of
sovereign immunity or as to what type
of ownership or association with a
Tribal government will cause an entity
to fall within the scope of the categories
established by Congress in the CFPA.
The Bureau will reach determinations in
any particular case upon review of the
information before it at that time. As
stated in the notice of proposed
decision in agreement with Bureau determination
that lender did not have requisite relationship with
a tribe for Tribal law to apply).
343 This section of the final rule excludes from the
definition of the term ‘‘covered nonbank’’ a ‘‘State,’’
as defined in 12 U.S.C. 5481(27)—a term that
includes ‘‘any federally recognized Indian tribe, as
defined by the Secretary of the Interior’’ under
section 104(a) of the Federal Recognized Indian
Tribe List Act of 1994, 25 U.S.C. 5131(a).
344 As described in the proposal (88 FR 6088 at
6120) with respect to § 1092.202(g), the Bureau
would permit entities to file notifications of nonregistration under that section when they have a
good faith basis to believe that they do not qualify
as a ‘‘covered nonbank’’ because they constitute
part of a ‘‘State,’’ as that term is defined in CFPA
section 1001(27). Entities could similarly file good
faith notifications under final § 1092.204(f) for the
same reason.
345 Under the final rule, when an entity makes a
non-frivolous filing under § 1092.202(g) or
§ 1092.204(f), the Bureau will not bring an
enforcement action based on the entity’s failure to
comply with § 1092.202 or § 1092.204 unless the
Bureau has first notified the person that the Bureau
believes the person does in fact qualify as a covered
nonbank or supervised registered entity (as
applicable), or the order is a covered order, and has
subsequently provided the person with a reasonable
opportunity to comply with § 1092.202 or
§ 1092.204, as applicable.
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rulemaking, the Bureau’s failure to
respond to a good-faith notice ‘‘should
not be misapprehended as Bureau
acquiescence in the filer’s assertions in
the notice.’’ 346
The Tribal commenters expressed
concern regarding publication of
information with respect to good-faith
notifications submitted under proposed
§§ 1092.202(g) and 1092.203(f). The
Bureau is finalizing the definition of
‘‘administrative information’’ at
§ 1092.201(a) to expressly provide for
the treatment of good-faith notifications
as administrative information. As
discussed in the section-by-section
analysis of that definition above, goodfaith notifications qualify as
administrative information, which is
excluded from the publication
provisions in § 1092.205. Thus, contrary
to commenters’ concerns, the Bureau
disagrees that filing a § 1092.202(g) or
§ 1092.204(f) notification in good faith
will lead to publication of the
notification under the final rule,
exposing a tribe to frivolous private
litigation or improperly involving the
Bureau in third-party claims regarding
Tribal sovereignty.
The Bureau finalizes its preliminary
conclusion in the proposal 347 that
obtaining good-faith notifications may
assist the Bureau in better
understanding how potentially
regulated entities interpret the scope of
§ 1092.202, and concludes the same
with respect to § 1092.204. The Bureau
wishes to be informed about entities’
interpretations of §§ 1092.202 and
1092.204. The Bureau declines to adopt
the proposed alternative recommended
by Tribal commenters, which would
allow entities to claim a good-faith
defense to any action enforcing the
rule’s requirements without needing to
file a good-faith notification. The
proposed alternative would not provide
the Bureau with information regarding
the number of entities that might be
asserting such a good-faith exemption or
provide the means for the Bureau to
follow up with any questions. It would
fail to notify the Bureau of the existence
of the entity, its views of whether it is
a covered nonbank or supervised
registered entity, or how to contact it.
The Bureau finalizes its preliminary
conclusion in the proposal that this
alternative is not preferable to the goodfaith notification option set forth in
§§ 1092.202(g) and 1092.204(f).
The Bureau concludes that it is
appropriate to include provisions in the
final rule requiring a person to promptly
comply with the rule’s requirements
346 88
347 88
FR 6088 at 6120.
FR 6088 at 6120–21.
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upon becoming aware of facts or
circumstances that would not permit it
to continue representing that it has a
good-faith basis to believe that it is not
a covered nonbank or supervised
registered entity, as applicable, or that
an order in question is not a covered
order. The Bureau concludes that it is
necessary to include these provisions in
order to account for changing or
previously unknown facts or
circumstances that might render
previously filed good-faith notifications
incorrect or obsolete, and to maintain
the ongoing accuracy of the information
maintained in the nonbank registry. The
Bureau does not believe that these
requirements are vague, unclear, or
impose on Tribal sovereign immunity.
Notifications may be filed only where
the entity has the applicable good-faith
belief. The Bureau believes it is
appropriate to require the entity to
consider whether any subsequent cases,
regulatory orders, complaints, or other
matters may affect the accuracy of its
notifications to the Bureau.
Final Rule
For the reasons set forth above and in
the description of the proposal, the
Bureau is finalizing § 1092.202(g) as
proposed, with two minor revisions for
clarification.348 Proposed § 1092.202(g)
had referred to a person’s good-faith
basis to believe that ‘‘an order in
question does not qualify as a covered
order,’’ whereas proposed § 1092.203(f)
had referred to a person’s good-faith
basis to believe that ‘‘an order in
question is not a covered order.’’ The
Bureau does not intend these two
slightly different phrases to mean
different things. The Bureau is adopting
revisions to § 1092.202(g) in the two
places where this phrase had occurred
to refer to a person’s good-faith basis to
believe that ‘‘an order in question is not
a covered order.’’
Section 1092.203 Optional One-Time
Registration of NMLS-Published
Covered Orders
Section 1092.203(a) One-Time
Registration Option
Proposed Rule
The proposal would have required
each covered nonbank that is identified
by name as a party subject to a covered
order described in proposed
§ 1092.202(a) to register as a registered
entity with the NBR system in
accordance with proposed § 1092.202 if
it is not already so registered, and to
348 See also the section-by-section discussions of
§ 1092.101(d) and (e) above regarding the Bureau’s
adoption of the revised terms ‘‘nonbank registry’’
and ‘‘nonbank registry implementation date.’’
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provide or update, as applicable, the
information described in subpart B in
the form and manner specified by the
Bureau. The proposal would also have
required submission of written
statements by supervised registered
entities in connection with such
covered orders as provided in proposed
§ 1092.203. Proposed § 1092.204 would
have required the Bureau to make
certain information submitted to the
NBR system available to the public by
means that would have included
publishing it on the Bureau’s publicly
available internet site within a
timeframe determined by the Bureau in
its discretion.
Comments Received
In connection with proposed
§ 1092.102(b), the Bureau sought
comment on the types of coordinated or
combined systems that would be
appropriate under CFPA sections
1022(c)(7)(C) and 1024(b)(7)(D) and the
types of information that could be
obtained from or provided to State
agencies.
Multiple commenters stated that the
proposed registry was redundant with
existing registries and other published
information, while several consumer
advocate commenters stated that the
proposed registry would not be
redundant because no existing registry
would be equivalent. For ease of
reference, the Bureau is describing these
comments and the Bureau’s responses
thereto in this part. Most of these
commenters, including the SBA Office
of Advocacy, stated or suggested that
the collection and publication of the
information described in the proposal
was particularly duplicative of the
requirements imposed upon covered
nonbanks that are registered under the
NMLS. Commenters stated that, in light
of the redundancy with existing
registries and other sources of
information, the Bureau should not
finalize the proposal or at least should
reconsider the creation of the proposed
registry.
Industry and consumer advocate
commenters agreed with the Bureau’s
statements in the proposal about the
need for a new Bureau registry for
nonbank entities that are subject to the
Bureau’s jurisdiction and that are
subject to certain agency and court
orders. Commenters urged the Bureau to
register various specific types of
nonbanks, including nonbank mortgage
lenders, fintech companies, and student
financing companies. Commenters also
stated that the registry was particularly
important since nonbanks are increasing
their market share and otherwise
becoming increasingly relevant in the
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markets for consumer financial products
and services. Industry and consumer
advocate commenters stated that there
was a dearth of information about
nonbank financial companies, including
their number and type and the practices
they engage in. An industry commenter
stressed the importance of ensuring
consumers are protected when they
engage with both banks and nonbanks
in seeking consumer financial products
and services.
A consumer advocate commenter
agreed that the Bureau, in administering
the nonbank registry, should rely on
information an entity previously
submitted to the registry under part
1092 and coordinate or combine
systems with State agencies, as provided
in proposed § 1092.102(b). The
commenter stated that not only would
this provision allow for more efficient
implementation of the registry by
avoiding duplicative or redundant
efforts but would also reflect the
importance of this registry to both
Federal and State regulators, and that
the Bureau should consider
coordination with existing State
consumer financial protection agencies.
A joint comment from State regulators
stated that a significant share of covered
orders on the proposed registry are
currently reported in NMLS, which the
comment described as currently the
most comprehensive registry of nonbank
financial services providers. The joint
comment stated that in particular there
was reason to believe a significant share
of the covered order information
captured by the proposed registry for
supervised registered entities was likely
already available in NMLS Consumer
Access. The comment expressed
particular concern with respect to the
confusion that might be generated when
consumers compared the information on
the proposed registry with the
information available on the NMLS
Consumer Access website. The joint
comment stated that consumers visiting
either the proposed Bureau registry or
NMLS Consumer Access might be
confused as to why they were unable to
locate information on certain companies
on one site and not the other. The joint
comment also voiced concern that
identical or similar information on the
same company published in different
formats by different online tools may
frustrate consumers looking for critical
financial services information.
The joint comment also stated that
NMLS Consumer Access includes
information on actions related to
violations of covered consumer
protection laws as well as actions
related to licensing or administrative
violations that would not be covered
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under the proposal. Therefore, the
comment stated, NMLS provides
consumers with a more complete
picture of nonbank enforcement actions
than would be provided by the
proposed Bureau registry. The joint
comment stated that if the Bureau chose
to proceed, the Bureau should exempt
companies from the requirement of
filing a public order if the order is
already published on the NMLS
Consumer Access website. Other
commenters similarly stated that the
Bureau should consider exempting
companies from the rule’s requirements
for orders that are already published or
available via NMLS or should otherwise
create a safe harbor for entities that
comply with NMLS reporting
requirements.
Commenters also made various other
arguments and observations related to
the NMLS, including that the proposed
registry would be largely duplicative of
the NMLS or not necessary in light of
the existence of the NMLS, that NMLS
operates in much the same way as the
proposed registry, that the NMLS
includes most of the data the Bureau
would be looking to collect in the
nonbank registry about covered orders,
that the Bureau should more closely
tailor the rule to the NMLS’s
requirements to avoid duplication, or
that, by failing to use or rely on the
information on the public-facing NMLS
website, the Bureau was not
coordinating with State bank regulatory
authorities to minimize regulatory
burden. In particular, industry
commenters discussed the NMLS
Company Form (Form MU1) submitted
by nonbanks under the NMLS, which
commenters stated includes a
requirement to provide information
regarding enforcement actions within
the past 10 years. One industry
commenter pointed out that the Form
MU1 requires the submission of an
attestation by an employee or officer
and stated that, although the language of
this attestation is different from the
Bureau’s proposal, the intent and
purpose are similar, and the Bureau
could rely on the attestation in the Form
MU1 rather than the proposed written
statement; another industry commenter
similarly stated that the Bureau should
be able to rely on the attestations
provided through NMLS filings.
In addition, during the Bureau’s
interagency consultations on the
proposed and final rule as described in
part V above, certain consulting parties
expressed similar concerns regarding
overlap and duplication between the
proposed NBR system and NMLS
Consumer Access.
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56097
Commenters also identified other
registries or sources of information
regarding agency or court orders that
they stated made the Bureau’s proposal
redundant or unnecessary, or stated that
the Bureau should not finalize the
proposal in light of the existence of such
other sources of information.
Commenters pointed to the websites
and registries maintained by individual
Federal and State agencies, the Federal
Trade Commission’s Sentinel database
and Banned Debt Collectors list,
information maintained by the Better
Business Bureau, the Bureau’s own
Consumer Response portal and
database, information posted by the U.S.
Department of Housing and Urban
Development, information published in
connection with lawsuits, and databases
listing public reprimands of credit
unions associated with credit union
service organizations (CUSOs).
Commenters also stated that the Bureau
would be able to obtain adequate
information from other regulators under
its information-sharing memorandums
of understanding (MOUs) with those
regulators.
Response to Comments Received
Description of Option Adopted Under
§ 1092.203
After considering the arguments by
commenters, the Bureau is adopting a
one-time registration option excepting
entities from other requirements of the
rule, including the proposed writtenstatement requirements, for orders that
are published on the NMLS Consumer
Access website. The NMLS Consumer
Access website currently makes
available for public viewing, subject to
certain terms and conditions of access,
certain information regarding
companies that are regulated by State
agencies in connection with a variety of
financial services industries, including
information regarding administrative
and enforcement actions against such
companies.349
The Bureau agrees with commenters
that it is consistent with the purposes of
the final rule to adopt such a limited
exception. This exception will reduce
burden on entities that are subject to the
rule, help avoid confusion, and promote
coordination with the States in
exercising the Bureau’s nonbank
registration authorities by leveraging
information already gathered and
published by the States. Section
1092.203 of the final rule provides an
349 See NMLS, ‘‘Information About NMLS
Consumer Access’’ (September 9, 2016), at https://
mortgage.nationwidelicensingsystem.org/about/
Documents/InformationAboutNMLSConsumer
Access.pdf.
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option for covered nonbanks to submit
limited information regarding such
covered orders in substitution of
submitting filings about such covered
orders to the Bureau-maintained
nonbank registry under the rule’s other
provisions. To provide for this option,
the Bureau is adopting new § 1092.203
as well as related new definitions for the
terms ‘‘NMLS’’ and ‘‘NMLS-published
covered order.’’
Covered nonbanks will have the
option to either register under
§ 1092.203 with respect to any
applicable NMLS-published covered
order(s) or to comply with the general
registration requirements of subpart B
with respect to such order(s). Covered
nonbanks may opt to register under the
one-time registration provision for all,
some, or none of the applicable NMLSpublished covered orders to which they
are subject.350 Covered nonbanks that
exercise this option with respect to an
NMLS-published covered order will be
required to submit certain limited
information to the nonbank registry
regarding the covered order to enable
the Bureau to coordinate the nonbank
registry with the NMLS. Upon
exercising this option and submitting
the required information about the
NMLS-published covered order, the
covered nonbank will have no further
obligation under subpart B to provide
information to, or update information
provided to, the nonbank registry
regarding the NMLS-published covered
order.
The Bureau intends to notify users of
the nonbank registry regarding the
existence of NMLS-published covered
orders and the covered nonbanks that
are subject to them by publishing under
§ 1092.205 relevant information about
the applicable covered nonbank and
covered order that the Bureau collects
under § 1092.203. Such users may then,
subject to any terms of use or other
conditions of access that the NMLS’s
operator may impose, view a copy of the
order on the NMLS Consumer Access
website, as well as any information
about the applicable covered nonbank
that may be maintained and published
there.
350 An entity that wishes to confirm that any
particular covered order is published on the NMLS
Consumer Access website may either review the
information on the NMLS Consumer Access website
in a manner consistent with any terms of use or
other conditions on access that may be imposed by
the NMLS’s operator, or verify that information by
contacting the State regulator that issued the order
or the NMLS’s operator directly.
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Continued Need for Bureau’s Nonbank
Registry That Applies to All Covered
Orders and Covered Nonbanks
The one-time registration option in
§ 1092.203 will complement the
nonbank registry. The Bureau agrees
with the commenters asserting that
there is a need for a new Bureau registry
with respect to covered orders issued
against nonbank covered persons. As
described in part IV above, the final rule
will assist the Bureau in monitoring for
risks to consumers in the offering or
provision of a wide range of consumer
financial products or services and will
impose registration requirements on a
wide range of nonbank covered persons
subject to the Bureau’s jurisdiction. The
nonbank registry will accomplish this
goal by assisting the Bureau in having
access to relevant information regarding
applicable covered nonbanks and
covered orders even where information
regarding those entities and orders is
not available through the NMLS. The
Bureau’s registry will also help ensure
that the Bureau is provided with
information about such covered orders
as they are issued across multiple
product markets and geographies and in
connection with the wide range of
consumer financial products and
services regulated by the Bureau. Thus,
there remains a need for the Bureau to
adopt its own new nonbank registry in
order to provide the Bureau with
information necessary to support its
functions under the CFPA. In addition,
for the reasons discussed in part IV(F)
and the section-by-section discussion of
§ 1092.205 below, the Bureau intends to
publish certain information submitted
to its new nonbank registry.
The Adopted Exception for NMLSPublished Covered Orders Will Reduce
Burden on Registered Entities and
Implement the CFPA and § 1092.102(b)
by Coordinating With State Agencies
The Bureau is adopting the option set
forth in § 1092.203 in part to reduce
burden on entities that are subject to the
final rule. The Bureau’s adoption of
§ 1092.203 lowers the cost to firms of
the final rule relative to the proposed
rule. For entities with NMLS-published
covered orders, exercising this option
should take even less employee time
than registering under the other
provisions of the rule. As described
further below, the Bureau believes that
this option will advance the purposes
described herein while imposing less
cost on entities subject to the final rule.
The Bureau is also finalizing this
option in part to implement the
approach described in the proposal in
discussing proposed § 1092.102(b).
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There, the Bureau proposed that in
administering the NBR system, the
Bureau may coordinate or combine
systems in consultation with State
agencies as described in CFPA sections
1022(c)(7)(C) and 1024(b)(7)(D).351
Section 1092.203 is consistent with the
Bureau’s statutory mandates under these
provisions to consult with State
agencies regarding requirements or
systems (including coordinated or
combined systems for registration) in
developing and implementing
registration requirements under CFPA
sections 1022(c)(7)(C) and with respect
to supervisory requirements adopted
under CFPA section 1024(b)(7)(D).
CFPA section 1022(c)(7)(C) states: ‘‘In
developing and implementing
registration requirements under [CFPA
section 1022(c)(7)], the Bureau shall
consult with State agencies regarding
requirements or systems (including
coordinated or combined systems for
registration), where appropriate.’’ 352
Similarly, CFPA section 1024(b)(7)(D)
states: ‘‘In developing and
implementing requirements under
[CFPA section 1022(b)(7)], the Bureau
shall consult with State agencies
regarding requirements or systems
(including coordinated or combined
systems for registration), where
appropriate.’’ Section 1092.203 will
enable the Bureau to develop and
implement the registration requirements
of the rule adopted in part under CFPA
section 1022(c)(7), as well as the
written-statement requirements adopted
under CFPA section 1024(b)(7), in a
manner that allows for ‘‘coordinated’’
and ‘‘combined’’ systems for registration
as indicated under these statutory
provisions. As indicated by the
consumer advocate commenter with
respect to proposed § 1092.102(b),
coordinating or combining systems with
State agencies as provided in
§ 1092.102(b) of the final rule not only
allows for more efficient
implementation of the registry by
avoiding duplicative or redundant
efforts but also reflects the importance
of this registry to both Federal and State
regulators. In addition, § 1092.203’s
option for one-time registration in lieu
of filing annual written statements is
consistent with § 1092.102(b) and with
the Bureau’s statutory mandate to
consult with State agencies in
developing and implementing
requirements adopted under CFPA
section 1024(b)(7), including
§ 1092.204’s written-statement
requirements.
351 88
352 12
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Notifications submitted by covered
nonbanks under § 1092.203(b) will alert
the Bureau to the existence of the order
and the relevant covered nonbank, and
to the publication of the order on the
NMLS Consumer Access website.
Should the Bureau desire to learn more
about any particular NMLS-published
covered order, including information
about violations identified by State
agencies, it may do so through the
NMLS or by contacting relevant State
agencies for additional information,
including under the relevant provisions
of the CFPA and applicable informationsharing agreements. Thus, the option
adopted at § 1092.203 will promote
coordination with State agencies in
connection with the nonbank registry.
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The Adopted Exception for NMLSPublished Orders Appropriately
Addresses the Bureau’s Current Need
for Information Regarding Applicable
Orders and Companies
The Bureau is also providing this
option for covered nonbanks in
recognition of the Bureau’s extensive
experience with the NMLS, the
information that currently is collected
under the NMLS, the Bureau’s access to
the NMLS, and the public’s access to the
NMLS Consumer Access website
(subject to any applicable terms of use
or other conditions). The Bureau
concludes that at this time it currently
needs to collect only limited
information from covered nonbanks
about covered orders that are published
by State agencies on the NMLS
Consumer Access website. Under the
final rule, a covered nonbank subject to
a covered order that is published on the
NMLS Consumer Access website will
have the option to instead notify the
Bureau’s nonbank registry that the order
is so published and to provide certain
limited information about itself and the
covered order to the Bureau’s nonbank
registry. In general, applicable State
regulators submit certain information to
the NMLS and keep that information
updated, which will help to ensure the
information’s accuracy and timeliness.
Furthermore, as argued by commenters,
covered nonbanks are generally subject
to legal obligations to provide truthful
and accurate submissions to their State
regulators, and the States regularly post
information to NMLS and help ensure
the accuracy of the information
published there. In light of these
considerations, the Bureau concludes
that the information about covered
orders that is available via the NMLS is
relatively more likely to be reliable and
up to date than information maintained
on systems that are not similarly used,
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maintained, and monitored by State
agencies.
Adopting the one-time registration
option will provide the Bureau with
much of the information about covered
orders and the nonbank entities that are
subject to them that the Bureau
proposed to collect under the proposed
rule. The Bureau acknowledges that, by
providing this option, the nonbank
registry will not contain all of the
information about covered orders that it
would have contained under the
Bureau’s registry as described in the
proposed rule. However, the Bureau
believes that the adoption of § 1092.203
will provide a number of significant
benefits to the Bureau and to covered
nonbanks. While this approach under
the final rule means that the Bureau will
likely need to review two different
systems in order to obtain complete
information regarding all covered
orders, the additional option adopted
under the final rule will facilitate those
efforts. Importantly, the information
collected under § 1092.203 will notify
the Bureau regarding the existence of
covered orders and the covered
nonbanks that are subject to them. This
limited filing will notify the Bureau
regarding the covered nonbank’s
existence and the existence of the
covered order, and will enable the
Bureau to obtain more information
about the covered nonbank and the
covered order, should it so choose,
through other means, including through
the Bureau’s own access to the
information stored on NMLS as well as
through other direct communications
with applicable State agencies.
The Bureau also concludes that it
does not need to impose § 1092.204’s
annual written statement requirements
in connection with NMLS-published
covered orders in cases where the
applicable covered nonbank has filed a
one-time registration under § 1092.203.
By submitting information under
§ 1092.203, the supervised registered
entity will notify the Bureau regarding
the covered nonbank’s existence and the
existence of the covered order. The
Bureau, based on its extensive
experience with the NMLS, has
determined for purposes of this final
rule that once it has been so notified of
the existence of a covered nonbank and
an applicable NMLS-published covered
order, it generally will be able to obtain
sufficient information through the
NMLS and the State authorities
participating in that system so as to
render annual written statements under
this final rule in connection with such
an order unnecessary. Under the CFPA
provisions that provide for sharing of
supervisory information among the
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56099
Bureau and State agencies,353 as well as
under its standing information-sharing
agreements with the Conference of State
Bank Supervisors (CSBS) and individual
State agencies, the Bureau anticipates
that it will be able to obtain information
to inform its supervisory prioritizations
and activities.
In particular, as discussed by several
commenters, many covered nonbanks
that are licensed by State regulators
through the NMLS submit the NMLS
Company Form MU1 in connection with
various matters relating to their State
licenses. The NMLS currently uses the
Form MU1 as its universal licensing
form for companies to apply for and
maintain nondepository, financial
services licenses from State agencies
participating on NMLS. As discussed by
commenters, the current version of
Form MU1 requires licensed entities to
provide information to State regulators
about a variety of matters, including
information about orders entered against
the entity in connection with a financial
services-related activity and about
violations of financial services-related
regulations or statutes.354 Also as
discussed by commenters, Form MU1
requires the submission of an attestation
by an authorized representative
regarding the accuracy of the
information submitted. If the Bureau
wants information relevant to the
covered nonbank’s compliance with
covered orders identified on the Form
MU1, the Bureau generally can obtain
such information for its internal use
through its statutory authorities and its
information-sharing agreements with
CSBS and the relevant State authorities.
Although Form MU1 itself may not
provide the Bureau with information
about compliance with a covered order,
the Bureau is willing to accept some
reduced convenience in order to reduce
regulatory burden and promote
coordination with the States with
respect to NMLS-published covered
orders. Thus, it is not necessary at this
time for the nonbank registry to collect
annual statements under § 1092.204
with respect to an NMLS-published
covered order from a supervised
registered entity that opts to submit a
filing under § 1092.203 in connection
with that NMLS-published covered
order.
353 See
12 U.S.C. 1022(c)(6), 1024(b)(3).
NMLS Resource Center, https://mortgage.
nationwidelicensingsystem.org/slr/common/policy/
Pages/default.aspx. A commenter noted that
entities must promptly file updates to their MU1
disclosures as needed.
354 See
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The Adopted Exception for NMLSPublished Covered Orders
Appropriately Addresses the Current
Need To Provide Relevant Information
to Other Users of the Bureau’s Registry
In addition, as described in part IV(F)
above and in the section-by-section
discussion of § 1092.205 below, the
Bureau intends to publish certain
limited information about the entity and
the order as obtained under § 1092.203,
for the purpose of notifying other
regulators and other users of the
nonbank registry about the entity’s
existence and the existence of the
covered order. Users of the information
published under § 1092.203 will then
have the option, where doing so is
consistent with any NMLS Consumer
Access terms of use or other applicable
conditions, to review the information
that is published on the NMLS
Consumer Access website about the
covered order and the covered nonbank.
While the NMLS does not contain
registration information regarding all of
the covered nonbanks that are likely to
be subject to the final rule, and does not
publish all of the information that the
Bureau will collect and intends to
publish under the rule, the Bureau
believes that, on the whole, the
information about NMLS-published
covered orders made available to the
public on the NMLS Consumer Access
website (subject to any applicable terms
of use or other conditions) currently
satisfies many of the goals of
publication that the Bureau described in
its proposal. These goals include
making information about covered
nonbanks and the covered orders to
which they are subject readily
accessible in a comprehensive and
collected manner. As stated by
commenters, the NMLS Consumer
Access website currently publishes a
wide range of information regarding
those covered nonbanks that are subject
to applicable State licensing and
registration requirements, including
much of the identifying information that
would be collected under the proposal,
such as the entity’s legal name, business
address, and NMLS identifier. The
NMLS Consumer Access website is
currently searchable by name, company,
city, State, ZIP code, NMLS
identification, and/or license number
(subject to any applicable terms of use
or other conditions). The NMLS
Consumer Access website also currently
publishes much of the same information
that would have been collected and
published under the proposal with
respect to covered orders—in particular,
a copy of the order and relevant
information about the agency that
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issued or obtained the order. Therefore,
where the Bureau publishes information
on its nonbank registry informing users
of that system about the existence of a
covered nonbank and the issuance of an
applicable order against that nonbank,
users can (subject to NMLS Consumer
Access’s terms of use or other applicable
conditions) obtain related information
from the NMLS Consumer Access
website, including much of the same
information about the covered nonbank
and covered order that would have
otherwise been available via the
proposed nonbank registry. In addition,
many users of the nonbank registry—in
particular, many State regulators—have
their own access to the NMLS system
and may use that access to obtain
additional information about the
company, beyond what is available
through the NMLS Consumer Access
website.
As stated in the joint comment by
State regulators, the one-time
registration option provided in the final
rule will also help minimize company,
consumer, and other public user
confusion when utilizing both NMLS
Consumer Access and the nonbank
registry. First, consumers and other
users of the nonbank registry will have
the ability to review any information
about the order that is published in the
nonbank registry (whether from the
limited filing under § 1092.203 or a
more detailed filing under § 1092.202)
as well as any information published on
the NMLS Consumer Access website
(subject to any applicable terms of use
or other conditions of access), and will
be able to associate the NMLS Consumer
Access website and the Bureau’s
nonbank registry. Thus, users will have
a mechanism to identify and associate
the information provided in both the
NMLS Consumer Access website and
the Bureau’s nonbank registry about that
company and any relevant covered
orders. Second, publication of the
limited information obtained under
§ 1092.203 as provided under
§ 1092.205 will help clarify the identity
of the applicable covered nonbanks and
the covered orders they are subject to,
and otherwise reduce confusion about
the information published on the NMLS
Consumer Access website and the
Bureau’s nonbank registry. Thus, the
option provided under § 1092.203 will
help reduce the redundancies identified
by commenters while maintaining the
integrity and usefulness of the nonbank
registry.
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Response to Comments Received
Regarding Redundancies With Other
Registries and Sources of Information
The Bureau believes that the NMLS
represents a uniquely useful
complement to the nonbank registry.
The Bureau disagrees with commenters
that the other sources of information
identified by commenters diminish the
need for the nonbank registry, or that
the rule should accept registration of
covered orders under those sources in
lieu of registration with the nonbank
registry. As stated above in part IV(B),
although referrals from and other
information provided by other agencies
have been valuable to the Bureau’s
work, the Bureau currently often relies
on other agencies to take proactive steps
to contact it. Having access to a
centralized list of orders entered against
nonbanks will significantly increase the
Bureau’s ability to monitor the market
so that the Bureau can identify, better
understand, and ultimately, prevent
further consumer harm. The Bureau
disagrees that the indirect method
proposed by commenters would be as
efficient or effective as requiring
covered nonbanks to directly submit
information to the Bureau. Similarly,
requiring the Bureau to proactively
reach out and obtain information under
its information-sharing memorandums
of understanding with other regulators
without creating its own registry would
be an inadequate substitute for the final
rule.
The Bureau disagrees that simply
steering users to the various other
public-facing websites and registries
maintained by other Federal agencies,
State regulators, State attorneys general,
and local agencies would serve the
purposes of the final rule.355 First, such
an approach would be confusing and
inefficient for the Bureau and for other
users of the public registry the Bureau
intends to establish, who would need to
become proficient at searching and
otherwise using the various websites
maintained by multiple Federal
agencies, State regulators, State
attorneys general, and local agencies in
order to locate applicable information
about covered orders and covered
nonbanks. The sheer number of such
websites would present an obstacle to
obtaining full information about all of
the covered orders that have been issued
against the covered nonbank. Collecting,
keeping track of, and verifying
355 The Bureau also disagrees that the Bureau’s
own Consumer Response portal renders the
nonbank registry unnecessary. To the contrary, the
Bureau’s consumer response function will be
informed by the increased monitoring of risks and
trends provided by the nonbank registry.
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information maintained on a wide range
of uncoordinated Federal, State, and
local agency websites would be highly
inefficient for the Bureau and other
users of the nonbank registry. Such an
approach would also impair the
accuracy of the information maintained
by the nonbank registry. The various
websites publishing such orders would
be subject to various approaches to
maintaining and updating information
about the applicable entities and orders
listed on them, including the frequency
at which such information is published
and updated. In addition, the external
web page(s) to which the Bureau directs
users for more information regarding an
order might be changed or otherwise
become outdated. By contrast, currently
the NMLS Consumer Access website
generally maintains updated and
consolidated information about entities
and orders that are listed on it.
Second, because the information
maintained by such a variety of agencies
would necessarily vary in format and
presentation, it would be very
challenging for the Bureau to regularly
monitor, search, and link to the
appropriate selection of orders on the
registry that the Bureau would deem
relevant to its jurisdiction. Such
websites may not provide information
about nonbanks and orders in a uniform
manner that will enable the Bureau to
easily locate and access that
information.
Third, the final rule, unlike the
alternative information sources
suggested by commenters, is calibrated
to collect information relevant to the
Bureau’s exercise of its authorities. Even
where another agency publishes a
particular order against a covered
nonbank, it may not be self-evident to
the Bureau that the covered nonbank is
a covered nonbank—information that
would be provided in the nonbank
registry. The Bureau currently lacks
access to any comprehensive list of
covered nonbanks, and thus may not
even be aware of such entities or that it
should monitor orders issued against
them. Also, neither the orders
themselves nor the relevant website
publishing those orders would
necessarily provide sufficient
information to permit the Bureau to
recognize that the order was a covered
order. For example, it may not be clear
from the face of the order the extent to
which the violations of law found or
alleged in the order arose out of conduct
in connection with the offering or
provision of a consumer financial
product or service. Thus, the
information that would be collected by
the Bureau either by solely linking to a
host of multiple other websites or by
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reaching out under its informationsharing memorandums of
understanding, or both, would always
necessarily be incomplete. Under such
an approach, the Bureau would be
required to attempt to discern on an
ongoing basis which entities listed on
another agency’s website were subject to
its jurisdiction and when they had
become subject to a covered order.
Therefore, at a minimum, the Bureau
will need to be notified when a covered
order is issued against a covered
nonbank, and will need to be notified
about the existence of the covered
nonbank and the relevant covered order.
The Bureau concludes that imposing a
registration requirement on the covered
nonbank itself to register with and
notify the Bureau regarding such
matters, as authorized under the CFPA,
is the most effective and efficient
mechanism for collecting this
information.
Fourth, the Bureau has concluded that
it will often be difficult to obtain an
adequate substitute for the information
contained in the written statement with
respect to covered orders that are not
available through the NMLS. The
Bureau is not currently aware of other
regularized and consolidated official
sources of information about covered
orders that would provide the
information about order violations that
would be contained in the written
statement.
As an alternative to the approach
taken in the final rule, the Bureau
considered requiring covered nonbanks
to notify the Bureau when they become
subject to a covered order—even one not
published on the NMLS Consumer
Access website—in a manner similar to
that adopted under § 1092.203 of the
final rule. Under such an alternative
system, the Bureau might have used
such notifications to attempt to obtain
additional information about the
covered nonbank and the covered order
directly under its information-sharing
memorandums of understanding with
relevant regulators. However, such a
requirement would not have adequately
accomplished the purposes of the
registry for the reasons explained above.
Because the Bureau could not be
assured that the other Federal, State,
and local systems would routinely
collect and make available the types of
relevant identifying information about
covered nonbanks subject to covered
orders that are currently collected under
the NMLS with respect to companies
registered with the NMLS, the nonbank
registry would therefore still need to
collect such identifying information
directly from registering nonbanks.
Moreover, such an approach would
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56101
require the Bureau to comb through a
large number of different websites
maintained by various Federal agencies,
State regulators, State attorneys general,
and local agencies, all using their own
organization, formats, naming
conventions, frequency of posting and
updating, and other matters. Such an
approach would be cumbersome at best
not only for the Bureau but also for
registering entities themselves. Such an
approach would therefore represent a
less efficient and effective means of
accomplishing the purposes of the final
rule, including registering applicable
covered nonbanks and supporting the
objectives and functions of the Bureau
through monitoring markets for
consumer financial products and
services, than the approach being
adopted by the Bureau under
§ 1092.203.
That approach is comparatively much
more useful both for the Bureau and for
other potential users of the registry. As
discussed above, filings submitted
under § 1092.203 will notify both the
Bureau and such other potential users
when a covered order is issued against
a covered person. Then the Bureau and
other users will be able to use the NMLS
to access additional information about
the covered nonbank and covered order
(subject to any applicable terms of use
or other conditions). The NMLS and
applicable State regulators generally
collect identifying information about
most of the companies that have
applicable orders published on the
NMLS Consumer Access website. For
example, the NMLS Form MU1 requires
companies to provide information
regarding their legal name, address,
NMLS number, and State licensing
information. The Bureau will generally
be able to obtain this information from
NMLS and directly from State
regulators. (While the Bureau
understands that some covered
nonbanks that are subject to an NMLSpublished covered order may not have
created an NMLS account—for example,
where a covered order is issued against
a company that is not appropriately
licensed by an applicable State—the
Bureau also understands that the
number of such covered nonbanks is
comparatively small. The Bureau
intends to use the information collected
through the nonbank registry to better
understand the number of such
companies, and intends to continue to
consult with State agencies and the
NMLS’s operator regarding coordination
of the nonbank registry and the NMLS.)
Thus, the Bureau believes it will more
readily be able to identify most covered
nonbanks that register an NMLS-
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published covered order than it would
be able to identify covered nonbanks
subject to other types of covered orders.
In addition, the NMLS, which is
maintained through the coordinated
action of the States, will be relatively
simple for the Bureau to monitor and to
coordinate with. The NMLS provides a
valuable coordination function by
organizing information about registered
nonbank companies, generally by
assigning an NMLS identification
number for the company and
assembling relevant identifying and
licensing information together in an
accessible manner. Limiting the number
of places where the Bureau will need to
search in order to obtain information
about covered nonbanks and covered
orders to two—the nonbank registry and
the NMLS—will help limit the Bureau’s
search costs, and conserve resources
that it could apply elsewhere, including
to monitor for risk to consumers in other
ways. By minimizing the number of
places such information will be located,
the final rule will also help minimize
variation in the steps that would be
required to obtain access to the
information or any controls that may be
placed on access to the information, and
the ways or formats in which that
information may be posted. Thus, the
final rule will help ensure access by the
Bureau to more uniform and consistent
reporting about covered nonbanks and
covered orders.
In addition to providing a
consolidated source of information to
the Bureau, the NMLS is also
comparatively a more useful resource
for other users of the public registry the
Bureau intends to establish than a
collection of other websites would be.
As discussed above, where the Bureau
publishes information on its nonbank
registry informing users of that registry
about the existence of a covered
nonbank and the issuance of an
applicable order against that nonbank,
State regulators will generally be able to
obtain related information from the
NMLS pursuant to their arrangements
with NMLS. In addition, as discussed
above, the NMLS Consumer Access
website currently publishes a wide
range of information regarding those
covered nonbanks that are subject to
applicable State licensing and
registration requirements, including
much of the identifying information that
would be collected under the proposal,
such as the entity’s legal name, business
address, and NMLS identifier. Other
users of the nonbank registry may use
the NMLS Consumer Access website to
access copies of, and other information
about, NMLS-published covered orders
and covered nonbanks that are
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registered with the NMLS, so long as
that access is consistent with any terms
of use or other conditions of access that
NMLS may impose. Thus, the NMLS
Consumer Access website provides a
centralized point of access (subject to
NMLS Consumer Access’s applicable
terms of use or other conditions of
access) for persons seeking to learn
more about NMLS-published covered
orders and covered nonbanks.
Moreover, publication on the NMLS
Consumer Access website will help
ensure that such orders are presented in
a format that is uniform and consistent,
which will reduce the opportunity for
confusion for persons who are
attempting to locate and learn about
NMLS-published covered orders.
Therefore, the Bureau has determined
that maintaining its own registry, with
the alternative option for one-time
registration of NMLS-published covered
orders provided in § 1092.203, will best
serve the purposes of the final rule as
described herein.
Final Rule
For the reasons described above and
as follows in this section-by-section
analysis, the Bureau is finalizing a new
§ 1092.203, and is renumbering the
remainder of the sections of subpart B
to part 1092 accordingly. Consistent
with the approach suggested by
commenters, this section will provide
an express exception from some of the
requirements of the rule as proposed
(including the proposed writtenstatement requirements) for orders that
are published on the NMLS Consumer
Access website, which may be exercised
at the option of the covered nonbank in
lieu of registering under subpart B
generally with respect to such orders.
The Bureau is adopting corresponding
definitions of the terms ‘‘NMLS’’ and
‘‘NMLS-published covered order’’ at
§ 1092.201(j) and (k). See the discussion
of these definitions in the section-bysection discussion of these sections
above.
With respect to any NMLS-published
covered order, a covered nonbank that
is identified by name as a party subject
to the order may elect to comply with
the one-time registration option
described in this section in lieu of
complying with the requirements of
§§ 1092.202 and 1092.204. Section
1092.203(c) provides that, once a
covered nonbank avails itself of this
option, and chooses to file the
information required under
§ 1092.203(b) with respect to an NMLSpublished covered order, the covered
nonbank shall have no further
obligation under subpart B to provide
information to, or update information
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provided to, the nonbank registry
regarding the NMLS-published covered
order.
As discussed above, by collecting and
potentially publishing limited
information for the purpose of
coordinating the nonbank registry with
NMLS, the final rule will also promote
coordination with States in accordance
with CFPA sections 1022(c)(7)(C) and
1024(b)(7)(D).
As provided in § 1092.201(k), no
covered order issued or obtained at least
in part by the Bureau shall be an NMLSpublished covered order. Thus, a
covered nonbank must comply with the
requirements of § 1092.202 and (where
applicable) § 1092.204 with respect to a
covered order that has been issued or
obtained at least in part by the Bureau
and may not elect to comply with the
one-time registration option described
in § 1092.203 with respect to such a
covered order whether or not the order
has been published on the NMLS
Consumer Access website. This
restriction applies whether the
applicable covered order was issued
either by a court or by the Bureau itself,
so long as the order was issued in any
action or proceeding brought at least in
part by the Bureau. The Bureau has a
special interest in monitoring its own
orders, and in obtaining updated
information under § 1092.202 regarding
them. The identifying information
submitted under § 1092.202, and the
final rule’s obligation to update that
information in the event of changes,
could provide new and useful
information to the Bureau in monitoring
and enforcing its own orders. For
example, a covered nonbank subject to
a Bureau covered order that moves its
principal place of business or changes
its name will be required to notify the
Bureau. Also, the Bureau has a special
interest in obtaining annual written
statements under § 1092.204 from
supervised registered entities regarding
such Bureau orders. The written
statements will provide information
regarding ongoing compliance with the
Bureau order and the name and title of
the attesting executive, will otherwise
facilitate the Bureau’s supervision of
entities subject to its orders, and will
help the Bureau detect and assess risks
to consumers in connection with the
orders it has issued or obtained. The
Bureau also concludes that the rule’s
written-statement requirements should
be imposed on supervised registered
entities subject to covered orders that
have been issued or obtained by the
Bureau to ensure that such entities are
legitimate entities and are able to
perform their obligations to consumers.
Thus, the final rule requires covered
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nonbanks to comply with § 1092.202
and (where applicable) § 1092.204 with
respect to such covered orders whether
or not they are published on the NMLS
Consumer Access website.
Section 1092.203(b) Information To Be
Provided
Proposed Rule
See the section-by-section discussion
of § 1092.203(a) above for a discussion
of the proposal’s requirements regarding
submission of information and written
statements and publication of
information relating to covered orders.
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Comments Received
See the section-by-section discussion
of § 1092.203(a) above for a summary of
comments received requesting an
exception for NMLS-published covered
orders as well as comments received
regarding alleged redundancies with
other registries and sources of
information.
Final Rule
For the reasons described above and
as follows in this section-by-section
analysis, the Bureau is adopting a new
§ 1092.203(b) requiring a covered
nonbank that chooses to exercise the
option described in § 1092.203(a), in the
form and manner specified by the
Bureau, to provide such information
that the Bureau determines is
appropriate for the purpose of
identifying the covered nonbank and the
NMLS-published covered order, and
otherwise for the purpose of
coordinating the nonbank registry with
the NMLS. The Bureau will provide
instructions regarding the submission of
such information in filing instructions
issued under § 1092.102(a).
The Bureau is finalizing this
requirement in order to help ensure that
it obtains adequate information
regarding NMLS-published covered
orders to maintain the usefulness of the
nonbank registry with respect to such
orders. Without such a requirement, the
Bureau may not learn about the
existence of such orders or the
applicable covered nonbank, or may not
be informed that the covered nonbank is
a covered nonbank subject to its
jurisdiction or that the covered order is
a covered order. Such matters are
critical for the Bureau to be informed
about so that it may understand when
information regarding such matters that
is of interest to the Bureau and relevant
to its jurisdiction may be available from
State agencies. The Bureau will also
need this information in order to help
coordinate the nonbank registry with
the NMLS, including to verify that an
applicable NMLS-published covered
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order is in fact published on the NMLS
Consumer Access website and to obtain
information regarding the applicable
covered nonbank and the NMLSpublished covered order.
Under § 1092.205 of the final rule, the
Bureau intends to publish certain
information that the nonbank registry
collects under § 1092.203. As described
above and in the section-by-section
discussion of § 1092.205 below, and
except as provided therein, the Bureau
believes the publication of certain
information collected under § 1092.203
will be in the public interest, in order
to allow users of the Bureau’s public
registry to identify that a covered
nonbank has become subject to a
covered order and (consistent with any
applicable terms of use or other
conditions of access) to be able to locate
information about that covered nonbank
and covered order on the NMLS
Consumer Access website. The Bureau
may also collect additional information
under § 1092.203 for the purpose of
coordinating the nonbank registry with
the NMLS that it may choose not to
publish. In administering the nonbank
registry, the Bureau will implement
§ 1092.203 along with § 1092.102(b) as
part of coordinating or combining
systems in consultation with State
agencies.
203(c) No Further Obligation To Provide
or Update Information
Proposed Rule
See the section-by-section discussion
of § 1092.203(a) above for a discussion
of the proposal’s requirements regarding
submission of information and written
statements and publication of
information relating to covered orders.
Comments Received
See the section-by-section discussion
of § 1092.203(a) above for a summary of
comments received requesting an
exception for NMLS-published covered
orders as well as comments received
regarding alleged redundancies with
other registries and sources of
information.
Final Rule
For the reasons described above and
as follows in this section-by-section
analysis, the Bureau is adopting a new
§ 1092.203(c) stating that, upon
providing the information described in
§ 1092.203(b), the covered nonbank
shall have no further obligation under
subpart B to provide information to, or
update information provided to, the
nonbank registry regarding the NMLSpublished covered order. Thus, once a
covered nonbank has submitted the
information specified in the filing
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56103
instructions adopted under
§ 1092.102(a) for an applicable NMLSpublished covered order, the covered
nonbank will have no further obligation
to provide information to, or update
information provided to, the nonbank
registry regarding the NMLS-published
covered order. Thus, among other
things, following such a submission, the
covered nonbank need not submit either
an initial or a revised filing under
§ 1092.202(b)(2) with respect to the
NMLS-published covered order.
(However, if the covered nonbank is
also subject to at least one other covered
order that is registered or required to be
registered under § 1092.202, and such
other order(s) is not eligible for
registration under § 1092.203 or the
covered nonbank has not opted to
register the order(s) under that
provision, the covered nonbank will
remain subject to § 1092.202(b)(2)’s
requirements with respect to such other
covered order(s), including the ongoing
obligation to update its identifying
information.) If the covered nonbank is
a supervised registered entity, then,
following such a submission under
§ 1092.203, it will not be required to
submit an annual written statement
under § 1092.204 or otherwise comply
with the requirements of that section in
connection with the applicable NMLSpublished covered order.
As described in the section-by-section
analysis of § 1092.203(a) above, the
Bureau believes that this exception to
the requirements of the final rule with
respect to NMLS-published covered
orders is consistent with the purposes of
the final rule described in part IV above.
This exception will reduce burden on
entities that are subject to the rule, help
avoid confusion, and promote
coordination with the States in
exercising the Bureau’s nonbank
registration authorities by leveraging
information already gathered and
published by the States.
Section 1092.204 Annual Reporting
Requirements for Supervised Registered
Entities
Proposed § 1092.203, which is
renumbered in the final rule as
§ 1092.204, would have required
supervised registered entities annually
to identify an executive (or executives)
who is responsible for and
knowledgeable of the firm’s efforts to
comply with orders identified in the
registry. The proposal would also have
required supervised registered entities
to submit on an annual basis a written
statement signed by that executive (or
executives) regarding the entity’s
compliance with orders in the registry.
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The Bureau is finalizing this
component of the proposal, with certain
changes to the proposed regulatory text
that are discussed below. Below, the
Bureau first addresses comments
regarding the Bureau’s legal authority to
impose the requirements in § 1092.204
and then discusses § 1092.204’s
individual paragraphs.
Proposed Rule’s Discussion of the
Bureau’s Legal Authority To Impose
Written-Statement Requirements
The Bureau relied on its rulemaking
authority under CFPA section
1024(b)(7)(A)–(C) in requiring
supervised registered entities to submit
written statements.356 The Bureau
explained that each of those paragraphs
provides independent authority for the
requirement to submit written
statements. First, the Bureau explained,
CFPA section 1024(b)(7)(A) and (B)
authorize these written-statement
requirements because the statements
would facilitate the Bureau’s
supervision efforts and its assessment
and detection of risks to consumers. The
Bureau believed the proposed written
statement would facilitate the Bureau’s
supervision efforts, including by
providing the Bureau with important
additional information regarding risks to
consumers that may be associated with
the covered order; informing the
Bureau’s risk-based prioritization of its
supervisory activities under CFPA
section 1024(b); and improving the
Bureau’s ability to conduct its
supervisory and examination activities
with respect to the supervised nonbank,
when it does choose to exercise its
supervisory authority. The Bureau noted
that submission of a written statement
that identifies noncompliance with
reported orders would provide the
Bureau with important information
regarding risks to consumers that may
be associated with the order. The
Bureau further noted that such orders
themselves frequently contain
provisions aimed at ensuring an entity’s
future legal compliance with the
covered laws violated. The Bureau
believed that an entity’s compliance
with such provisions may mitigate the
continuing risks to consumers presented
by the entity and thus the potential need
for current supervisory activities. By
contrast, the Bureau also believed that
evidence of noncompliance with an
order requiring registration under the
proposal would be probative of a
potential need for supervisory
examination of the supervised nonbank
and would be a relevant factor for the
Bureau to consider in conducting its
risk-based prioritization of its
supervisory program under CFPA
section 1024(b)(2), including (b)(2)(C),
(D), and (E). Likewise, in cases where
the Bureau determined to exercise its
supervisory authorities with respect to a
supervised nonbank required to submit
written statements under the proposal,
the Bureau expected that those written
statements would provide important
information relevant to conducting
examination work. For example, the
Bureau explained that it might use the
written statements in determining what
information to require from a supervised
nonbank, in determining the content of
supervisory communications and
recommendations, or in making other
decisions regarding the use of its
supervisory authority.
Second, the Bureau explained in the
proposal that it has authority to require
preparation of the written statements
under CFPA section 1024(b)(7)(C)
because the written statements will help
ensure that supervised registered
entities ‘‘are legitimate entities and are
able to perform their obligations to
consumers.’’ 357 The Bureau interpreted
CFPA section 1024(b)(7)(C) as
authorizing it to prescribe substantive
rules to ensure that supervised entities
are willing and able to comply with
their legal obligations to consumers,
including those imposed by Federal
consumer financial law. The Bureau
believed that the proposed requirement
to submit an annual written statement
would help ensure that the supervised
registered entity takes its legal duties
seriously, and that it is not treating the
risk of enforcement actions for
violations of legal obligations as a mere
cost of doing business. If an entity
reported under proposed
§ 1092.203(d)(2) that it violated its
obligations under covered orders, the
Bureau noted that may indicate that the
entity lacks the willingness or ability
more generally to comply with its legal
obligations, including its obligations
under the Federal consumer financial
laws that the Bureau enforces. The
Bureau believed that that would
especially be the case if an entity
reported violations under proposed
§ 1092.203(d)(2) in multiple years or
with respect to multiple covered orders,
or if the violation amounted to a repeat
of the conduct that initially gave rise to
the covered order. The Bureau noted
that, under CFPA section 1024(b)(2),358
the Bureau may prioritize such an entity
for supervisory examination to
determine whether the entity has
worked in good faith to maintain
U.S.C. 5514(b)(7)(A)–(C).
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358 12
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Certain Comments Received Regarding
the Bureau’s Legal Authority To Impose
Written-Statement Requirements
Some industry commenters
questioned the Bureau’s authority to
impose the written-statement
requirements, while some consumer
advocate commenters stated that the
Bureau was authorized to impose the
written-statement requirements. The
Bureau finalizes its conclusion set forth
in the proposal that CFPA section
1024(b)(7) authorizes the rule’s writtenstatement requirements.359 The Bureau
discusses and responds to some of these
comments together in this part for ease
of reference. For further discussion of
the written-statement requirements in
the final rule and the Bureau’s
responses to comments received, see the
section-by-section analysis of § 1092.204
below.
Commenters focused primarily on the
meaning of CFPA section 1024(b)(7)(B)
and 1024(b)(7)(C). Industry commenters
commented that the proposed written
statement would not qualify as a
‘‘record’’ within the meaning of CFPA
section 1024(b)(7)(B). They also argued
that section 1024(b)(7)(B) only allows
the Bureau to require a supervised
entity to produce records, not to compel
an individual executive to provide the
required written statement. Further, an
industry commenter stated that the
written-statement requirement is not the
type of rule contemplated by CFPA
section 1024(b)(7)(C) because, in the
group’s view, the requirement does not
address the competency of management
or financial requirements to ensure an
entity’s solvency. Finally, commenters
contended that Congress’s express
provision for certification or attestation
requirements in other statutory
provisions 360 implies that the Bureau
lacks the authority to impose the
proposed written-statement requirement
under CFPA section 1024(b)(7) because
that provision does not expressly
address such a requirement.
359 See,
e.g., 88 FR 6088 at 6091–93, 6125.
cited 7 U.S.C. 6s(k)(3)(B)(ii), 12
U.S.C. 1851(f)(3)(A)(ii), 15 U.S.C. 7241(a), and 15
U.S.C. 7262(b).
360 Commenters
357 12
356 12
protocols aimed at ensuring compliance
with its legal obligations and detecting
and appropriately addressing any legal
violations that the entity may commit.
In this way, the Bureau explained that
the written statement required by
proposed § 1092.203(d)(2) would assist
the Bureau in ensuring that supervised
registered entities are legitimate entities
and are able to perform their obligations
to consumers.
U.S.C. 5514(b)(7)(C).
U.S.C. 5514(b)(2).
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The Bureau’s Response to Certain
Comments Received Regarding the
Bureau’s Legal Authority To Impose
Written-Statement Requirements
The Bureau finalizes its conclusion
that CFPA section 1024(b)(7) authorizes
the Bureau to impose the writtenstatement requirements contained in
§ 1092.204. As an initial matter,
commenters are wrong in suggesting
that Congress’s express provision for
certification or attestation requirements
in provisions like 7 U.S.C.
6s(k)(3)(B)(ii), 12 U.S.C.
1851(f)(3)(A)(ii), 15 U.S.C. 7241(a), and
15 U.S.C. 7262(b) implies that the
Bureau lacks authority to impose the
written-statement requirement under
section 1024(b)(7). The commenters
appear to be relying on the principle
articulated in Russello v. United States
that Congress generally ‘‘acts
intentionally and purposely in the
disparate inclusion or exclusion’’ of
statutory language.361 That principle,
however, only applies when ‘‘Congress
includes particular language in one
section of a statute but omits it in
another section of the same Act.’’ 362 By
contrast, ‘‘[l]anguage in one statute
usually sheds little light upon the
meaning of different language in another
statute.’’ 363 Therefore, 15 U.S.C. 7241(a)
and 7262(b), which Congress enacted in
the Sarbanes-Oxley Act of 2002,364 have
little bearing on the proper
interpretation of CFPA section
1024(b)(7).
While 7 U.S.C. 6s(k)(3)(B)(ii) and 12
U.S.C. 1851(f)(3)(A)(ii), like section
1024(b)(7), were enacted in the DoddFrank Act (albeit in different titles than
section 1024(b)(7)), those provisions are
also insufficient to invoke the Russello
principle. That principle infers meaning
from differences in language between
statutory provisions that are otherwise
similarly worded. Accordingly, the
inference ‘‘grows weaker with each
difference in the formulation of the
provisions under inspection.’’ 365 Also,
the Russello principle ‘‘applies with
limited force’’ to broadly worded
statutes.366 The Russello principle is
founded on the premise that ‘‘the
absence of the words used in [a separate
statutory provision] could indicate an
intention to exclude their application’’
in the principal provision at issue.367 It,
however, ‘‘makes less sense to draw that
inference when . . . the provision at
issue uses broader language that
encompasses the meaning of the absent
words and thus did not need to
expressly include them.’’ 368
Applying those considerations here, 7
U.S.C. 6s(k)(3)(B)(ii) and 12 U.S.C.
1851(f)(3)(A)(ii) provide no basis for
reading into CFPA section 1024(b)(7) an
atextual limitation that would prevent
the Bureau from imposing the writtenstatement requirement. The provisions
do not use parallel wording. While 7
U.S.C. 6s(k)(3)(B)(ii) and 12 U.S.C.
1851(f)(3)(A)(ii) focus on particular
reporting requirements, CFPA section
1024(b)(7) provides a general grant of
rulemaking authority to facilitate
supervision, assessment, and detection
of risks to consumers, and to ensure that
supervised entities are legitimate and
are able to perform their obligations to
consumers. Further, as explained in
greater detail below, Congress used
expansive language in section 1024(b)(7)
that encompasses the authority to
impose the written-statement
requirements. The contrast that the
commenters attempt to draw between
section 1024(b)(7) and other, more
limited provisions imposing
certification or attestation requirements
does not support restricting section
1024(b)(7)’s breadth.
Turning to the specific subparagraphs
of CFPA section 1024(b)(7), no
commenter specifically addressed the
Bureau’s statements in the notice of
proposed rulemaking that CFPA section
1024(b)(7)(A) provides a ‘‘distinct,
independently sufficient basis for the
proposed written-statement
requirements.’’ 369 In the absence of any
comments specifically challenging the
proposition that CFPA section
361 Russello v. United States, 464 U.S. 16, 23
(1983) (citation omitted).
362 Id.
363 Id. at 25.
364 Public Law 107–204, 116 Stat. 745.
365 City of Columbus v. Ours Garage & Wrecker
Serv., Inc., 536 U.S. 424, 435–36 (2002); accord Clay
v. United States, 537 U.S. 522, 532 (2003); see also
Nat’l Postal Policy Council v. Postal Regulatory
Comm’n, 17 F.4th 1184, 1191 (D.C. Cir. 2021)
(Russello presumption ‘‘has limited force’’ when
‘‘two provisions use different words and are not
otherwise parallel’’); United States v. Councilman,
418 F.3d 67, 74 (1st Cir. 2005) (‘‘[I]f the language
of the two provisions at issue is not parallel, then
Congress may not have envisioned that the two
provisions would be closely compared in search of
terms present in one and absent from the other.’’).
366 See United States v. O’Donnell, 608 F.3d 546,
552 (9th Cir. 2010).
367 Id.
368 Id.; see also Adirondack Med. Ctr. v. Sebelius,
740 F.3d 692, 697 (D.C. Cir. 2014) (explaining that
the ‘‘expressio unius canon’’ is a ‘‘poor indicator of
Congress’ intent’’ to limit the scope of an otherwise
‘‘broad grant of authority’’); Councilman, 418 F.3d
at 74 (‘‘The Russello maxim . . . is simply a
particular application of the classic principle
expressio unius est exclusio alterius . . . .’’).
369 88 FR 6088 at 6090; see also id. at 6093
(‘‘Section 1024(b)(7) of the CFPA . . . identifies
three independent sources of Bureau rulemaking
authority.’’); id. at 6125 (‘‘Each of th[e] paragraphs
[in CFPA section 1024(b)(7)(A)–(C)] provides
independent authority for the requirement to
submit written statements.’’).
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1024(b)(7)(A) authorizes the writtenstatement requirements, the Bureau
finalizes its conclusion that section
1024(b)(7)(A) supports those
requirements. The written-statement
requirements will ‘‘facilitate [the
Bureau’s] supervision’’ efforts and its
‘‘assessment and detection of risks to
consumers’’ within the meaning of
section 1024(b)(7)(A). In particular, the
written-statement requirements will
provide the Bureau with important
additional information regarding risks to
consumers that may be associated with
the covered order; inform the Bureau’s
risk-based prioritization of its
supervisory activities under CFPA
section 1024(b); and improve the
Bureau’s ability to conduct its
supervisory and examination activities
with respect to the supervised nonbank,
when it chooses to exercise its
supervisory authority. Because CFPA
section 1024(b)(7)(A) provides a distinct
grant of authority separate from CFPA
section 1024(b)(7)(B) or 1024(b)(7)(C)—
a proposition not disputed by any
commenter—section 1024(b)(7)(A)
suffices to support the written-statement
requirements, even if (as the
commenters argue) the written
statement did not qualify as a ‘‘record’’
that the Bureau could require under
section 1024(b)(7)(B) and also was not
authorized by section 1024(b)(7)(C).
Although not necessary to support the
written-statement requirements, the
Bureau also concludes that section
1024(b)(7)(B) authorizes those
requirements as well. Section
1024(b)(7)(B) authorizes the Bureau to
require entities subject to its supervisory
authority ‘‘to generate, provide, or retain
records for the purposes of facilitating
supervision . . . and assessing and
detecting risks to consumers.’’ 370 As the
Bureau has explained,371 the term
‘‘records’’ in section 1024(b)(7)(B) is
broad. It includes any ‘‘[i]nformation
that is inscribed on a tangible medium
or that, having been stored in an
electronic or other medium, is
retrievable in perceivable form,’’ or any
‘‘documentary account of past
events.’’ 372 The written statement
370 12
U.S.C. 5514(b)(7)(B).
88 FR 6088 at 6093.
372 Record, Black’s Law Dictionary (11th ed.
2019); accord Record, Webster’s Third New
International Dictionary (1981) (‘‘an account in
writing or print (as in a document) . . . intended
to perpetuate a knowledge of acts or events’’; ‘‘a
piece of writing that recounts or attests to
something’’); Record, American Heritage Dictionary
of the English Language, https://www.ah
dictionary.com/word/search.html?q=record (‘‘[a]n
account, as of information or facts, set down
especially in writing as a means of preserving
knowledge’’).
371 See
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required by § 1092.204 easily qualifies
as a ‘‘record’’ under that definition. The
written statement provides
‘‘[i]nformation’’ or a ‘‘documentary
account’’ of past events—namely, the
fact of ‘‘whether, to the attesting
executive’s knowledge, the supervised
registered entity during the preceding
calendar year identified any violations
or other instances of noncompliance’’
with an applicable covered order, as
well as the steps the attesting executive
undertook to review and oversee the
supervised registered entity’s activities
with respect to the covered order. Even
under commenters’ preferred definitions
of ‘‘record,’’ the written statement fits
the bill. It ‘‘set[s] down in writing,’’
‘‘furnish[es] written evidence’’ of, and
‘‘gives evidence of’’ the matters required
to be addressed in the written statement.
It also ‘‘recalls or relates past events.’’
Put another way, the written statement
provides ‘‘a description of actions taken
by the business,’’ which commenters
recognize ‘‘might constitute a ‘record.’ ’’
Because the written statement qualifies
as a ‘‘record,’’ section 1024(b)(7)(B)
authorizes the Bureau to require
supervised nonbanks to ‘‘generate’’—
i.e., create 373—such written statements
and ‘‘provide’’ them to the Bureau.374
Contrary to commenters’ assertions,
§ 1092.204(d) does not require the entity
to comply with covered orders, or to
engage in, or to refrain from, other
specific non-recordkeeping conduct.
Rather, the two elements of the written
statement required under
§ 1092.204(d)(1) and (2) are statements
about facts that will already exist at the
time the written statement is
submitted—namely, the steps the
executive took, and whether or not the
entity identified any applicable
violations. Section 1092.204(d) merely
requires that the supervised registered
entity generate and submit a record
(signed by the attesting executive) about
those existing facts.
The commenters suggest that, because
the Bureau uses the term ‘‘attest’’ in
describing the statements required to be
included in the written statement, the
document cannot qualify as a ‘‘record.’’
But nothing about the use of the term
‘‘attest’’ changes the substance of the
written-statement requirements or takes
the written statement outside the realm
of the term ‘‘records.’’ ‘‘Attest’’ means to
‘‘affirm to be true or genuine.’’ 375 It is
373 See Generate, Webster’s Third New
International Dictionary (1981) (defining ‘‘generate’’
as ‘‘to bring into existence’’).
374 12 U.S.C. 5514(b)(7)(B).
375 Attest, Webster’s Third New International
Dictionary (1981); accord Attest, Black’s Law
Dictionary (11th ed. 2019) (‘‘[t]o affirm to be true
or genuine’’); Attest, American Heritage Dictionary
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common to refer to the maker of a
record as having ‘‘attest[ed]’’ to the
information contained in that record.
Indeed, Webster’s Third New
International Dictionary uses the word
‘‘attest’’ in defining the word ‘‘record’’:
The definition of ‘‘record’’ includes ‘‘a
piece of writing that recounts or attests
to something.’’ 376
Further, contrary to commenters’
suggestion, the fact that § 1092.204(e)
requires the supervised entity to
‘‘maintain documents and other records
sufficient to provide reasonable
support’’ for its written statement does
not transform the written statement into
something other than a ‘‘record.’’
Information contained in documents
that constitute ‘‘records’’ is often
supported by other ‘‘records.’’ For
example, accounting journals or ledgers
are ‘‘records,’’ even though they are
often based on other ‘‘records,’’ such as
receipts or invoices.377 Similarly,
§ 1092.204(e)’s recordkeeping
requirement does not render the written
statement a non-‘‘record.’’
Commenters also contend that the
Bureau is exceeding its authority under
section 1024(b)(7)(B) by imposing the
requirement to submit written
statements on individual executives.
According to commenters, section
1024(b)(7)(B) only allows the Bureau to
require a supervised entity to produce
records; it does not allow the Bureau to
require an executive of a supervised
entity to provide any such certification.
The commenters, however, do not
accurately describe the nature of the
requirements imposed by § 1092.204 of
the Bureau’s rule. Section 1092.204
imposes requirements on supervised
registered entities, not on any particular
individuals. Supervised registered
entities with applicable covered orders
must designate attesting executives who
satisfy certain criteria, and they must
submit a written statement that is signed
by the attesting executive ‘‘on behalf of
the supervised registered entity.’’ 378
Those obligations belong to the
supervised registered entity, not to any
individual. If a supervised registered
entity failed to designate an attesting
executive or to submit a written
statement when required to do so, the
of the English Language, https://
www.ahdictionary.com/word/search.html?q=attest
(‘‘[t]o affirm to be correct, true, or genuine’’).
376 Record, Webster’s Third New International
Dictionary (1981) (emphasis added).
377 See, e.g., 2 Robert P. Mosteller et al.,
McCormick on Evidence § 287 (8th ed. 2022)
(explaining that accounting journals or ledgers may
be admissible under the hearsay exception for
records of regularly conducted activities, even
though the journals or ledgers are based on other
records).
378 Section 1092.204(b), (d).
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supervised registered entity—not a
particular individual—would
potentially be subject to an enforcement
action. It is thus simply incorrect to
suggest that § 1092.204 imposes
requirements on corporate executives in
their personal capacities. To be sure, as
with any other regulatory obligation,
supervised registered entities, like any
legal entity, must take steps to comply
with § 1092.204 through their agents.
But the obligations under § 1092.204
belong to supervised registered entities,
not to particular individuals acting in
their personal capacities.
For the reasons discussed above, the
Bureau does not find the comments
challenging its reliance on section
1024(b)(7)(B) persuasive. The Bureau
thus finalizes its conclusion that section
1024(b)(7)(B) authorizes § 1092.204’s
written-statement requirements.
In addition, the Bureau finalizes its
conclusion that CFPA section
1024(b)(7)(C) provides a distinct,
independent statutory basis for
§ 1092.204’s written-statement
requirements. Section 1024(b)(7)(C)
authorizes the Bureau to prescribe rules
to ensure that nonbanks subject to its
supervisory authority ‘‘are legitimate
entities and are able to perform their
obligations to consumers.’’ 379 As the
Bureau has explained, § 1092.204’s
written-statement requirements further
the statutory purposes specified in
section 1024(b)(7)(C) because those
requirements will facilitate the Bureau’s
assessment of whether a company is
willing and able to satisfy its legal
obligations, including those set forth in
covered orders.380
In response, commenters assert that
the types of requirements contemplated
by section 1024(b)(7)(C) address the
competency of management and
financial requirements to ensure the
entity’s solvency, and according to
commenters, the written-statement
requirements do ‘‘not further either of
those statutory purposes.’’ As an initial
matter, the commenters’ argument fails
on its own terms because § 1092.204’s
written-statement requirements
‘‘address the competency of
management.’’ If an entity is violating
its obligations under a covered order, or
its executives are not taking sufficient
steps to effectively oversee the entity’s
compliance with its obligations under
such an order, that would raise concerns
regarding ‘‘the competency of [the
entity’s] management.’’
The commenters also fail to account
for the full breadth of the language
Congress used in section 1024(b)(7)(C).
379 12
U.S.C. 5514(b)(7)(C).
88 FR 6088 at 6091, 6093, 6125.
380 See
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As the Bureau has explained,381 the
term ‘‘obligations’’ in section
1024(b)(7)(C) encompasses ‘‘anything
that a person is bound to do or forbear
from doing,’’ including duties ‘‘imposed
by law, contract, [or] promise.’’ 382
Contrary to commenters’ suggestion, the
term ‘‘obligations’’ is not limited to
financial requirements related to
solvency. Similarly, ‘‘legitimate
entities’’ is a broad phrase
encompassing an inquiry into whether
an entity takes seriously its duty to
‘‘[c]omply[ ] with the law.’’ 383
Commenters also lose sight of the
purposes of the Bureau’s supervisory
program, which are ‘‘assessing
compliance with the requirements of
Federal consumer financial law’’;
‘‘obtaining information about the
activities and compliance systems or
procedures’’ of entities subject to
Bureau supervision; and ‘‘detecting and
assessing risks to consumers and to
markets for consumer financial products
and services.’’ 384 The authority that
Congress granted to the Bureau in CFPA
section 1024(b)(7) must at least be
sufficiently expansive to allow the
Bureau to issue rules aimed at achieving
the supervisory objectives listed in
CFPA section 1024(b)(1). According the
terms ‘‘obligations’’ and ‘‘legitimate
entities’’ in section 1024(b)(7)(C) their
full breadth—rather than artificially
restricting them, as commenters
propose, to addressing limited issues
like solvency—is most consistent with
achieving the congressionally stated
purposes of supervision, including
‘‘assessing compliance with the
requirements of Federal consumer
financial law.’’ 385
In accordance with the expansive
language that Congress used in section
1024(b)(7)(C), the Bureau finalizes its
conclusion that section 1024(b)(7)(C)
provides authority for § 1092.204.
Section 1092.204(a) Scope of Annual
Reporting Requirements
Proposed Rule
Proposed § 1092.203(a) would have
provided that the proposed section
would apply only with respect to
covered orders with an effective date (as
381 See
88 FR 6088 at 6093.
Black’s Law Dictionary (11th ed.
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382 Obligation,
2019).
383 Legitimate, Black’s Law Dictionary (11th ed.
2019) (‘‘[c]omplying with the law; lawful’’); accord
Legitimate, Webster’s Second New International
Dictionary (1934) (defining ‘‘legitimate’’ as
‘‘[a]ccordant with law or with established legal
forms and requirements; lawful’’); Legitimate,
Webster’s Third New International Dictionary
(1981) (similar).
384 12 U.S.C. 5514(b)(1).
385 12 U.S.C. 5514(b)(1)(A).
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that term was defined at proposed
§ 1092.201(f)) on or after the nonbank
registration system implementation date
for proposed § 1092.203.
This section would have applied only
to certain larger supervised entities.386
The Bureau preliminarily concluded
that the reporting requirements set forth
in the section—which focused
specifically on larger supervised
entities’ compliance with the orders
registered pursuant to § 1092.202—
should apply only prospectively to
those covered orders with an effective
date on or after the NBR implementation
date for proposed § 1092.203. The
Bureau explained that the prospective
application of § 1092.203 would have
ensured that entities faced with
enforcement actions that might result in
covered orders could take § 1092.203’s
requirements into account in their
decision-making. While the Bureau did
not believe that compliance with
proposed § 1092.203’s requirements
would materially affect an entity’s
decision-making about how to respond
to a prospective enforcement action—as
discussed in further detail in section VII
of the proposal, for the vast majority of
entities, the Bureau generally did not
anticipate any of the proposed rule’s
reporting and publication requirements
imposing meaningful burden either
operationally or on their bottom line—
the Bureau proposed this provision out
of an abundance of caution. In addition,
the Bureau explained that this
limitation would have helped ensure
that supervised registered entities
would be required to submit reports
only after the nonbank registration
system implementation date.
Comments Received
Commenters did not specifically
address proposed § 1092.203(a). For
comments regarding the proposed
written-statement requirements
generally, including comments stating
that the Bureau lacks authority to
impose such requirements and
otherwise commenting on the nature
and scope of the requirements, see the
discussion elsewhere in this section-bysection discussion of § 1092.204.
386 The proposal would have excluded from the
term ‘‘supervised registered entity’’ persons with
less than $1 million in annual receipts resulting
from offering or providing all consumer financial
products and services described in 12 U.S.C.
5514(a). As discussed in the section-by-section
discussion of § 1092.201(q) above, in a revision to
the proposed rule, the Bureau is adopting an
exclusion for persons with less than $5 million in
annual receipts (as defined) resulting from offering
or providing all consumer financial products and
services described in 12 U.S.C. 5514(a), as well as
a clarification to this provision.
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56107
Final Rule
For the reasons discussed in the
description of the proposal above, the
Bureau adopts § 1092.203(a) as
proposed (renumbered as § 1092.204(a)),
with certain changes for the reasons
described below.387 See the section-bysection discussion of § 1092.201(q)
above for a discussion of revisions to the
definition of ‘‘supervised registered
entity.’’
Section 1092.204(a) describes the
covered orders that are subject to
§ 1092.204’s written-statement
requirements. The Bureau is finalizing
three revisions to this paragraph (a).
First, the Bureau is finalizing an
amendment to the proposal at
§ 1092.204(a)(1) that clarifies that
§ 1092.204 applies only with respect to
covered orders with an effective date on
or after the ‘‘applicable’’ nonbank
registry implementation date. This
amendment reflects the addition of
§ 1092.206 to the final rule, which
establishes nonbank implementation
dates for different categories of covered
nonbanks subject to the final rule. As
discussed in the section-by-section
discussion of § 1092.206 below, the
Bureau is specifying the annual
registration date in § 1092.206 of the
final rule for each category of covered
nonbank in order to provide greater
certainty and clarity to covered
nonbanks as of the issuance of the final
rule. Section 1092.204’s writtenstatement requirements apply only with
respect to covered orders with an
effective date on or after the nonbank
registry implementation date that
applies to the supervised registered
nonbank subject to the covered order, as
provided in § 1092.206.
Second, the Bureau is finalizing an
amendment to the proposal at
§ 1092.204(a)(1) that provides that final
§ 1092.204 shall apply only with respect
to covered orders ‘‘as to which
information is provided or required to
be provided under § 1092.202’’ (and that
also have an effective date on or after
the applicable nonbank registry
implementation date for § 1092.204).
This amendment clarifies that only
covered orders that have been registered
(or are required to be registered) under
§ 1092.202 are subject to § 1092.204’s
written-statement requirements. For
example, a supervised registered
nonbank would not be required to
comply with § 1092.204’s writtenstatement requirements in cases where
the applicable covered order has not
387 See also the section-by-section discussion of
§ 1092.101(e) above regarding the Bureau’s adoption
of the revised term ‘‘nonbank registry
implementation date.’’
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been registered (and was not required to
be registered) under § 1092.202: (1) due
to a stay or other agency or court action;
(2) because the later of the 90-day
period following its applicable nonbank
registry implementation date or the
effective date of the covered order as
provided under § 1092.202 had not yet
expired; or (3) where the supervised
registered nonbank has exercised the
option to register an NMLS-published
covered order under § 1092.203 instead
of § 1092.202. However, once the
covered order is registered (or required
to be registered) under § 1092.202, the
supervised nonbank must comply with
§ 1092.204 as applicable, subject to the
other provisions of the rule, including
§ 1092.202(f)’s provisions regarding
submitting a final filing upon
termination of the covered order. See
the section-by-section discussion of
§ 1092.204(d) below regarding the scope
of the written statements required by
that section.
Third, the Bureau is finalizing a new
paragraph at § 1092.204(a)(2) that
provides that a supervised registered
entity is not required to comply with
§ 1092.204’s written-statement
requirements with respect to any NMLSpublished covered order for which it
chooses to comply with the one-time
registration option described in
§ 1092.203. This provision complements
the related provisions at § 1092.203(a)
and (c), which also provide that a
covered nonbank that is identified by
name as a party subject to a covered
order may elect to comply with the onetime registration option described in
that section in lieu of complying with
the requirements of § 1092.204.
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Section 1092.204(b) Requirement To
Designate Attesting Executive
Proposed Rule
Proposed § 1092.203(b) would have
required a supervised registered entity
subject to an applicable covered order to
annually designate as its attesting
executive for purposes of proposed
subpart B its highest-ranking duly
appointed senior executive officer (or, if
the supervised registered entity does not
have any duly appointed officers, the
highest-ranking individual charged with
managerial or oversight responsibility
for the supervised registered entity)
whose assigned duties include ensuring
the supervised registered entity’s
compliance with Federal consumer
financial law, who has knowledge of the
entity’s systems and procedures for
achieving compliance with the covered
order, and who has control over the
entity’s efforts to comply with the
covered order. The supervised
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registered entity would have been
required annually to designate one
attesting executive for each covered
order to which it is subject and for all
submissions and other purposes related
to that covered order under proposed
subpart B. The supervised registered
entity would have also been required to
authorize the attesting executive to
perform the duties of an attesting
executive on behalf of the supervised
registered entity with respect to the
covered order as required in proposed
§ 1092.203, including submitting the
written statement described in proposed
§ 1092.203(d).
Criteria That an Attesting Executive
Must Satisfy
For the reasons described in section
IV(D) of the proposal, proposed
§ 1092.203(b) would have provided that
a supervised registered entity subject to
a covered order described in proposed
§ 1092.203(a) would generally be
required to designate as its attesting
executive for purposes of proposed
subpart B its highest-ranking duly
appointed senior executive officer (i)
whose assigned duties include ensuring
the supervised registered entity’s
compliance with Federal consumer
financial law, (ii) who has knowledge of
the entity’s systems and procedures for
achieving compliance with the covered
order, and (iii) who has control over the
entity’s efforts to comply with the
covered order. If the supervised
registered entity has no duly appointed
officers, proposed § 1092.203(b) would
have required the entity to designate as
its attesting executive the highestranking individual charged with
managerial or oversight responsibility
for the supervised registered entity who
meets those three criteria.
As explained below in the discussion
of proposed § 1092.203(d), the Bureau
proposed that the attesting executive
would sign a written statement
submitted by the supervised registered
entity regarding the entity’s compliance
with covered orders. The Bureau
believed that proposal would have the
benefit of ensuring that the supervised
registered entity’s reporting obligations
under proposed § 1092.203 have
received attention from the highest
applicable level of a supervised
registered entity’s management. The
Bureau proposed the criteria in
proposed § 1092.203(b) in order to
ensure that the person who attests and
signs the written statement has
sufficient authority and access to all the
relevant company stakeholders to
ensure that the report is as complete and
accurate as possible. The Bureau
believed that the language of proposed
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§ 1092.203(b) would have ensured that
the supervised registered entity
designates an appropriately highranking employee as its attesting
executive. The Bureau believed that
such a person will be in the best
position to know all relevant
information with respect to the order,
and to provide a reliable attestation in
the written statement regarding the
entity’s compliance with the covered
order.
The Bureau anticipated that this
individual will in most cases likely be
a top senior executive of the entity. For
entities that are not organized as
corporations, and thus may not have
duly appointed officers, proposed
§ 1092.203(b) would have clarified that
the attesting executive may be another
individual who is charged with
managerial or oversight responsibility
for the supervised registered entity. The
Bureau anticipated that this individual
would in most cases serve in a capacity
equivalent to a high-ranking senior
executive at a corporation. For example,
the Bureau noted, a supervised
registered entity organized as a limited
liability company that is run by an
individual managing member and lacks
executive officers may designate the
managing member as its ‘‘attesting
executive,’’ where the managing
member’s assigned duties include
ensuring the supervised registered
entity’s compliance with Federal
consumer financial law and the
managing member has the requisite
knowledge and control as described in
proposed § 1092.203(b). Likewise, the
Bureau further noted, a supervised
registered entity organized as a general
or limited partnership may designate an
individual partner who otherwise
satisfies the requirements set forth in
proposed § 1092.203(b). The use of the
term ‘‘executive’’ was not intended to
preclude the designation of such
persons as ‘‘attesting executives’’ where
the supervised registered entity
otherwise lacks a senior executive
officer who satisfies proposed
§ 1092.203(b)’s requirements.
The Bureau anticipated that entities
would take appropriate steps to ensure
compliance with the proposed rule in
the event that an executive leaves
employment or changes duties, or a
higher-ranking executive is put in place.
For example, the Bureau explained, a
supervised registered entity might
consider designating an alternate
attesting executive for each covered
order to address such possibilities,
including by ensuring that they have
sufficient knowledge of the entity’s
systems and procedures for achieving
compliance with the applicable covered
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order(s) and control over the entity’s
efforts to comply with the covered
order(s).
The proposal would have also
required that the supervised registered
entity designate as its attesting
executive for a covered order a person
who has knowledge of the entity’s
systems and procedures for achieving
compliance with the covered order. The
Bureau anticipated that this requirement
would help ensure that the annual
written statement is completed by an
individual with sufficient knowledge of
the entity’s systems and procedures for
achieving compliance to make the
written statement required by proposed
§ 1092.203(d). The Bureau expected that
an executive who lacked knowledge of
those compliance systems and
procedures would not be in the best
position to identify violations of the
order. Therefore, the Bureau believed
that without the proposed knowledge
requirement, the attestation proposed at
§ 1092.203(d)(2) would lose much of its
usefulness.
Proposed § 1092.203(b) would have
also required that the attesting executive
be required to have control over the
entity’s efforts to comply with the
covered order. By this requirement, the
Bureau meant to require that the
executive have the ability, under the
entity’s existing compliance systems
and procedures, to direct and supervise
the entity’s efforts to comply with the
applicable covered order. The Bureau
explained that this proposed
requirement would complement the
knowledge requirement discussed
above, since the Bureau believed an
executive with control over the entity’s
efforts to comply with the covered order
would be more likely also to have (and
to demand) the requisite knowledge
regarding the entity’s related
compliance systems and procedures.
The Bureau noted that it is possible that
an executive with knowledge of an
entity’s related compliance systems and
procedures, but who does not have
control over the entity’s efforts to
comply with an applicable covered
order, would not have been fully
informed regarding violations of the
order. The Bureau further explained that
it would also be able to use information
regarding which executives have control
of the entity’s efforts to comply with
specific covered orders in connection
with its supervisory reviews of the
entity’s compliance systems and
procedures, compliance with Federal
consumer financial law, and risks to
consumers and markets.
In addition, the Bureau expected that
the proposal’s requirements to designate
an attesting executive who has
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knowledge of the entity’s systems and
procedures for achieving compliance
with its covered orders, and who has
control over the entity’s efforts to
comply with its covered orders, would
create an additional incentive for certain
entities to comply with their obligations
to consumers. The Bureau believed that
most supervised registered entities
would comply with covered orders even
without the proposal. However, the
Bureau believed that these requirements
would motivate additional compliance
efforts at certain entities that have failed
to take adequate steps to comply with
the order. The Bureau also believed that
if a particular executive is identified to
the Bureau as the person ultimately
accountable for ensuring compliance
with a covered order, the clear
delineation of that executive’s
responsibility would prompt the
executive to focus greater attention on
ensuring compliance, which in turn
would increase the likelihood of
compliance.
In addition, the Bureau anticipated
that obtaining information about which
senior executive officer(s) at a
supervised registered entity have
knowledge of the entity’s systems and
procedures for achieving compliance
with specific covered orders, and who
have control over the entity’s efforts to
comply with those covered orders,
would facilitate the Bureau’s ability to
identify situations in which individual
executives have recklessly disregarded,
or have actual knowledge of, the entity’s
violations of covered orders. The Bureau
believed that this information would
better enable the Bureau to identify risks
to consumers related to such orders and
the entity’s compliance systems and
procedures, and to take steps to address
such risks through its supervisory or
other authorities. Where the applicable
covered order is a Bureau order, the
Bureau believed such information will
also facilitate the Bureau’s efforts to
assess compliance with the order and to
make determinations regarding any
potential related Bureau supervisory or
enforcement actions. For example, the
Bureau noted, where information
obtained under proposed § 1092.203
indicates that a high-ranking executive
has knowledge of (or has recklessly
disregarded) violations of legal
obligations falling within the scope of
the Bureau’s jurisdiction, and has
authority to control the violative
conduct, the Bureau could use that
information in assessing whether an
enforcement action should be brought
not only against the nonbank covered
person, but also against the individual
executive.
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The Bureau noted that in developing
this proposal, it considered various
options other than requiring entities to
designate a senior executive officer as
an attesting executive. The Bureau
considered permitting entities to
designate lower ranking individuals
whose assigned duties include ensuring
the supervised registered entity’s
compliance with Federal consumer
financial law and who possessed
sufficient knowledge and control to
provide a written statement under
proposed § 1092.203. However, the
Bureau believed that requiring entities
to designate their highest-ranking
executive officer would better help
ensure that all relevant information was
considered when submitting the written
statement. In addition, because the
attestation that would have been
provided under proposed
§ 1092.203(d)(2) would be subject to the
knowledge of the attesting executive,
the Bureau believed this requirement
would help enhance the reliability of
that attestation, and thus the accuracy of
the written statement. The Bureau noted
that lower-ranking managers at the
entity might not be aware of all relevant
facts. Also, the Bureau believed that the
designation requirement would provide
an important piece of information
regarding the organizational structure of
an entity’s compliance management
system—namely, the identity of the
entity’s highest-ranking executive
whose assigned duties include ensuring
the supervised registered entity’s
compliance with Federal consumer
financial law, and who has the requisite
level of knowledge and control. The
Bureau believed that this information
would be valuable to the Bureau’s
understanding of the supervised
registered entity’s compliance systems
and procedures and its organization,
business conduct, and activities subject
to the covered order. The Bureau
concluded that such information would
have informed the Bureau’s functions,
including its use of its supervisory and
enforcement authorities.
As another alternative to imposing
this requirement, the Bureau noted that
it might instead require the entity to
appoint an individual with a given
title—for example, the entity’s Chief
Compliance Officer (CCO), or
equivalent. However, the Bureau
observed that it did not have
comprehensive information regarding
the organizational structures of the
entities it supervises, and the Bureau
expected that many supervised
registered entities may have
organizational structures that do not
provide for a CCO or other officer title.
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The Bureau believed that the proposed
requirement to designate the entity’s
highest-ranking executive who satisfies
the specified criteria would help ensure
that an appropriately high-level
individual was designated but would
retain flexibility to accommodate a
range of entity organizational structures.
And as discussed above, the Bureau
believed that requiring the entity to
designate its attesting executive for each
covered order would provide the Bureau
with information regarding the entity,
including its compliance systems and
procedures and its organization,
business conduct, and activities subject
to the covered order.
As another alternative to the approach
proposed in § 1092.203(b), the Bureau
explained that it might require
supervised registered entities to obtain a
review or audit by an independent
third-party consultant of the entities’
written statements and the facts
underlying the written statements.
However, the Bureau believed that this
alternative would impose costs on the
entity that would largely be avoided by
the proposal’s requirement to designate
an attesting executive already providing
services to the entity and would require
the Bureau to impose controls on such
reviews in order to ensure their
usefulness. In addition, this alternative
would not have provided the Bureau
with the information regarding the
entity described above.
reporting relationships within the entity
and the entity’s compliance systems and
procedures. The Bureau thus believed
that this proposed designation
requirement would help ensure
compliance with the proposed rule,
facilitate the Bureau’s supervision of the
supervised registered entity, help the
Bureau assess and detect risks to
consumers, and help ensure that the
entity is legitimate and able to perform
its obligations to consumers.
The Bureau expected that under most
circumstances, a supervised registered
entity would designate one single
individual as its attesting executive for
all of the covered orders to which it is
subject. However, the Bureau noted,
there may be situations in which there
is no one senior executive officer with
the requisite knowledge of the entity’s
systems and procedures for achieving
compliance with all of the covered
orders to which the entity is subject,
and who has control over the entity’s
efforts to comply with those orders. In
such a case, the Bureau proposed that
the entity could designate different
attesting executives for the covered
orders. By requiring a supervised
registered entity to designate one
attesting executive for each covered
order described in proposed
§ 1092.203(a) to which it is subject,
proposed § 1092.203(b) would have
enabled the Bureau to better identify
such situations.
Requirement To Designate an Attesting
Executive for Each Covered Order on an
Annual Basis
Proposed § 1092.203(b) would have
required a supervised registered entity
to annually designate one attesting
executive for each applicable covered
order to which it is subject and for all
submissions and other purposes related
to that covered order under proposed
subpart B. The Bureau believed that
requiring a supervised registered entity
to designate an attesting executive for
each covered order would facilitate the
Bureau’s supervision of the supervised
registered entity by, among other things,
facilitating the Bureau’s supervisory
communications with the supervised
registered entity regarding the covered
order, including any related supervisory
concerns. The Bureau would have also
been able to contact the attesting
executive with questions and to
understand how the executive’s
responsibilities relate to the entity’s
obligations under its covered orders.
The Bureau also believed that by
requiring the entity to designate its
attesting executive(s) on an annual
basis, the proposal would have better
enabled the Bureau to understand the
Comments Received
See the beginning of the section-bysection discussion of § 1092.204 for a
discussion of certain comments received
regarding the Bureau’s legal authority to
impose the final rule’s written-statement
requirements.
Industry commenters and the joint
comment from State regulators generally
opposed the imposition of the rule’s
written-statement requirements.
Commenters stated that the proposed
requirements were unnecessary,
onerous, and vague, would add little to
no value to the Bureau fulfilling its
objectives, and would be unlawful and
drive up compliance costs. An industry
commenter stated that the proposed
requirements were extreme and an
attempt to trap and embarrass
companies and their executives.
Industry commenters stated that the
proposed written-statement
requirements would not further the
purpose of the proposal.
Industry commenters stated that the
proposed written statements were more
burdensome than described, and that
the proposal did not adequately explain
the benefits of the written-statement
requirements. Industry commenters
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expressed concern that the writtenstatement requirements would harm
consumers by discouraging qualified
individuals from seeking employment
with nonbanks, and stated that the
Bureau should reconsider the cost and
impact that would be associated with
the written-statement requirements in
harming hiring by supervised registered
entities and in discouraging applicants.
The SBA Office of Advocacy stated that
the Bureau had failed to support its
claims that few entities would lack a
qualified executive, and to provide
information about the costs that would
be incurred to obtain a qualified
executive to perform the duties
required.
Industry commenters stated that
proposed § 1092.203(b)’s requirements
to designate an attesting executive for
each covered order were unfair, because
the proposed designation requirement
served only as a shaming tool and
appeared to place sole responsibility for
compliance on the attesting executive.
However, a consumer advocate
commenter stated that the Bureau
would be able to make clear that the
attesting executive is not necessarily an
at-fault individual. An industry
commenter stated that no other industry
seeks to impose liability upon corporate
executives acting in a corporate
capacity, and that under the proposal
such liability would be unlimited.
Industry commenters stated that the
proposed requirement to designate an
attesting executive for each covered
order did not reflect real-world
situations and how companies actually
manage risk, and would inappropriately
signal that other persons are less
responsible for the supervised registered
entity’s compliance with the covered
order. Industry commenters also stated
that proposed § 1092.203(b)’s
requirements to designate an attesting
executive for each covered order were in
conflict with the Bureau’s existing
guidance stating that an institution’s
board of directors or other principals are
ultimately responsible for the
institution’s compliance management,
and that designation of an attesting
executive would encourage the
mistaken notion that compliance is the
sole responsibility of that individual.
The proposal indicated that the
Bureau was considering adopting a
requirement that the attesting executive
attest that, in the executive’s
professional judgment, the entity’s
compliance systems and procedures are
reasonably designed to detect violations
of the applicable covered order and
ensure that such violations are reported
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to the attesting executive.388 An
industry commenter stated that this
alternative requirement would
contribute to the impression that the
compliance burden rests solely with the
attesting executive.
An industry commenter stated that
designation of an attesting executive
would serve no purpose for closely held
entities.
Industry commenters stated that the
rule, including the proposed writtenstatement requirements, should apply
prospectively only.
Response to Comments Received
See the beginning of the section-bysection discussion of § 1092.204 for a
discussion of the Bureau’s response to
certain comments received regarding the
Bureau’s legal authority to impose the
final rule’s written-statement
requirements. As explained in that
discussion, § 1092.204’s writtenstatement requirements are appropriate
and lawful and will serve the purposes
identified in CFPA section
1024(b)(7)(A)–(C) and the goals of the
final rule.
See part VIII for discussion of
comments related to the economic costs
and benefits associated with
§ 1092.204’s written-statement
requirements, including costs related to
hiring and discouraging qualified
applicants from seeking employment
with supervised registered entities. As
described in that analysis, the Bureau
concludes that the requirements
imposed by the final rule’s writtenstatement requirements will impose
only modest costs on entities beyond
the costs entities are already incurring
to ensure compliance with covered
orders. The Bureau is finalizing an
exception to the written-statement
requirements for NMLS-published
covered orders, as discussed in part
IV(E) and the section-by-section
discussion of § 1092.203, which will
reduce overall costs to industry as
discussed in part VIII.
As part of its mandate to ensure that
markets for consumer financial products
are fair, transparent, and competitive,389
the Bureau is committed to applying the
law and regulations fairly and equitably
across all persons subject to its
authority. The Bureau believes the
written statement is a fair approach to
obtaining important information about
covered orders from supervised
registered entities. The Bureau disagrees
with the industry commenters that
§ 1092.204(a)’s requirement to designate
an attesting executive for each covered
388 88
FR 6088 at 6126.
12 U.S.C. 5511(a).
389 See
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order represents an unfair attempt to
place responsibility on individual
attesting executives for violations of
covered orders, or to impose unlimited
accountability on individual executives
in an unprecedented manner. The final
rule does not establish any new
standards, or alter any existing
standards, regarding individuals’
liability for supervised registered
entities’ violations of covered orders or
other legal obligations. Nor does the
final rule alter which agencies have
jurisdiction to enforce the obligations
imposed in covered orders or the scope
of agencies’ discretion to determine
whether to bring such enforcement
actions. Any individual accountability
in connection with violations of covered
orders shall continue to be determined
in accordance with existing law. The
final rule also does not affect the
Bureau’s existing approach to its
supervisory responsibilities, including
the manner in which the Bureau
assesses board and management
oversight at supervised registered
entities.390
As described in the proposal,
§ 1092.204(b) establishes requirements
for the supervised registered entity’s
designation of its attesting executive(s)
to ensure that the person who signs the
written statement has sufficient
authority and access to all the relevant
company stakeholders to ensure that the
report is as complete and accurate as
possible.391 Those requirements are
intended to serve the informationcollection purposes of the rule by
helping to ensure the accuracy and
usefulness of the written statement. As
stated in the proposal,392 the Bureau
also believes these requirements will
create an additional incentive for certain
entities to comply with their obligations
to consumers. These requirements are
specific to the rule. As the Bureau
explained in the proposal,393 the final
rule does not establish any minimum
level of compliance management or
expectation for compliance systems and
procedures. Further, aside from the
targeted designation, written-statement,
and recordkeeping requirements in
§ 1092.204(b) through (e), the final rule
does not impose any requirements on
any of the entity’s internal affairs, or
require any particular approach of
allocating responsibility for complying
390 See, e.g., Federal Financial Institutions
Examination Council, Uniform Interagency
Consumer Compliance Rating System, 81 FR 79473,
79478 (Nov. 14, 2016) (discussing assessment by
agency examiners of Board and management
oversight).
391 88 FR 6088 at 6121–22.
392 Id. at 6122.
393 Id. at 6100.
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with covered orders or with the law
generally. The Bureau understands that
compliance management at supervised
registered entities will likely be
managed differently from entity to
entity and that compliance management
systems will and should be adapted to
a supervised registered entity’s business
strategy and operations. The final rule
does not purport to impose any
restrictions on the manner in which
supervised registered entities address
such matters.
In the proposal, the Bureau explained
that, because—in the Bureau’s
experience—most supervised entities
take active steps to comply with covered
orders, they would likely already have
in place an officer or employee who
could satisfy the § 1092.204(b)
criteria.394 For similar reasons, the
Bureau believed that most supervised
entities would have in place systems
and procedures to help them achieve
compliance with covered orders to
which they are subject.395 Therefore, the
Bureau believed that few supervised
entities would need to make significant
changes to their compliance systems to
comply with § 1092.204.396 Despite the
Bureau’s request for comment on the
issue, no commenter provided
persuasive evidence that § 1092.204(b)’s
designation requirement likely would
impose material additional costs on a
substantial number of supervised
registered entities, beyond the costs
those entities are already likely to incur
as part of fulfilling their obligations
under the covered orders to which they
are subject. For additional discussion
about these and other potential costs
associated with this provision, see parts
VIII and IX.
In the proposal,397 the Bureau
described the attesting executive as
‘‘identified to the Bureau as the person
ultimately accountable for ensuring
compliance with a covered order.’’ This
description was merely intended to
reflect § 1092.203(b)’s requirements
regarding the designation of the highestranking individual charged with
managerial or oversight responsibility
for the supervised registered entity who
meets the three criteria established in
that section. To be clear, the final rule
does not affect the Bureau’s longstanding guidance for supervised
registered entities organized as
corporations that the board of directors
is ultimately responsible for developing
and administering a compliance
management system that ensures
394 See
88 FR 6088 at 6132.
id. at 6133.
396 See id. at 6132–33.
397 Id. at 6122.
395 See
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compliance with Federal consumer
financial laws and addresses and
minimizes associated risks of harm to
consumers.398 In a supervised registered
entity organized under a non-corporate
form, that ultimate responsibility may
rest with a controlling person or some
other arrangement. The Bureau
understands that compliance
management at supervised registered
entities will likely be managed
differently from entity to entity and that
compliance management systems will
and should be adapted to a supervised
registered entity’s business strategy and
operations. Consistent with FFIEC
guidance, Bureau examiners evaluate
Board and management oversight factors
commensurate with the institution’s
size, complexity, and risk profile.399
The Bureau agrees that compliance is
often the responsibility of many, and
not just a single executive. The final
rule does not attempt to place such
responsibility entirely on the shoulders
of the entity’s attesting executive.
Nevertheless, as stated in the
proposal,400 the Bureau does believe
that § 1092.204(b)’s designation
requirement will create an additional
incentive for certain entities to comply
with their obligations to consumers. The
Bureau expects the requirement to
designate a single attesting executive for
the covered order will prompt the
executive to focus greater attention on
ensuring compliance, which in turn will
increase the likelihood of compliance.
Also, as stated in the proposal,401 the
Bureau intends to use the information
submitted under § 1092.204 to facilitate
its efforts to assess compliance with any
covered orders that may be enforced by
the Bureau, and to make determinations
regarding any potential Bureau
supervisory or enforcement actions
related to the covered order or any other
identified risks to consumers. For
example, where information obtained
under proposed § 1092.204 indicates
that a high-ranking executive has
knowledge of (or has recklessly
disregarded) violations of legal
obligations falling within the scope of
the Bureau’s jurisdiction, and has
authority to control the violative
conduct, the Bureau may use that
information in assessing whether an
enforcement action should be brought
not only against the nonbank covered
person, but also against the individual
executive. However, the final rule itself
398 See CFPB Supervision and Examination
Manual at CMR 3.
399 See, e.g., Uniform Interagency Consumer
Compliance Rating System, 81 FR 79473 at 79480.
400 88 FR 6088 at 6122.
401 Id.
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does not impose any legal obligation on
the attesting executive to ensure
compliance with any covered order.
The Bureau declines to finalize the
proposed additional requirement
described in the proposal 402 that would
have required the attesting executive to
attest that the entity’s compliance
systems and procedures are reasonably
designed to detect violations of the
applicable covered order and ensure
that such violations are reported to the
attesting executive. The Bureau
disagrees with the industry commenter
that a requirement that the executive
attest to such matters would contribute
to the impression that the compliance
burden rests solely with the attesting
executive. But the Bureau does not
believe it is necessary at this time to
require supervised registered entities to
submit such information on an annual
basis, or to dedicate staff and other
Bureau resources to reviewing such
submissions.
The Bureau believes it is appropriate
even for closely held entities annually
to designate an attesting executive for
each covered order. The designation
requirement will serve the informationcollection purposes of the rule by
ensuring that the person who signs the
written statement has sufficient
authority and access to all the relevant
company stakeholders to ensure that the
report is as complete and accurate as
possible.403 These requirements are
necessary even for closely held entities.
The Bureau may not regularly examine
such entities, may not be aware of the
entity’s existence, and may not have
adequate information about the entity’s
structure or operations; the designation
requirement will help inform the
Bureau regarding such matters. In
addition, the designation requirement
will facilitate the Bureau’s efforts to
assess compliance with any covered
orders that may be enforced by the
Bureau, and to make determinations
regarding any potential Bureau
supervisory or enforcement actions
related to the covered order or any other
identified risks to consumers.
As for commenters’ requests that the
rule’s written-statement requirements
apply only prospectively, they are in
fact so limited. Section 1092.204’s
written statement requirements apply
only prospectively to covered orders
with an effective date after the nonbank
registry implementation date that is
applicable to the supervised registered
entity under § 1092.206. Thus, a
supervised registered entity will not be
required to file written statements for
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402 88
FR 6088 at 6126.
403 See 88 FR 6088 at 6121–22.
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any covered order issued before late
2024, at the earliest. Moreover, as
explained above, while some covered
orders with an effective date after the
applicable nonbank registry
implementation date might relate to
violations of covered laws committed
before the final rule’s effective date, the
Bureau does not believe that the
prospect of becoming subject to the
written-statement requirements would
have had a significant marginal impact
on a supervised registered entity’s
decision whether to engage in conduct
that risked violating covered laws, given
the negative consequences already
associated with committing such legal
violations.404
Final Rule
The Bureau adopts § 1092.203(b) as
proposed (renumbered as § 1092.204(b))
for the reasons described above, with
minor technical edits and certain
changes and clarifications for the
reasons discussed below.
The first sentence of § 1092.204(b) in
the final rule has been revised from the
proposed version to provide that the
requirement to designate an attesting
executive applies only as to covered
orders that are described in
§ 1092.204(a). The first sentence of
§ 1092.204(b) in the final rule has also
been revised from the proposed version
to clarify, consistent with the approach
described in the proposal and the final
rule, that under § 1092.204(b) a
supervised registered entity subject to a
covered order described in § 1092.204(a)
is required to designate an attesting
executive for each covered order to
which it is subject.
Section 1092.204(c) Requirement To
Provide Attesting Executive(s) With
Access to Documents and Information
Proposed Rule
Proposed § 1092.203(c) would have
required a supervised registered entity
subject to proposed § 1092.203 to
provide its attesting executive(s) with
prompt access to all documents and
information related to the supervised
registered entity’s compliance with all
applicable covered order(s) as necessary
to make the written statement(s)
required in proposed § 1092.203(d).
The Bureau believed that this
proposed requirement would help
ensure that the attesting executive for an
applicable covered order has timely
access to the documents and
information needed to submit an
informed and accurate written statement
404 See additional discussion of retroactivity
concerns in the section-by-section discussion of
§ 1092.202(d) above.
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under proposed § 1092.203(d). A
supervised registered entity would not
have been permitted to refuse or deny
to its attesting executive access to
documents or information related to the
supervised registered entity’s
compliance with the covered order.
Under the proposed requirement, the
Bureau would have expected the
attesting executive to have prompt
access to all such documents and
information, notwithstanding, for
example, any privileges that may apply
to the documents and information, or
where or how the documents and
information are stored.
The Bureau believed that this
requirement would enhance the
accuracy and usefulness of the written
statement, which in turn would enhance
the Bureau’s ability to supervise the
entity effectively, assess and detect risks
to consumers, and ensure the entity is
legitimate and able to perform its
obligations to consumers. The Bureau
requested comment on the need for this
requirement and whether other
requirements, modifications, or
amendments to proposed § 1092.203(c)
should be considered in order to ensure
the accuracy and usefulness of the
written statement.
Comments Received
Commenters did not specifically
address proposed § 1092.204(c).
Final Rule
For the reasons set forth in the
description of the proposal above, the
Bureau adopts § 1092.203(c) as
proposed (renumbered as § 1092.204(c)).
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Section 1092.204(d) Annual
Requirement To Submit Written
Statement to the Bureau for Each
Covered Order
Proposed Rule
Proposed § 1092.203(d) would have
required, on or before March 31 of each
calendar year, that the supervised
registered entity submit to the NBR
system, in the form and manner
specified by the Bureau, a written
statement with respect to each covered
order described in proposed
§ 1092.203(a). In the written statement,
the attesting executive would have been
required to provide a summary
description of the executive’s efforts to
review and oversee compliance with the
applicable order, and to attest regarding
the entity’s compliance with the order.
Proposed § 1092.203(d) would have
required the written statement to be
signed by the supervised registered
entity’s attesting executive.
Proposed § 1092.203(d)(1) would have
required the written statement to
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contain a general summary description
of the steps, if any, the attesting
executive has undertaken to review and
oversee the supervised registered
entity’s activities subject to the
applicable covered order for the
preceding calendar year. This proposal
was intended to provide information to
the Bureau regarding the compliance
monitoring efforts that have been
undertaken by the executive during the
applicable time period in connection
with the order. The proposed rule
would not have established any
minimum procedures or otherwise
specified the steps the executive must
take to review and oversee the entity’s
activities. Instead, the proposed rule
would have required only that the
executive provide the Bureau with a
general description of the steps the
executive has already taken in this
regard. The Bureau believed that this
information would enhance the
usefulness of the written statement by
providing valuable context regarding the
basis of the attesting executive’s
knowledge and by assisting the Bureau
with determining the degree to which
the Bureau may rely on the written
statement. The Bureau believed that this
information would be useful because
the proposal would not by itself
establish minimum requirements
regarding the attesting executive’s
review and oversight of the entity’s
activities.
Proposed § 1092.203(d)(2) would have
required the attesting executive to attest
whether, to the attesting executive’s
knowledge, the supervised registered
entity during the preceding calendar
year identified any violations or other
instances of noncompliance with any
obligations that were imposed in a
public provision of the covered order by
the applicable agency or court based on
a violation of a covered law. The
attestation would have been provided
subject to the attesting executive’s
knowledge. As discussed above with
respect to proposed § 1092.203(b) and
proposed § 1092.203(c), the Bureau
anticipated that the attesting executive
would have adequate knowledge of the
entity’s systems and procedures for
achieving compliance with the covered
order to provide a useful attestation.
The written statement described in
the proposal would have addressed
violations and other instances of
noncompliance with obligations that are
‘‘based on’’ a violation of a covered law.
For purposes of this proposed
requirement, the Bureau explained that
an obligation would have been ‘‘based
on’’ an alleged violation where the order
identifies the covered law in question,
asserts or otherwise indicates that the
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56113
covered nonbank has violated it, and
imposes the obligation on the covered
nonbank as a result of the alleged
violation.405 This would have included,
for example, obligations imposed as
‘‘fencing-in’’ or injunctive relief, so long
as those obligations were imposed at
least in part as a result of the entity’s
violation of a covered law. The
proposed written statement would have
also needed to address, for example, any
obligation imposed as part of other legal
or equitable relief granted with respect
to the violation of a covered law, as well
as any obligation imposed in order to
prevent, remedy, or otherwise address a
violation of a covered law, or the
conditions resulting from such
violation. The Bureau explained that, as
discussed elsewhere in the proposal, an
order may identify a covered law as the
legal basis for the obligations imposed
by referencing another document, such
as a written opinion, stipulation, or
complaint, that shows that a covered
law served as the legal basis for the
obligations imposed in the order. The
Bureau proposed this approach because
an order may satisfy the proposed
definition of ‘‘covered order’’ but
nonetheless contain provisions that are
entirely unrelated to covered laws. This
element of the requirement in proposed
§ 1092.203(d)(2) was intended to
exclude such provisions that are
entirely unrelated to violations of
covered laws.
The supervised registered entity
would have been required to state
whether it has or has not identified
instances of noncompliance with
respect to each covered order. If no such
instances of noncompliance have been
identified, the supervised registered
entity would have been required to so
state. The proposed rule would not have
established any minimum procedures or
otherwise imposed or specified steps a
supervised registered entity must take in
order to review or monitor compliance
with each covered order.406 Instead, the
proposed rule would merely have
required supervised registered entities
to report violations and noncompliance
that they had already identified in the
course of their own compliance reviews
and assessments. The Bureau believed
405 As in the context of proposed § 1092.201(e)(4),
the Bureau explained that an obligation imposed
based on multiple violations, some of covered laws
and some of other laws, would qualify as an
‘‘obligation[ ] . . . based on an alleged violation of
a covered law’’ within the meaning of proposed
§ 1092.203(d)(1), even if the violations of the noncovered laws would themselves have sufficed to
warrant the imposition of the obligation.
406 As discussed elsewhere in the proposal, the
Bureau expected that some supervised registered
entities might bolster their compliance efforts in
response to the proposal.
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that supervised registered entities likely
already conduct reviews to determine
their compliance with covered orders,
and those reviews would assist in
completing the required written
statements. The Bureau did not expect
the proposal to amend or affect any
review, reporting, or recordkeeping
requirement contained in any covered
order or other provision of law.
While proposed § 1092.203(d) would
have required the written statement to
be signed by the supervised registered
entity’s attesting executive, it would not
have required the attesting executive to
submit a statement subject to the
penalty of perjury. Nevertheless, the
Bureau noted that knowingly and
willfully filing a false attestation or
report with the Bureau may be subject
to criminal penalties.407 The Bureau
believed that the signature requirement,
and the consequent potential for
criminal liability where a knowingly
false attestation is made, would be
likely to deter attesting executives from
submitting written statements that are
incorrect or based on incomplete or
otherwise inadequate information. The
Bureau explained that this requirement
should significantly enhance the
accuracy and usefulness of the written
statement.
Comments Received
Commenters objected to the proposed
annual requirement to submit a written
statement to the Bureau for each
covered order, and to the type of
information that the proposal would
require a supervised registered entity to
submit. Industry commenters stated that
the written statement to be submitted
under proposed § 1092.204(d) would
require proving to the Bureau that the
entity had complied with applicable
law. Industry commenters expressed
concern with the Bureau’s statement in
the notice of proposed rulemaking 408
that the proposed requirement for the
attesting executive to sign the written
statement, and the consequent potential
for criminal liability where a knowingly
false attestation is made, would be
likely to deter attesting executives from
submitting written statements that are
incorrect or based on incomplete or
otherwise inadequate information.
Commenters referred or alluded to this
statement in the proposal in expressing
concern that an incorrect or false
written statement would be punishable,
and stated that a single individual could
not hold first-hand knowledge sufficient
to ensure compliance with a covered
order. An industry commenter stated
407 See
408 See
18 U.S.C. 1001.
88 FR 6088 at 6125.
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that the proposal seemed to conflate
‘‘knowingly and willfully’’ with the
making of an incorrect statement or a
statement based on incomplete or
otherwise inadequate information, and
stated that the Bureau’s discussion of 18
U.S.C. 1001 was misleading and caused
confusion as to what standard would
apply to the attestation.
Commenters stated that the proposed
written-statement requirements were
vague and unclear, so executives and
supervised registered entities would be
required to guess what the Bureau
expects in terms of compliance.
Commenters stated that the Bureau must
unambiguously articulate the
obligations of supervised registered
entities and attesting executives under
the rule, including the potential liability
and intent standards. Industry
commenters further suggested that such
assertedly vague requirements
represented an attempt at ‘‘regulation by
enforcement’’ by the Bureau.
An industry commenter stated that
the proposed requirement to attest
regarding past violations was
incompatible with constitutional due
process, since a court might
subsequently determine, after the
executive had submitted a written
statement, that an applicable violation
had in fact occurred. The commenter
expressed concern that such a
development would lead to retroactive
liability for the attesting executive.
An industry commenter stated that
the proposal would have required the
submission of an absolute statement,
which in the commenter’s view would
be unreasonable, and stated that the
required written statement should
include materiality and reasonableness
standards—for example, to provide that
the entity had not identified any
material violations, and that the
statement was based on a reasonable
and good-faith review of the material
information.
Industry commenters and a joint
comment by State regulators stated that
the proposed written statement
requirement was jurisdictional
overreach by the Bureau and an
unauthorized attempt to enforce laws
that the Bureau does not enforce.
Commenters also stated that the issuing
agency (or court), and not the Bureau,
should monitor and establish
compliance guidelines related to the
covered order.
A joint comment by State regulators
asserted that the proposed writtenstatement requirements would
complicate and frustrate attempts by the
States to enforce Federal consumer
financial law, and stated that such
requirements would be onerous,
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duplicative, and unnecessary, and may
ultimately weaken the original
regulatory action and order. This
comment and industry commenters also
stated that the proposed writtenstatement requirements would create
contradictory reporting obligations,
since covered orders themselves contain
reporting provisions and the agencies
that issue or obtain such orders will also
be monitoring compliance.
Commenters stated that in lieu of the
proposed written-statement
requirements, the Bureau should rely on
similar attestations submitted to the
NMLS, including the NMLS Form MU1,
where applicable. The joint comment
letter from State regulators stated that
established information-sharing
memorandums of understanding and
supervisory coordination protocols
provide the most effective and
straightforward means for the Bureau
and State regulators to raise concerns
and identify potential instances of
recidivism at supervised registered
nonbanks.
An industry commenter stated that
the registry should provide supervised
registered entities with an opportunity
to supplement their written statements
with relevant ameliorating information,
such as remediation paid or steps taken.
A joint comment by industry
commenters stated that the proposal
failed to consider downsides to the
written-statement requirements, and
that the Bureau had failed to provide an
adequate explanation of the basis of its
belief that those requirements would
achieve their claimed benefits or the
scale of any benefit to consumers.
An industry commenter stated that
the requirement that would have been
imposed under proposed
§ 1092.203(d)(1) to ‘‘[g]enerally describe
the steps that the attesting executive has
undertaken to review and oversee the
supervised registered entity’s activities
subject to the applicable covered order
for the preceding calendar year’’ may
exceed the reporting requirements of the
underlying covered order, multiplying
the burden imposed by that order.
Another industry commenter stated that
this requirement would not provide an
adequate, accurate description of the
compliance framework and that the
Bureau could instead simply obtain this
information through its normal
supervisory process. This commenter
also stated that obtaining this
information via the proposed registry
would put confidential supervisory
information at risk. Other industry
commenters stated the Bureau should
detail how it will safeguard written
statement information against data
breach.
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An industry commenter stated that
the proposed registry should not require
disclosure of information protected by
the attorney-client privilege.
Commenters stated that the proposed
written-statement requirements would
have a significant chilling effect on the
hiring and retention of senior executives
and could discourage competent
individuals from serving in such roles,
raising costs and potentially harming
consumers.
An industry commenter suggested
that the proposed written-statement
requirements would raise First
Amendment concerns related to
compelled speech, and an individual
commenter expressed concerns
regarding the proposal’s implications for
free speech.
An industry commenter stated that
the proposed written statements would
be redundant because the applicable
covered order, if issued under consent,
would already have been signed by a
company officer.
An industry commenter stated that
the attestation described at proposed
§ 1092.203(d)(2) should not be made by
an executive but by the supervised
registered entity itself. An industry
commenter stated that the proposed
written statement would
inappropriately substitute individual
liability for the company’s liability,
contrary to longstanding corporate legal
tenets regarding piercing the corporate
veil.
Industry commenters stated that the
proposed written statements would
cause supervised registered entities to
place undue emphasis on compliance
with covered orders to the detriment of
their other compliance responsibilities,
distorting compliance programs at such
entities, imposing unwarranted burden,
and harming consumers.
Industry commenters stated that the
proposed written-statement
requirements should not include any
representations about compliance with
covered orders issued under State laws.
In particular, these commenters
suggested that because many covered
orders require ongoing compliance with
State UDAP laws, and because those
laws are very broad and cover a wide
range of activities, it would be
impossible for attesting executives to be
certain that the supervised registered
entity had not violated such a covered
order. Commenters stated that the
Bureau has no legitimate interest in
requiring written statements regarding
compliance with such laws.
More generally, commenters stated
that the proposed written-statement
requirements were unfair because it
would be impossible for an executive to
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attest that the supervised registered
entity had not committed any violations
of the applicable covered order,
especially since such orders often cover
a wide range of broad laws, including
UDAAP laws.
In the proposal, the Bureau stated that
it was ‘‘also considering adopting a
requirement that the written statement
contain a short description of the
entity’s compliance systems and
procedures relating to the covered order,
including a description of the processes
for notifying the attesting executive
regarding violations or other instances
of noncompliance with the order.’’ 409
The Bureau stated that it ‘‘expects that
many executives may choose to provide
such information in the summary
narrative portion of the written
statement required in proposed
§ 1092.203(d)(1), as part of describing
the steps that the attesting executive has
undertaken to review and oversee the
supervised registered entity’s activities
subject to the applicable covered order,’’
but it sought ‘‘comment on whether to
expressly require submission of such
information in the final rule.’’ 410 One
industry commenter, while stating that
the Bureau should remove the writtenstatement requirements altogether,
argued in the alternative that if the
Bureau did choose to require a written
statement it should take an approach
similar to this proposed alternative.
Under the approach suggested by the
industry commenter, the entity would
be required to submit a written
statement to the effect that the entity’s
overall compliance program is
reasonably designed to detect and
prevent violations of all orders, and not
just a particular covered order. Another
industry commenter stated that this
proposed alternative would not alleviate
the industry commenter’s concerns
about the proposal, would not provide
an adequate, accurate description of the
compliance framework, and could risk
revealing confidential information about
the entity or its compliance system or
procedures.
Industry commenters stated that the
proposal failed to identify benefits of
the proposed written-statement
requirements that could not readily be
achieved through the Bureau’s exercise
of its existing supervisory authorities
with fewer negative consequences.
These commenters stated that the
Bureau could gather sufficient
information through its normal
supervisory process. A commenter
stated that the Bureau could obtain
more detailed and comprehensive
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FR 6088 at 6126.
410 Id.
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56115
information about the entity’s
compliance systems and procedures for
complying with the order through the
supervisory process.
Tribe and industry commenters stated
that for purposes of the written
statement, orders should not be
considered ‘‘final’’ as provided under
proposed § 1092.201(e) until all avenues
of appeal have been exhausted.
Response to Comments Received
Section 1092.204(d) does not require
that the supervised registered entity
demonstrate its compliance with the
covered order to the Bureau. The
provision requires only that the
supervised registered entity indicate
whether or not, to the knowledge of the
attesting executive, the supervised
registered entity has identified any
violations of applicable provisions of
the covered order. As stated in the
proposal, knowingly and willfully filing
a false attestation or report with the
Bureau may be subject to criminal
penalties under other provisions of law
outside the final rule.411 But neither the
final rule nor the existing legal
obligations of individuals and entities to
be truthful in their attestations to the
Bureau require attesting executives to
demonstrate compliance with covered
orders. Section 1092.204(d)(2) requires
only that the executive attest
(truthfully), to the executive’s
knowledge, regarding whether the entity
has identified any applicable violations
(or other instances of noncompliance).
For example, an attesting executive
might attest truthfully that the entity has
not identified a violation even if the
entity has in fact violated the order, so
long as the entity has not identified that
violation.
The proposal’s statement regarding
the possibility of criminal penalties did
not purport to expand or otherwise
affect the scope of an executive’s
potential liability under existing
criminal law for submitting false
statements to the Bureau. Nor does the
final rule impose any requirements
regarding steps that an executive must
411 See, e.g., 18 U.S.C. 1001. One industry
commenter asserted, incorrectly, that the proposal
would have required the attesting executive to
submit the annual written statement subject to the
penalty of perjury. As stated in the proposal, and
as acknowledged by other commenters, proposed
§ 1092.203(d) would not have required the attesting
executive to submit a statement subject to the
penalty of perjury. See 88 FR 6088 at 6125. The
Bureau sought comment on its proposal to require
the attesting executive’s signature on the statement
but not to require a statement subject to the penalty
of perjury. Commenters did not provide arguments
in support of changing this approach, and the
Bureau finalizes § 1092.204(d) without requiring the
attesting executive to submit a statement subject to
the penalty of perjury.
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take to review and oversee the
supervised registered entity’s activities
subject to the applicable covered order.
While the Bureau expects attesting
executives to submit truthful statements
under the final rule and believes that
the existence of other laws like 18
U.S.C. 1001 provides incentives in that
regard, the final rule does not purport to
interpret provisions of criminal law
(which are administered by agencies
other than the Bureau) or to identify
particular circumstances under which
an attesting executive would become
criminally liable for false statements.412
Nor, as discussed in the description of
the proposal above, does the final rule
itself establish any minimum
procedures or otherwise specify the
steps the executive must take in order
to review and oversee the entity’s
activities. Instead, § 1092.204(d)(1)
requires only that the executive provide
the Bureau with a general description of
the steps the executive has already
taken in this regard; this information
will provide valuable context regarding
the basis of the attesting executive’s
knowledge and will assist the Bureau
with determining the degree to which
the Bureau may rely on the written
statement. The attestation submitted
under § 1092.204(d)(2) is made subject
to the attesting executive’s knowledge,
as that knowledge exists. As discussed
above, based in part on the other
written-statement requirements
contained in § 1092.204, the Bureau
anticipates that the attesting executive
will have adequate knowledge of the
entity’s systems and procedures for
achieving compliance with the covered
order to provide a useful attestation.
The Bureau declines to modify the
required contents of the written
statement as provided at
§ 1092.204(d)(1) and (2). The Bureau
believes these provisions are sufficiently
clear to inform registered supervised
entities and their attesting executives
regarding their responsibilities under
the final rule. Section 1092.204(d)(1)
requires that the attesting executive
generally describe the steps that the
attesting executive has undertaken to
review and oversee the supervised
registered entity’s activities subject to
the applicable covered order for the
preceding calendar year. Section
1092.204(d)(2) requires that the attesting
executive attest whether, to the attesting
executive’s knowledge, the supervised
registered entity during the preceding
412 Note, however, that a supervised registered
entity’s failure or refusal to make reports or provide
information as required under the final rule may
violate civil laws administered by the Bureau,
including not just the rule itself but also 12 U.S.C.
5536(a)(2).
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calendar year identified any violations
or other instances of noncompliance
with any obligations that were imposed
in a public provision of the covered
order by the applicable agency or court
based on a violation of a covered law.
If the executive knows of such
identified violations, the executive
should so state; conversely, if the
executive does not know of such
identified violations, the executive
should so state. That is all these
provisions of the final rule require.
The final rule does not require that
the supervised registered entity prove
its compliance with the applicable
covered order to the Bureau. Instead, the
rule requires the attesting executive to
state whether the entity has identified
applicable violations of the covered
order. If an agency or court were to
subsequently determine that, contrary to
the entity’s determination at the time of
the written statement, the supervised
registered entity had in fact violated the
covered order during the relevant year,
that determination would not establish
that the entity’s attestation was false.
Thus, the rule does not impose a
retroactive liability on supervised
registered entities or their attesting
executives.
The Bureau believes that the written
statement requirement is reasonable and
declines to impose materiality
requirements as to the type of violations
that must be declared. There is value to
the Bureau in knowing about any
violation of existing orders, even
violations that might be characterized as
‘‘minor.’’ The covered order is in place
because an agency or court has already
determined that issuing the order, and
each of the provisions thereof, was
appropriate to address a violation by the
supervised registered entity of a covered
law. A subsequent violation of the
covered order is therefore a ‘‘second
strike’’ that is probative of risk to
consumers. The Bureau believes that
obtaining information about such
matters through the written statement
will facilitate its supervisory activities
and its assessment and detection of risks
to consumers. In addition, violation of
any legally binding obligation may
indicate that the entity lacks the
willingness or ability more generally to
comply with its legal obligations,
including its obligations under the
Federal consumer financial laws that
the Bureau enforces. Thus, the
submission of information about such
violations, even allegedly minor ones,
will assist the Bureau in ensuring that
supervised registered entities are
legitimate entities and are able to
perform their obligations to consumers.
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The Bureau also declines to impose a
reasonableness, good faith, or other
standard regarding the steps that the
attesting executive has undertaken to
review and oversee the supervised
registered entity’s activities subject to
the applicable covered order. The final
rule does not impose any substantive
requirements on supervised registered
entities or attesting executives regarding
such steps. Thus, there is no need for
the final rule to establish a standard
against which the Bureau will assess
compliance with any such
requirements. The Bureau intends to
review the summary narrative portion of
the written statement required in
§ 1092.204(d)(1) for information
regarding the executive’s review. In
addition, § 1092.204(e) imposes related
recordkeeping requirements with
respect to the preparation of the written
statement. The Bureau anticipates that
these requirements will assist the
Bureau in assessing the reliability of the
written statement.
For similar reasons, the Bureau
declines to impose reasonableness or
other standards with respect to the
entity’s efforts to identify applicable
violations of covered orders. The final
rule does not impose any substantive
requirements on supervised registered
entities with respect to such matters.
For example, the final rule does not
establish any minimum procedures or
otherwise impose or specify steps a
supervised registered entity must take in
order to review or monitor compliance
with any covered order. The Bureau will
continue to assess such matters as part
of its normal supervisory process where
applicable.
The Bureau disagrees that the writtenstatement requirements represent an
attempt to enforce the orders or laws
that are administered by other agencies
(or by courts). The written-statement
requirements are intended to promote
the Bureau’s own work by facilitating
the Bureau’s supervisory activities and
its assessment and detection of risks to
consumers, and by ensuring that
supervised registered entities are
legitimate entities and are able to
perform their obligations to consumers.
The Bureau is adopting these
requirements for the purposes
established by Congress. The Bureau
does not agree with commenters’
assertions that written-statement
requirements to provide information
about violations of a covered order
constitute an effort to enforce that order.
The written statement required under
§ 1092.204(d) is not intended to monitor
compliance by supervised registered
entities with covered orders for the
purpose of enforcing those orders. This
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part of the written statement is intended
to provide the Bureau with information
regarding whether or not the entity
violated the covered order during the
preceding year. As described at part IV,
that information will facilitate the
Bureau’s supervision of the supervised
registered entity, help the Bureau detect
and assess risks to consumers, and help
ensure that supervised registered
entities are legitimate entities and are
able to perform their obligations to
consumers. However, the Bureau does
not intend to, and does not assert any
authority to, enforce covered orders
merely because of their covered order
status. While certain covered orders—
such as the Bureau’s own orders—will
be enforceable by the Bureau, others
will not be. The final rule will not affect
whether the Bureau may enforce the
terms of any covered order.
Some commenters expressed concern
that the Bureau is overextending its
authority by using the written-statement
requirements in an effort to enforce
State law. The written-statement
requirement, however, does not seek to
compel compliance with orders issued
under State law. Instead, the writtenstatement requirement is an aid to
assessing risks to consumers arising
under Federal consumer financial law,
including by considering the extent to
which an entity is subject to oversight
by State authorities.413 Although it is
possible that, in some instances, the
Bureau may review information
submitted through the registry,
including the written statements from
attesting executives, and determine that
supervisory action under Federal
consumer financial law is necessary, the
Bureau’s review may also indicate that
action under Federal law is unnecessary
or should be a lower supervisory
priority.
The Bureau believes it is important to
obtain the information described in the
final rule about supervised registered
entities’ ongoing compliance with
relevant provisions of covered orders,
including covered orders issued or
413 See 12 U.S.C. 5514(b)(2)(D) (providing that, in
prioritizing entities for supervision, the Bureau
should consider ‘‘the extent to which such
institutions are subject to oversight by State
authorities for consumer protection’’). As discussed
in the section-by-section discussion of § 1092.201(c)
above, the Bureau declines to remove State laws
from the final rule’s definition of ‘‘covered law’’ or
to exempt covered orders issued under such laws
from the scope of the written-statement
requirements. As discussed in that section and in
the proposal, the Bureau has determined that
agency and court orders stemming from violations
of these State laws will likely be probative of risk
to consumers. The Bureau believes that it is
important to impose the annual written-statement
requirements on supervised registered entities that
are subject to such covered orders.
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obtained by State and local agencies.
The Bureau believes that the written
statement obligations in the final rule
will not complicate or frustrate State
enforcement efforts. The Bureau will not
undermine the efforts of other regulators
by collecting such information from
entities subject to its jurisdiction related
to the offering or provision of consumer
financial products and services. As
discussed above, the Bureau does not
intend to, and does not assert any
authority to, enforce covered orders not
issued or obtained by the Bureau merely
because of their covered order status. As
stated in the proposal,414 evidence
regarding a supervised registered
entity’s compliance with a covered
order will provide the Bureau with
important information regarding risks to
consumers that may be associated with
the order and will be highly relevant to
the Bureau’s own supervisory and
enforcement efforts. State regulators
conduct enhanced supervision and
ongoing monitoring of companies that
are subject to covered orders precisely
because of the increased risk such
orders represent. The Bureau agrees
with the joint comment from State
regulators that increased coordination
and information sharing with the States
regarding such orders will also facilitate
the work of all regulators concerned,
and the Bureau intends to use the
information provided under the registry,
including the written statement, so that
it may be better informed about such
orders and thus be in a better position
to communicate with other regulators
about them.
The additional reporting obligation in
the final rule will not prevent or
interfere with the efforts of supervised
registered entities to comply with their
other reporting obligations. Supervised
registered entities can comply with their
reporting requirements under
§ 1092.204(d) and other sources of law,
much as supervised registered entities
currently comply with Bureau
supervisory requests for information
under CFPA section 1024(b)(1) while
also complying with other reporting
requirements.415
The Bureau agrees with the industry
commenter that registration under the
NMLS system will provide information
that may help lessen the need to submit
an annual written statement to the
Bureau under this section. As discussed
in the section-by-section discussion of
final § 1092.203, the Bureau is adopting
a provision that will provide an option
for a supervised registered entity to file
a one-time statement to the Bureau in
PO 00000
414 See
415 See
88 FR 6088 at 6125.
12 U.S.C. 5514(b)(1).
Frm 00091
Fmt 4701
Sfmt 4700
56117
lieu of complying with § 1092.204’s
requirements with respect to a NMLSpublished covered order.
The Bureau declines to supplement
the written-statement requirements
beyond the requirements in the final
rule. However, any supervised
registered entity that wishes to discuss
any matter relevant to Bureau
supervision should contact the
appropriate Bureau supervisory
representative. To the extent that the
supervised registered entity believes
that the submission of such information
would be useful or informative to the
Bureau, it may use other channels to do
so.
The Bureau has considered alternative
approaches to adopting the writtenstatement requirements for supervised
registered entities. However, as
discussed herein and in part IV(D), the
Bureau finalizes its preliminary findings
contained in the proposal 416 that
requiring supervised nonbanks to
designate attesting executives and to
submit certain written statements
relating to compliance with reported
orders will facilitate the Bureau’s
supervisory efforts and better ensure
that supervised registered entities are
legitimate entities and are able to
perform their obligations to consumers.
Among other things, as discussed herein
and in part IV(D), the Bureau concludes
that the adoption of the writtenstatement requirements will provide
valuable information regarding the
entities subject to Bureau supervision.
The Bureau may use that information,
including whether supervised registered
entities have identified violations of
covered orders registered under
§ 1092.202, in conducting its
supervisory prioritization efforts,
assessing compliance systems and
procedures, and detecting and assessing
risk to consumers and to markets for
consumer financial products and
services. As described in parts VIII and
IX, the Bureau has considered the
potential benefits, costs, and impacts of
the written-statement requirements in
the final rule, including the potential
benefit to consumers.
Under the final rule, as proposed,
§ 1092.204(d)(1) requires the written
statement to contain only a general
summary description of the attesting
executive’s actions, and thus does not
impose a substantial new reporting
requirement. This provision does not
affirmatively require the executive to
take any actions related to compliance
with the covered order; it only requires
the executive to provide the Bureau
with a general description of what
416 88
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applicable steps, if any, the executive
has taken. The Bureau anticipates that
this general description will generally
be short and summary in nature. The
Bureau concludes that such a statement
will generally be sufficient to serve the
purposes of this requirement and
provide the information sought by the
Bureau. This requirement will provide
valuable context regarding the basis of
the attesting executive’s knowledge and
assist the Bureau with determining the
degree to which the Bureau may rely on
the written statement.
Final § 1092.204(d)(1) is not intended
to provide the Bureau with a
comprehensive understanding of a
supervised registered entity’s
compliance systems or procedures.
Instead, it is intended to enhance the
usefulness of the written statement by
providing valuable context regarding the
basis of the attesting executive’s
knowledge and by assisting the Bureau
with determining the degree to which
the Bureau may relay on the written
statement. To the extent the Bureau
desires additional information regarding
the supervised registered entity’s
activities or practices, the Bureau may
utilize its other supervisory authorities.
As expressly provided at final
§ 1092.205(b), the written statement
submitted under final § 1092.204(d) will
be treated as CFPB confidential
supervisory information subject to the
provisions of 12 CFR part 1070. The
Bureau disagrees that requiring
submission of this confidential
supervisory information via the
nonbank registry will put the
information at risk. The Bureau has
adequate data safeguards to protect the
written statement information that
supervised registered entities provide to
the Bureau under § 1092.204(d). Such
information will be protected by the
Bureau’s confidentiality regulations at
12 CFR part 1070, the Federal Trade
Secrets Act, 18 U.S.C. 1905, and other
laws. In addition, the Bureau is subject
to data breach requirements provided in
the Federal Information Security
Management Act (FISMA), applicable
Office of Management and Budget
(OMB) Memoranda, U.S. Department of
Homeland Security (DHS) Binding
Operational Directives, National
Institute of Standards and Technology
(NIST) Federal Information Processing
Standards and documents, and other
applicable guidance.
To the extent that certain comments
might be read as expressing concern that
§ 1092.204(d) might require the
submission of information protected by
the attorney-client privilege or another
legal privilege, the commenters do not
identify any particular scenarios under
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which submission of privileged
information might be required to
comply with § 1092.204(d), and as
discussed in the section-by-section
discussion of § 1092.201(d), the Bureau
does not intend for the final rule to
require the submission of privileged
information to the nonbank registry.
As discussed in part VIII below, the
Bureau acknowledges that certain firms
that are subject to covered orders and
that lack adequate compliance systems
may be forced to pay attesting
executives a salary premium because of
the written-statement requirements, but
believes that there will be few such
firms. The Bureau also disagrees with
commenters’ assertions that, for most
covered nonbanks, the requirement for
covered nonbanks to designate attesting
executives for covered orders will
discourage competent compliance and
risk management personnel from
serving in such roles. Neither
§ 1092.204(b)’s designation
requirements nor the publication of the
name and title of the attesting executive
as provided at § 1092.205 will
materially increase the legal obligations
of such executives. As discussed
elsewhere in this section, § 1092.204(d)
requires the submission only of certain
limited statements on behalf of the
supervised registered entity to the
executive’s knowledge. For most
companies, this statement should be
straightforward and noncontroversial.
Thus, for most supervised registered
entities, the Bureau does not agree with
commenters’ assertions that the
proposed requirements would have a
significant chilling effect on the hiring
and retention of senior executives.
The written-statement requirement
does not violate the First Amendment.
The final rule merely requires a factual
disclosure regarding (1) the steps the
attesting executive has taken to review
and oversee the supervised registered
entity’s activities subject to the
applicable covered order, and (2)
whether, to the attesting executive’s
knowledge, the supervised registered
entity during the preceding calendar
year identified violations or other
instances of noncompliance with the
entity’s obligations under such a
covered order. It only requires that the
written statement be made to the
Bureau, not to the general public. The
rule excludes the written statement from
its publication requirements and
expressly provides that the written
statement ‘‘will be treated as Bureau
confidential supervisory information.’’
The written-statement requirement will
facilitate Bureau supervisory efforts. It
bears no resemblance to the type of
‘‘Government-mandated pledge or
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Frm 00092
Fmt 4701
Sfmt 4700
motto’’ that has been held to violate the
First Amendment.417 Such a limited
reporting requirement, especially one
connected to extant conduct regulations,
complies with the First Amendment.418
The Bureau disagrees with the
industry commenter that the writtenstatement requirements would be
redundant because the applicable
covered order, if issued under consent,
would already have been signed by a
company officer. A signature of a
supervised registered entity’s officer
with respect to a covered consent order
(such as on a stipulation or consent
agreement) would not serve the
purposes of § 1092.204’s writtenstatement requirements. Among other
things, there generally would be no
requirement that such an executive
would satisfy the criteria established
under § 1092.204(b); such an executive
generally would not be designated on an
annual basis, depriving the Bureau of
relevant up-to-date information; an
executive signature consenting to a
covered order generally would not
provide any of the information that
would be submitted in the annual
written statement required under
§ 1092.204(d); and the other
requirements established in § 1092.204,
including § 1092.204(c) and (e),
generally would not be imposed with
respect to the covered order.
Regarding the comment that the
attestation described at § 1092.203(d)(2)
should not be made by an executive but
by the supervised registered entity itself,
the written statement—as discussed
above 419—is a statement by the
supervised registered entity. To be sure,
§ 1092.204(d) requires the written
statement to be made and signed ‘‘on
behalf of the supervised registered
entity’’ by a particular individual agent,
the attesting executive. Section
1092.204(b) establishes requirements for
the entity’s designation of its attesting
417 Rumsfeld v. Forum for Academic &
Institutional Rights, Inc., 547 U.S. 47, 61–62 (2006)
(discussing W. Va. State Bd. of Educ. v. Barnette,
319 U.S. 624 (1943), and Wooley v. Maynard, 430
U.S. 705 (1977)).
418 See, e.g., Arkansas Times LP v. Waldrip, 37
F.4th 1386, 1394 (8th Cir. 2022) (en banc) (holding
that requirement that government contractors
certify compliance with conduct-based regulations
did not unconstitutionally compel speech); United
States v. Arnold, 740 F.3d 1032, 1033–35 (5th Cir.
2014) (rejecting ‘‘compelled speech’’ challenge to
Federal sex-offender registration requirements);
United States v. Conces, 507 F.3d 1028, 1040 (6th
Cir. 2007) (holding that requiring responses to
discovery requests did not violate First
Amendment); United States v. Sindel, 53 F.3d 874,
878 (8th Cir. 1995) (rejecting ‘‘compelled speech’’
challenge to providing information required by an
IRS form).
419 See the Bureau’s response to certain comments
regarding the Bureau’s legal authority to impose
written-statement requirements above.
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executive(s) to ensure that the person
who signs the written statement has
sufficient authority and access to all the
relevant company stakeholders to
ensure that the report—which is filed on
behalf of the entity, not the individual
executive—is as complete and accurate
as possible.420 But the obligations under
§ 1092.204 belong to supervised
registered entities, not to particular
individuals acting in their personal
capacities.
The Bureau disagrees that
§ 1092.204(d)(2) represents an
inappropriate attempt to substitute the
individual liability of the attesting
executives for the liability of the
supervised registered entities they
represent. As discussed above, even for
those covered orders that the Bureau is
authorized to enforce, § 1092.204(b)’s
requirement to designate an attesting
executive does not mean that the Bureau
intends to hold that executive solely
responsible for the entity’s compliance
with those covered orders. The final
rule does not impose any additional
requirements to take steps to address
any covered order, nor does it establish
any standards for imposing liability on
any individual in connection with any
covered order. Any individual
accountability in connection with
violations of such orders shall continue
to be determined in accordance with
existing law, which the final rule does
not purport to change. Nor does the
final rule affect the Bureau’s existing
approach to assessing board and
management oversight at supervised
registered entities.
The Bureau disagrees that
§ 1092.203(d)(2) would cause a
supervised registered entity to place
undue emphasis on compliance with
covered orders, to the detriment of its
other compliance responsibilities. As
stated in part IV(A) above, agency and
court orders are not suggestions. It is
incumbent on supervised registered
entities to comply with such orders and
also manage their other responsibilities.
As explained in the proposal,421 the
Bureau believes, based on its experience
and expertise, that most entities subject
to covered orders endeavor in good faith
to comply with them and will already
have in place systems and procedures to
help achieve such compliance. The
Bureau thus believes that few entities
would significantly alter their
compliance systems, procedures, or
priorities in response to § 1092.204.422
420 See
88 FR 6088 at 6121–22.
421 See 88 FR 6088 at 6133.
422 The final rule does not obligate supervised
registered entities to spend an inordinate amount of
time, or indeed any time at all, on compliance with
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Further, the risk of legal sanctions will
likely deter entities from neglecting
other legal obligations not associated
with covered orders. The Bureau thus
does not believe that § 1092.204 will
cause supervised registered entities to
ignore other legal requirements not set
forth in covered orders.
For the reasons discussed in part IV
and the section-by-section discussions
of § 1092.201(c) and (e) above, the
Bureau concludes that the term
‘‘covered order’’ should include orders
issued or obtained by agencies other
than the Bureau. As discussed in part
IV(D) and this section-by-section
discussion of § 1092.204, submission of
a written statement regarding either
compliance or noncompliance with
covered orders will provide the Bureau
with important additional information
regarding risks to consumers that may
be associated with the orders and the
applicable supervised registered
entities’ compliance systems and
procedures, and will otherwise facilitate
the Bureau’s supervision of such
entities. The Bureau disagrees with
commenters’ assertions that the Bureau
lacks a legitimate interest in obtaining
such information from entities that are
subject to its supervisory and
examination jurisdiction under CFPA
section 1024.
With respect to the comments stating
that it would be impossible for an
executive to attest that a supervised
entity had complied with a broadly
drafted covered order, including orders
based on violations or alleged violations
of Federal or State UDAP/UDAAP laws,
final § 1092.204(d) does not require that
the supervised registered entity prove
its compliance with the covered order to
the Bureau, as discussed above. Section
1092.204(d)(1) requires the executive to
generally describe the steps that the
attesting executive has undertaken to
review and oversee the supervised
registered entity’s activities subject to
the applicable covered order for the
preceding calendar year, but imposes no
minimum standards or other
requirements regarding those steps. And
all the entity need disclose under
§ 1092.204(d)(2) is whether, to the
attesting executive’s knowledge, the
supervised registered entity during the
preceding calendar year identified any
violations or other instances of
noncompliance with any obligations
that were imposed in a public provision
of the covered order by the applicable
covered orders. The final rule does not establish
any minimum level of compliance management or
expectations for compliance systems and
procedures at supervised registered entities. It only
requires such entities to report information about
their compliance to the Bureau.
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Frm 00093
Fmt 4701
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56119
agency or court based on a violation of
a covered law. Such matters are within
the power of the supervised registered
entity and its attesting executive to
know and describe to the Bureau, and
will provide important information that
is useful to the Bureau. Should the
Bureau desire additional information
relating to the covered order or the
supervised registered entity’s
compliance with the covered order, the
Bureau may choose to follow up on the
information provided by the supervised
registered entity in its written statement,
including via its supervisory and
examination authority or by
communicating with the appropriate
agency.
The Bureau declines to adopt the
alternative approach proposed in the
notice of proposed rulemaking that the
written statement contain a short
description of the entity’s compliance
systems and procedures relating to the
covered order.423 The Bureau concludes
the written-statement requirements
included in the final rule will provide
sufficient information to the Bureau to
serve the purposes of the writtenstatement requirement. The written
statement will provide valuable
information to the Bureau regarding the
entity’s attesting executive for each
applicable covered order, the steps
undertaken by that executive to review
and oversee compliance with the
covered order, and any applicable
recent violations of the order identified
by the supervised registered entity. To
the extent the Bureau desires to obtain
more information about the entity’s
compliance systems or procedures than
is provided in the written statement, the
Bureau may choose to follow up directly
with the supervised registered entity
through its supervisory authority or
through other means. The Bureau does
not believe it is necessary at this time
to require all supervised registered
entities to submit a description of the
entity’s relevant compliance systems
and procedures on an annual basis, or
to dedicate staff and other Bureau
resources to reviewing such
submissions.
Likewise, the Bureau declines to
adopt the alternative approach proposed
by the commenter to obtain a single
representation about all covered orders
to which the entity is subject. The
Bureau believes that requiring a separate
written statement for each covered order
will be more likely to provide the
Bureau with meaningful and useful
information regarding the covered order,
the entity’s compliance with that
covered order, other risks to consumers
423 See
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that are related to that covered order,
and other matters. The Bureau also
believes this proposed alternative is
inconsistent with the approach to
designation of attesting executives taken
under § 1092.204(b). As described in the
proposal,424 the Bureau believes it is
desirable to require a supervised
registered entity to annually designate
one attesting executive for each
applicable covered order to which it is
subject and for all submissions and
other purposes related to that covered
order under subpart B. If an entity has
designated multiple attesting executives
under the rule, the Bureau would not
necessarily expect each such executive
to be able to provide a meaningful
attestation with respect to all covered
orders. See part IV above for additional
discussion of these issues.
With respect to the comment
opposing the adoption of this proposed
alternative, while the Bureau does not
necessarily agree with the industry
commenter’s assertion that the proposed
alternative would fail to provide
adequate or accurate information to the
Bureau, the Bureau believes the writtenstatement requirements included in the
final rule will provide sufficient
information to the Bureau to serve the
purposes of the written-statement
requirement. Regarding the inclusion of
confidential information in the written
statement, the Bureau expects that the
written statement may contain certain
confidential information about the
entity and its compliance system or
procedures. Anticipating this issue, the
final rule treats the written statement as
Bureau confidential supervisory
information (§ 1092.205(b)) and would
not publish it. As discussed in the
section-by-section discussion of
§ 1092.205(b), this approach will
enhance the usefulness of submissions
under final § 1092.204(d)(1) and (2),
increase the Bureau’s ability to detect
and assess potential noncompliance and
emerging risks to consumers, and
promote compliance with the law.
With respect to the comments stating
that the Bureau should use its existing
supervisory authorities instead of
imposing the written-statement
requirements, the Bureau disagrees to
the extent the comments suggest that the
Bureau should collect written
statements only in connection with
particular examinations via direct
communication with supervised
registered entities. Such an approach
would not be more reliable and
predictable for all parties than a rulebased approach, and would be less
administrable for the Bureau. The
424 See
88 FR 6088 at 6123.
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approach adopted in the final rule will
structure the information collected and
establish a regular cadence for collecting
it. This approach also will enable the
Bureau to more readily utilize this
information, as it will be linked via the
nonbank registry to the other
information submitted by the relevant
supervised registered entity regarding
the applicable covered order.425
In addition, there is no existing
comprehensive list of nonbank entities
subject to Bureau supervision, so the
Bureau would be unable to issue a
standing order to such entities to
produce such information. The final
rule requires supervised registered
entities, within the timeframes
established by the rule, to identify
themselves to the Bureau and to provide
information that is relevant to the
Bureau’s assessment and detection of
risks to consumers related to such
entities. As discussed in part IV(D)
above, the collection of this information
will facilitate Bureau supervision by,
among other things, helping the Bureau
identify when a nonbank entity subject
to its supervisory authority is subject to
a covered order, and by annually
collecting information about the entity’s
compliance with the covered orders to
which it is subject. This information
will in turn help the Bureau prioritize
its nonbank examinations under CFPA
section 1024(b)(2) and otherwise inform
how the Bureau supervises and
examines the entity. As appropriate, the
Bureau may also, as one commenter
suggests, obtain more detailed and
comprehensive information about the
entity’s compliance systems and
procedures for complying with the order
via direct communication with the
entity through the supervisory process.
See the section-by-section discussion
of § 1092.201(e) above regarding the
final rule’s treatment of covered orders
that may be subject to appeal.
Final Rule
The Bureau adopts § 1092.203(d) as
proposed (renumbered as § 1092.204(d))
for the reasons discussed above and in
the description of the proposal, with
changes to the wording of the
paragraph’s first sentence.426 That
sentence now reads (with additions
marked with italics): ‘‘On or before
March 31 of each calendar year, the
supervised registered entity shall, in the
form and manner specified by the
Bureau, submit to the nonbank registry
a written statement with respect to each
also part IV(D) above.
also the section-by-section discussion of
§ 1092.101(d) above regarding the Bureau’s
adoption of the revised term ‘‘nonbank registry.’’
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425 See
426 See
Frm 00094
Fmt 4701
Sfmt 4700
covered order described in paragraph
(a)(1) of this section to which it is
subject.’’ 427 The changes reflect
revisions to § 1092.204(a) that are
discussed in the section-by-section
analysis of that subsection (as well as
the Bureau’s adoption of the term
‘‘nonbank registry’’ described in the
section-by-section discussion of
§ 1092.101(d) above).
Under § 1092.204(d) of the final rule,
written statements only need to address
periods during which covered nonbanks
qualify as supervised registered entities.
Therefore, if a covered nonbank did not
qualify as a supervised registered entity
at any point during the preceding
calendar year, it does not need to file a
written statement in the current
calendar year, even if the covered
nonbank becomes a supervised
registered entity by March 31 of the
current calendar year.
Section 1092.204(e) Requirement To
Maintain and Make Available Related
Records
Proposed Rule
Proposed § 1092.203(e) would have
imposed recordkeeping requirements
with respect to the preparation of the
written statement. These requirements
were designed to promote effective and
efficient enforcement and supervision of
proposed § 1092.203. The Bureau would
have relied on its rulemaking authorities
under CFPA section 1024(b)(7)(A)–(C)
in imposing proposed § 1092.203(e)’s
recordkeeping requirements.
Proposed § 1092.203(e) would have
required a supervised registered entity
to maintain documents and other
records sufficient to document the
entity’s preparation of the written
statement, to provide reasonable
support for the written statement, and to
otherwise demonstrate compliance with
the requirements of proposed § 1092.203
with respect to any submission under
that section. The proposed section
would have required the supervised
registered entity to maintain those
documents and records for five years
after such submission was required. The
proposal would have also required the
supervised registered entity to make
such documents and other records
available to the Bureau upon the
Bureau’s request. The Bureau explained
that the purpose of this requirement
would be to enable the Bureau to assess,
as part of its normal supervisory
427 Under § 1092.204(a)(2), a supervised
registered entity is not required to comply with
§ 1092.204—including the requirements of
§ 1092.204(d)(2)—with respect to any NMLSpublished covered order for which it has chosen to
comply with the one-time registration option
described in § 1092.203.
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process, the supervised registered
entity’s compliance with proposed
§ 1092.203. The Bureau explained that it
expected such documents and other
records to be in a form sufficient to
enable the Bureau to conduct this
assessment. The Bureau believed that
the five-year time period would
appropriately facilitate the Bureau’s
examination and enforcement
capabilities with respect to compliance
with proposed § 1092.203’s
requirements.
Comments Received
One industry commenter stated that
the requirement to ‘‘provide reasonable
support’’ for the written statement was
vague and overly broad, and that it
could extend to every record that a
company has. Relatedly, the commenter
stated that the costs associated with this
requirement could not be quantified as
a result of this uncertainty.
The commenter also stated that the
proposed recordkeeping requirement
would be unduly burdensome because it
would require a supervised registered
entity to maintain evidence of
compliance with covered orders. And
the commenter objected to the duration
of the recordkeeping requirement, as the
five-year obligation imposed under
proposed § 1092.203(e) might exceed
the duration of the requirements
imposed by the other provisions of the
proposal (such as where the order
terminates earlier). The commenter also
stated the Bureau should have
considered obtaining documents from
other regulators as an alternative to
proposed § 1092.203.
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Response to Comments Received
The Bureau disagrees with the
industry commenter’s statement that the
requirements of § 1092.204(e) (which
was initially proposed as § 1092.203(e))
are vague and overly broad, and that an
estimate of the costs associated with
those requirements cannot be
quantified. Section 1092.204(e) does not
require a supervised registered entity to
comply with any covered order, nor
does it require the entity to prove that
it is in compliance with any covered
order. Instead, § 1092.204(e) requires the
entity to maintain documents sufficient
to allow the Bureau, through its normal
supervisory process, to review the
entity’s compliance with the
requirements of § 1092.204 with respect
to a submission under that section.
Thus, § 1092.204(e) requires a
supervised registered entity to maintain
documents that demonstrate compliance
with the various paragraphs of
§ 1092.204.
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Specifically, a supervised registered
entity would satisfy § 1092.204(e) with
respect to the requirements of
§ 1092.204(b) regarding the designation
of an attesting executive for a particular
covered order by maintaining records
that reasonably support the entity’s
designation, including records that
demonstrate that the attesting executive
satisfies the criteria established by
§ 1092.204(b).
Section 1092.204(d)(1) requires the
attesting executive to ‘‘[g]enerally
describe the steps that the attesting
executive has undertaken to review and
oversee the supervised registered
entity’s activities subject to the
applicable covered order for the
preceding calendar year.’’ A supervised
registered entity would satisfy
§ 1092.204(e) with respect to a statement
submitted under § 1092.204(d)(1) by
maintaining documents that reasonably
support the description submitted. If the
entity chooses to submit a statement
under § 1092.204(d)(1) that describes
specific steps undertaken by the
attesting executive to review and
oversee the entity’s applicable activities,
§ 1092.204(e) would require that the
entity maintain documents that
demonstrate that the executive
undertook the steps described. For
example, the entity could preserve
relevant reports provided to the
executive regarding compliance with
the relevant order, or emails that
demonstrate the questions asked by the
executive as part of the executive’s
review.
Section 1092.204(d)(2) requires the
attesting executive to ‘‘[a]ttest whether,
to the attesting executive’s knowledge,
the supervised registered entity during
the preceding calendar year identified
any violations or other instances of
noncompliance with any obligations
that were imposed in a public provision
of the covered order by the applicable
agency or court based on a violation of
a covered law.’’ If, to the executive’s
knowledge, the entity did identify such
a violation, the executive should so
attest under § 1092.204(d)(2), and the
entity should maintain records
sufficient to provide reasonable support
for the executive’s statement. For
example, the entity could preserve
relevant documents that caused the
executive to know that a violation had
occurred, such as a report or email sent
to the executive. On the other hand, if
the executive attests that he or she does
not know of any such violation, the
Bureau anticipates that attestation will
generally be based upon the executive’s
review and oversight as described in the
portion of the written statement
submitted under § 1092.204(d)(1). By
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56121
demonstrating what steps (if any) the
executive had undertaken to review and
oversee the activities subject to the
covered order, the entity generally
would also provide support for the
statement that the executive was not
aware of applicable violations. Thus, in
such cases the Bureau would generally
expect the documentation that supports
the portion of the written statement
submitted under § 1092.204(d)(1) also to
adequately support the portion
submitted under § 1092.204(d)(2), and
§ 1092.204(e) would generally not
require the entity to maintain any other
additional records specifically in
connection with the portion of the
written statement submitted under
§ 1092.204(d)(2).
With respect to the comment
regarding potential burden associated
with § 1092.204(e)’s recordkeeping
requirements, this provision would not
require a supervised registered entity to
maintain documents to enable the
Bureau to assess whether the entity is in
compliance with any covered order.
Instead, this provision would require a
supervised registered entity to maintain
documents that demonstrate compliance
with § 1092.204 itself. Section 1092.204
imposes a set of requirements regarding
the designation of one or more attesting
executives and submission of one or
more annual reports. It requires neither
that the entity comply with any covered
order nor that it demonstrate to the
Bureau that it is in compliance with any
covered order. Documents that
demonstrate the entity’s compliance
with § 1092.204 will not generally be
available from other regulators or from
sources other than the entity itself.
The Bureau acknowledges that in
some cases, a supervised registered
entity’s obligation to maintain
documents under § 1092.204(e) may
extend, perhaps by several years, past
the time required for the entity’s final
filing under § 1092.202(f)(1). While, as
provided in § 1092.202(f)(2), a
supervised registered entity’s final filing
under § 1092.202(f)(1) relieves the entity
of its obligations to update its filing or
to file written statements with respect to
the applicable covered order under
subpart B, the entity would remain
subject to § 1092.204(e)’s requirements
to maintain and make available
applicable records. Nevertheless, the
Bureau believes § 1092.204(e)’s five-year
recordkeeping requirement is consistent
with the final rule’s approach to final
filings in § 1092.202(f). The purpose of
§ 1092.204(e)’s recordkeeping
requirement is to promote effective and
efficient enforcement and supervision of
§ 1092.204. The Bureau may wish to
review a supervised registered entity’s
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past compliance with § 1092.204 even
after the entity has been released, as
provided under § 1092.202(f)(2), from its
ongoing obligations to update
information under § 1092.202 and to file
annual written statements under
§ 1092.204. The Bureau believes the
five-year period is an appropriate length
of time to require preservation of
records in order to facilitate any review
that may occur. For a discussion of the
economic costs and benefits associated
with this provision, see part VIII.
Final Rule
The Bureau adopts § 1092.203(e) as
proposed (renumbered as § 1092.204(e))
for the reasons discussed above and in
the description of the proposal.
Section 1092.204(f) Notification of
Entity’s Good-Faith Belief That
Requirements Do Not Apply
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Proposed Rule
Proposed § 1092.203(f) would have
provided that a person may submit a
notice to the NBR system stating that it
is neither designating an attesting
executive nor submitting a written
statement pursuant to proposed
§ 1092.203 because it has a good-faith
basis to believe that it is not a
supervised registered entity or that an
order in question is not a covered order.
Such a filing may be combined with any
similar filing under proposed
§ 1092.202(g).428 Proposed § 1092.203(f)
would have also required the person to
promptly comply with § 1092.203 upon
becoming aware of facts or
circumstances that would not permit it
to continue representing that it has a
good-faith basis to believe that it is not
a supervised registered entity or that an
order in question is not a covered order.
The Bureau proposed to treat
information submitted under
§ 1092.203(f) as ‘‘administrative
information’’ as defined by proposed
§ 1092.201(a).
The Bureau proposed § 1092.203(f) for
several reasons. First, while the Bureau
believed that determining whether a
company qualifies as a ‘‘supervised
registered entity’’ (or whether an order
is a covered order) should be
straightforward in most cases, some
persons may be uncertain about whether
they are a supervised registered entity
(or whether an order is a covered order).
The Bureau acknowledged in its
proposal that even when they have a
good-faith basis to believe they are not
428 See
also the section-by-section discussion of
§ 1092.202(g), which provides a similar option with
respect to § 1092.202.
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a supervised registered entity (or an
order is not a covered order), they could
annually designate an attesting
executive and file annual written
statements if they did not want to incur
the risk of violating the requirements of
proposed § 1092.203. But the Bureau
believed that that approach could
impose burden on persons who
ultimately are not supervised registered
entities (or whose orders are not covered
orders). The Bureau therefore proposed
an alternative option for these persons.
Rather than facing the burden of
designating an attesting executive and
filing written statements, such an entity
could have elected to file a notice under
proposed § 1092.203(f). The Bureau
explained that, when a person makes a
non-frivolous filing under proposed
§ 1092.203(f) stating that it has a goodfaith basis to believe that it is not a
supervised registered entity (or an order
is not a covered order), the Bureau
would not bring an enforcement action
against that person based on the
person’s failure to comply with
proposed § 1092.203 unless the Bureau
has first notified the person that the
Bureau believes the person does in fact
qualify as a supervised registered entity
(or the order in question qualifies as a
covered order) and has subsequently
provided the person with a reasonable
opportunity to comply with proposed
§ 1092.203.429
The Bureau also believed that filings
under proposed § 1092.203(f) may
reduce uncertainty by the Bureau about
why certain entities are not designating
an attesting executive or providing a
written statement under proposed
§ 1092.203. In addition, the Bureau
believed that these notifications might
provide the Bureau with information
about how market participants are
interpreting the scope of proposed
§ 1092.203, about the potential need for
the Bureau to instruct certain persons to
designate an attesting executive and
provide written statements, and about
the potential need for guidance or
rulemaking clarifying the scope of
proposed § 1092.203.
As in the case of proposed
§ 1092.202(g), the Bureau considered an
alternative to proposed § 1092.203(f)
under which entities would not file a
notice with the Bureau, but they could
avoid penalties for non-compliance with
§ 1092.203 if in fact they could establish
a good-faith belief that they did not
429 The Bureau explained that, under proposed
§ 1092.102(c), the filing of a notification under
proposed § 1092.203(f) would not affect the entity’s
ability to dispute more generally that it qualifies as
a person subject to Bureau authority.
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qualify as supervised registered entities
subject to § 1092.203 (or their order was
not a covered order). Under this
alternative, entities would have
maintained such good-faith belief so
long as the Bureau had not made clear
that § 1092.203 would apply to them.
Although the Bureau preliminarily
concluded that this alternative was not
preferable to requiring entities to
actually file notices under proposed
§ 1092.203(f), the Bureau sought
comment on whether it should finalize
this alternative instead. It also sought
comment on whether, if it finalized this
alternative, entities would require
additional guidance on the
circumstances pursuant to which an
entity could no longer legitimately
assert a good-faith belief that § 1092.203
would not apply to its conduct. While
the Bureau anticipated that such
circumstances would certainly include
entity-specific notice from the Bureau
that § 1092.203 applies, the Bureau did
not believe such notice should be
required to terminate a good faith
defense to registration. Among other
circumstances, the Bureau anticipated
that at least formal Bureau
interpretations of (for example) the
provisions of CFPA section 1024(a)(1)
would generally suffice to terminate
such belief.430
Comments Received
As discussed in the section-by-section
discussion of § 1092.202(g) above, the
Bureau received a number of comments
from tribes regarding proposed
§§ 1092.202(g) and 1092.203(f). The
tribes commenting on the proposal
generally opposed proposed
§§ 1092.202(g) and 1092.203(f) and
submitted specific objections to aspects
of the proposal.
Response to Comments Received
See the section-by-section discussion
of § 1092.202(g) above for a description
of the Bureau’s responses to comments
received regarding proposed
§ 1092.203(f).
Final Rule
The Bureau adopts § 1092.203(f) as
proposed (renumbered as § 1092.204(f))
for the reasons discussed above and in
the description of the proposal.431
430 12
U.S.C. 5514(a)(1).
the section-by-section discussion of
§ 1092.101(d) above regarding the Bureau’s
adoption of the revised term ‘‘nonbank registry.’’
431 See
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Section 1092.205 Publication and
Correction of Registration Information
Section 1092.205(a) Internet Posting of
Registration Information
Proposed Rule
Proposed § 1092.204(a)
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Proposed § 1092.204(a) would have
required the Bureau to make available to
the public the information submitted to
it by persons pursuant to proposed
§ 1092.202, except that the Bureau could
choose not to publish certain
administrative information or other
information that the Bureau determined
may be inaccurate, not required to be
submitted under subpart B, or otherwise
not in compliance with part 1092 and
any accompanying guidance. Proposed
§ 1092.204(a) would have further
provided that the Bureau may make
registration information available to the
public by means that include publishing
it on the Bureau’s publicly available
internet site within a timeframe
determined by the Bureau in its
discretion. However, as discussed below
regarding proposed § 1092.204(b), the
proposal would have specifically
provided that the Bureau would not
disclose the written statement submitted
under proposed § 1092.203.
The Bureau explained that
publication of registered entities’
identifying information would facilitate
the ability of consumers to identify
covered persons that are registered with
the Bureau.432 And the Bureau believed
that publication of additional
information about registered entities
and covered orders would be in the
public interest.433 Namely, as discussed
in more detail in section IV(E) of the
proposal’s preamble, proposed
§ 1092.204(a) would have provided
information of use to consumers, other
regulators, industry, nongovernment
organizations, and the general public.
Proposed § 1092.204(a) also would have
formally aligned the proposed NBR
system with Federal Government
emphasis on making government data
available to and usable by the public, by
default, to the greatest extent
possible.434
The Bureau explained that making the
data collected publicly available would
further the rationale of the proposal—
that is, enhancing oversight and
432 12
U.S.C. 5512(c)(7)(B).
U.S.C. 5512(c)(3)(B).
434 See, e.g., Open, Public, Electronic, and
Necessary Government Data Act, in title II of Public
Law 115–435 (Jan. 14, 2019); Office of Management
and Budget, M–19–18, Federal Data Strategy—A
Framework for Consistency (June 4, 2019), https://
www.whitehouse.gov/wp-content/uploads/2019/06/
M-19-18.pdf.
433 12
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awareness of covered orders and the
covered nonbanks that are subject to
them. The Bureau believed that
regulators and other agencies at all
levels of government (not just the
Bureau) could use the information the
Bureau would make publicly available
to set priorities. The Bureau believed
publication was also in the public
interest because researchers could
analyze the information the Bureau
would make publicly available to gain
valuable insight into the issues
addressed in the NBR system. For
example, as the Bureau explained in its
proposal, they could produce reports
that may inform consumers and the
public more broadly of potential risks
related to covered orders, or otherwise
use the public data to promote private
innovation. The Bureau also believed
that organizations representing
consumer interests could use the
information to assist with their
consumer protection efforts. The Bureau
further explained in its proposal that
publication can also help inform the
public, including industry actors, about
how regulators are enforcing Federal
consumer financial laws and other
similar laws. The Bureau cited, for
example, that industry actors could use
the registry as a convenient source of
information regarding regulator actions
and trends across jurisdictions, helping
them to better understand legal risks
and compliance obligations. The Bureau
believed that at least in certain cases,
consumers may be able to use the
information in the registry to make
informed choices regarding consumer
financial products and services,
including potentially using the
information to assist with the assertion
of private rights of action that might be
available under the Federal consumer
financial laws. Finally, the Bureau
believed that publication would help
promote Bureau accountability by
helping the public better see and
understand the results of the nonbank
registry initiative, and helping the
public gain greater insight into Bureau
decision-making. As discussed in
section IV(E) of the proposal, the Bureau
believed that identifying the executive
who has knowledge and control of the
supervised entity’s efforts to comply
with the covered order would provide
particular benefits to the Bureau, the
public, and other users of the registry.
Proposed § 1092.204(a) would have
provided that the Bureau may choose
not to publish certain administrative
information or other information that
the Bureau determines may be
inaccurate, not required to be submitted
under proposed subpart B, or otherwise
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56123
not in compliance with part 1092 and
any accompanying guidance. The
Bureau proposed to exclude
administrative information, as defined
at proposed § 1092.201(a), from the
proposed publication requirement
because it believed the publication of
such information may not in all
instances be especially useful to
external users of the registry. The
Bureau explained that administrative
information is likely to include
information such as time and date
stamps, contact information, and
administrative questions. The Bureau
anticipated that it may need such
information to work with personnel at
nonbanks and in order to administer the
NBR system. The Bureau believed that
publishing such information would not
be in the public interest because
publication would be unnecessary and
likely would be counterproductive to
the goals of ensuring compliance with
the proposal and publishing usable
information.
The Bureau would have also reserved
the right not to publish any information
that it determines may be inaccurate,
not required to be submitted under
proposed subpart B, or otherwise not in
compliance with part 1092 and any
accompanying guidance. For example,
the Bureau explained, persons may
submit unauthorized or inadvertent
filings, or filings regarding orders that
would not require registration under the
proposal, or other inaccurate or
inappropriate filings. The Bureau
believed it would require flexibility not
to publish such information in order to
maintain the accuracy and integrity of
the NBR system and the data that would
be published by the Bureau. And
publication of information that the
Bureau determines is, or may be,
inaccurate, not required to be submitted
under proposed subpart B, or that is
otherwise not appropriately submitted
under the proposal and accompanying
guidance, would not further the goals of
the proposal.
Furthermore, consistent with CFPA
section 1022(c)(8),435 the Bureau
explained that it would not publish
information protected from public
disclosure under 5 U.S.C. 552(b) or 552a
or any other provision of law. The
Bureau, however, did not believe that
any of the information proposed to be
435 12 U.S.C. 5512(c)(8) (‘‘In . . . publicly
releasing information held by the Bureau, or
requiring covered persons to publicly report
information, the Bureau shall take steps to ensure
that proprietary, personal, or confidential consumer
information that is protected from public disclosure
under [the FOIA] or [the Privacy Act of 1974, 5
U.S.C. 552a,] or any other provision of law, is not
made public under [the CFPA].’’).
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collected under proposed § 1092.202
would be protected from public
disclosure by law. The Bureau requested
comments on this question, and
whether any other steps should be taken
to protect this information from public
disclosure.
The Bureau recognized that by relying
in part on its supervisory authority in
section 1024 of the CFPA to require
submission of information to the
nonbank registry, registry information
could be construed to be ‘‘confidential
supervisory information’’ as defined in
the Bureau’s confidentiality rules at 12
CFR 1070.2(i). The Bureau stated that,
under the proposal, public release of
information pursuant to § 1092.204(a)
would have been authorized by the
Bureau’s confidentiality rules at 12 CFR
1070.45(a)(7), which permits the Bureau
to disclose confidential information
‘‘[a]s required under any other
applicable law.’’ The Bureau did not
believe that the information proposed to
be published under § 1092.204(a) would
have raised the concerns generally
addressed by the Bureau’s restrictions
on disclosure of confidential
supervisory information. For example,
the Bureau anticipated that the
information collected pursuant to
§ 1092.202 would otherwise be subject
to disclosure under the Freedom of
Information Act and would not be
particularly sensitive to financial
institutions or compromise any
substantial privacy interest; that
disclosure of the information would not
impede the confidential supervisory
process; and that disclosure would not
present risks to the financial system writ
large.
Proposed § 1092.204(b)
Proposed § 1092.204(b) would have
provided that the publication described
in proposed § 1092.204(a) would not
have included the written statement
submitted under proposed § 1092.203,
and that such information would be
treated as confidential supervisory
information subject to the provisions of
part 1070. The Bureau proposed to
require the submission of the written
statement pursuant to CFPA section
1024(b)(7), which authorizes the Bureau
to prescribe rules regarding registration,
recordkeeping, and other requirements
for covered persons subject to its
supervisory authority under CFPA
section 1024. The Bureau believed that
treating the written statements that it
would receive under proposed
§ 1092.203 as confidential, and not
publishing them under proposed
§ 1092.204, would facilitate the Bureau’s
supervision of supervised registered
entities by enabling the Bureau to obtain
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frank and candid assessments and other
information from supervised registered
entities regarding violations and
noncompliance in connection with
covered orders. The Bureau believed
this information in turn would better
enable the Bureau to spot emerging
risks, focus its supervisory efforts, and
address underlying issues regarding
noncompliance, compliance systems
and processes, and risks to consumers.
The Bureau recognized that there may
have been some benefit to other users of
the NBR system from publishing the
written statements that it would receive
under proposed § 1092.203, including
enhancing the ability of other agencies
and affected consumers to monitor
compliance. However, the Bureau
believed that these potential benefits
were likely to be outweighed by
increased candor and compliance with
proposed § 1092.203. The Bureau noted
that its supervision program depends
upon the full and frank exchange of
information with the institutions it
supervises. The Bureau explained that,
consistent with the policies of the
prudential regulators, the Bureau’s
policy is to treat information obtained in
the supervisory process as confidential
and privileged.436 For example, the
Bureau explained in its proposal that it
would treat all such information as
exempt from disclosure under
exemption 8 of the Freedom of
Information Act.437 The Bureau believed
that these considerations would also
underlie supervisory communications
with supervised registered entities
under proposed § 1092.203, and that the
proposed approach would enhance the
usefulness of submissions under
proposed § 1092.203, increase the
Bureau’s ability to detect and assess
potential noncompliance and emerging
risks to consumers, and promote
compliance with the law.438
436 See CFPB Compliance Bulletin 2015–01 (Jan.
27, 2015), https://files.consumerfinance.gov/f/
201501_cfpb_compliance-bulletin_treatment-ofconfidential-supervisory-information.pdf; CFPB
Bulletin 2012–01 (Jan. 4, 2012), https://
files.consumerfinance.gov/f/2012/01/GC_bulletin_
12-01.pdf. Also consistent with the policies of the
prudential regulators, the Bureau recognized that
the sharing of confidential supervisory information
with other government agencies may in some
circumstances be appropriate, and in some cases,
required. See id. For example, in accordance with
the scheme of coordinated supervision established
by Congress, the Bureau’s policy is to share
confidential supervisory information with the
prudential regulators and State regulators that share
supervisory jurisdiction over an institution
supervised by the Bureau. See id.
437 See 5 U.S.C. 552(b)(8).
438 Proposed § 1092.102(c) would have provided
that proposed part 1092 would not alter applicable
processes whereby a person may dispute that it
qualifies as a person subject to Bureau authority.
The Bureau believed written statements submitted
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Comments Received
Comments Received Regarding
Proposed § 1092.204(a)
General comments received regarding
publication.
Many commenters opposed the
proposal’s approach to publication of
registry information, and either
questioned whether the proposed public
registry was necessary or opposed
publication of the registry. Commenters
stated that the proposed publication of
the registry information would create a
much more elevated level of scrutiny
and risk for covered nonbanks subject to
covered orders.
Consumer advocate commenters and
some industry and individual
commenters generally supported the
publication of the registry, stating that it
would provide a valuable resource to
help regulators and consumers. A
consumer advocate commenter stated
that the public registry would be
immensely useful for the Bureau and
other Federal and State regulators alike,
and another consumer advocate
commenter stated that it would unify
the efforts of the various enforcers of
consumer protection laws. A consumer
advocate commenter stated that the
public registry would be particularly
beneficial for low-income consumers. A
consumer advocate commenter agreed
that making the proposed registry public
would enhance the ability of consumer
advocacy organizations conducting due
diligence, and would better equip
organizations to warn consumers against
companies with patterns or practices of
illegal or otherwise harmful behaviors.
The consumer advocate commenter also
stated that searchable public databases
like the proposed registry empower
consumers, regulators, and consumer
advocates, and that the registry would
help protect older Americans and all
consumers as well as benefit Bureau
supervision. Consumer advocate
commenters stated the information
obtained from the public registry would
also assist the Bureau and other
regulators in developing new
regulations and other reforms for
consumer protection. Consumer
advocate and industry commenters
stated that the public registry would
to the NBR system under § 1092.203 of the
proposed rule (renumbered to § 1092.204 of the
final rule) would constitute Bureau confidential
supervisory information under the regulatory
definition of that term even if the submitter later
disputed that it qualified as a person subject to the
Bureau’s supervisory authority. See 12 CFR
1070.2(i) (defining Bureau confidential supervisory
information), (q) (‘‘Supervised financial institution
means a financial institution that is or that may
become subject to the Bureau’s supervisory
authority.’’).
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create heightened accountability and
have a deterrent effect on violations.
Consumer advocate commenters stated
that the public registry would promote
compliance with orders. An industry
commenter stated that the public
registry would help entities conduct due
diligence and choose their service
providers, would motivate nonbanks to
comply with the law, and would
provide financial institutions with
examples of the types of acts and
practices that constitute violations of
consumer financial protection laws.
See part V above for a discussion of
comments regarding publication
received from other agencies during the
Bureau’s interagency consultation
process.
Comments received regarding
alternatives to the proposal’s approach
to publication.
Many commenters proposed
alternatives to the proposal’s approach
to publication of registry information.
An industry commenter stated that the
Bureau could just provide links on a
web page instead. An industry
commenter stated that the additional
benefit of publication to consumers was
unclear in light of the existence of other,
more user-friendly registries. Another
industry commenter stated that the
Bureau should instead work with State
and other Federal agencies to create a
unified database. An industry
commenter stated that the Bureau
should use its other tools instead to
provide transparency and public
guidance, including the Bureau’s
Supervisory Highlights publication,
advisory opinions, and other
rulemakings such as larger participant
rules. A consumer advocate commenter
stated the Bureau should work with the
Federal Deposit Insurance Corporation
(FDIC) and other regulators to establish
other similar registries in addition to
establishing the proposed Bureau
registry. An industry commenter stated
that the publication of registry
information might deter other regulators
from maintaining their own sites
containing information about covered
orders.
An industry commenter stated that
publication of information about
covered orders would lack context and
be unfair and misleading because
entities are precluded from similarly
publicly disclosing outcomes of
successful audits and examinations.
An industry commenter stated that
the Bureau should permit a covered
nonbank to publish its own
accompanying statement or explanation
in connection with information
published in the registry so that other
financial institutions in the market and
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consumers can better understand the
reason for the covered order.
Comments received stating
publication of registry information
would further improper purposes.
Commenters stated that the true
purpose of publishing the registry was
to name and shame the entities that
were registered as well as their
executives, to impose a ‘‘scarlet letter’’
on such persons, or to punish such
entities, and not the purposes stated in
the Bureau’s proposal.
Industry commenters also stated that
the Bureau’s true purpose in publishing
registry information was to benefit
plaintiffs’ lawyers and class action
lawsuits against industry participants.
Industry commenters stated that the
information published in the proposed
registry would be used against the
covered nonbank in other litigation, and
that increased litigation and risk of
litigation against covered nonbanks will
hurt consumers by raising costs.
Commenters stated that the references
in the proposal and in related Bureau
statements identifying the proposed
registry as relating to ‘‘repeat offenders’’
indicated that the registry was being
adopted for an improper purpose.
Commenters stated that the Bureau
should not call the proposed registry a
‘‘repeat offender registry.’’ Commenters
also questioned what it might mean to
be a ‘‘repeat offender’’ as the Bureau
used that term, and what the
consequences of such a designation
might be. An industry commenter stated
that such a designation would imply
wrongdoing, even though the entity
might not have admitted liability. An
industry commenter stated that such a
designation would mislead consumers
by indicating that less significant
violations listed on the registry were
comparable to more serious ones. An
industry commenter stated that the term
‘‘repeat offenders’’ was inflammatory,
and expressed concern that the Bureau
would impose ‘‘repeat offender
penalties’’ based on non-CFPB orders.
An industry commenter stated that the
use of such language demonstrated a
belief on the part of the Bureau that past
violations are an indication of potential
future violations. And an industry
commenter stated that the proposal did
not truly address ‘‘repeat offenders’’ but
rather perhaps those businesses who are
not able to afford defending themselves
from government attacks.
Comments received regarding the
publication of the name and title of
attesting executives.
The Bureau specifically requested
comment on whether the requirement to
submit the name and title of the
attesting executive ‘‘would assist users
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56125
of the NBR system and whether it would
unduly interfere with the privacy
interests of the attesting executive or
other interests of the supervised
entity.’’ 439 A consumer advocate
commenter stated that it would be
appropriate to publish the name and
title of the attesting executive, and that
the Bureau would be able to make clear
that the executive is not necessarily an
at-fault individual. Other commenters
objected to the proposal’s provisions
regarding the publication of the name
and title of the attesting executive.
Commenters stated that publishing the
name and title of the attesting executive
would impose reputational harm or
would violate due process and the
presumption of innocence by shaming
the executive and the company. An
industry commenter stated that the
proposed requirement to designate a
current executive as an attesting
executive would unfairly implicate
executives in previous wrongdoing, and
that the rule should only require
designation of an attesting executive
where the executive had been serving at
the time of the violations underlying the
order. Some industry commenters
expressed privacy concerns about this
aspect of the Bureau’s proposal. Most of
the commenters generally expressed this
concern without added explanation, but
one industry commenter asserted that it
was highly likely publishing this
information would result in these
individuals being subject to unfair and
unjust harassment.
Other comments received regarding
publication.
An individual commenter stated that
the proposed publication of registry
information would focus on larger
companies, leading consumers to
smaller but possibly more harmful
entities. Other commenters asserted that
smaller entities will be
disproportionately affected. A joint
comment from industry groups stated
that the proposed registry would risk
public trust in new and emerging
companies. An industry commenter
stated that the proposed registry would
deter consumers from working with
legitimate companies, including debt
collection businesses.
A consumer advocate commenter
urged the Bureau to make the proposed
public database searchable, sortable,
and downloadable.
Industry commenters and another
commenter stated that the proposal was
contrary to the public policy behind the
Fair Debt Collection Practices Act
439 88
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(FDCPA).440 A commenter stated that
the proposal would publish the names
of covered nonbanks in order to punish
and harm them in a manner precluded
by the FDCPA. An industry commenter
stated that while the proposal might not
directly conflict with the FDCPA, it
could prompt additional interest in
public information in court records and
other materials that might embarrass
consumers.
Commenters disagreed with the
Bureau’s statements in the proposal that
publication of registry information
would benefit other regulators and
agencies. An industry commenter stated
that publication would be of small or no
benefit to other agencies because the
orders published under the proposal
would already be public and because
the relevant State regulators already
have adequate information about
covered orders.
Commenters stated that publication of
the proposed registry would confuse
consumers and other public users, thus
itself leading to risk and harm to
consumers.
Commenters stated that the proposal
would present all orders as the same,
which would be misleading. An
industry commenter stated that one
State’s orders may not appropriately
compare to other States, and expressed
concern that companies with covered
orders addressing other matters not
related to consumer products, data, or
market harm could still inadvertently be
included with companies that have an
actual track record of consumer harm.
The commenter also asserted that orders
with effective dates before 2019 were
less relevant to the registry because
covered nonbanks were more likely to
have taken remedial steps in connection
with the order, and expressed concern
that the publication of such earlier
orders together with orders issued later
would unfairly characterize the earlier
orders as having the same relevance as
later ones. And the commenter stated
that the registry should only require
registration once a nonbank became
subject to at least five non-expired
covered orders.
Comments Received Regarding
Proposed § 1092.204(b)
The Bureau specifically sought
comment on the proposed approach
with respect to treatment of the written
statement,441 whether treatment of
written statement submissions as
Bureau confidential supervisory
440 15 U.S.C. 1692 et seq. The FDCPA is an
enumerated consumer law and a Federal consumer
financial law, as provided at 12 U.S.C. 5481(12)(H)
and (14).
441 88 FR 6088 at 6129.
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information was warranted, and
whether the Bureau should consider
taking other steps to facilitate the
submission of written statements. An
industry commenter expressed concern
about proposed § 1092.203(b) and the
Bureau’s treatment of the written
statements submitted under proposed
§ 1092.203, stating that the Bureau
might change its mind about protecting
written statements as confidential
supervisory information.
Response to Comments Received
Response to Comments Received
Regarding Proposed § 1092.204(a)
Response to general comments
received regarding publication.
For the reasons given in the
description of the proposal above and
further addressed below, the Bureau
intends to publish a registry that
contains the identifying information for
covered nonbanks that the nonbank
registry collects under § 1092.202(c) and
the information regarding covered
orders collected under § 1092.202(d), as
well as certain information collected
under § 1092.203 for the purposes of
enabling users of the registry to identify
NMLS-published covered orders and the
applicable covered nonbanks subject to
them. Except as described further
below, the Bureau concludes that
publication of such information will be
in the public interest. However, as
described further below, the Bureau is
modifying the proposal to provide that
the Bureau may choose, in its sole
discretion, not to publish such
information based on operational
considerations.
The Bureau agrees with commenters
that the nonbank registry’s
centralization and republication of
covered orders that are already public
may make them easier to locate and
access, and thus somewhat increase
their visibility. That is part of the point
of publishing them. The Bureau believes
that publication of registry information
as described in § 1092.205 will serve the
purposes described in part IV.
Response to comments received
regarding alternatives to the proposal’s
approach to publication.
The Bureau does not agree that the
proposed alternative approaches to
publication suggested by commenters
would serve the purposes for which the
Bureau is adopting the final rule.
Among other things, these alternative
approaches would be more resource
intensive for Federal and State agencies,
including the Bureau, and would make
it more difficult to identify covered
orders and the covered nonbanks that
are subject to them.
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As discussed in part IV and the
section-by-section discussion of
§ 1092.203 above, the Bureau is
finalizing a new § 1092.203 that
provides, with respect to any NMLSpublished covered order, a covered
nonbank that is identified by name as a
party subject to the order may elect to
comply with the one-time registration
option described in that section in lieu
of complying with the requirements of
§§ 1092.202 and 1092.204. Also as
discussed in part IV and the section-bysection discussion of § 1092.203 above,
the Bureau disagrees with commenters
that the other sources of information
identified by commenters diminish the
need for the nonbank registry, or that
the rule should accept registration of
covered orders under those sources in
lieu of registration with the nonbank
registry. While the Bureau intends to
continue using all of its available tools
to promote transparency and provide
guidance as appropriate, the Bureau
concludes that it is also appropriate to
adopt the final rule to accomplish the
purposes described herein.
With respect to the industry
commenter’s assertion that the
publication of registry information
might deter other regulators from
maintaining their own sites containing
information about covered orders, first,
the Bureau believes establishing the
registry accomplishes the goals
established for it under the CFPA, and
would do so even if the effect described
by this commenter were to occur. The
Bureau does not believe this
consideration should outweigh the
benefits resulting from the final rule.
Second, it is not clear this described
effect would occur, and whether it does
or not depends upon many factors
outside the Bureau’s control. Other
agencies must make their own decisions
regarding how best to utilize their own
resources to meet their own goals and
priorities. As described at part V, the
Bureau engaged in consultations with
many Federal, State, and Tribal agencies
with respect to both the proposal and
the final rule, as required by the CFPA.
No other agency, in those discussions or
otherwise, has indicated to the Bureau
that it was considering ceasing the
publication of any of its own published
orders in light of the final rule. Third,
even if the Bureau were to consider this
potential effect, the Bureau would
expect it to be a very small one, since
the Bureau expects agencies would
generally continue to maintain their
current approach to publishing their
own orders. Many agencies are under an
existing legal obligation to publish their
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orders.442 For agencies that have
discretion over whether to publish their
orders enforcing the law, the Bureau
does not anticipate that the Bureau’s
rule would cause many, if any, agencies
to change their practices regarding
publication. The orders defined as
‘‘covered orders’’ under the final rule
represent only a portion of the orders
issued or obtained by most, if not all,
agencies other than the Bureau. For
example, covered orders do not include
orders against individuals, or that do
not relate to covered laws. Likewise,
other agencies may have jurisdiction
over entities that do not qualify as
covered nonbanks and thus are not
subject to the final rule. The Bureau
thus expects that few, if any, agencies
would modify their general practices
regarding publication to avoid a subset
of their orders from appearing in the
Bureau’s public registry. Therefore, the
Bureau does not expect the final rule to
have much, if any, effect on the
publication decisions made by other
agencies.
As explained above, an industry
commenter expressed concern that the
Bureau’s public registry would be unfair
and misleading because it would not
contain information regarding
successful audits and examinations of
registered entities. The Bureau
disagrees. The existence of prior
successful audits or examinations does
not render the information that would
be published in the registry inaccurate,
inconsistent, or misleading.
The consumer advocate commenter’s
suggestion to establish other similar
registries in addition to establishing the
proposed Bureau registry is outside the
scope of the proposal, but the Bureau
may consider related action at a later
date.
The Bureau declines to create a
mechanism for a covered nonbank to
publish its own accompanying
statement or explanation on the
nonbank registry in connection with
information published in the registry.
The Bureau believes requiring the
nonbank registry to publish such
statements would increase the
complexity and costs associated with
the nonbank registry and may confuse
users. The Bureau declines to republish
on its own registry statements provided
by covered nonbanks regarding either
442 See, e.g., 12 U.S.C. 1818(u) (requiring
appropriate Federal banking agencies to publish
certain final orders and agreements); 5 U.S.C.
552(a)(2)(A) (‘‘[E]ach agency, in accordance with
published rules, shall make available for public
inspection in an electronic format . . . final
opinions, including concurring and dissenting
opinions, as well as orders, made in the
adjudication of cases’’).
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the Bureau’s own orders or orders
issued or obtained by other agencies,
especially as those statements may
contain factual or legal errors. The
Bureau also declines to utilize its
resources to review and screen such
statements for materials that may not be
appropriate to publish, such as
personally identifiable information
about consumers. Such statements are
not generally included with orders
published by the Bureau or by other
agencies. Subject to other applicable
law, covered nonbanks would be free to
issue their own statements about a
covered order or the matters underlying
it.
Response to comments received
stating publication of registry
information would further improper
purposes.
The Bureau disagrees with the
commenters stating publication of
registry information would further
improper purposes. The Bureau
reiterates that its purposes in publishing
registry information are described in
part IV and in the description of the
Bureau’s proposal above, and include
informing the public, other regulators,
academic researchers, consumer
advocacy organizations, and public
education efforts regarding covered
orders and the covered nonbanks that
are subject to them. Any publication by
the Bureau of the information collected
through the registry is not intended to
punish companies or individuals for
their past acts. As discussed in part
IV(F) above, consumers may benefit
from the publication of the information
collected by the registry, including
information about orders that are
already public. For example, the Bureau
believes that, at least in certain cases,
publishing information about the entity
and its applicable orders in a public
registry will help certain consumers
make informed decisions regarding their
choice of consumer financial products
or services, especially if the information
in the registry is recirculated, compiled,
or analyzed by other users such as
consumer advocacy organizations,
researchers, or the media. And
publication of covered orders in the
registry may also facilitate private
enforcement of the Federal consumer
financial laws by consumers, to the
extent those laws provide private rights
of action, where consumers have been
harmed by a registered nonbank. These
purposes are consistent with the public
interest, with the Bureau’s other
purposes in publishing registry
information, and with the Bureau’s
statutory authorities. The Bureau
disagrees that its purpose in publishing
such information is to shame companies
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56127
or executives that are listed in the
registry.
With respect to the industry
comments regarding use of published
orders in litigation, and potential
additional costs that may be associated,
the covered orders subject to
publication under § 1092.205 are
already public, which will limit the
costs imposed on firms by the final
rule’s publication provisions. As
discussed in part IV(F) above, the
Bureau believes that users who have
access to information published in the
registry may potentially use that
information to assist with the assertion
of private rights of action that might be
available under the Federal consumer
financial laws. That is part of the reason
the Bureau is issuing the final rule. The
Bureau disagrees that litigation brought
by other agencies or consumers to
enforce rights under Federal consumer
financial law, as applicable, is
necessarily inappropriate. While the
registry information published under
the final rule may include plaintiffs’
lawyers among its users, or help inform
class action lawsuits against industry
participants, it is not the purpose of the
registry to encourage or promote
lawsuits purely for the sake of litigation.
Rather, the Bureau is finalizing
§ 1092.205 for the purposes described in
part IV and in the description of final
§ 1092.205 below. For additional
discussion about these and other
potential costs associated with this
provision, see part VIII.
With respect to the comments
regarding the statements in the proposal
and other related Bureau statements
about ‘‘repeat offenders,’’ one of the
purposes of the rule is to help the
Bureau identify persons that repeatedly
violate the law. The information that the
Bureau intends to publish under
§ 1092.205 will help the Bureau and
other users identify entities that have
violated the law, including those that
have become subject to more than one
covered order. Such entities would be
more difficult to identify without the
existence of the registry because the
information about these entities and
orders is scattered across multiple
sources, and may no longer be accurate
or updated in a timely fashion.
However, the proposal did not purport
to comprehensively define the term
‘‘repeat offender’’ 443 or to establish any
specific legal consequences of any such
designation, and the Bureau declines to
443 But see 88 FR 6088 at 6095 (‘‘Recidivism—
whether in the form of a company that repeatedly
violates the law and as a result becomes subject to
multiple orders, or in the form of a company that
violates the orders to which it is subject—poses
particular risks to consumers.’’).
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do so in the final rule. The Bureau will
use the information supplied by the
registry in accordance with relevant
law, including to inform its supervisory
and enforcement functions. For
example, as stated in part IV(B) above,
the information contained in the
proposed registry may be relevant in
assessing civil penalties for violations of
Federal consumer financial laws, given
that Congress has provided that such
penalties should take into account an
entity’s ‘‘history of previous violations’’
and ‘‘such other matters as justice may
require.’’ 444 As stated in part IV(B)
above, the Bureau may consider certain
matters identified in previous
enforcement actions published in the
nonbank registry to be relevant under
these provisions. But the final rule does
not establish new requirements or
guidelines for such determinations,
which will be made in accordance with
existing law.
Response to comments received
regarding the publication of the name
and title of attesting executives.
The Bureau intends to publish the
names and titles of attesting executives
designated under § 1092.204(b).445
Publishing this name and title
information will provide information of
use to consumers, other regulators,
industry, nongovernment organizations,
and the general public.
As explained elsewhere in this
preamble, collecting information
regarding the name and title of the
attesting executive for a given covered
order will provide the Bureau with
insight into the entity’s organization,
business conduct, and activities, and
will inform the Bureau’s supervisory
work, including its risk-based
prioritization process. As discussed in
part IV(F) above, the Bureau believes
this information will be similarly
valuable to other users of the nonbank
registry, and thus intends to publish it
in connection with covered orders
registered by supervised registered
entities. Disclosure of this information
would increase transparency regarding
how the Bureau processes and verifies
information submitted as part of the
nonbank registry. Thus, publication
would further the rationale of the
proposal—that is, enhancing oversight
and awareness of covered orders and the
covered nonbanks that are subject to
them. Publishing the name and title of
attesting executives for the covered
orders listed on the registry will bring
specificity and concreteness to the
444 See,
e.g., 12 U.S.C. 5565(c)(3)(D), (E).
discussed further below, the Bureau is
retaining the discretion not to publish this
information based on operational considerations.
445 As
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information that is available to users of
the nonbank registry allowing users to
better understand the nature of
particular covered orders, which
activities of the applicable supervised
registered entity they relate to, and who
at the entity has control over the entity’s
efforts to comply with a particular
covered order. Publishing name and
title information for attesting executives
could help consumers and consumer
advocacy organizations better
understand and monitor the conduct of
the entities with whom consumers do
business.
While the Bureau will treat the
contents of the written statements as
CFPB confidential supervisory
information (§ 1092.204(b)), publishing
the name and title of each supervised
registered entity’s attesting executive(s)
for each covered order will provide
transparency to users of the registry and
the general public regarding important
matters connected with the applicable
covered order. The entity will be
identified as potentially subject to
Bureau supervision under CFPA section
1024,446 the officers will be designated
as satisfying the criteria established in
§ 1092.204(b) with respect to each
covered order, and registry users will be
able to quickly and efficiently identify
which officer is responsible for filing
the annual written statement with
respect to the covered order. Thus, the
registry will provide users with an upto-date and accessible source of
information about supervised registered
entities, the covered orders to which
they are subject, and the senior officers
who are responsible for filing annual
written statements about those orders.
The Bureau does not intend, in
publishing the name and title of the
attesting executive, to convey the
impression that the executive is solely
responsible for compliance at the entity,
or that problems with the entity’s
compliance with the covered order
should be directed solely to the
attention of the attesting executive, or
that the executive was necessarily in
any way responsible for the entity’s
violations of law or other actions or
omissions that resulted in the
imposition of the covered order. The
Bureau also disagrees with commenters’
assertions that the designation
requirement will unfairly implicate the
446 12 U.S.C. 5514. While, under § 1092.102(c) of
the final rule, an entity’s compliance with
§ 1092.204 would not prevent the entity from
disputing that it is subject to Bureau supervision
under 12 U.S.C. 5514, publication of the fact that
an entity has designated an attesting executive
under § 1092.204 would indicate to users of the
nonbank registry that the entity may be subject to
Bureau supervision.
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attesting executive in previous
wrongdoing, and declines to adopt the
industry commenter’s suggestion that
the rule should only require designation
of an executive where the executive had
been serving at the time of the violations
underlying the order. As discussed in
the section-by-section discussion of
§ 1092.204(b), even for those covered
orders that the Bureau is authorized to
enforce, § 1092.204(b)’s requirement to
designate an attesting executive does
not mean that the Bureau intends to
hold that executive solely responsible
for the entity’s compliance with those
covered orders. For example,
§ 1092.204(b)’s requirements for the
entity’s designation of its attesting
executive(s) do not imply that the
attesting executive is, merely by dint of
that individual’s designation under the
final rule, more responsible or
accountable than is a supervised
registered entity’s board of directors for
any of the entity’s acts or omissions.
The Bureau acknowledges that some
nonbank registry users may be
susceptible of misimpressions on these
matters, and may misunderstand the
Bureau’s publication of the executive’s
name and title as a statement about the
executive’s culpability or responsibility.
Nevertheless, the Bureau does not
believe this misconception will be
widespread, and believes the
publication of the name and title of
attesting executives will generally be in
the public interest for the reasons
discussed. As discussed in the sectionby-section discussion of § 1092.204(b)
above, the final rule does not establish
any new standards, or alter any existing
standards, regarding individuals’
liability for supervised registered
entities’ violations of covered orders or
other legal obligations.
Likewise, publishing the name and
title of the attesting executive will not
violate due process or the presumption
of innocence. As discussed above, such
publication as provided in § 1092.205 is
consistent with the public interest, with
the Bureau’s other purposes in
publishing registry information, and
with the Bureau’s statutory authorities.
The Bureau disagrees that publishing
such information will shame executives
that are listed in the registry. Publishing
such information also does not impose
criminal penalties on or otherwise
punish such executives. Publication
will inform potential users of the
registry that the supervised registered
entity has designated the individual
named on the grounds that the
individual satisfies the criteria
established under § 1092.204(b) with
respect to the particular covered order.
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Those criteria do not carry any
connotation of shame or wrongdoing,
and publication of such information is
not a punishment or penalty.
The Bureau believes that the
publication of the name and title of the
attesting executive associated with each
covered order who satisfies the criteria
of § 1092.204(b) with respect to that
order will be useful to users of the
nonbank registry, and disagrees that it
will only cause reputational harm. For
example, such information will
facilitate coordination and
communication regarding the order
between the Bureau, other government
agencies, and the supervised registered
entity. Other regulators, especially those
that have issued covered orders
regarding the supervised entity, would
likely benefit from understanding which
executive(s) have been tasked with
ensuring compliance with their orders.
Clients or other companies that do
business with the entity would have a
better understanding of which areas of
the company are affected by a covered
order and who is responsible for
compliance with it. And researchers,
media, and other users of the
information may be able to detect trends
or patterns associated with such
information.
Such additional regulatory and public
scrutiny of the individuals who are so
designated, and the awareness on the
part of the executive and supervised
registered entity that other parties may
associate the executive’s name with the
entity’s efforts to comply with the order,
will promote identification and
assessment of risks to consumers and
compliance with the laws that the
Bureau administers. In particular, with
respect to covered orders enforced by
the Bureau, publication as authorized
under the final rule will help ensure
accountability at the entity for
noncompliance and provide an
incentive to pay more attention to such
covered orders.
One industry commenter challenged
the Bureau’s assertion that the
publication of name and title
information would promote compliance,
asserting that because this information
is already public in some other form, it
is difficult in the commenter’s view to
see how this requirement creates an
enhanced incentive other than creating
negative reputational costs. Since the
requirement to designate an attesting
executive specific to each covered order
stems from the rule itself and is not a
preexisting requirement, information
about the name and title of any
particular attesting executive associated
under the rule with a particular covered
order would not already be public
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information. The Bureau believes that
many attesting executives will already
be publicly identified as employees of
these entities in some other way (e.g., on
the company’s website or in filings,
licenses, or registrations required under
applicable Federal or State securities or
corporate law). However, such sources
would not generally provide
information regarding the entity’s
designation of attesting executives in
the manner prescribed by the final rule.
Also, not all public sources of
information about the names and titles
of executives may be as accurate or
reliable, or as frequently updated, as the
Bureau’s registry. Publishing the name
and title information in the nonbank
registry itself will enhance users’ ability
to identify accurate and up-to-date
information about such matters quickly,
and to associate it with the correct
covered order and supervised registered
entity. By enabling enhanced
monitoring of such matters, publication
of the name and title information will
promote compliance and the
identification and assessment of risks to
consumers.
One industry commenter asserted that
publishing an attesting executive’s name
and title would disrupt supervised
registered entities’ normal complainthandling procedures by creating a false
perception that reaching out to a
particular executive would be more
effective. The Bureau agrees with the
commenter that consumers generally
should not rely on the name and title of
the attesting executive as a tool for
identifying where to direct their
complaints or inquiries. Section
1092.203(b) does not identify an
executive’s role in the entity’s
complaint-handling process as one of
the criteria for designating an attesting
executive, and consumers should not
rely on this designation for such a
purpose. The Bureau acknowledges that
the notice of proposed rulemaking
stated that publishing the attesting
executive’s name and title would
‘‘inform consumers of a person to whom
they could direct escalated
complaints.’’ 447 However, in this final
rule, the Bureau is not adopting this
rationale for publishing the name and
title of the attesting executive. The
Bureau agrees with the commenter that
a supervised registered entity’s normal
complaint-handling procedures may not
always involve the designated executive
in the entity’s complaint-handling
process, and that consumers’ escalating
of complaints or inquires to officers
whom the entity has not designated as
responsible for fielding complaints or
PO 00000
inquiries directly from the public may
not always be effective or appropriate.
Nor should consumers or other users of
the nonbank registry utilize this
information for the purposes of
harassment, badgering, or intimidation
of the entity’s officers.
However, as described in the
proposal,448 it is possible that at least
under certain scenarios, consumers who
are affected by a supervised registered
entity’s compliance (or failure to
comply) with a covered order may
benefit from knowing the name and title
of the executive who has knowledge and
control of the supervised entity’s efforts
to comply with the covered order.
Publishing this information will enable
consumers to better understand the
operations and structure of the
supervised registered entity—for
example, which of the entity’s lines of
business or business names has
responsibility for the matters addressed
by the order, how their complaints or
inquiries regarding matters relating to
the order may be addressed, and how
the entity’s compliance efforts with
respect to any one covered order may
relate to its efforts with respect to other
such orders.
Likewise, as stated in the proposal,449
publication of executive name and title
information will enable employee
whistleblowers, or other consumers who
have knowledge and information about
violations of the applicable order, to
ensure that such information gets to the
appropriate department or office within
the supervised registered entity. Again,
the Bureau agrees with commenters that
whistleblowers and consumers
generally should not rely on the name
and title of the attesting executive as a
tool for identifying the individual to
whom to direct this information. The
final rule is not intended to require
supervised registered entities to
establish different processes for such
matters or to require attesting executives
to become responsible for all
whistleblower complaints. Nevertheless,
publishing this information will help
whistleblowers and consumers better
understand the operations and structure
of the supervised registered entity,
including where—using any applicable
processes established by the entity for
obtaining information about such
matters—to direct whistleblowing
complaints or information about
violations of the covered order in order
to ensure that their complaint or
information is being sent to the
appropriate part of the organization.
448 Id.
447 88
FR 6088 at 6102.
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One commenter asserted that
publication of the name and title of
attesting executives would not ensure
that supervised registered entities are
legitimate entities and are able to
perform their obligations to consumers
under CFPA section 1024(b)(7)(C). First,
to the extent this comment is intended
to assert that § 1092.204(b)’s designation
requirement is unlawful, the Bureau
disagrees; see parts III and IV and the
section-by-section discussion of
§ 1092.204(b). Second, this concern is
not relevant to the Bureau’s legal
authority to publish this information.
While the Bureau is promulgating the
written-statement requirements,
including the requirement to designate
attesting executive(s) and submit
written statements, under its authority
under CFPA section 1024(b)(7)(A)–(C),
the Bureau is also collecting attesting
executives’ names and titles under its
market-monitoring authorities in CFPA
section 1022(c),450 and it intends to
publish such information under its
authority at CFPA section 1022(c)(3),
not under CFPA section 1024(b)(7)(A)–
(C).451 Nevertheless, the Bureau believes
that publication of the name and title
information will in fact independently
help ensure that supervised registered
entities are legitimate entities and are
able to perform their obligations to
consumers. Publishing this information
will promote accountability and
compliance at the supervised registered
entity, helping to ensure that the
supervised registered entity takes its
legal duties seriously, and that it is not
treating the risk of enforcement actions
for violations of legal obligations as a
mere cost of doing business. While the
commenter questioned why an
illegitimate entity would register at all,
the Bureau believes that not all entities
that register in compliance with the
final rule will necessarily be perfectly
willing and able to comply with their
other legal obligations to consumers,
450 See
id. at 6119.
discussed in the proposed rule, see 88 FR
6088 at 6128, the Bureau recognizes that the
attesting executives’ names and titles could be
construed as ‘‘confidential supervisory
information’’ as defined in the Bureau’s
confidentiality rules at 12 CFR 1070.2(i) because the
Bureau is relying in part on its supervisory
authority in 12 U.S.C. 5514 to collect the
information. In the proposal, the Bureau explained
that public release of information pursuant to
proposed § 1092.204(a) would have been authorized
by the Bureau’s confidentiality rules at 12 CFR
1070.45(a)(7), which permits the Bureau to disclose
confidential information ‘‘[a]s required under any
other applicable law.’’ The Bureau recognizes that
12 CFR 1070.45(a)(7) is no longer applicable
because publication under the final rule is
discretionary. As such, if the Bureau publishes the
above-described information, it would do so
pursuant to an authorization from the Director in
accordance with 12 CFR 1070.46.
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451 As
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including those imposed by Federal
consumer financial law. Collecting and
publishing name and title information
for attesting executives will help ensure
these entities are legitimate.
With respect to commenters’ privacy
concerns, the only information collected
under § 1092.204 related to the written
statement that would be published
under § 1092.205 is the attesting
executive’s name and title. The Bureau
would not publish any contact
information required to be submitted
through the registry, which the Bureau
intends to obtain as ‘‘administrative
information’’ pursuant to filing
instructions issued under § 1092.102(a).
It is not clear how publication of this
limited name and title information
would result in any harassment of the
attesting executives. Moreover, under
the Freedom of Information Act,452 an
individual’s expectation of privacy is
diminished concerning matters where
the individual is acting in a business
capacity.453 Finally, the rule requires
that the attesting executive be a highranking senior executive officer at the
entity. As such, the Bureau believes that
many attesting executives will already
be publicly identified as employees of
these entities in some other way (e.g., on
the company’s website or in filings,
licenses, or registrations required under
applicable Federal or State securities or
corporate law). The Bureau does not
believe publishing the name and title of
the attesting executives implicates any
more than a de minimis privacy interest.
Response to other comments received
regarding publication.
Commenters did not provide any data
supporting their claims about the likely
size of covered nonbanks that would be
subject to covered orders. Likewise, the
industry commenter provided no
evidence that new and emerging
covered nonbanks are more likely to be
subject to covered orders, or that the
proposed registry would impose an
unfair burden on them. While the
Bureau does not expect the final rule to
impose unfair or disproportionate
effects on either small or large covered
nonbanks, or based upon their new or
emerging status, in any case the rule’s
requirements do not depend upon such
matters. The Bureau intends to use the
information it obtains through the rule
to better understand the size and other
characteristics of entities that are subject
to covered orders. This information will
be highly relevant and useful not just to
U.S.C. 552.
e.g., Brown v. Perez, 835 F.3d 1223, 1234–
37 (10th Cir. 2016); King & Spalding, LLP v. U.S.
Dep’t of Health & Human Servs., 395 F. Supp. 3d
116, 119–23 (D.D.C. 2019).
PO 00000
452 5
453 See,
Frm 00104
Fmt 4701
Sfmt 4700
the Bureau but to all government
regulators of covered nonbanks as well
as the other potential users of the
registry discussed above. With respect
to potential costs associated with this
provision on smaller entities, see parts
VIII and IX.
As part of the purpose of the Bureau’s
publication of registry information
under § 1092.205 is to make the
information available and easily usable
for a range of potential users, including
the general public, the Bureau intends
to develop a nonbank registry with the
goal of making registry information
searchable, sortable, and downloadable,
among other things.
The Bureau believes the registry is
authorized by the CFPA and does not
conflict with other laws, including the
FDCPA or its implementing Regulation
F.454 The Bureau disagrees with
commenters’ suggestion that the
Bureau’s publication of information
about covered orders and covered
nonbanks as described in § 1092.205 is
likely to lead to the disclosure of
embarrassing information about
consumers. As stated in part III(B), the
Bureau’s registry is designed to not
collect any protected proprietary,
personal, or confidential consumer
information, and thus, the Bureau will
not publish, or require public reporting
of, any such information under
§ 1092.205.
Notwithstanding commenters’
assertions, the Bureau believes that
collection and publication of
information will benefit other agencies,
for the reasons provided in the
description of the proposed rule above.
The Bureau’s publication of identifying
information, which may not have been
previously made public, will enable
other agencies, as well as consumers
and other users, to more readily identify
companies that are subject to covered
orders and otherwise obtain relevant
information about them, such as their
legal name and principal place of
business. While certain identifying
information about covered nonbanks,
especially those that are subject to other
disclosure obligations under Federal
and State securities laws or other laws,
may already be available, information
about many covered nonbanks may not
be publicly available. Nor will all
covered nonbanks necessarily be subject
to licensing regimes or, even if they are
so subject, be duly licensed and
registered in every jurisdiction where it
is required. Publication by the Bureau of
identifying information under
§ 1092.205 also will present such
information in a consistent and readable
454 See
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format and will otherwise assist other
agencies as well as other registry users
in locating and using this information.
In addition, Bureau publication of
information regarding covered orders as
described under § 1092.205 will collect
and organize that information and make
it easier to find and use. By requiring
covered nonbanks to provide and
maintain information about the orders
under § 1092.202(d), the final rule will
help ensure that other agencies and
other users have ready access to
collected and updated information
about covered orders that may be
relevant to their jurisdiction. As
described in part V above, during
interagency consultation some agencies
stated they would use the information
published in the registry, while others
stated they would not.
See the section-by-section discussion
of § 1092.203 above with respect to
comments received regarding potential
consumer confusion that commenters
stated could be caused by the
publication of information in the
proposed registry in connection with
the NMLS Consumer Access website,
and the Bureau’s adoption of optional
one-time registration of NMLSpublished covered orders under that
section. As to other types of consumer
confusion addressed by commenters, in
the proposal,455 the Bureau
acknowledged there may be some
uncertainty over the degree to which
consumers would use the publicized
information and, when they do, over
how consumers could interpret such
information. The Bureau stated that it
would continue to evaluate the
possibility that publishing information
collected under subpart B has the
potential to create confusion, which, to
the extent it occurs, is unlikely to serve
the public interest. And the Bureau
stated that, if it finalized the proposed
provision on publishing registry
information, it would consider options
for publishing the information in a
manner that mitigates this risk. No
commenter submitted specific
suggestions.
To be clear, registration of any
covered person under the final rule does
not constitute endorsement by the
Bureau or any other agency of the
Federal Government. Registered entities
may also be subject to orders that are
not published in the registry.
The Bureau does not believe, and
does not intend by finalizing the rule or
publishing information under
§ 1092.205 to suggest, that all covered
orders are somehow equivalent. To the
contrary, the Bureau understands that
covered orders are likely to vary widely
in many ways, including in the types of
covered nonbanks they are issued
against, the types of covered laws they
enforce, the type and magnitude of the
harm to consumers they address, the
types of remedies they impose, their
duration, and any number of other
matters. One of the reasons the Bureau
is adopting the final rule is so that it
may collect and review covered orders,
including from covered nonbanks that it
may not know about, in order to better
understand such issues. As discussed in
the section-by-section discussion of
§ 1092.201(e), the Bureau does not
believe these differences among covered
orders require modification of the
proposal. An order that satisfies the
definition of the term ‘‘covered order’’ is
subject to the rule’s requirements with
respect to such orders, to the extent they
apply.
Nor does the Bureau believe that any
differences among covered orders would
render publication of such orders or the
other registration information required
by the rule to be misleading or
inappropriate. To the contrary,
publication of the information collected
through the registry will better enable
users to review and understand such
covered orders directly for themselves,
and thus to better appreciate any
differences among them that may exist.
Thus, publication of registry
information as intended by the Bureau
will accord with the Bureau’s objectives
and functions under the CFPA of,
among other things, ensuring that
‘‘markets for consumer financial
products and services are fair,
transparent, and competitive,’’ 456 and
‘‘publishing information relevant to the
functioning of markets for consumer
financial products and services’’ to
facilitate ‘‘identify[ing] risks to
consumers and the proper functioning
of such markets.’’ 457 Publication of the
copies of covered orders obtained under
§ 1092.202(d)(1) will provide users with
the opportunity to review the
differences among covered orders.
The Bureau’s potential publication of
information relating to consent orders as
described at § 1092.205 will not provide
inaccurate, inconsistent, or misleading
information to consumers, as the Bureau
will simply be collecting and presenting
factual information regarding orders that
are already published (or required to be
published) elsewhere. As discussed in
parts VIII and IX below, the Bureau
concludes that the publication
provisions of the rule will impose only
minor costs on affected entities resulting
456 See
455 88
FR 6088 at 6128.
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12 U.S.C. 5511(a).
12 U.S.C. 5511(c)(3).
Frm 00105
Fmt 4701
Sfmt 4700
56131
from changes in consumer behavior.
Publication of information as intended
by the Bureau will enable users of the
registry to access relevant factual
information about covered nonbanks
and covered orders and will not cause,
but rather help prevent, confusion and
the distribution of misleading
information.
With respect to the commenter’s
objection to the publication of older
orders, as discussed in the section-bysection discussion of § 1092.201(e)
above, the Bureau acknowledges that in
the intervening time following the
issuance of a covered order and before
registration, it is possible that many
entities will have taken steps to address
the violations and other issues
identified in the covered order. But
information regarding the issuance of
such a covered order, and the
information that will be collected under
the final rule about the covered nonbank
and the order, will still be useful to
users of the registry. With respect to the
comment that the Bureau should only
require registration once a covered order
has become subject to a minimum of
five covered orders, the Bureau
concludes that such an approach would
omit useful information about both
covered nonbanks and covered orders
and would otherwise not further the
purposes of the final rule. The Bureau
also concludes that such an approach is
not necessary in order to limit confusion
for users of the registry. As discussed
above, while the Bureau may publish
information about covered nonbanks
and covered orders as authorized under
§ 1092.205 in part to facilitate
identification of entities that repeatedly
break the law, the Bureau in this final
rule does not purport to
comprehensively define the term
‘‘repeat offender’’ or to establish any
specific legal consequences of any such
designation.
For further discussion of these and
other comments regarding potential
confusion related to the publication of
information about covered orders, see
the section-by-section discussion of
§ 1092.201(e) above.
The Bureau concludes that
publication of the information collected
under the registry with respect to such
covered orders as described in
§ 1092.205 will serve the purposes
described herein.
Response to Comments Received
Regarding Proposed § 1092.204(b)
For the reasons given in the
description of proposed § 1092.204(b)
above, the Bureau concludes that
treating the written statements that it
receives under § 1092.204 of the final
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rule as CFPB confidential supervisory
information, and not publishing them
under § 1092.205 of the final rule,
would facilitate the Bureau’s
supervision of supervised registered
entities by enabling the Bureau to obtain
frank and candid assessments and other
information from supervised registered
entities regarding violations and
noncompliance in connection with
covered orders. This information in turn
would better enable the Bureau to spot
emerging risks, focus its supervisory
efforts, and address underlying issues
regarding noncompliance, compliance
systems and processes, and risks to
consumers. The final rule adopts the
proposal’s approach and identifies the
written statement as CFPB confidential
supervisory information under
§ 1092.204(a)(1). The Bureau believes its
existing regulations under part 1070 are
adequate to establish safeguards for
protecting the confidentiality of such
information.
Final Rule
For the reasons described in parts
III(B), IV(F), the section-by-section
discussion of § 1092.205(a) above, and
as follows, the Bureau is not finalizing
§ 1092.204(a) as proposed, but is instead
adopting a revised § 1092.205(a) that
provides that the Bureau ‘‘may’’ publish
the information submitted to the
nonbank registry pursuant to
§§ 1092.202 and 1092.203.458 As
described below, this provision will
preserve the Bureau’s discretion not to
publish information based on
operational considerations, such as
resource constraints. The Bureau is also
adopting proposed § 1092.204(b), which
would have provided that the Bureau
would not publish the annual written
statement and would treat it as Bureau
confidential supervisory information,
largely as proposed but with revisions to
reflect the renumbering of this provision
as § 1092.205(a)(1) of the final rule. The
Bureau is also adopting a provision at
§ 1092.205(a)(2) that expressly provides
that the Bureau will not publish
administrative information collected
pursuant to subpart B.
Except as described below, the Bureau
intends to publish a registry that
contains the identifying information for
covered nonbanks that the nonbank
registry collects under § 1092.202(c) and
the information regarding covered
orders collected under § 1092.202(d)
and (f), as well as certain information
collected under § 1092.203 for the
purposes of enabling users of the
458 See the section-by-section discussion of
§ 1092.101(d) above regarding the Bureau’s
adoption of the revised term ‘‘nonbank registry.’’
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registry to identify NMLS-published
covered orders and the applicable
covered nonbanks subject to them.
Under CFPA section 1022(c)(3), the
Bureau ‘‘shall publish not fewer than 1
report of significant findings of its
monitoring required by this subsection
in each calendar year,’’ and ‘‘may make
public such information obtained by the
Bureau under this section as is in the
public interest.’’ 459 Except as described
below, the Bureau finds that it would be
in the public interest to publish
information (other than ‘‘administrative
information,’’ which the final rule
provides the Bureau will not publish)
that has been appropriately submitted to
the nonbank registry as required under
§ 1092.202. In addition, except as
described below, the Bureau finds that
the publication of certain information
submitted under § 1092.203 will be in
the public interest where publication
would serve the purposes of allowing
users of the Bureau’s public registry to
identify that a covered nonbank has
become subject to a covered order and
to be able to locate information about
that covered nonbank and covered order
on the NMLS Consumer Access website.
The Bureau may also collect additional
information under § 1092.203 for the
purpose of coordinating the nonbank
registry with the NMLS that it may
choose not to publish. The Bureau
concludes that such publication of the
above-described information will be in
the public interest for the reasons
provided in parts III(B) and IV(F) and
this section-by-section discussion of
§ 1092.205(a).
However, and notwithstanding the
conclusions in the paragraph above, the
Bureau reserves discretion not to
publish information based on
operational considerations, including
resource constraints.
In light of the adopted provision
providing the Bureau with discretion
not to publish any or all of the
information collected, the Bureau is not
finalizing the provision in the proposed
rule that would have expressly reserved
the right not to publish any information
that it determines may be inaccurate,
not required to be submitted under
subpart B, or otherwise not consistent
with part 1092 and any accompanying
guidance. However, under the final rule,
the Bureau retains the discretion not to
publish any information that it
determines may be inaccurate, not
required to be submitted under subpart
B, or otherwise not consistent with part
1092 and any accompanying guidance.
The final rule provides that the
publication described in § 1092.205(a)
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U.S.C. 5512(c)(3).
Frm 00106
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will not include the annual written
statement submitted by supervised
registered entities under § 1092.204. The
Bureau adopts § 1092.204(b) as
proposed (renumbered as
§ 1092.205(a)(1)) for the reasons
described above, with minor revisions
to reflect the renumbering of § 1092.204
and this provision.
The Bureau is also adopting a
provision at § 1092.205(a)(2) that
expressly provides that the publication
described in § 1092.205(a) will not
include ‘‘administrative information,’’
as that term is defined at § 1092.201(a).
The proposed rule had reserved the
Bureau’s right not to publish
administrative information, but did not
expressly prohibit its publication under
proposed § 1092.204(a). However, the
Bureau concludes that administrative
information should not be made
publicly available under § 1092.205(a).
The identifying information collected
under § 1092.202(c) already will
facilitate the ability of consumers to
identify covered persons for purposes of
the Bureau’s authority in CFPA section
1022(c)(7)(B) to publicly disclose
registration information. Further,
including administrative information
with other information the Bureau
publishes pursuant to § 1092.205(a) is
unlikely to serve the public interest for
purposes of the Bureau’s authority to
publish information under CFPA
section 1022(c)(3). The publication of
information collected for a purely
administrative purpose generally will
not be useful to external users of the
registry. Administrative information is
likely to include information such as
time and date stamps, contact
information, and administrative
questions. The Bureau may need such
information to work with personnel at
nonbanks and in order to administer the
nonbank registry. As discussed in the
section-by-section discussion of
§ 1092.201(a) above, the Bureau will
also treat as administrative information
the notifications of nonregistration
submitted under §§ 1092.202(g) and
1092.204(f). Publishing such
information would not be in the public
interest because it is unclear what use
the public would have for such
information. In addition, publishing
such information likely would be
counterproductive to the goals of
ensuring compliance with the proposal.
Also, as discussed in the section-bysection discussion of § 1092.202(d)
above, under the final rule, the Bureau
will treat as ‘‘administrative
information’’ and not publish
information collected under the
nonbank registry regarding the names of
the person’s affiliates registered under
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subpart B with respect to the same
covered order. The proposal would have
collected this information under
proposed § 1092.202(d)(1)(v) and
published it under § 1092.204(a). Under
the final rule, § 1092.201(d)(1)(v) has
been deleted, but the Bureau may
determine to collect this information as
‘‘administrative information’’ under
§ 1092.202(c). In filing instructions
issued under § 1092.102(a), the Bureau
will specify whether and how it will
collect such information. The Bureau
anticipates that collecting such affiliate
information may be useful in
administering the nonbank registry
including in connection with
administering any joint or combined
submissions by affiliates under
§ 1092.202. However, while such
affiliate information will generally be
obvious from the face of the relevant
covered order or otherwise from
information that has been reported
publicly, it may not always be, and the
Bureau at this time does not believe that
there would be a significant public
benefit associated with publishing this
information through its registry.
Therefore, the Bureau has determined
not to mandate the collection of such
information in the final rule, and not to
publish such information under
§ 1092.205 if it is collected.
Section 1092.205(b) Other Publications
of Information
Proposed Rule
Proposed § 1092.204(c) would have
provided that the Bureau may, at its
discretion, compile and aggregate data
submitted by persons under proposed
subpart B and may publish such
compilations or aggregations (in
addition to any other publication under
proposed § 1092.204(a)). The Bureau
explained that any such publication that
relates to annual written statements
submitted under proposed § 1092.203
would be in a form that is consistent
with the Bureau’s treatment of those
annual written statements as Bureau
confidential supervisory information.460
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Comments Received
Commenters did not specifically
address proposed § 1092.204(c).
Final Rule
For the reasons set forth in the above
description of the proposal, the Bureau
adopts § 1092.204(c) as proposed
(renumbered as § 1092.205(b)), with
minor technical edits. Any publication
under § 1092.205(b) that relates to
administrative information submitted to
the nonbank registry under § 1092.202
460 See,
e.g., 12 CFR 1070.41(c).
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will be in an aggregated or other
appropriate format that is designed not
to disclose that particular administrative
information relates to a particular
covered nonbank.
Section 1092.205(c) Correction of
Submissions to the Nonbank Registry
Proposed Rule
Proposed § 1092.204(d) would have
clarified that a covered nonbank must
correct an information submission
within 30 days of when it becomes
aware or has reason to know the
submitted information was and remains
inaccurate. Proposed § 1092.204(d)
would have clarified that the process for
making corrections will be described in
the filing instructions the Bureau issues
pursuant to proposed § 1092.102(a).
Proposed § 1092.204(d) also would have
clarified that the Bureau may direct a
covered nonbank to correct errors or
other non-compliant submissions to the
NBR system. Under proposed
§ 1092.204(d), the Bureau could have
directed corrections at any time and in
its sole discretion.
Comments Received
Commenters did not specifically
address proposed § 1092.204(d).
Final Rule
For the reasons set forth in the above
description of the proposal, the Bureau
adopts § 1092.204(d) as proposed
(renumbered as § 1092.205(c)), with
minor technical changes.461
Section 1092.206 Nonbank Registry
Implementation Dates
Proposed Rule
Proposed § 1092.101(e) would have
defined the term ‘‘nonbank registration
system implementation date’’ to mean,
for a given requirement or subpart of
part 1092, the date(s) determined by the
Bureau to commence the operations of
the NBR system in connection with that
requirement or subpart. As stated in the
proposal, the Bureau proposed to
provide advance public notice regarding
the nonbank registration system
implementation date with respect to
proposed subpart B to enable entities
subject to subpart B to prepare and
submit timely filings to the NBR system.
Comments Received
Commenters did not specifically
address the definition of ‘‘nonbank
registration system implementation
date’’ in proposed § 1092.101(e). For a
discussion of comments addressing the
461 See the section-by-section discussion of
§ 1092.101(d) above regarding the Bureau’s
adoption of the revised term ‘‘nonbank registry.’’
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timing of the effective date of the
Bureau’s proposed rule, see part VII
below.
Final Rule
For the reasons discussed below and
in the section-by-section discussion of
§ 1092.101(e) above and part VII below,
the Bureau is adopting the revised term
‘‘nonbank registry implementation date’’
instead of the term ‘‘nonbank
registration system implementation
date’’ used in the proposed rule and is
adopting a revised definition of this
term to provide that the Bureau may
specify a nonbank registry
implementation date with respect to a
given person or category of persons. The
Bureau is also adopting § 1092.206 to
specify the nonbank registry
implementation date for given
categories of covered nonbanks. The
Bureau is not adopting the proposal to
provide in the rule that the Bureau
would specify the ‘‘nonbank registration
system implementation date’’ for
subpart B following the issuance of the
final rule. Instead, to provide greater
certainty and clarity to covered
nonbanks as of the issuance of the final
rule, the Bureau is specifying nonbank
registry implementation dates for
subpart B in § 1092.206 of the final rule.
The nonbank registry implementation
date established under § 1092.206 is
relevant to two provisions of the final
rule. As provided in § 1092.202(b)(2)(i),
each covered nonbank required to
register under § 1092.202 must submit a
filing containing the information
described in § 1092.202(c) and (d) to the
nonbank registry within the later of 90
days after the applicable nonbank
registry implementation date under
§ 1092.206 or 90 days after the effective
date of any applicable covered order.
And as provided in § 1092.204(a)(1),
§ 1092.204 applies only with respect to
covered orders with an effective date on
or after the applicable nonbank registry
implementation date. Thus, this
provision will affect the timeframe for
submission of covered orders during the
initial rollout of the nonbank registry
and the covered orders that will be
subject to § 1092.204’s written-statement
requirements.
Section 1092.206 establishes the
nonbank registry implementation date
for purposes of subpart B as follows.
Under § 1092.206(a)(1), for a covered
nonbank that (as of the effective date of
subpart B) is a larger participant of a
market for consumer financial products
or services described under CFPA
section 1024(a)(1)(B) as defined by one
or more rules issued by the Bureau, the
nonbank registry implementation date
for subpart B is 30 days after subpart B
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takes effect with respect to that covered
nonbank. Under § 1092.206(a)(2), for a
covered nonbank that (as of the effective
date of subpart B) is described under
any other provision of CFPA section
1024(a)(1), the nonbank registry
implementation date for subpart B is
120 days after subpart B takes effect
with respect to that covered nonbank.
Under § 1092.206(a)(3), for any other
covered nonbank, the nonbank registry
implementation date for subpart B is
210 days after subpart B takes effect
with respect to that covered nonbank.
(Section 1092.206(a)(3) shall apply to a
covered nonbank that for the first time
becomes subject to the Bureau’s
supervision and examination authority
under CFPA section 1024(a)(1) after the
effective date of subpart B.)
For the administrability of the
nonbank registry, which has numerous
potential registrants, the Bureau has
determined that registering different
categories of nonbank covered persons
in different phases will be appropriate.
The phased implementation approach
will also alleviate potential confusion in
complying with the requirements of the
final rule and promote greater stability
and certainty for registered entities. This
phased implementation approach will
better enable the Bureau to learn from
the information collected and its
experience in maintaining the registry,
and to enhance its processes before
information from a wider universe of
covered nonbanks is collected. As
described above, the first phase under
subpart B will register larger
participants, the second phase will
register other supervised nonbanks, and
the third phase will register other
covered nonbanks. Larger participants
generally have greater resources to
comply with the rule’s requirements
than do smaller business concerns.
Other supervised markets may include
smaller business concerns that are
affected by the rule to the extent they
are not excluded, such as by the
exclusion for entities with less than $5
million in relevant receipts described in
§ 1092.201(q) discussed in the sectionby-section discussion of that paragraph
above. As a result, the phased
registration groupings described above
(registering larger participants first, then
other covered nonbanks supervised
under any other provision of CFPA
section 1024(a)(1), then other covered
nonbanks) would leave more time for
most supervised registrants that are not
larger enterprises to comply with the
registration requirements. In addition,
the Bureau believes it is appropriate to
begin collecting information from
covered nonbanks that are subject to the
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Bureau’s supervision and examination
authority first before extending the
rule’s registration requirements to other
covered nonbanks, as such information
will generally be more relevant to the
Bureau’s supervisory prioritization
efforts and its supervision program.
The Bureau is also adopting
§ 1092.206(b), which clarifies that if
paragraph (a) would establish a nonbank
registry implementation date on a date
that is a Saturday, Sunday, or Federal
holiday, the applicable nonbank registry
implementation date will be the next
day that is not a Saturday, Sunday, or
Federal holiday. Therefore, given an
effective date for the final rule of
September 16, 2024, for purposes of
subpart B the nonbank registry
implementation date established under
§ 1092.206(a)(1) will be Wednesday,
October 16, 2024; under
§ 1092.206(a)(2), the date will be
Tuesday, January 14, 2025; and under
§ 1092.206(a)(3), the date will be
Monday, April 14, 2025.
VII. Effective Date of Final Rule
Proposed Rule
The Administrative Procedure Act
generally requires that rules be
published not less than 30 days before
their effective dates.462 The Bureau
proposed that, once issued, the final
rule would be effective 30 days after it
is published in the Federal Register.
However, it proposed that registrants
would only need to submit information
once the Bureau launched and
announced a registration system, which
the proposal noted was likely to be no
earlier than January 2024.
Comments Received
An industry commenter stated that
the effective date of the rule should be
at least a year from the date it is
promulgated, in order to provide
adequate time to establish the suggested
processes, procedures, and reports in
addition to adding additional staff to
support the process that would be
required under the proposal.
Response to Comments Received
The final rule will take effect on
September 16, 2024. The Bureau
disagrees with the commenter that
additional time will be needed for
entities to comply with the final rule.
The final rule’s effective date is more
than three months from the issuance of
the rule, and more than 60 days after
anticipated publication in the Federal
Register. This is a longer time period
than the 30 days in the proposed rule.
This longer period will provide
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U.S.C. 553(d).
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additional time for covered nonbanks to
prepare to comply with their obligations
under the final rule. In addition, as
discussed in the section-by-section
analysis of § 1092.206 above, for the
administrability of the nonbank registry
the Bureau has determined that
registering different nonbank covered
persons in different phases will be
appropriate. This phased
implementation approach will better
enable the Bureau to learn from the
information collected and its experience
in maintaining the registry, and to
enhance its processes before
information from a wider universe of
covered nonbanks is collected. The
Bureau is also specifying nonbank
registry implementation dates for
subpart B in § 1092.206 of the final rule
to provide greater certainty and clarity
to covered nonbanks as of the issuance
of the final rule. Given an effective date
of September 16, 2024, the earliest
nonbank registry implementation date is
Wednesday, October 16, 2024, or 30
days after the final rule’s effective date,
and no entity will be required to submit
any information to the nonbank registry
before Tuesday, January 14, 2025.
In addition, the reporting obligations
imposed by the rule are modest. As
discussed further in part VIII, the
impact of the registration provisions of
the rule on affected firms would be
limited, and, relative to the baseline, the
written-statement requirements should
impose only modest costs on most
covered entities. The Bureau disagrees
with the industry commenter that
covered nonbanks will be required to
adopt costly new processes or hire a
significant number of additional staff in
order to achieve compliance with the
final rule.
Final Rule
The effective date of the final rule is
September 16, 2024. This date is more
than three months after the issuance of
the rule, and more than 60 days after
anticipated publication in the Federal
Register. This is a longer time period
than the 30 days in the proposed rule.
This longer time period will provide
additional time for covered nonbanks to
prepare to comply with their obligations
under the final rule.
VIII. Dodd-Frank Act Section 1022(b)(2)
Analysis
A. Overview
In developing this final rule, the
Bureau has considered the rule’s
potential benefits, costs, and impacts.463
463 Specifically, section 1022(b)(2)(A) of the CFPA
requires the Bureau to consider the potential
benefits and costs of the regulation to consumers
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In developing this final rule, the Bureau
has consulted with, or offered to consult
with, the appropriate prudential
regulators and other Federal agencies,
including regarding consistency with
any prudential, market, or systemic
objectives administered by such
agencies. Under CFPA sections
1022(c)(7)(C) and 1024(b)(7)(D), the
Bureau has also consulted with State
agencies regarding this final rule’s
requirements and registry.464
The Bureau is issuing this final rule
to require nonbanks to report certain
public agency and court orders
imposing obligations based on
violations of consumer protection laws
because the creation and maintenance of
a central repository for information
regarding such public orders that have
been imposed upon nonbank covered
persons will support Bureau functions
in a variety of ways and thus ultimately
benefit consumers. The Bureau also
believes that consumers, the public, and
other potential users of the proposed
registry would benefit if the Bureau
publishes certain information from the
registry, as it intends to do.465 In
addition, the Bureau’s receipt of annual
supervisory reports from its supervised
nonbanks regarding their compliance
with such orders would facilitate the
Bureau’s supervisory efforts and
assessment and detection of risks to
consumers and help ensure that
supervised nonbanks are legitimate
entities and are able to perform their
obligations to consumers.
This final rule has three principal sets
of substantive provisions, which are
separately analyzed below. The first set
of provisions (hereinafter referred to as
the ‘‘Registration Provisions’’) will
require nonbank covered persons that
are subject to certain public orders to
register with the Bureau and to submit
certain information related to those
public orders to the Bureau. The second
set of provisions (hereinafter referred to
as the ‘‘Supervisory Reports
Provisions’’) will require nonbank
covered persons that are subject to
supervision and examination by the
Bureau to prepare and submit an annual
written statement, signed by a
designated individual, regarding
compliance with each covered public
and covered persons, including the potential
reduction of access by consumers to consumer
financial products and services; the impact of the
proposed rule on insured depository institutions
and insured credit unions with $10 billion or less
in total assets as described in section 1026 of the
CFPA; and the impact on consumers in rural areas.
12 U.S.C. 5512(b)(2)(A).
464 12 U.S.C. 5512(c)(7)(C), 5514(b)(7)(D).
465 For more information on the issue of
publication, see the section-by-section discussion of
§ 1092.205.
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order. The third set of provisions
(hereinafter referred to as the
‘‘Publication Provisions’’) describes the
registration information the Bureau may
make publicly available.
The Bureau received multiple
comments on the proposal stating that
the proposed registry was redundant
with existing registries and other
published information, and in particular
with the NMLS. See the section-bysection analysis of § 1092.203 above for
a discussion of these comments and the
Bureau’s response. Consistent with an
approach suggested by commenters, the
Bureau is adopting an express exception
from the requirements of the rule for
orders that are published on the NMLS
Consumer Access website, except for
orders issued or obtained at least in part
by the Bureau; that exception may be
exercised at the option of the covered
nonbank. Nonbanks that exercise this
option may submit a one-time
registration regarding certain agency
and court orders that are published on
the NMLS Consumer Access website
maintained at
www.NMLSConsumerAccess.org, in lieu
of complying with the other
requirements of the rule with respect to
the order. Such nonbanks will be
required to submit certain limited
information to the nonbank registry to
enable the Bureau to identify the
relevant nonbank and order and
otherwise coordinate the nonbank
registry with the NMLS. Upon
exercising this option and submitting
the required information about the
relevant order, a nonbank will have no
further obligation under subpart B to
provide information to, or update
information provided to, the nonbank
registry regarding the order. By allowing
this option, this final rule addresses
many comments received and lowers
the cost to firms of the final rule relative
to the proposed rule.
B. Data Limitations and Quantification
of Benefits, Costs, and Impacts
The discussion below relies in part on
information that the Bureau has
obtained from commenters, other
regulatory agencies, and publicly
available sources. The Bureau has
performed outreach with other
regulatory agencies on many of the
issues addressed by this final rule.
However, as discussed further below,
the data are generally limited with
which to quantify the costs, benefits,
and impacts of the final provisions. In
light of these data limitations, the
analysis below generally provides a
qualitative discussion of the benefits,
costs, and impacts of the final
provisions. General economic principles
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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.
C. Baseline for Analysis
In evaluating the benefits, costs, and
impacts of the final rule, the Bureau
takes as a baseline the current legal
framework regarding orders that will be
covered under the final rule. Therefore,
the baseline for the analysis of the final
rule is that nonbank covered persons are
not required to register with the Bureau,
nonbank covered persons subject to
Bureau supervision and examination
generally are not required to prepare
and submit annual reports regarding
compliance with public orders
enforcing the law, and information on
the nonbank covered persons and most
corresponding covered orders is
generally not published by the Bureau
in the manner contemplated by the final
rule.
The final rule should affect the market
as described below for as long as it is
in effect. However, the costs, benefits,
and impacts of any rule are difficult to
predict far into the future. Therefore, the
analysis below of the benefits, costs, and
impacts of the final rule is most likely
to be accurate for the first several years
following implementation of the final
rule.
D. Potential Benefits and Costs of the
Final Rule to Consumers and Covered
Persons
With certain exceptions, the final rule
will apply to covered persons as defined
in the CFPA, including persons that
engage in offering or providing a
consumer financial product or
service.466 Among others,467 these
products and services generally include
those listed below, at least to the extent
they are offered or provided for use by
consumers primarily for personal,
family, or household purposes:
• Extending credit and servicing
loans;
• Extending or brokering certain
leases of personal or real property;
• Providing real estate settlement
services;
• Engaging in deposit-taking
activities, transmitting or exchanging
funds, or otherwise acting as a
custodian of funds;
• Selling, providing, or issuing stored
value or payment instruments;
• Providing check cashing, check
collection, or check guaranty services;
466 For the full scope of the term ‘‘covered
person,’’ see 12 U.S.C. 5481(6).
467 For the full scope of the term ‘‘consumer
financial product or service,’’ see 12 U.S.C. 5481(5).
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• Providing payments or other
financial data processing products or
services to a consumer by any
technological means;
• Providing financial advisory
services;
• Collecting, analyzing, maintaining,
or providing consumer report
information or certain other account
information; and
• Collecting debt related to any
consumer financial product or
service.468
The Registration and Publication
Provisions will affect such covered
persons (as that term is defined in 12
U.S.C. 5481(6)) that (1) do not fall
within any of the listed exclusions in
§ 1092.201(d), such as those for insured
depository institutions, insured credit
unions, and related persons (as that
term is defined in 12 U.S.C. 5481(25)),
and (2) have had covered orders issued
against them. The Supervisory Reports
Provisions will affect such covered
persons that (1) are subject to
supervision and examination by the
Bureau pursuant to CFPA section
1024(a),469 (2) have had covered orders
issued against them, (3) are at or above
the $5 million annual receipt threshold,
unless such covered persons are subject
to certain exclusions, and (4) are not
registering covered orders under the
one-time registration option for NMLSpublished covered orders under
§ 1092.203.
A major benefit of the final rule is that
it will give the Bureau comparatively
high-quality data on the number and
type of covered orders. Currently, the
Bureau does not have high-quality data
on the number of covered orders, nor
does it have high-quality data on the
number of nonbank covered persons
that are subject to covered orders.
To derive an estimate of the number
of affected entities under the final rule
using publicly available data, the
Bureau used data from the most recent
available Economic Census. Table 1
below presents entity counts for the
North American Industry Classification
System (NAICS) codes that generally
align with the financial services and
products listed above. The markets
defined by NAICS codes in some cases
include entities that will not qualify as
covered nonbanks under the final rule.
It is also possible that some covered
nonbanks may not be counted in the
table below, because, for example, the
financial services they provide are not
their primary line of business. The
Bureau sought comment on NAICS
codes not included in table 1 that
include a significant number of entities
that will be affected by the final rule,
and no commenters recommended that
other NAICS codes be included.
TABLE 1—POTENTIAL SCOPE OF FINAL RULE
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NAICS name(s)
NAICS code(s)
Number of
NAICS entities
Nondepository Credit Intermediation .........................................................................................................
Activities Related to Credit Intermediation ................................................................................................
Portfolio Management ................................................................................................................................
Investment Advice .....................................................................................................................................
Passenger Car Leasing .............................................................................................................................
Truck, Utility Trailer, and Recreational Vehicle Rental and Leasing ........................................................
Activities Related to Real Estate ...............................................................................................................
Consumer Reporting ..................................................................................................................................
Debt Collection ..........................................................................................................................................
5222
5223
523920
523930
532112
532120
5313
561450
561440
14,330
13,618
24,430
17,510
449
1,612
79,563
307
3,224
Total ....................................................................................................................................................
..............................
155,043
Therefore, for purposes of its analysis
of the final rule, the Bureau estimates
that there are roughly 155,043 covered
nonbanks. As noted above, covered
nonbanks will only be affected by the
rule if they are subject to covered
orders. Based on its experience and
expertise, the Bureau estimates that
perhaps one percent, and at most five
percent, of covered nonbanks are subject
to covered orders. Therefore, the Bureau
estimates that the rule would likely
affect between 1,550 and 7,752 covered
nonbanks. The Bureau sought comment
and submissions of data concerning the
number and characteristics of covered
nonbanks subject to covered orders but
did not receive data contradicting its
estimate. The Bureau also sought input
on this subject during its consultation
process with other Federal, State, and
Tribal regulators. Notably, a coalition of
State-regulator commenters with access
to data from NMLS did not question the
Bureau’s estimate. Moreover, this
coalition used the Bureau’s estimate in
combination with NMLS data to make
arguments, which are discussed below,
regarding the rule’s potential impact on
small entities and covered nonbanks
subject to supervision and examination
by the Bureau.
However, a different commenter
appeared to disapprove of the Bureau’s
estimates, asserting that the CFPB was
merely guessing on the potential scope
of its rule. This commenter did not
provide other analytical approaches or
data for the CFPB to consider when
estimating the number of affected
nonbanks, nor did the commenter
provide a different estimate. In response
to this comment, the Bureau sought to
check the reasonableness of its estimate
by obtaining data from a database titled
‘‘Violation Tracker,’’ maintained by
Washington, DC-based nonprofit Good
Jobs First (https://violationtracker.
468 See 12 U.S.C. 5481(15) (defining term
‘‘financial product or service’’).
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469 12
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goodjobsfirst.org/). The database collects
reports of orders entered against
companies for violating a wide range of
laws. From the database, the Bureau
obtained data on agency actions
identified in the database as involving
‘‘consumer-protection related offenses’’
or ‘‘financial offenses’’ with penalty
announcement dates between 2017 and
April 2024. This data set includes
roughly 13,200 orders. The Bureau
further limited the data to orders
identified by the database as involving
a ‘‘primary offense type’’ related to
‘‘consumer protection,’’ ‘‘discriminatory
practices (non-employment),’’
‘‘privacy,’’ ‘‘banking,’’ ‘‘mortgage
abuses,’’ or ‘‘payday lending,’’ which
resulted in a collection of roughly 4,500
orders. Of these, some orders apply to
the same entity. Taking those orders
into account, the Bureau estimates that
this set of orders applies to roughly
3,700–4,000 unique entities. The Bureau
U.S.C. 5514(a).
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notes that these numbers are consistent
with its estimate of the number of
entities likely to be affected by the final
rule (1,550 to 7,752 covered nonbanks),
which the Bureau provided in the
proposal and reaffirms here.470
The Bureau sought comment and
submissions of data concerning the
number and characteristics (such as
annual revenues, number of employees,
and main area of business) of covered
nonbanks subject to covered orders.
However, commenters generally did not
provide, and the Bureau does not have,
this kind of quantitative data to analyze
the costs, benefits, and impacts of the
final rule. In light of the limited data
available to the Bureau on the number
of covered nonbanks subject to covered
orders, the analysis below focuses on
the potential benefits and costs of the
proposed rule for affected consumers
and covered nonbanks.
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1. Registration Provisions
Under these final provisions, affected
entities will have to provide: (1)
identifying information and
470 The Bureau’s analysis of the Violation Tracker
data may exclude some covered nonbanks subject
to covered orders. The Violation Tracker database
excludes orders with penalties of less than $5,000,
so the estimates above do not account for them. In
addition, the filters that the Bureau has applied may
have excluded some orders that would qualify as
‘‘covered orders’’ subject to the rule’s requirements.
Moreover, the Bureau has not verified the accuracy
or completeness of the Violation Tracker data, so it
is possible the data do not include some covered
orders that would need to be registered under the
rule.
The estimates derived above also likely include
some entities that are not covered nonbanks subject
to covered orders. The Violation Tracker database
does not purport to identify ‘‘covered orders’’ that
would be subject to the final rule’s registration
requirements, and the ‘‘primary offense types’’
identified in the data may be highly overinclusive.
Further, among the orders in the data set, the rule’s
registration requirements would apply only to those
orders that remain in effect as of the rule’s effective
date, but the Bureau lacks data to exclude from its
analysis of the Violation Tracker data orders that
are no longer in effect. Indeed, the written
statement provisions apply only to orders with an
effective date on or after the applicable nonbank
registry implementation date, so none of the orders
described above will implicate the written
statement provisions. The data include orders that
may not be ‘‘public’’ as defined in the final rule;
see § 1092.201(m) of the final rule. And many
entities subject to the identified orders are insured
depository institutions or insured credit unions and
so will not be ‘‘covered nonbanks’’ under the final
rule; see § 1092.201(d)(1) of the final rule. Thus,
many, and perhaps most, of the orders included in
the estimates above are likely not ‘‘covered orders’’
under the final rule.
Because of these caveats, the Bureau does not
view the 3,700–4,000 numbers derived above from
the Violation Tracker database as a highly accurate
estimate of the number of entities likely to be
affected by the final rule. However, the Bureau
finds that these data further confirm the
reasonableness of the Bureau’s estimate in the
proposed rule of the number of entities that the rule
will likely affect.
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administrative information and (2)
information regarding covered orders.
The Bureau believes this information
should be readily available to affected
firms. Therefore, the cost of complying
with the Registration Provisions for
most affected firms should be on the
order of a few hours of an employee’s
time. The cost would likely be even
lower for firms that have and exercise
the option to register NMLS-published
covered orders under § 1092.203. The
cost may be higher for firms with
several covered orders, or with covered
orders that are frequently modified and
are not registered under § 1092.203’s
one-time-registration provisions.
The Bureau generally expects that
firms will know whether they are
covered persons or are subject to
covered orders. If a firm is unsure of its
obligations under the Registration
Provisions, one option would be to hire
outside legal counsel to advise them on
these issues. However, another option
for such firms would be to register using
the nonbank registry, even if doing so is
not legally required. As explained
above, the cost associated with
registering an order is likely low—a few
hours of an employee’s time. In
addition, if firms have a good-faith basis
to believe they are not covered
nonbanks (or that their orders are not
covered orders), they may submit a
notice to the nonbank registry stating
such under § 1092.202(g). Preparing and
submitting such notices would take at
most a few hours of an employee’s time.
The Bureau further notes that the mere
act of registering an order or submitting
a § 1092.202(g) notice is unlikely to
have significant indirect costs because
§ 1092.102(c) would provide that the
rule ‘‘does not alter any applicable
process whereby a person may dispute
that it qualifies as a person subject to
Bureau authority.’’ Firms should
generally choose the lowest-cost option
available to them, and low-cost
options—either registering under the
nonbank registry or filing a notice under
proposed § 1092.202(g)—are options
available to firms.
To obtain a quantitative estimate of
the cost of this final provision, the
Bureau assesses the average hourly base
wage rate for the reporting requirement
at $49.29 per hour. This is the mean
hourly wage for employees in four major
occupational groups assessed to be most
likely responsible for the registration
process: Management ($66.23/hr); Legal
Occupations ($64.34/hr); Business and
Financial Operations ($43.55/hr); and
Office and Administrative Support
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56137
($23.05/hr).471 We multiply the average
hourly wage of $49.29 by the private
industry benefits factor of 1.42 to get a
fully loaded wage rate of $70.00/hr.472
The Bureau includes these four
occupational groups in order to account
for the mix of specialized employees
that may assist in the registration
process. The Bureau assesses that the
registration process will generally be
completed by office and administrative
support employees that are generally
responsible for the registrant’s
paperwork and other administrative
tasks. Employees specialized in
business and financial operations or in
legal occupations are likely to provide
information and assistance with the
registration process. Senior officers and
other managers are likely to review the
registration information before it is
submitted and may provide additional
information. Assuming as outlined
above a fully loaded wage rate of
roughly $70, and that complying with
this provision would take around five
hours of employees’ time, yields a cost
impact of around $350 per firm. Again,
the cost would likely be even lower for
firms that have and exercise the option
to register NMLS-published covered
orders under § 1092.203. Because
§ 1092.203 requires less information
from covered nonbanks than § 1092.202,
exercising the option made available in
§ 1092.203 should take even less
employee time.473 Therefore, the impact
of this final provision on affected firms
will be limited.
One commenter appeared to disagree
with the Bureau’s cost estimate,
objecting to the proposed rule because
of the expense of submitting,
monitoring, and updating the ‘‘vast’’
amount of information under the rule.
As discussed in more detail above, the
Bureau does not agree that the
Registration Provisions require entities
to submit ‘‘vast’’ amounts of
information. The commenter did not
elaborate on this point or provide
alternative data or analysis to produce
471 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. The hourly wage estimates
used in the proposed rule were slightly different
because they were drawn from 2021 data.
472 As of December 2023, the ratio between total
compensation and wages for private industry
workers is 1.42. See U.S. Bureau of Labor Statistics,
Employer Costs for Employee Compensation:
Private industry dataset (December 2023), https://
www.bls.gov/web/ecec/ecec-private-dataset.xlsx.
473 In the unlikely event that a covered nonbank
concluded that registering an NMLS-published
covered order under § 1092.203 would be more
costly than registering it under § 1092.202, the
covered nonbank could forgo the option presented
in § 1092.203 and register the order under
§ 1092.202 instead.
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an alternative cost estimate of the
Registration Provisions. However, the
Bureau agrees that entities registering
orders under § 1092.202 may incur
ongoing costs to comply with
§ 1092.202(b)(2)(ii), which requires that
covered nonbanks submit revised
registration filings within 90 days after
any amendment to a registered covered
order or information required under
§ 1092.202(c) or (d). Similarly,
§ 1092.202(f) requires a registered entity
to submit a revised filing within 90 days
if a covered order is terminated,
modified, or abrogated, or if it ceases to
be a covered order by operation of
§ 1092.202(e).474 The Bureau believes
that the cost of those subsequent filings
would generally be less than the cost of
preparing and submitting the initial
registration.
These final provisions will likely not
provide any benefits for affected firms.
These final provisions will give the
CFPB comparatively high-quality
information on outstanding covered
orders and the entities subject to those
orders. That information will assist the
Bureau in monitoring for risks to
consumers in the offering or provision
of consumer financial products or
services. The registry will allow the
Bureau to more effectively monitor for
potential risks to consumers arising
from both individual violations of
consumer protection laws and broader
patterns in such violations and
enforcement actions intended to address
them. Such monitoring, in turn, will
help inform the Bureau’s exercise of its
other authorities. It will assist the
Bureau in determining whether to
prioritize certain entities for risk-based
supervision, or to investigate whether
certain entities have committed
violations that warrant Bureau
enforcement actions. The Bureau also
anticipates that the Registration
Provisions will give it more information
on important gaps in existing consumer
financial protection laws and will
therefore improve future Bureau
regulations. In addition, by providing
the Bureau with more information on
consumer harms in various markets, the
Registration Provisions will improve the
Bureau’s consumer education efforts.
All of these effects would benefit
consumers.475 The Bureau does not
have any data to quantify these benefits.
474 Covered nonbanks registering NMLSpublished covered orders under § 1092.203 are not
required to submit revised filings under
§ 1092.202(b)(2)(ii) or (f).
475 The Bureau will achieve these benefits even
for NMLS-published covered orders registered
under § 1092.203 of the final rule. Although
registrations under § 1092.203 will include less
information than under § 1092.202, registrations
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A joint letter by State regulators
argued that the notice of proposed
rulemaking overstated the benefits to
the Bureau of the proposed rule. The
letter asserted that the Bureau has not
proven that there is a recidivism
problem among nonbanks that would
necessitate the creation of the Bureau’s
registry and that State regulators are
effectively protecting consumers from
repeat offenders through existing
mechanisms and authorities. To
substantiate this claim, the letter
provided examples of instances in
which agencies have brought actions
against entities that have repeatedly
violated the law. The Bureau agrees
with the point that it and other
regulators have at times successfully
brought enforcement actions against
entities that have repeatedly violated
the law. But the Bureau disagrees with
the commenter’s view that this implies
the Bureau and other regulators could
not or should not improve their
regulatory, supervisory, and
enforcement activity. As described in
the paragraph above, the registry will
assist the Bureau in monitoring for risks
to consumers in the offering or
provision of consumer financial
products or services. Among other
things, the registry will assist the
Bureau in analyzing trends in
enforcement actions against covered
nonbanks, including trends regarding
nonbank recidivism. Notably the State
regulators’ joint letter provides no
concrete data on such trends and
instead only provides anecdotal
examples of individual enforcement
actions; providing data on such trends
will be one benefit of the rule.
The Registration Provisions will likely
not impose any significant costs on
consumers. As noted above, the final
provisions would impose limited costs
on a minority of firms in consumer
finance markets. Firms are unlikely to
raise prices as a consequence, given the
minimal size of the cost increase and
the fact that it is borne by a small
portion of the overall market.
2. Supervisory Reports Provisions
These final provisions will only affect
covered nonbanks subject to Bureau
supervision and examination.
Furthermore, such covered nonbanks
that have opted to register NMLSpublished covered orders under
§ 1092.203 will not be subject to these
under § 1092.203 will notify the Bureau about the
existence of the covered nonbank and the issuance
of an applicable order against it. The Bureau will
then generally be able to obtain further information
about the order and the covered nonbank through
the NMLS and the agency that issued or obtained
the order.
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final provisions with respect to such
orders. Therefore, they will affect fewer
covered nonbanks and fewer consumers
than the Registration Provisions
analyzed above.
Some firms may be unsure whether
they are supervised covered persons not
otherwise excluded from the
requirements of the final Supervisory
Reports Provisions, or whether they are
subject to covered orders, so they may
be unsure whether they will have to
comply with these final provisions. The
Bureau notes that complying with these
final provisions if it is legally
unnecessary is unlikely to have greater
costs than if it is legally necessary,
because § 1092.102(c) provides that the
rule does not alter applicable processes
whereby a person may dispute that it
qualifies as a person subject to Bureau
authority. Also, under § 1092.204(f), if a
firm has a good-faith basis to believe
that it is not a supervised registered
entity subject to the Supervisory Reports
Provisions (or that its order is not a
covered order), it may submit a notice
to the nonbank registry stating as such.
Preparing and submitting such a notice
would take at most a few hours of an
employee’s time. Firms should generally
choose the lowest-cost option available
to them. Therefore, firms are unlikely to
spend more to determine whether they
need to comply with the Supervisory
Reports Provisions than the cost to the
firms of complying with the provisions
or, for firms with a good-faith basis to
believe they are not supervised
registered entities (or their orders are
not covered orders), of filing a
§ 1092.203(f) notice.
These provisions will require that
affected supervised entities designate an
attesting executive for each applicable
covered order. The attesting executive
will be a duly appointed senior
executive officer (or, if no such officer
exists, the highest-ranking individual at
the entity charged with managerial or
oversight responsibilities) (i) whose
assigned duties include ensuring the
supervised registered entity’s
compliance with Federal consumer
financial law, (ii) who possesses
knowledge of the supervised entity’s
systems and procedures for achieving
compliance with the covered order, and
(iii) who has control over the supervised
entity’s efforts to comply with the
covered order. The Bureau believes that,
even under the baseline scenario, most
supervised entities would take active
steps to comply with covered orders,
and therefore would already have such
an officer or individual in place to
oversee the entity’s compliance with its
obligations under the covered order.
Therefore, the Bureau anticipates that
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this designation requirement would
impose little or no additional cost on
most supervised registered entities. The
Bureau notes that the cost may be higher
for supervised entities that lack a highranking officer or other employee with
the requisite qualifications to serve as
an attesting executive. But the Bureau
believes that there would be few such
entities because the Bureau expects
most supervised registered entities
maintain adequate board and
management oversight consistent with
an appropriate compliance management
system.
The Supervisory Reports Provisions
will also require that the supervised
registered entity submit a written
statement signed by the applicable
attesting executive for each covered
order to which it is subject. In the
written statement, the attesting
executive will: (i) generally describe the
steps that the attesting executive has
undertaken to review and oversee the
supervised registered entity’s activities
subject to the applicable covered order
for the preceding calendar year; and (ii)
attest whether, to the attesting
executive’s knowledge, the supervised
registered entity during the preceding
calendar year identified any violations
or other instances of noncompliance
with any obligations that were imposed
in a public provision of the covered
order by the applicable agency or court
based on a violation of a covered law.
The Bureau cannot precisely quantify
the impact of the written-statement
requirement on impacted firms. But
based on its experience and expertise,
the Bureau believes that most entities
subject to covered orders endeavor in
good faith to comply with them and will
already have in place some manner of
systems and procedures to help achieve
such compliance. For these entities, the
written-statement requirement will
require little more than submitting a
written statement from the attesting
executive that generally describes the
steps the executive took consistent with
the established systems and procedures
to reach conclusions regarding entity
compliance with the orders. Thus,
relative to the baseline, the writtenstatement requirement will impose only
modest costs on most covered entities,
related primarily to the time and effort
needed to (i) memorialize the attesting
executive’s existing oversight of
compliance and (ii) determine whether
the supervised registered entity during
the preceding calendar year identified
any violations or other instances of
noncompliance with any obligations
that were imposed in a public provision
of the covered order by the applicable
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agency or court based on a violation of
a covered law.
While the attesting executive would
sign the written statement, the Bureau
expects that other employees in other
major occupational groups (Legal
Occupations, Business and Financial
Operations, and Office and
Administrative Support) would support
the attesting executive in preparing the
statement. Assuming that satisfying the
written-statement requirement would
take twenty hours of employees’ time,
and that the average cost to entities of
an employee’s time is roughly $70 an
hour as discussed above, yields an
estimate that the cost of this
requirement on covered entities would
be roughly $1,400 per firm.
The Bureau acknowledges that, under
the baseline, some supervised registered
entities may not have in place systems
and procedures to allow them to
confidently identify violations or other
instances of noncompliance with any
obligations that were imposed in a
public provision of the covered order.
As discussed elsewhere in this
preamble, the Supervisory Reports
Provisions will likely prompt some such
entities to adopt new or additional
compliance systems and procedures,
imposing a greater cost on them.
However, as noted above, based on its
experience and expertise, the Bureau
believes that most entities subject to
covered orders endeavor in good faith to
comply with them and will already have
in place some manner of systems and
procedures to help achieve such
compliance. Therefore, the Bureau
believes that the number of supervised
registered entities that will put in place
significant new compliance systems and
procedures as a result of the rule will be
relatively small.
In addition, the Supervisory Reports
Provisions will require entities to
maintain records related to the written
statement for five years. Conservatively
assuming that ensuring the necessary
documents are properly stored also
requires ten hours of employee time
adds $700 to the costs to affected
entities of these final provisions. One
commenter stated that entities would
have to pay for document retention and
storage to comply with the proposed
rule, but did not suggest that the
Supervisory Reports Provisions’
recordkeeping requirements would
impose more than $700 in costs on
affected entities.
The Bureau notes that, for the
purposes of the final rule, the term
‘‘supervised registered entity’’ excludes
persons with less than $5 million in
annual receipts resulting from offering
or providing consumer financial
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56139
products and services described in
CFPA section 1024(a).476 Relative to this
final rule, the proposed rule further
included in the term ‘‘supervised
registered entity’’ persons with more
than $1 million in annual receipts.
Therefore, this final rule should impact
fewer firms, with higher average annual
receipts, than anticipated by the
proposed rule. The combined costs of
around $2,100 imposed by the
Supervisory Reports Provisions on the
majority of affected entities should be
roughly 0.04 percent or less of annual
receipts.
The costs of the Supervisory Reports
Provisions may be higher in absolute
terms at larger entities because
identifying instances of noncompliance
with obligations imposed in a public
provision of a covered order may be
more complex at larger entities. But
because larger entities will generally
have greater annual receipts, the
applicable compliance costs as a
percentage of annual receipts will likely
remain nominal even for larger entities.
The costs of the Supervisory Reports
Provisions will also likely be higher at
entities with multiple instances of
noncompliance with public provisions
of covered orders, or with multiple
covered orders.
Some commenters argued either that
the Supervisory Reports Provisions
would impose an undue burden or that
the analysis in the proposed rule
underestimated the costs imposed by
the Supervisory Reports Provisions.
Those commenters, however, did not
provide data, information, or analysis to
support their claims. Another
commenter suggested a higher employee
cost estimate of $118 per hour for work
to prepare the written statement, based
on the commenter’s members’
experience. The Bureau notes that, as
discussed above, in data from the
Bureau of Labor Statistics the highest
wage rate among all occupations
considered (for Management) is $66.23
per hour; multiplied by a benefits factor
of 1.42 as discussed above, this yields
an employee cost estimate of $94.05 per
hour. Still, using the commenter’s
preferred hourly cost estimate yields a
total cost estimate of roughly $2,400 per
firm for the twenty hours of employees’
time estimated to be required to prepare
a written statement. This represents
roughly .05 percent of the annual
revenue of an entity with annual
revenue of $5 million per year. Another
commenter argued that the proposed
rule’s requirements were vague and so
476 12 U.S.C. 5514(a). See the section-by-section
discussion of § 1092.201(q)(4) for more information
regarding how annual receipts are calculated.
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would take more staff time, at a higher
average hourly rate, than analyzed in
the proposed rule; this commenter
instead favored compliance cost
estimates of $4,200–$7,200 for internal
employees plus roughly $4,000 for
outside counsel, for a total cost of
$8,200–$12,200. The Bureau disagrees
with this commenter’s view that the
rule’s requirements are vague and will
generally impose costs this high. Still, to
put the commenter’s estimates in
perspective, the Bureau notes that
$12,200 would still constitute less than
.25 percent of annual receipts for firms
with average annual receipts of at least
$5 million.
Similarly, another commenter argued
the Bureau significantly underestimated
the amount of time involved with
complying with the written-statement
requirement; this commenter estimated
that the time involved would be akin to
the time spent by public companies
preparing CEO and CFO certifications of
Securities and Exchange Commission
(SEC) filings under section 302 of the
Sarbanes-Oxley Act and 18 U.S.C. 1350,
which was enacted in section 906 of
that Act.477 The Bureau disagrees that
the time and internal verification
processes associated with the CEO and
CFO certifications under those
provisions of the Sarbanes-Oxley Act
are comparable to what is required to
fulfill a supervised registered entity’s
obligations under the Supervisory
Reports Provisions. Section 302 of the
Sarbanes-Oxley Act required the SEC to
issue a rule requiring CEOs and CFOs to
certify in annual and quarterly reports
that the reports do not contain material
misstatements or misleading omissions
and that they fairly present in all
material respects the entity’s financial
condition and results of operations.
Section 302 also required the SEC’s rule
to mandate that CEOs and CFOs make
certain certifications regarding the
entity’s internal controls and
disclosures to auditors. Similarly, under
18 U.S.C. 1350, when an issuer files a
periodic report containing financial
statements with the SEC, that report
must be accompanied by a written
statement from the CEO and CFO
certifying that the periodic report fully
complies with the requirements of
section 13(a) or 15(d) of the Securities
Exchange Act of 1934 and that the
information contained in the report
‘‘fairly presents, in all material respects,
the financial condition and results of
operations of the issuer.’’ 478 The
commenter stated that these
477 See Sarbanes-Oxley Act of 2002, Public Law
107–204, secs. 302, 906, 116 Stat. 745, 777–78, 806.
478 18 U.S.C. 1350(b).
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certifications typically require hundreds
of hours and the involvement of a
disclosure committee comprised of
other professionals who, in addition to
providing the CEO and CFO necessary
assurances to support their
certifications, may also provide their
own sub-certifications.
The contents of the written statement
required under the final rule here, by
contrast, are of a more general, nontechnical character and can be derived
from the executive’s own knowledge,
with reference as needed to documents
and information related to the entity’s
compliance with the covered order.479
The written statement merely requires a
general description of the steps the
executive has personally undertaken to
review and oversee the supervised
registered entity’s activities subject to
the applicable covered order, and a
statement, ‘‘to the attesting executive’s
knowledge,’’ of whether the supervised
registered entity identified any
violations or instances of
noncompliance with applicable
obligations under the order during the
preceding calendar year.480 Because the
written statement is far more limited
than the certifications required under
the cited provisions of the SarbanesOxley Act, the Bureau does not believe
that the costs of complying with those
Sarbanes-Oxley Act provisions provide
an appropriate benchmark for
estimating the costs of the writtenstatement requirements. Indeed, as
noted elsewhere in this preamble, this
final rule does not establish any
minimum procedures or otherwise
specify the steps the attesting executive
must take in order to review and oversee
the supervised registered entity’s
activities. Nor does the final rule
establish any minimum level of
compliance management or expectation
for compliance systems and procedures
at supervised registered entities, or
purport to impose any restrictions on
the manner in which supervised
registered entities address such matters.
Therefore, the Bureau reaffirms its
conclusion that, for most supervised
registered entities, the written-statement
provisions will impose only modest
costs beyond the costs entities are
already incurring to ensure compliance
with covered orders.
As explained in greater detail in part
IV(D) and the section-by-section
discussion of § 1092.204 above, the
Supervisory Reports Provisions will
479 See § 1092.204(c) of the final rule (requiring
supervised registered entities to provide attesting
executives access to documents and information
necessary to make the written statement).
480 § 1092.204(d) of the final rule.
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facilitate the Bureau’s risk-based
supervision efforts, including its efforts
to assess compliance with the
requirements of Federal consumer
financial law, obtain information about
the supervised entities’ activities and
compliance systems or procedures, and
detect and assess risks to consumers and
to markets for consumer financial
products and services. All of these
effects would benefit consumers.
Moreover, while as noted above the
Bureau believes that most entities
subject to covered orders endeavor in
good faith to comply with them and will
already have in place some manner of
systems and procedures to help achieve
such compliance, it is also likely that
these final provisions will cause a few
entities without such systems and
procedures to develop them. This will
also benefit consumers. The Bureau
does not have any data to quantify this
benefit.
One commenter agreed with the
analysis above that most entities subject
to covered orders already endeavor in
good faith to comply with them, and so
the number of supervised registered
entities that will put in place significant
new compliance systems and
procedures as a result of the rule will be
relatively small. However, this
commenter argued that this in turn
implies that the rule will have little
compliance benefits. The Bureau agrees
with this commenter that the final rule
is unlikely to have a significant effect on
the compliance efforts of the entities
already endeavoring in good faith to
comply with covered orders. But the
Bureau also notes that the final rule will
likely improve the compliance efforts of
a smaller number of entities that under
the baseline would not endeavor in
good faith to comply with covered
orders. As discussed in both the
proposed rule and this preamble, this
should have a number of beneficial
effects for consumers.
One commenter argued that the
attestation requirement would divert
entities’ limited resources away from
serving consumers. Similarly, another
commenter argued the requirement
would lead entities to prioritize
compliance with covered orders over
other compliance obligations, creating
compliance risks for consumers. As
stated above, the Bureau believes that
no more than 5 percent of all covered
nonbanks are subject to covered orders;
of these many may have less than $5
million in relevant annual receipts,
otherwise not be supervised registered
entities, or exercise their option to
register NMLS-published covered orders
under § 1092.203, so the number of
firms impacted by the Supervisory
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Reports Provisions should be limited.
Finally, as argued above the Bureau
expects that even entities subject to the
Supervisory Reports Provisions will
generally incur minor costs because of
it. For these reasons the Bureau
disagrees with these commenters that
the Supervisory Reports Provisions
would have any meaningful costs for
consumers. Indeed, as described in the
paragraph above, the Bureau believes
this provision will benefit consumers,
including through providing a further
incentive for entities to comply with
their legal obligations.
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3. Publication Provisions
For affected covered nonbanks, the
main effect of these provisions will be
that (1) their identifying information, (2)
information regarding covered orders
that they provide to the Bureau, and (3)
for supervised registered entities, the
name and title of the attesting executive,
may be posted on the internet by the
Bureau.481 Much of this information
would be public even under the
baseline, so the additional direct effect
of this information being posted on the
Bureau’s website should be small. While
as detailed below there will be indirect
benefits and costs associated with
improving accountability, general
public awareness, and enforcement of
consumer protection law, the Bureau
does not anticipate publishing its
registry would have a significant direct
impact on consumer shopping
decisions.
Because covered nonbanks will
provide the required registry
information only if they are subject to
covered orders, consumers might
interpret the presence of a covered
nonbank on the Bureau’s website as
negative information about that covered
nonbank. Therefore, these provisions
may have negative reputational costs for
covered nonbanks whose information is
published on the Bureau website. Yet
481 As explained elsewhere in this preamble, the
Bureau intends to publish this information but is
retaining the discretion not to publish the
information based on operational considerations,
such as resource constraints. The analysis here
assumes that the Bureau will effectuate its intended
approach of publishing the stated information. If
the Bureau were not to publish any of the
information it collects under the final rule, the
potential benefits and costs discussed in this
section largely would not be realized, except that,
to a more limited extent, some of the benefits and
costs associated with the Publication Provisions
could result from the Bureau’s sharing of registry
information with other government agencies under
memorandums of understanding or other
interagency arrangements. Similarly, if the Bureau
were to publish only a portion of the information
that it currently intends to publish, the benefits and
costs of the Publication Provisions likely would be
more limited than the benefits and costs associated
with the Bureau’s current publication plans.
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covered orders would be public
information even under the baseline
with no rule. Therefore, these
provisions will not make public any
non-public orders. This will limit the
likely costs to covered nonbanks of
these provisions.
These final provisions will allow
certain information related to covered
orders that is already public to be
centralized on the Bureau’s website.
This will make the information more
readily accessible than it would
otherwise be. One commenter argued
that the proposed rule did not give any
weight to this effect, but it was
explicitly acknowledged in the
proposed rule. A large body of research
has studied the circumstances under
which providing consumers better
access to information does, and does
not, improve consumer outcomes.482
One consensus from this research is that
well-designed information disclosures
can be effective at directing consumer
attention. For example, one study found
that providing certain borrowers with
information about the costs of their
loans reduced borrowing.483 However,
another consensus from this research is
that information disclosures do not
always materially affect consumer
decision-making, and that the impact of
information disclosures on consumer
decision-making depends on their
design and implementation. Impactful
information disclosures are typically
more direct (e.g., disclosing the costs of
a particular type of loan to prospective
borrowers) and more timely (e.g.,
disclosed to prospective borrowers at
the time they are obtaining a loan) than
the information that will be centralized
and published under this final
provision. Therefore, the Bureau
believes that most consumers will not
change their behavior directly because
of this final provision, so the impact of
this final provision on most affected
entities will likely not be significant.
Many commenters agreed with this
analysis, although one mischaracterized
the proposed rule as arguing that
consumers would be likely to use the
public registry. In response to these
comments, the Bureau notes that as
discussed in the proposed rule the
registry may benefit consumers in a
number of ways beyond directly
influencing their behavior. As discussed
in the proposed rule, the Publication
482 For one review of this research, see Thomas
A. Durkin and Gregory E. Elliehausen, Truth in
Lending: Theory, History, and a Way Forward
(2011).
483 See Marianne Bertrand and Adair Morse,
Information Disclosure, Cognitive Biases, and
Payday Borrowing, 66 The Journal of Finance 1865,
1865–93 (2011).
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Provisions are likely to help government
agencies, including the Bureau, enforce
consumer protection laws. As noted by
some commenters, the Publication
Provisions may also help provide
valuable information to other
individuals or organizations, such as
researchers, investors and business
partners of covered persons, and media
and advocacy organizations.484
Providing additional information to
these entities through publication will
also benefit consumers. Moreover,
although the Bureau expects that a
fraction of consumers may use the
registry to make informed decisions in
the market for consumer financial
products and services, directly
informing consumers of covered orders
was not the exclusive purpose of the
Publication Provisions in either the
proposed or final rules.
Commenters also argued that
publishing the registry information will
have a small effect on consumer
behavior because the registered orders
will already be public and available for
consumers to review. While these
comments appear to disagree with the
comments discussed in the previous
paragraph regarding the reasons why the
Bureau’s registry likely will have a
small direct effect on consumer
behavior, these commenters appear to
agree with those in the previous
paragraph, and with the Bureau, that the
direct effect on consumer behavior will
in fact be small. Again, this would
imply that the Publication Provisions
would impose only minor costs on
affected entities resulting from changes
in consumer behavior. And again, in
response to these comments, the Bureau
notes that directly informing consumers
of covered orders was not the exclusive
purpose of the Publication Provisions in
either the proposed or final rules.
Conversely, other commenters argued
that the Bureau’s analysis understates
the reputational costs of publication,
including to new and emerging financial
institutions. These commenters,
however, did not provide any support
for this claim or provide an alternative
estimate of the Publication Provisions’
costs.
Commenters also argued that the
public registry would misinform
consumers because consumers would
not have the legal context to understand
the orders. Similarly, another
commenter argued that impacted
entities would need to invest resources
into combatting the reputational harm
imposed by the Publication Provisions.
These arguments, however, appear to
484 See part IV(F) and the section-by-section
discussion of § 1092.205 above.
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suppose that many consumers will
themselves see, and change their
behavior based on, the public orders,
which as argued above (by both the
Bureau and other commenters) is likely
incorrect. While the Bureau agrees that
some consumers, if they saw the
covered orders, would find them to be
complex and challenging to interpret,
that is one reason the Bureau has
concluded that the public registry
would have less direct impact on
consumers than other kinds of
information disclosures that are
generally found to be effective. The
Bureau also reiterates its belief that few
consumers would likely see these
covered orders themselves, even under
the final Publication Provisions.
The Bureau acknowledges that the
issues disclosed by a few covered orders
may be so controversial among
consumers that their publication on the
Bureau’s website could impose a
substantial impact on the firms affected
by those orders. However, as noted
above, covered orders would be public
information even under the baseline
with no rule. Therefore, covered orders
that disclose particularly controversial
practices would likely be well known
among consumers even under the
baseline.
Commenters also expressed concern
that the Publication Provisions would
result in increased litigation for covered
nonbanks, both through enforcement
actions by government agencies and
through class action and other lawsuits
by private litigants. The Bureau agrees
that the public registry could provide
some informational benefits to
government enforcement agencies and
private attorneys and would therefore
impose corresponding enforcement,
litigation, and insurance costs on some
entities. As discussed above, the
Publication Provisions may also help
provide valuable information to other
individuals or organizations, such as
researchers, investors and business
partners of covered persons, and media
and advocacy organizations; providing
information to these individuals or
organizations may impose
corresponding costs on entities affected
by the Publication Provisions, such as
costs to respond to publications based
on information obtained from the
Bureau’s registry. The Bureau does not
have any data with which to quantify
these costs. However, as discussed
above the Bureau believes that perhaps
1 percent and at most 5 percent of
covered entities are subject to covered
orders, and that among entities subject
to covered orders, most endeavor in
good faith to comply with them.
Therefore, the Bureau expects that the
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Publication Provisions will only expose
a small number of entities to increased
costs. Moreover, the Bureau does not
share the commenters’ belief that
providing information to government
enforcement agencies and attorneys
provides no benefit to consumers. To
the contrary, as explained above, the
Bureau views facilitating public and
private enforcement of the Federal
consumer financial laws as a benefit of
this registry.485 The Bureau thus agrees
with different commenters that the
registry will help the CFPB, law
enforcement community, and the public
limit the harms from repeat violators of
their legal obligations.
One commenter noted that these final
provisions could put affected entities at
a competitive disadvantage relative to
other entities in the market, by making
information about them and the covered
orders to which they are subject more
accessible. The Bureau acknowledges
that public awareness that an entity has
been subjected to liability for violating
a covered law may disadvantage that
entity relative to other entities that have
not been subjected to similar liability.
However, the Publication Provisions
would not make public any covered
orders that were not already published
(or required to be published). This in
turn mitigates the direct effects of this
final provision on marketplace
competition.
These final provisions could benefit
firms in affected markets, even those
without covered orders, by centralizing
certain information on covered orders.
This could give firms a clearer picture
of how consumer financial protection
laws are enforced across agencies and
jurisdictions, and could reduce costs for
firms that would conduct research into
this question under the baseline. As
noted by one commenter, these
provisions may have benefits to other
market participants, such as potential
investors, contractual partners, financial
firms, and others that are conducting
due diligence on a registered
nonbank.486 Providing the public,
including firms, with information on the
extent and nature of covered orders is
consistent with the Bureau’s
congressionally assigned purpose of
ensuring that consumer financial
markets are fair, transparent, and
competitive.487 The Bureau does not
have any data with which to quantify
these benefits.
For consumers, one effect of the final
provision will be improved access to
485 See the section-by-section discussion of
§ 1092.205 above.
486 See discussion at part IV(F) above.
487 12 U.S.C. 5511(a).
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information about covered nonbanks
with covered orders. However, as noted
above, this information would be public
even under the baseline. Moreover, as
discussed in more detail above,
impactful information disclosures are
typically more direct and more timely
than the information that would be
centralized and published under this
provision. Therefore, the Bureau
believes that most consumers will not
change their behavior due to this final
provision. As discussed in more detail
above, many commenters agreed with
this conclusion.
By centralizing certain information on
covered orders, another effect of the
Publication Provisions will be to
improve the ability of regulatory
agencies besides the Bureau to conduct
their activities, including supervision,
enforcement, regulation, market
monitoring, research, and consumer
education. One commenter argued that
the benefits of the rule for enforcement
agencies were overstated in the
proposed rule because covered orders
are already public and because certain
regulators are already aware of certain
covered orders. However, the Bureau
noted these points in the proposed rule.
The Bureau argued in the proposed rule,
and finds here, that the Publication
Provisions would indirectly benefit
consumers by centralizing certain
information that is already public,
which will assist agencies charged with
enforcing Federal consumer financial
laws with carrying out their
responsibilities. Several commenters
and consulting parties agreed that the
proposed rule would help regulators
and law enforcement. The Bureau does
not have any data to quantify this
benefit.
The Publication Provisions will likely
not impose any significant costs on
consumers. As noted above, the
provisions may impose some costs on
some firms, and it is possible that those
firms may respond to these increased
costs by increasing prices for
consumers. But as discussed above, the
costs of these provisions on affected
firms will be limited, so any cost
increases caused by the rule will be
limited at affected firms. Moreover,
many firms will not be affected at all by
these provisions and so will not raise
prices because of these provisions.
Finally, a number of commenters
argued that the proposed rule, by
increasing the costs to entities of
consent orders, would discourage
settlements in regulatory proceedings
and so impose further costs on affected
entities. The Bureau acknowledges that
the final rule will increase the costs to
entities of covered orders, and so may
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have a marginal effect on the decision
of some entities to settle. However, as
argued above, the Bureau believes that
the costs imposed by the final rule on
entities subject to covered orders will be
quite limited, so relative to the baseline,
the final rule should increase the
expected costs of settlement by little.
Therefore, the Bureau believes that,
among entities deciding whether to
settle an enforcement action, it would
be rare for costs imposed by this final
rule to make a difference in the
decision. Moreover, as noted above, the
Bureau believes that perhaps one
percent, and at most five percent, of
covered nonbank entities are subject to
covered orders. The small number of
covered entities subject to covered
orders strongly suggests that only a
small percentage of such entities
become subject to covered orders each
year, and so could arguably be deciding
whether to settle an enforcement matter
that might result in a covered order.
Therefore, the final rule should have
only a small effect on the decisions of
a small number of firms contemplating
whether or not to settle.
E. Potential Specific Impacts of the
Final Rule
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1. Insured Depository Institutions and
Insured Credit Unions With $10 Billion
or Less in Total Assets, as Described in
Section 1026
This final rule will only apply to
nonbanks. Therefore, it will have no
direct impacts on any insured
depository institution or insured credit
union. The rule may have some indirect
effects on some insured depository
institutions and insured credit unions
with $10 billion or less in total assets.
For example, insured depository
institutions and insured credit unions
that are affiliated with affected entities
might experience indirect costs because
the final rule may impose some costs on
their nonbank affiliates. Insured
depository institutions and insured
credit unions that compete with affected
entities might experience indirect
benefits because of the proposed rule
because the proposed rule may impose
some costs on their competitors. But as
noted above, even for nonbanks that are
directly affected by the final rule, the
Bureau does not anticipate that the
rule’s impact will be significant in most
cases. Therefore, the Bureau anticipates
that any indirect effects on insured
depository institutions or insured credit
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unions with $10 billion or less in total
assets will be even less significant.
2. Impact of the Proposed Rule on
Access to Consumer Financial Products
and Services and on Consumers in Rural
Areas
By imposing some costs on affected
covered nonbanks, the final rule may
cause affected covered nonbanks to
provide fewer financial products and
services (or financial products and
services at higher cost) to consumers.
However, as noted above, the final rule
will likely impose only limited costs on
a limited number of covered nonbanks.
Therefore, the impact of the final rule
on consumer access to financial
products and services will be limited
even at affected covered nonbanks.
Moreover, bank and nonbank entities
that will not be directly affected by the
final rule could provide financial
products and services to consumers that
would otherwise obtain these financial
products and services from affected
covered nonbanks. Therefore, the
negative impact of the final rule on
consumer access to financial products
and services would be limited. By
improving the ability of the CFPB to
conduct its activities, including
supervision, enforcement, regulation,
market monitoring, and consumer
education, the final rule will likely
improve the functioning of the broader
market and so may also have positive
effects on consumer access to consumer
financial products or services provided
in conformity with applicable legal
obligations designed to protect
consumers.
Broadly, the Bureau believes that the
analysis above of the impact of the final
rule on consumers in general provides
an accurate analysis of the impact of the
final rule on consumers in rural areas.
The impact of the final rule on
consumers in rural areas will likely be
relatively smaller if the proposed rule
affects fewer entities in rural areas.
High-quality data on the rural market
share of entities that will be affected by
the final rule does not exist, so the
Bureau cannot judge with certainty the
relative impact of the rule on rural
areas. However, for certain large and
well-studied markets, there is evidence
that nonbanks have larger market shares
in urban areas and smaller market
shares in rural areas.488 Based on this
488 For evidence on the mortgage market, see
Julapa Jagtiani, Lauren Lambie-Hanson, and
Timothy Lambie-Hanson, Fintech Lending and
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56143
limited evidence, the Bureau expects
that the impact of the final rule will be
smaller in rural areas.
IX. Regulatory Flexibility Act Analysis
A. Overview
The Regulatory Flexibility Act (RFA)
generally requires an agency to conduct
an initial regulatory flexibility analysis
(IRFA) and a final regulatory flexibility
analysis (FRFA) of any rule subject to
notice-and-comment rulemaking
requirements, unless the agency certifies
that the rule will not have a significant
economic impact on a substantial
number of small entities.489 The Bureau
also is subject to certain additional
procedures under the RFA involving the
convening of a panel to consult with
small business representatives before
proposing a rule for which an IRFA is
required.490
A FRFA is not required for this final
rule because it will not have a
significant economic impact on a
substantial number of small entities.
B. Impact of Final Provisions on Small
Entities
The final rule has three principal sets
of substantive provisions, which are
separately analyzed below. The first set
of provisions (hereinafter referred to as
the ‘‘Registration Provisions’’) will
require nonbank covered persons that
are subject to certain public agency and
court orders enforcing the law to register
with the Bureau and to submit certain
information related to those public
orders to the Bureau. The second set of
provisions (hereinafter referred to as the
‘‘Supervisory Reports Provisions’’) will
require nonbank covered persons that
are supervised by the Bureau to prepare
and submit an annual written statement,
signed by a designated individual,
regarding compliance with each covered
public order. The third set of provisions
(hereinafter referred to as the
‘‘Publication Provisions’’) describes the
registration information the Bureau may
make publicly available.
The analysis below evaluates the
economic impact of the final provisions
on small entities as defined by the
Mortgage Credit Access, 1 The Journal of FinTech
(2021). For evidence on the auto loan market, see
Donghoon Lee, Michael Lee, and Reed Orchinik,
Market Structure and the Availability of Credit:
Evidence from Auto Credit, MIT Sloan Research
Paper (2022), https://papers.ssrn.com/sol3/papers.
cfm?abstract_id=3966710.
489 5 U.S.C. 601 et seq.
490 5 U.S.C. 609.
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RFA.491 The RFA’s definition of ‘‘small’’
varies by type of entity.492
With certain exceptions, the final rule
will apply to covered persons as defined
in the CFPA, including persons that
engage in offering or providing a
consumer financial product or
service.493 Among others,494 these
products and services would generally
include those listed below, at least to
the extent they are offered or provided
for use by consumers primarily for
personal, family, or household
purposes.
• Extending credit and servicing
loans;
• Extending or brokering certain
leases of personal or real property;
• Providing real estate settlement
services;
• Engaging in deposit-taking
activities, transmitting or exchanging
funds, or otherwise acting as a
custodian of funds;
• Selling, providing, or issuing stored
value or payment instruments;
• Providing check cashing, check
collection, or check guaranty services;
• Providing payments or other
financial data processing products or
services to a consumer by any
technological means;
• Providing financial advisory
services;
• Collecting, analyzing, maintaining,
or providing consumer report
information or certain other account
information; and
• Collecting debt related to any
consumer financial product or
service.495
The Registration and Publication
Provisions will affect such covered
491 For purposes of assessing the impacts of the
proposed rule on small entities, ‘‘small entities’’ is
defined in the RFA to include small businesses,
small not-for-profit organizations, and small
government jurisdictions. 5 U.S.C. 601(6). A ‘‘small
business’’ is determined by application of Small
Business Administration regulations and reference
to the North American Industry Classification
System (NAICS) classifications and size standards.
5 U.S.C. 601(3). A ‘‘small organization’’ is any ‘‘notfor-profit enterprise which is independently owned
and operated and is not dominant in its field.’’ 5
U.S.C. 601(4). A ‘‘small governmental jurisdiction’’
is the government of a city, county, town, township,
village, school district, or special district with a
population of less than 50,000. 5 U.S.C. 601(5).
492 U.S. Small Bus. Admin., Table of Small
Business Size Standards Matched to North
American Industry Classification System Codes,
https://www.sba.gov/sites/default/files/2022-09/
Table%20of%20Size%20Standards_
NAICS%202022%20Final%20Rule_Effective%20
October%201%2C%202022.pdf (current SBA size
standards).
493 For the full scope of the term ‘‘covered
person,’’ see 12 U.S.C. 5481(6).
494 For the full scope of the term ‘‘consumer
financial product or service,’’ see 12 U.S.C. 5481(5).
495 See 12 U.S.C. 5481(15) (defining term
‘‘financial product or service’’).
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persons (as that term is defined in 12
U.S.C. 5481(6)) that (1) do not fall
within any of the listed exclusions in
§ 1092.201(d), such as those for insured
depository institutions, insured credit
unions, and related persons (as that
term is defined in 12 U.S.C. 5481(25)),
and (2) have had covered orders issued
against them. The Supervisory Reports
Provisions will affect such covered
persons that (1) are subject to
supervision and examination by the
Bureau pursuant to CFPA section
1024(a),496 (2) have had covered orders
issued against them, (3) are at or above
the $5 million annual receipts
threshold, unless such covered persons
are subject to certain exclusions, and (4)
are not registering covered orders under
the one-time registration option for
NMLS-published covered orders under
§ 1092.203.
A major benefit of the final rule is that
it will give the Bureau comparatively
high-quality data on covered orders.
Currently, the Bureau does not have
high-quality data on the number of
covered orders, nor does it have reliable
information on the number of small,
covered firms that are subject to covered
orders. Therefore, the Bureau cannot
reliably estimate the precise number of
small entities that would be impacted
by the final rule.
One commenter argued that the
Bureau could not explain why its rule
would not have a significant economic
impact on a substantial number of small
entities because the Bureau had not
provided clear information about the
number of small entities that would be
impacted by the rule. Other commenters
asserted that the Bureau’s rule would
affect a substantial number of small
entities, although they did not provide
evidence to support this assertion. One
commenter argued that the proposed
rule would increase burdens for smaller
financial technology companies in
particular. In response to these
comments, the Bureau notes that its
certification under 5 U.S.C. 605(b) does
not depend on the total number of small
entities that would be affected by the
rule. That is because the Bureau has
concluded that, regardless of the
number of affected small entities, the
economic impact of the rule for the vast
majority of affected small entities would
not be significant. Therefore, even if a
substantial number of small entities
were affected by the rule,497 the rule
U.S.C. 5514(a).
be clear, commenters have not presented
data establishing that the final rule will in fact
affect a substantial number of small entities. The
Bureau here simply notes that, even if it were
assumed that the final rule has some economic
effect on a substantial number of small entities, that
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497 To
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still would not have a significant
economic impact on a substantial
number of small entities within the
meaning of 5 U.S.C. 605(b).
The SBA Office of Advocacy asked if
it would be possible for the Bureau to
obtain information on the number of
small entities subject to covered orders
from States or Federal agencies that
have issued these covered orders. The
Bureau indeed asked for similar
information from Federal agencies, State
regulators, State attorneys general, and
tribes in interagency consultations for
the proposed rule. The specific question
asked was: ‘‘Approximately how many
public final orders are issued each year
by agencies or courts in enforcement
actions brought by Federal, State, Tribal
governments, or local government
agencies against covered person entities
for violations of laws prohibiting unfair,
deceptive, or abusive acts or practices,
in cases involving consumer financial
products or services? (In addition to the
number of such orders, the CFPB is
interested in information regarding the
particular statutes or regulations
prohibiting unfair, deceptive, or abusive
acts or practices that are cited in such
enforcement actions.) Approximately
how many such orders are issued each
year for violations of Federal consumer
financial laws?’’ The Bureau also asked
a similar question in consultations for
the final rule, as follows:
‘‘Approximately how many orders
issued or obtained by your agency
during the past seven years would
qualify as ‘covered orders’ as defined in
the draft final rule?’’ While not
definitive, the responses the Bureau
obtained to this question were
consistent with its estimate above that
perhaps one percent, and at most five
percent, of covered entities are subject
to covered orders. However, the Bureau
concluded for several reasons that this
information was still not sufficient to
provide a rigorous quantitative estimate
of the number of small entities subject
to covered orders. First, most agencies
with whom the Bureau consulted did
not provide this requested information
to the Bureau. Second, many of these
agencies do not track the number of
covered orders they have outstanding.
Third, many of these agencies cannot
reliably determine whether entities
subject to covered orders qualify as
‘‘small entities’’ within the meaning of
the RFA.
The SBA Office of Advocacy also
asked if it would be possible for the
CFPB to use economic data from the
Census Bureau’s Statistics of U.S.
impact will not be significant for the vast majority
of affected small entities.
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Businesses to extrapolate the number of
affected small entities. These data
indicate that, of entities listed in table
1 above, roughly 96 percent are small.
In the notice of proposed rulemaking,
the Bureau did not estimate the number
of small entities that will be affected by
the final rule because, even with an
estimate of the number of small entities
in an industry, the Bureau could not
provide a precise estimate of the
number of such entities subject to
covered orders. However, the Bureau
notes that a conservative upper bound
estimate of the number of small entities
that will be affected by the final rule can
be obtained if one assumes that all
entities subject to covered orders are
small.498 In this case, if at most 5
percent of all covered nonbanks are
subject to covered orders and so will be
affected by the final rule,499 all such
affected entities are small, and roughly
96 percent of covered nonbanks in
affected markets are small, then at most
5.2 percent of small covered nonbanks
are subject to covered orders and so will
be affected by the final rule.500 The
Bureau reiterates that this 5.2 percent
number provides a conservative upper
bound on the fraction of small entities
in relevant markets that will be affected
by the final rule, and the actual fraction
of small entities that will be affected by
the final rule is likely to be smaller.
Nonetheless, this analysis indicates that
the rule will not in fact impact a
substantial number of small entities. As
explained above, however, the Bureau’s
certification under 5 U.S.C. 605(b) does
not depend on the number of small
entities affected by the rule.
A joint letter from State regulators
misinterpreted the proposed rule as
arguing that because only 1 percent to
5 percent of covered nonbanks would
need to comply with the proposed rule’s
registration and reporting requirements,
the proposed rule would not have a
significant economic impact on a
substantial number of small entities. In
the context of its discussion of the rule’s
impacts under CFPA section
1022(b)(2)(A), the Bureau indeed
estimated that between 1 percent and 5
percent of all covered nonbanks
(including both small entities and larger
entities) might be impacted by the
498 To be clear, it is not the case that all entities
subject to covered orders are small entities. In
response to comments, the Bureau here is merely
using a simplifying assumption to derive a
conservative upper bound estimate of the rule’s
potential impact on small entities.
499 As explained above, the estimate that perhaps
1 percent, and at most 5 percent, of covered
nonbanks are subject to covered orders is based on
the Bureau’s experience and expertise and is not
disputed by commenters.
500 Dividing 5% by 96% yields 5.2%.
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proposed rule. In its RFA analysis in the
proposed rule, however, the Bureau did
not estimate the percentage of coverednonbank small entities that might be
affected by the proposed rule. The
Bureau’s RFA analysis in the proposed
rule thus did not rely on that 1-to-5
percent estimate, and the Bureau’s RFA
analysis here does not depend on that
estimate, either. It is, however, notable
that the State-regulator commenters,
which have significant experience with
enforcement actions against small
entities and access to a substantial
amount of information about such
actions through the NMLS, do not argue
that the percentage of covered-nonbank
small entities with covered orders is
substantially higher than 1 percent to 5
percent. As noted above, if no more than
approximately 5 percent of coverednonbank small entities will have
covered orders subject to the rule’s
requirements, then the rule will not
impact a substantial number of small
entities.
The same state-regulator commenters
cited NMLS data to argue that the
proposed rule would predominantly
impact small nonbank entities, because
nearly 96 percent of state-licensed
nonbank NMLS Call Report filers are
small. As explained above, the Bureau’s
analysis of the Census Bureau’s
Statistics of U.S. Businesses data
indicates that roughly 96 percent of
entities listed in table 1 are small, so the
Bureau agrees with these state-regulator
commenters that a large majority of
entities in affected markets are small.
The Bureau notes that this does not
necessarily imply that a large majority
of affected entities are small, since
among entities in affected markets, it is
possible that large entities will
disproportionately be subject to covered
orders and thus will be
disproportionately affected by the final
rule. However, if one further assumes,
as these commenters do, that small
entities will be impacted by the rule in
roughly the same proportion as other
entities, the Bureau agrees that this
indeed implies that a large majority of
affected entities will be small. This
finding merely reflects the fact that most
nonbanks are likely small businesses
under the Small Business
Administration’s regulations. Since
most nonbanks likely qualify as small
businesses, it is not surprising that a
rule addressing orders entered against
nonbanks would predominantly affect
small businesses if small businesses
were impacted in proportion to their
representation among all businesses.
This fact, however, does not affect the
Bureau’s assessment that the final rule
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here will not have a significant
economic impact on a substantial
number of small entities. As explained
above, the final rule will not have a
significant economic impact on the vast
majority of affected entities, including
affected small entities. Further, as also
noted above, the state-regulator
commenters do not argue that the
percentage of covered-nonbank small
entities with covered orders is
substantially higher than 1 percent to 5
percent. Again, if no more than 5
percent of all covered nonbanks are
subject to covered orders (as the
commenters do not dispute), and
roughly 96 percent of all covered
nonbanks in affected markets are small
(as the commenters and the Bureau
agree), then no more than 5.2 percent of
small covered nonbanks can possibly be
subject to covered orders and so be
affected by the final rule. This implies
that the rule will not impact a
substantial number of small entities
(although, to reiterate, the Bureau’s 5
U.S.C. 605(b) certification does not
depend on that fact).
1. Registration Provisions
The first set of provisions will require
covered firms to register using the
nonbank registry and submit certain
required information. Required
information includes identifying and
administrative information, as well as
information regarding covered orders.
This information should be readily
accessible to almost all entities affected,
and providing it through the nonbank
registry should be straightforward.
Firms would not have to purchase new
hardware or software, or train
specialized personnel, to comply with
these final provisions.
To obtain a quantitative estimate of
the cost of these provisions, the Bureau
assesses the average hourly base wage
rate for the reporting requirement at
$49.29 per hour. This is the mean
hourly wage for employees in four major
occupational groups assessed to be most
likely responsible for the registration
process: Management ($66.23/hr); Legal
Occupations ($64.34/hr); Business and
Financial Operations ($43.55/hr); and
Office and Administrative Support
($23.05/hr).501 We multiply the average
hourly wage of $49.29 by the private
industry benefits factor of 1.42 to get a
501 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. The hourly wage estimates
used in the proposed rule were slightly different
because they were drawn from 2021 data.
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fully loaded wage rate of $70.00/hr.502
The Bureau includes these four
occupational groups in order to account
for the mix of specialized employees
that may assist in the registration
process. The Bureau assesses that the
registration process will generally be
completed by office and administrative
support employees that are generally
responsible for the registrant’s
paperwork and other administrative
tasks. Employees specialized in
business and financial operations or in
legal occupations are likely to provide
information and assistance with the
registration process. Senior officers and
other managers are likely to review the
registration information before it is
submitted and may provide additional
information. Assuming as outlined
above a fully loaded wage rate of
roughly $70, and that complying with
this final provision would take around
five hours of employees’ time, yields a
cost impact of around $350 per firm.
The cost would likely be even lower for
firms that have and exercise the option
to register NMLS-published covered
orders under § 1092.203. Because
§ 1092.203 requires less information
from covered nonbanks than § 1092.202,
exercising the option made available in
§ 1092.203 should take even less
employee time.503 Therefore, the impact
of this final provision on affected firms
will be limited.
Several commenters disagreed with
this cost assessment.504 One preferred a
higher estimate of $5,000 per year,
based in part on the argument that the
scope of administrative information is
‘‘wholly unknown’’ and can encompass
a ‘‘limitless breadth’’ of information.
The Bureau disagrees with these claims.
502 As of December 2023, the ratio between total
compensation and wages for private industry
workers is 1.42. See U.S. Bureau of Labor Statistics,
Employer Costs for Employee Compensation:
Private industry dataset (December 2023), https://
www.bls.gov/web/ecec/ecec-private-dataset.xlsx.
503 In the unlikely event that a covered nonbank
concluded that registering an NMLS-published
covered order under § 1092.203 would be more
costly than registering it under § 1092.202, the
covered nonbank could forgo the option presented
in § 1092.203 and register the order under
§ 1092.202 instead.
504 In this section, the Bureau discusses
comments that focused primarily on the rule’s
potential effects on small entities. To the extent that
these comments address the potential benefits and
costs of the rule for covered persons, the Bureau
recognizes that the comments are also relevant to
its analysis under CFPA section 1022(b)(2)(A); it
did not duplicate its responses to those comments
in its section 1022(b)(2)(A) discussion above simply
to avoid unnecessary repetition. Similarly, the
Bureau has not repeated here responses to
comments about general impacts on covered
persons that are adequately addressed in its section
1022(b)(2)(A) discussion above.
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As explained above,505 § 1092.202(c)
only requires registered entities to
submit the specific ‘‘administrative
information’’ that is ‘‘required by the
nonbank registry,’’ and the Bureau has
made clear that it will ‘‘specify the types
of . . . administrative information
registered entities would be required to
submit’’ in ‘‘filing instructions . . .
issue[d] under . . . § 1092.102(a).’’ 506
Therefore, covered nonbanks should
have no need to hire outside legal
counsel to ascertain what information
qualifies as ‘‘administrative
information’’ required to be submitted
under the rule. Instead, the Bureau’s
filing instructions will specify what
categories of information covered
nonbanks must submit as
‘‘administrative information.’’
Another commenter based their
disagreement on this cost assessment on
the operational cost of developing new
technologies and databases to satisfy the
registration requirements. However, the
Bureau does not believe many, if any,
entities will have to develop new
technologies and databases to comply
with the Registration Provisions.
Therefore, the Bureau believes its $350
estimate is reasonable.
A joint letter from State regulators
argued qualitatively that, because many
small entities subject to covered orders
are not subject to CFPB supervision, the
costs imposed on them by the proposed
rule would be larger than the Bureau
estimated. However, the cost analysis
performed both in the proposed rule
and in this final rule does not
presuppose supervision by the CFPB.
Further, even if a covered nonbank is
not subject to CFPB supervision, it
would even under the baseline generally
be expected to have systems in place to
comply with its obligations under
Federal consumer financial laws and
other consumer-protection laws, and the
rule’s registration requirements do not
significantly add to the legal obligations
to which covered nonbanks are already
subject. Therefore, the Bureau again
concludes that its $350 estimate is
reasonable.
Commenters also noted that the rule
will impose ongoing costs on entities
after initial registration. The Bureau
agrees that entities registering orders
under § 1092.202 may incur ongoing
costs to comply with
§ 1092.202(b)(2)(ii), which requires that
covered nonbanks submit revised
registration filings within 90 days after
any amendment to a registered covered
order or information required under
505 See the section-by-section discussion of
§ 1092.201(a) above.
506 88 FR 6088 at 6118.
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§ 1092.202(c) or (d). Similarly,
§ 1092.202(f) requires a registered entity
to submit a revised filing within 90 days
if a covered order is terminated,
modified, or abrogated, or if it ceases to
be a covered order by operation of
§ 1092.202(e).507 The Bureau believes
that the cost of those subsequent filings
would generally be less than the cost of
preparing and submitting the initial
registration. The Bureau also believes
that most revised filings under
§ 1092.202(b)(2)(ii) or (f) would be
submitted after the initial year in which
an entity first registers an order. In
determining whether a significant
economic impact on a substantial
number of small entities (SISNOSE)
exists, the Bureau calculates impacts on
a periodic (usually annual) basis that is
relative to firm revenue. If the analysis
were extended past the initial year,
calculated costs would increase with
time, but so would calculated firm
revenue. The Bureau believes that, in
the case of the Registration Provisions,
the ratio of the two—which is the
relevant number for SISNOSE
analysis—likely would not increase
significantly over time, and in fact
would very likely decrease, because the
cost of submissions under
§ 1092.202(b)(2)(ii) or (f) would
generally be less than the cost of
preparing and submitting the initial
registration.
The same commenters also noted that
firms with multiple orders will face
higher costs. The Bureau agrees and
noted this point in the proposed rule.508
The Bureau also notes that there are
even fewer entities subject to multiple
covered orders than there are entities
subject to any covered order. The
Bureau further notes that the average
cost per order of registering orders is
likely to be lower for firms with more
covered orders, in part because some of
the costs involved with registering
orders (such as identifying and
supplying the required administrative
information) would generally only need
to be incurred once.
Two commenters noted that even
some entities not subject to covered
orders would still be impacted by the
proposed rule, if they were subject to
orders they viewed as potentially
covered, because they may have to
determine if the potentially covered
orders are actually covered. As it stated
in the proposed rule, the Bureau agrees
that some firms may be unsure whether
507 Covered nonbanks registering NMLSpublished covered orders under § 1092.203 are not
required to submit revised filings with respect to
such orders under § 1092.202(b)(2)(ii) or (f).
508 See 88 FR 6088 at 6131.
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they are covered persons not otherwise
excluded from the rule, or whether they
are subject to covered orders. As stated
in the proposed rule, for firms unsure of
their obligations under the Registration
Provisions, one option would be to hire
outside legal counsel to advise them on
these issues, which the Bureau agrees
could be costly for small firms.
However, another option for such firms
would be to register using the nonbank
registry, even if doing so is not legally
required. As explained above and in the
proposed rule, the cost associated with
registering an order is likely low—a few
hours of an employee’s time. In
addition, if firms have a good-faith basis
to believe they are not covered
nonbanks (or that their orders are not
covered orders), they may submit a
notice to the nonbank registry stating as
such under § 1092.202(g). Preparing and
submitting such notices would take at
most a few hours of an employee’s time.
The Bureau further notes that the mere
act of registering an order or submitting
a § 1092.202(g) notice is unlikely to
have significant indirect costs because
§ 1092.102(c) would provide that the
rule ‘‘does not alter any applicable
process whereby a person may dispute
that it qualifies as a person subject to
Bureau authority.’’ Firms should
generally choose the lowest cost option
available to them, and low-cost
options—either registering under the
nonbank registry or filing a notice under
proposed § 1092.202(g)—are options
available to firms.
2. Supervisory Reports Provisions
This second set of provisions will
require that affected supervised entities
designate an attesting executive for each
applicable covered order. The attesting
executive will be a duly appointed
senior executive officer (or, if no such
officer exists, the highest-ranking
individual at the entity charged with
managerial or oversight responsibilities)
(i) whose assigned duties include
ensuring the supervised registered
entity’s compliance with Federal
consumer financial law, (ii) who
possesses knowledge of the supervised
entity’s systems and procedures for
achieving compliance with the covered
order, and (iii) who has control over the
supervised entity’s efforts to comply
with the covered order. The Bureau
believes that, even under the baseline
scenario, most supervised entities
would take active steps to comply with
covered orders, and therefore would
already have such an officer or
individual in place to oversee the
entity’s compliance with its obligations
under the covered order. Therefore, the
Bureau anticipates that this designation
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requirement will impose little or no
additional impact on most supervised
registered entities. The Bureau notes
that the impacts may be higher for
supervised entities that lack a highranking officer or other employee with
the requisite qualifications to serve as
an attesting executive, but the Bureau
believes that there are few such entities
because the Bureau expects most
supervised registered entities maintain
adequate board and management
oversight consistent with an appropriate
compliance management system.
Furthermore, covered nonbanks that
have opted to register NMLS-published
covered orders under § 1092.203 will
not be subject to the Supervisory
Reports Provisions with respect to such
orders.
The Bureau sought comment on
whether proposed section 203(b)’s
designation requirement is likely to
impose material additional impacts on
supervised registered entities, beyond
the impacts those entities are already
likely to incur as part of fulfilling their
obligations under the covered orders to
which they are subject. The SBA Office
of Advocacy claimed that, in the
proposed rule, the Bureau provided no
basis for its claim that most supervised
entities would already have such an
officer or individual in place. This claim
is incorrect. In the proposed rule, as in
this final rule, the Bureau explained its
reasoning. The Bureau anticipates that
most supervised entities will take active
steps to comply with covered orders, as
the law requires. Therefore, the Bureau
believes that, even under the baseline
scenario, most supervised entities
would already have an officer or
individual satisfying § 1092.204(b)’s
requirements in place to oversee the
entity’s compliance with its obligations
under the covered order. This belief is
supported by the Bureau’s experience
with supervising nonbanks, which
includes examining their compliance
systems. Based on its supervision
experience, the Bureau believes it is
unlikely that many entities subject to its
supervision would have difficulty
designating an individual who satisfies
the criteria identified in § 1092.204(b).
The Supervisory Reports Provisions
will also require that the supervised
registered entity submit a written
statement signed by the applicable
attesting executive for each covered
order to which it is subject. In the
written statement, the attesting
executive will: (i) generally describe the
steps that the attesting executive has
undertaken to review and oversee the
supervised registered entity’s activities
subject to the applicable covered order
for the preceding calendar year; and (ii)
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attest whether, to the attesting
executive’s knowledge, the supervised
registered entity during the preceding
calendar year identified any violations
or other instances of noncompliance
with any obligations that were imposed
in a public provision of the covered
order by the applicable agency or court
based on a violation of a covered law.
The Bureau cannot precisely quantify
the impact of the written-statement
requirement on impacted firms. But
based on its experience and expertise,
the Bureau believes that most entities
subject to covered orders endeavor in
good faith to comply with them and will
already have in place some manner of
systems and procedures to help achieve
such compliance. For these entities, the
proposed written-statement requirement
would require little more than
submitting a written statement from the
attesting executive that generally
describes the steps the executive took
consistent with the established systems
and procedures to reach conclusions
regarding entity compliance with the
orders.
Thus, relative to the baseline, the
written-statement requirement will
impose only modest costs on most
covered entities, related primarily to the
time and effort needed to (i)
memorialize the attesting executive’s
existing oversight of compliance and (ii)
determine whether the supervised
registered entity during the preceding
calendar year identified any violations
or other instances of noncompliance
with any obligations that were imposed
in a public provision of the covered
order by the applicable agency or court
based on a violation of a covered law.
While the attesting executive will sign
the written statement and generally
describe the steps the executive has
taken to oversee the supervised
registered entity’s activities subject to
the applicable order, the Bureau expects
that other employees in other major
occupational groups (Legal
Occupations, Business and Financial
Operations, and Office and
Administrative Support) will support
the attesting executive in preparing the
statement. Assuming that satisfying the
written-statement requirement would
take twenty hours of employees’ time,
and that the average cost to entities of
an employee’s time is roughly $70 an
hour as discussed above, yields an
estimate that the cost of this
requirement on covered entities would
be roughly $1,400 per entity.
One commenter criticized this
estimate, arguing that many small
entities do not have employees in the
various occupational groups assumed
above and in particular would have to
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contract with outside legal counsel to
comply with the Supervisory Reports
Provisions. However, the Bureau notes
that the Supervisory Reports Provisions
only requires that the attesting executive
generally describe the steps the
executive has taken to oversee
compliance and state whether or not the
company has identified a violation; it
does not require the company to
conduct any new analysis, legal or
otherwise, in order to make that
determination. The Supervisory Reports
Provisions would not require, for
example, an entity to hire counsel to
conduct an assessment of past conduct
for violations of orders it has not already
identified. Therefore, for a sufficiently
small entity that would be forced to
employ management only (at a fully
loaded wage rate of $66.23 times 1.42 or
$94.05 per hour as discussed above) to
satisfy the written-statement
requirements, assuming again that
compliance takes twenty hours of
employee time, yields a cost estimate of
approximately $1,881 for such firms.
This is substantially lower than the
$3,000 to $6,000 estimate provided by
the commenter.
The Bureau acknowledges that, under
the baseline, some supervised registered
entities may not have in place systems
and procedures to allow them to
confidently identify violations or other
instances of noncompliance with any
obligations that were imposed in a
public provision of the covered order.
As discussed elsewhere in this
preamble, the Supervisory Reports
Provisions will likely prompt some such
entities to adopt new or additional
compliance systems and procedures,
imposing a greater cost on them.
However, as noted above, based on its
experience and expertise, the Bureau
believes that most entities subject to
covered orders endeavor in good faith to
comply with them and will already have
in place some manner of systems and
procedures to help achieve such
compliance. Therefore, the Bureau
believes that the number of supervised
registered entities that will put in place
significant new compliance systems and
procedures as a result of the final rule
will be relatively small.
Several commenters argued that
employees would be reluctant to act as
attesting executives because of the
Supervisory Reports Provisions and
would require a salary premium to do
so, raising costs for affected entities. The
Bureau acknowledges that, among
entities subject to covered orders that
lack adequate compliance systems,
employees could indeed be reluctant to
act as attesting executives under these
provisions and might require a salary
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premium to do so. However, as
discussed above, the Bureau believes
that most entities that are subject to
covered orders endeavor in good faith to
comply with them. Therefore, the
Bureau believes that most entities will
already have in place some manner of
systems and procedures to help achieve
such compliance. As a result, attesting
executives for most entities should not
require a salary premium in order to
comply with the written-statement
requirements. The Bureau acknowledges
that some firms without sufficient
systems and procedures in place to
comply with covered orders may be
forced to pay attesting executives a
salary premium because of the
Supervisory Reports Provisions, but
believes that there will be few such
firms. Furthermore, while the Bureau
cannot precisely quantify the salary
premium that would be required by
attesting executives at such firms, the
Bureau notes that an estimate of $25,000
provided by one commenter represents
less than .5 percent of annual receipts
of entities with more than $5 million
per year in annual receipts.
In addition, the Supervisory Reports
Provisions will require entities to
maintain records related to the written
statement for five years. Conservatively
assuming that ensuring the necessary
documents are properly stored also
requires ten hours of employee time
adds $700 to the costs to affected
entities of this final provision.
One commenter appeared to disagree
with this cost assessment and argued, in
reference to the recordkeeping
requirements of the Supervisory Reports
Provisions, that the added costs of
compliance would be significant enough
to cause small entities in the debtcollection industry material financial
hardship, if not cause them to cease
operations. However, this commenter
did not directly dispute the Bureau’s
cost estimate of ten hours of employee
time, nor did the commenter provide
data or analysis to dispute this estimate,
which as noted above implies a cost of
compliance of roughly $700.
The Bureau notes that, for the
purposes of this final rule, the term
‘‘supervised registered entity’’ excludes
persons with less than $5 million in
annual receipts resulting from offering
or providing consumer financial
products and services described in
CFPA section 1024(a). Relative to this
final rule, the proposed rule further
included in the term ‘‘supervised
registered entity’’ persons with more
than $1 million in annual receipts.
Therefore, relative to the proposed rule
that was discussed by commenters, the
Supervisory Reports Provisions will
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affect fewer small entities, and the
entities they will affect will have higher
annual receipts on average. The
estimated combined costs of around
$2,100 imposed by the Supervisory
Reports Provisions as discussed above
on most affected entities should be
roughly 0.04 percent or less of annual
receipts. Therefore, the impact of this
final provision on most affected small
entities will be limited.
The costs of the Supervisory Reports
Provisions may be higher at larger
entities because identifying instances of
noncompliance with obligations
imposed in a public provision of a
covered order may be more complex at
larger entities. But because larger
entities will generally have greater
annual receipts, the applicable
compliance costs as a percentage of
annual receipts will likely remain
nominal for larger entities, even if the
absolute value of those compliance costs
tends to increase as entity size
increases. The costs will also likely be
higher at entities with multiple
instances of noncompliance with public
provisions of covered orders, or with
multiple covered orders. However, there
are fewer entities subject to multiple
covered orders than there are entities
subject to any covered order.
Two commenters claimed that the
proposed rule did not contain any
assessment of the burden of the rule on
entities large enough to be both not
exempt and supervised (and so subject
to the Supervisory Reports Provisions)
but small enough to satisfy the SBA’s
definition of ‘‘small.’’ This claim is not
correct. The proposed rule contained
analysis, comparable to the analysis in
this final rule above, on the effect of the
Supervisory Reports Provisions on small
entities. This means that the proposed
rule analyzed the effect of the
Supervisory Reports Provisions on small
entities large enough to be impacted by
it. The final rule here does the same.
3. Publication Provisions
For affected covered nonbanks, the
main effect of the third set of provisions
will be that (1) their identifying
information, (2) information regarding
covered orders that they provide to the
Bureau, and (3) for supervised registered
entities, the name and title of the
attesting executive, may be posted on
the internet by the Bureau.509 Much of
509 As explained elsewhere in this preamble, the
Bureau intends to publish this information but is
retaining the discretion not to publish the
information based on operational considerations,
such as resource constraints. The analysis here
assumes that the Bureau will effectuate its intended
approach of publishing the stated information. If,
however, the Bureau were not to publish any of the
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this information would be public even
under the baseline, so the additional
direct effect of this information being
posted on the Bureau’s website should
be small.
However, because covered nonbanks
will provide this information only if
they are subject to covered orders,
consumers might interpret the presence
of a covered nonbank on the Bureau’s
website as negative information about
that covered nonbank. Therefore, these
provisions may have negative
reputational costs for the covered
nonbanks whose information is
published on the Bureau’s website. Yet
covered orders would be public
information even under the baseline
with no rule. Therefore, these
provisions will not make public any
non-public orders. This will limit the
likely costs on covered nonbanks of
these provisions.
These provisions will allow certain
information related to covered orders
that is already available to the general
public to be centralized on the Bureau’s
website. This will make the information
more readily accessible than it would
otherwise be. A large body of research
has studied the circumstances under
which providing consumers better
access to information does, and does
not, improve consumer outcomes.510
One consensus from this research is that
well-designed information disclosures
can be effective at directing consumer
attention. For example, one study found
that providing certain borrowers with
information about the costs of their
loans reduced borrowing.511 However,
another consensus from this research is
that information disclosures do not
always materially affect consumer
decision-making, and that the impact of
information disclosures on consumer
decision-making depends on their
design and implementation. Impactful
information disclosures are typically
more direct (e.g., disclosing the costs of
information it collects under the final rule, the
potential impacts on small entities discussed in this
section largely would not be realized—except that,
to a more limited extent, some of the impacts
associated with the Publication Provisions could
result from the Bureau’s sharing of registry
information with other government agencies under
memorandums of understanding or other interagency arrangements. Similarly, if the Bureau were
to publish only a portion of the information that it
currently intends to publish, the Publication
Provisions’ impacts on small entities likely would
be more limited than the impacts associated with
the Bureau’s current publication plans.
510 For one review of this research, see Thomas
A. Durkin and Gregory Elliehausen, Truth in
Lending: Theory, History, and a Way Forward
(2011).
511 See Marianne Bertrand and Adair Morse,
Information Disclosure, Cognitive Biases, and
Payday Borrowing, 66 The Journal of Finance 1865,
1865–93 (2011).
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a particular type of loan to prospective
borrowers) and more timely (e.g.,
disclosed to prospective borrowers at
the time they are obtaining a loan) than
the information that will be centralized
and published under this final
provision. Therefore, the Bureau
believes that most consumers will not
change their behavior due to this final
provision, so the impact of this final
provision on most affected entities will
likely not be significant. The Bureau
acknowledges that the issues disclosed
by a few covered orders may be so
controversial among consumers that
their publication on the Bureau website
could impose a substantial impact on
the firms affected by those orders.
However, as noted above, covered
orders would be public information
even under the baseline with no rule.
Therefore, covered orders that disclose
particularly controversial practices
would likely be well-known among
consumers even under the baseline. As
a result, the Bureau believes that these
final provisions are unlikely to have a
significant economic impact on a
substantial number of small entities.
The SBA Office of Advocacy critiqued
the analysis of the Publication
Provisions in the proposed rule as
‘‘confusing and contradictory’’ because
it concluded that the Publication
Provisions could have a significant
impact on a few small entities but
would not have a significant impact on
a substantial number of small entities.
But the possibility that a provision may
have a significant economic impact on
a limited number of small entities does
not mean that the provision will have a
significant economic impact on a
substantial number of small entities.
Because the Bureau has found that few
small entities would be significantly
affected by the Bureau’s re-publication
through its registry of orders that are
already public, the Bureau has
concluded that the possibility of such
significant impacts in relatively rare
cases does not indicate that a SISNOSE
exists. The Bureau’s conclusion about
the impact of the Publication Provisions
is therefore neither confusing nor
contradictory.
Another commenter argued that larger
firms are more likely to have public
relations funding to counteract the
negative publicity of appearing on the
Bureau’s website, and so this provision
would have an especially large relative
effect on small firms. The Bureau
acknowledges that larger firms are more
likely to have more funding for public
relations. However, the Bureau also
notes that larger firms are also more
likely to attract attention from
consumers, regulators, the media, and
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other public parties. Hence the Bureau
does not necessarily agree that this
provision would have an especially
large relative cost for small firms.
Furthermore, even if a provision may
have a somewhat larger effect on smaller
firms, that does not mean that the
provision has a significant economic
impact on a substantial number of small
entities. A relevant consideration in
determining whether the provision here
will have a significant economic impact
on a substantial number of small entities
is the fraction of small nonbank entities
that will be significantly impacted by
the provision. The commenter did not
provide such estimates.
For the reasons described above, the
Bureau believes that no provision of the
final rule will have a significant
economic impact on a substantial
number of small entities. Moreover, the
impact of each provision is sufficiently
small that the three provisions together
will not have a significant economic
impact on a substantial number of small
entities.
Accordingly, the Director certifies that
this final rule will not have a significant
economic impact on a substantial
number of small entities. Thus, a FRFA
is not required for this final rule.
X. Paperwork Reduction Act
Under the Paperwork Reduction Act
of 1995 (PRA),512 Federal agencies are
generally required to seek approval from
the Office of Management and Budget
(OMB) for information collection
requirements prior to implementation.
Under the PRA, the Bureau may not
conduct nor sponsor, and,
notwithstanding any other provision of
law, a person is not required to respond
to, an information collection unless the
information collection displays a valid
control number assigned by OMB. The
information collection requirements in
this final rule are mandatory. Certain
information collected under these
requirements may be made available to
the public, while other information
would not be made available to the
public, in accordance with applicable
law.
The collections of information
contained in this rule, and identified as
such, have been submitted to OMB for
review under section 3507(d) of the
PRA. A complete description of the
information collection requirements
(including the burden estimate
methods) is provided in the information
collection request that the Bureau has
submitted to OMB under the
requirements of the PRA. The
information collection request
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submitted to OMB requesting approval
under the PRA for the information
collection requirements contained
herein is available at
www.regulations.gov as well as on
OMB’s public-facing docket at
www.reginfo.gov.
Title of Collection: Nonbank
Registration—Agency and Court Orders
Registration.
OMB Control Number: 3170–0076.
Type of Review: Request for approval
of a new information collection.
Affected Public: Private sector.
Estimated Number of Respondents:
7,752.
Estimated Total Annual Burden
Hours: 35 hours.
In the notice of proposed rulemaking,
the Bureau invited comments on: (a)
Whether the collection of information is
necessary for the proper performance of
the functions of the Bureau, including
whether the information will have
practical utility; (b) the accuracy of the
Bureau’s estimate of the burden of the
collection of information, including the
validity of the methods and the
assumptions used; (c) ways to enhance
the quality, utility, and clarity of the
information to be collected; and (d)
ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
The comments on the rule generally,
and those relating to its burdens and
utility, are summarized above. The
Bureau is always interested in
comments on its information
collections, and how to improve their
utility and reduce their burdens. These
may be made at PRA_Comments@
CFPB.gov.
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XI. Congressional Review Act
Pursuant to the Congressional Review
Act,513 the Bureau will submit a report
containing this rule and other required
information to the U.S. Senate, the U.S.
House of Representatives, and the
Comptroller General of the United
States at least 60 days prior to the rule’s
published effective date. The Office of
Information and Regulatory Affairs has
designated this rule as a ‘‘major rule’’ as
defined by 5 U.S.C. 804(2).
List of Subjects in 12 CFR Part 1092
Administrative practice and
procedure, Consumer protection, Credit,
Intergovernmental relations, Law
enforcement, Nonbank registration,
Registration, Reporting and
recordkeeping requirements, Trade
practices.
513 5
U.S.C. 801 et seq.
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Authority and Issuance
For the reasons set forth above, the
Bureau amends 12 CFR chapter X by
adding part 1092 to read as follows:
PART 1092—NONBANK
REGISTRATION
Subpart A—General
Sec.
1092.100 Authority and purpose.
1092.101 General definitions.
1092.102 Submission and use of
registration information.
1092.103 Severability.
Subpart B—Registry of Nonbank Covered
Persons Subject to Certain Agency and
Court Orders
1092.200 Scope and purpose.
1092.201 Definitions.
1092.202 Registration and submission of
information regarding covered orders.
1092.203 Optional one-time registration of
NMLS-published covered orders.
1092.204 Annual reporting requirements for
supervised registered entities.
1092.205 Publication and correction of
registration information.
1092.206 Nonbank registry implementation
dates.
Subpart C—[Reserved]
Appendix A to Part 1092—List of State
Covered Laws
Authority: 12 U.S.C. 5512(b) and (c); 12
U.S.C. 5514(b).
Subpart A—General
§ 1092.100
Authority and purpose.
(a) Authority. The regulation in this
part is issued by the Bureau pursuant to
section 1022(b) and (c) and section
1024(b) of the Consumer Financial
Protection Act of 2010, codified at 12
U.S.C. 5512(b) and (c), and 12 U.S.C.
5514(b).
(b) Purpose. The purpose of this part
is to prescribe rules governing the
registration of nonbanks, and the
collection and submission of
registration information by such
persons, and for public release of the
collected information as appropriate.
(1) This subpart contains general
provisions and definitions used in this
part.
(2) Subpart B of this part sets forth
requirements regarding the registration
of nonbanks subject to certain agency
and court orders.
§ 1092.101
General definitions.
For the purposes of this part, unless
the context indicates otherwise, the
following definitions apply:
(a) Affiliate, consumer, consumer
financial product or service, covered
person, Federal consumer financial law,
insured credit union, person, related
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person, service provider, and State have
the same meanings as in 12 U.S.C. 5481.
(b) Bureau means the Consumer
Financial Protection Bureau.
(c) Include, includes, and including
mean that the items named may not
encompass all possible items that are
covered, whether like or unlike the
items named.
(d) Nonbank registry means the
Bureau’s electronic registry identified
and maintained by the Bureau for the
purposes of this part.
(e) Nonbank registry implementation
date means, for a given requirement or
subpart of this part, or a given person
or category of persons, the date(s)
determined by the Bureau to commence
the operations of the nonbank registry in
connection with that requirement or
subpart.
§ 1092.102 Submission and use of
registration information.
(a) Filing instructions. The Bureau
shall specify the form and manner for
electronic filings and submissions to the
nonbank registry that are required or
made voluntarily under this part. The
Bureau also may provide for extensions
of deadlines or time periods prescribed
by this part for persons affected by
declared disasters or other emergency
situations.
(b) Coordination or combination of
systems. In administering the nonbank
registry, the Bureau may rely on
information a person previously
submitted to the nonbank registry under
this part and may coordinate or combine
systems in consultation with State
agencies as described in 12 U.S.C.
5512(c)(7)(C) and 12 U.S.C.
5514(b)(7)(D).
(c) Bureau use of registration
information. The Bureau may use the
information submitted to the nonbank
registry under this part to support its
objectives and functions, including in
determining when to exercise its
authority under 12 U.S.C. 5514 to
conduct examinations and when to
exercise its enforcement powers under
subtitle E of the Consumer Financial
Protection Act of 2010. However, this
part does not alter any applicable
process whereby a person may dispute
that it qualifies as a person subject to
Bureau authority.
(d) Calculation of time periods. In
computing any date or period of time
prescribed by this part, exclude the day
of the event that triggers the period;
count every day, including intermediate
Saturdays, Sundays, and Federal
holidays; and include the last day of the
period. If any provision of this part
would establish a deadline for an action
that is a Saturday, Sunday, or Federal
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holiday, the deadline is extended to the
next day that is not a Saturday, Sunday,
or Federal holiday.
§ 1092.103
Severability.
If any provision of this part, 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.
Subpart B—Registry of Nonbank
Covered Persons Subject to Certain
Agency and Court Orders
§ 1092.200
Scope and purpose.
(a) Scope. This subpart requires
nonbank covered persons that are
subject to certain public agency and
court orders to register with the Bureau
and to submit a copy of each such
public order to the Bureau. This subpart
also requires certain nonbank covered
persons that are supervised by the
Bureau to prepare and submit an annual
written statement, signed by a
designated individual, regarding
compliance with each such public
order. Finally, this subpart also
describes the registration information
the Bureau may make publicly
available.
(b) Purpose. The purposes of the
information collection requirements
contained in this subpart are:
(1) To support Bureau functions by
monitoring for risks to consumers in the
offering or provision of consumer
financial products or services, including
developments in markets for such
products or services, pursuant to 12
U.S.C. 5512(c)(1);
(2) To prescribe rules regarding
registration requirements applicable to
nonbank covered persons, pursuant to
12 U.S.C. 5512(c)(7);
(3) To facilitate the supervision of
persons described in 12 U.S.C.
5514(a)(1), pursuant to 12 U.S.C.
5514(b);
(4) To assess and detect risks to
consumers, pursuant to 12 U.S.C.
5514(b); and
(5) To ensure that persons described
in 12 U.S.C. 5514(a)(1) are legitimate
entities and are able to perform their
obligations to consumers, pursuant to 12
U.S.C. 5514(b).
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§ 1092.201
Definitions.
For the purposes of this subpart,
unless the context indicates otherwise,
the following definitions apply:
(a) Administrative information means
contact information regarding persons
subject to this subpart and other
information submitted or collected to
facilitate the administration of the
nonbank registry including information
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submitted under §§ 1092.202(g) and
1092.204(f).
(b) Attesting executive means, with
respect to any covered order regarding
a supervised registered entity, the
individual designated by the supervised
registered entity to perform the
supervised registered entity’s duties
with respect to the covered order under
§ 1092.204.
(c) Covered law means a law listed in
paragraphs (c)(1) through (6) of this
section, to the extent that the violation
of law found or alleged arises out of
conduct in connection with the offering
or provision of a consumer financial
product or service:
(1) A Federal consumer financial law;
(2) Any other law as to which the
Bureau may exercise enforcement
authority;
(3) The prohibition on unfair or
deceptive acts or practices under section
5 of the Federal Trade Commission Act,
15 U.S.C. 45, or any rule or order issued
for the purpose of implementing that
prohibition;
(4) A State law prohibiting unfair,
deceptive, or abusive acts or practices
that is identified in appendix A to this
part;
(5) A State law amending or otherwise
succeeding a law identified in appendix
A to this part, to the extent that such
law is materially similar to its
predecessor; or
(6) A rule or order issued by a State
agency for the purpose of implementing
a prohibition on unfair, deceptive, or
abusive acts or practices contained in a
State law described in paragraph (c)(4)
or (5) of this section.
(d) Covered nonbank means a covered
person that is not any of the following:
(1) An insured depository institution
or insured credit union;
(2) A person who is a covered person
solely due to being a related person;
(3) A State;
(4) A natural person;
(5) A motor vehicle dealer that is
predominantly engaged in the sale and
servicing of motor vehicles, the leasing
and servicing of motor vehicles, or both,
within the meaning of 12 U.S.C. 5519(a),
except to the extent such a person
engages in functions that are excepted
from the application of 12 U.S.C.
5519(a) as described in 12 U.S.C.
5519(b); or
(6) A person that qualifies as a
covered person based solely on conduct
that is the subject of, and that is not
otherwise exempted from, an exclusion
from the Bureau’s rulemaking authority
under 12 U.S.C. 5517.
(e) Covered order—(1) In general.
Covered order means a final public
order issued by an agency or court,
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whether or not issued upon consent,
that:
(i) Identifies a covered nonbank by
name as a party subject to the order;
(ii) Was issued at least in part in any
action or proceeding brought by any
Federal agency, State agency, or local
agency;
(iii) Contains public provisions that
impose obligations on the covered
nonbank to take certain actions or to
refrain from taking certain actions;
(iv) Imposes such obligations on the
covered nonbank based on an alleged
violation of a covered law; and
(v) Has an effective date on or later
than January 1, 2017.
(2) Exception. The term ‘‘covered
order’’ does not include an order issued
to a motor vehicle dealer that is
predominantly engaged in the sale and
servicing of motor vehicles, the leasing
and servicing of motor vehicles, or both,
within the meaning of 12 U.S.C. 5519(a),
except to the extent such order is in
connection with the functions that are
excepted from the application of 12
U.S.C. 5519(a) as described in 12 U.S.C.
5519(b).
(f) Effective date means, in connection
with a covered order, the effective date
as identified in the covered order;
provided that if no other effective date
is specified, then the date on which the
covered order was issued shall be
treated as the effective date for purposes
of this subpart. If the issuing agency or
a court stays or otherwise suspends the
effectiveness of the covered order, the
effective date shall be delayed until
such time as the stay or suspension of
effectiveness is lifted.
(g) Identifying information means
existing information available to the
covered nonbank that uniquely
identifies the covered nonbank,
including the entity’s legal name, State
(or other jurisdiction) of incorporation
or organization, principal place of
business address, any doing business as
or fictitious business names, and any
unique identifiers issued by a
government agency or standards
organization.
(h) Insured depository institution has
the same meaning as in 12 U.S.C.
5301(18)(A).
(i) Local agency means a regulatory or
enforcement agency or authority of a
county, city (whether general law or
chartered), city and county, municipal
corporation, district, or other political
subdivision of a State, other than a State
agency.
(j) NMLS means the Nationwide
Multistate Licensing System.
(k) NMLS-published covered order
means a covered order that is published
on the NMLS Consumer Access website,
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www.NMLSConsumerAccess.org, except
that no covered order issued or obtained
at least in part by the Bureau shall be
an NMLS-published covered order.
(l) Order includes any written order or
judgment issued by an agency or court
in an investigation, matter, or
proceeding.
(m) Public means, with respect to a
covered order or any portion thereof,
published by the issuing agency or
court, or required by any provision of
Federal, State, or local law, rule, or
order to be published by the issuing
agency or court. The term does not
include orders or portions of orders that
constitute confidential supervisory
information of any Federal, State, or
local agency.
(n) Registered entity means any
person registered or required to be
registered under this subpart.
(o) Remain(s) in effect means, with
respect to any covered order, that the
covered nonbank remains subject to
public provisions that impose
obligations on the covered nonbank to
take certain actions or to refrain from
taking certain actions based on an
alleged violation of a covered law.
(p) State agency means the attorney
general (or the equivalent thereof) of any
State and any other State regulatory or
enforcement agency or authority.
(q) Supervised registered entity means
a registered entity that is subject to
supervision and examination by the
Bureau pursuant to 12 U.S.C. 5514(a)
except as provided in paragraphs (q)(1)
through (4) of this section. For purposes
of this definition, the term ‘‘subject to
supervision and examination by the
Bureau pursuant to 12 U.S.C. 5514(a)’’
includes an entity that qualifies as a
larger participant of a market for
consumer financial products or services
under any rule issued by the Bureau
pursuant to 12 U.S.C. 5514(a)(1)(B) and
(a)(2), or that is subject to an order
issued by the Bureau pursuant to 12
U.S.C. 5514(a)(1)(C). The term
‘‘supervised registered entity’’ does not
include:
(1) A service provider that is subject
to Bureau examination and supervision
solely in its capacity as a service
provider and that is not otherwise
subject to Bureau supervision and
examination;
(2) A motor vehicle dealer that is
predominantly engaged in the sale and
servicing of motor vehicles, the leasing
and servicing of motor vehicles, or both,
within the meaning of 12 U.S.C. 5519(a),
except to the extent such a person
engages in functions that are excepted
from the application of 12 U.S.C.
5519(a) as described in 12 U.S.C.
5519(b);
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(3) A person that qualifies as a
covered person based solely on conduct
that is the subject of, and that is not
otherwise exempted from, an exclusion
from the Bureau’s supervisory authority
under 12 U.S.C. 5517; or
(4) A person with less than $5 million
in annual receipts resulting from
offering or providing all consumer
financial products and services
described in 12 U.S.C. 5514(a). For
purposes of this exclusion:
(i) The term ‘‘annual receipts’’ has the
same meaning as that term has in 12
CFR 1090.104(a); and
(ii) A person’s receipts from offering
or providing a consumer financial
product or service subject to a larger
participant rule under 12 U.S.C.
5514(a)(1)(B) count as receipts for
purposes of the exclusion in this
paragraph (q)(4) regardless of whether
the person qualifies as a larger
participant.
§ 1092.202 Registration and submission of
information regarding covered orders.
(a) Scope of registration requirement.
This section shall apply only with
respect to covered orders with an
effective date on or after the effective
date of this subpart, or that remain in
effect as of the effective date of this
subpart.
(b) Requirement to register and submit
information regarding covered orders.
(1) Each covered nonbank that is
identified by name as a party subject to
a covered order described in paragraph
(a) of this section shall register as a
registered entity with the nonbank
registry in accordance with this section
if it is not already so registered, and
shall provide or update, as applicable,
the information described in this
subpart in the form and manner
specified by the Bureau.
(2) Each covered nonbank required to
register under this section shall:
(i) Submit a filing containing the
information described in paragraphs (c)
and (d) of this section to the nonbank
registry within the later of 90 days after
the applicable nonbank registry
implementation date under § 1092.206
or 90 days after the effective date of any
applicable covered order; and
(ii) Submit a revised filing amending
any information described in paragraphs
(c) and (d) of this section to the nonbank
registry within 90 days after any
amendments are made to the covered
order or any of the information
described in paragraph (c) or (d) of this
section changes.
(c) Required identifying information
and administrative information. A
registered entity shall provide all
identifying information and
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administrative information required by
the nonbank registry. In filing
instructions issued pursuant to
§ 1092.102(a), the Bureau may require
that covered nonbanks that are affiliates
make joint or combined submissions
under this section.
(d) Information regarding covered
orders. A registered entity shall provide
the following information for each
covered order subject to this section:
(1) A fully executed, accurate, and
complete copy of the covered order, in
a format specified by the Bureau;
provided that any portions of a covered
order that are not public shall not be
submitted, and these portions shall be
clearly marked on the copy submitted;
(2) In connection with each applicable
covered order, information identifying:
(i) The agency(ies) and court(s) that
issued or obtained the covered order, as
applicable;
(ii) The effective date of the covered
order;
(iii) The date of expiration, if any, of
the covered order, or a statement that
there is none;
(iv) All covered laws found to have
been violated or, for orders issued upon
the parties’ consent, alleged to have
been violated; and
(v) Any docket, case, tracking, or
other similar identifying number(s)
assigned to the covered order by the
applicable agency(ies) or court(s).
(3) If the registered entity is a
supervised registered entity, the name
and title of its attesting executive for
purposes of § 1092.204 with respect to
the covered order.
(e) Expiration of covered order status.
A covered order shall cease to be a
covered order for purposes of this
subpart as of the later of:
(1) Ten years after its effective date; or
(2) If the covered order expressly
provides for a termination date more
than ten years after its effective date, the
expressly provided termination date.
(f) Requirement to submit revised and
final filings with respect to certain
covered orders. (1) If a covered order is
terminated, modified, or abrogated
(whether by its own terms, by action of
the applicable agency, or by a court), or
if an order ceases to be a covered order
for purposes of this subpart by operation
of paragraph (e) of this section, the
registered entity shall submit a revised
filing to the nonbank registry within 90
days after the effective date of such
termination, modification, or
abrogation, or the date such order ceases
to be a covered order.
(2) If, due to such termination,
modification, or abrogation of a covered
order, or due to the application of
paragraph (e) of this section, the order
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no longer remains in effect or is no
longer a covered order, then, following
its final filing under paragraph (f)(1) of
this section with respect to such
covered order, the registered entity will
have no further obligation to update its
filing or to file written statements with
respect to such covered order under this
subpart.
(g) Notification by certain persons of
non-registration under this section. A
person may submit a notice to the
nonbank registry stating that it is not
registering pursuant to this section
because it has a good-faith basis to
believe that it is not a covered nonbank
or that an order in question is not a
covered order. Such person shall
promptly comply with this section upon
becoming aware of facts or
circumstances that would not permit it
to continue representing that it has a
good-faith basis to believe that it is not
a covered nonbank or that an order in
question is not a covered order.
§ 1092.203 Optional one-time registration
of NMLS-published covered orders.
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(a) One-time registration option with
respect to an NMLS-published covered
order. With respect to any NMLSpublished covered order, a covered
nonbank that is identified by name as a
party subject to the order may elect to
comply with the one-time registration
option described in this section in lieu
of complying with the requirements of
§§ 1092.202 and 1092.204.
(b) Information to be provided. The
covered nonbank, in the form and
manner specified by the Bureau, shall
provide such information that the
Bureau determines is appropriate for the
purpose of identifying the covered
nonbank and the NMLS-published
covered order, and otherwise for the
purpose of coordinating the nonbank
registry with the NMLS.
(c) No further obligation to provide or
update information with respect to the
NMLS-published covered order. Upon
providing such information, the covered
nonbank shall have no further
obligation under this subpart to provide
information to, or update information
provided to, the nonbank registry
regarding the NMLS-published covered
order.
§ 1092.204 Annual reporting requirements
for supervised registered entities.
(a) Scope of annual reporting
requirements. (1) This section shall
apply only with respect to covered
orders with an effective date on or after
the applicable nonbank registry
implementation date under § 1092.206
and as to which information is provided
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or required to be provided under
§ 1092.202.
(2) A supervised registered entity is
not required to comply with this section
with respect to any NMLS-published
covered order for which it chooses to
comply with the one-time registration
option described in § 1092.203.
(b) Requirement to designate attesting
executive. Subject to paragraph (a) of
this section, a supervised registered
entity subject to a covered order shall
designate as its attesting executive for
the covered order for purposes of this
subpart its highest-ranking duly
appointed senior executive officer (or, if
the supervised registered entity does not
have any duly appointed officers, the
highest-ranking individual charged with
managerial or oversight responsibility
for the supervised registered entity)
whose assigned duties include ensuring
the supervised registered entity’s
compliance with Federal consumer
financial law, who has knowledge of the
entity’s systems and procedures for
achieving compliance with the covered
order, and who has control over the
entity’s efforts to comply with the
covered order. The supervised
registered entity shall annually
designate one attesting executive for
each such covered order to which it is
subject and for all submissions and
other purposes related to that covered
order under this subpart. The
supervised registered entity shall
authorize the attesting executive to
perform the duties of an attesting
executive on behalf of the supervised
registered entity with respect to the
covered order as required in this
section, including submitting the
written statement described in
paragraph (d) of this section.
(c) Requirement to provide attesting
executive(s) with access to documents
and information. A supervised
registered entity subject to this section
shall provide its attesting executive(s)
with prompt access to all documents
and information related to the
supervised registered entity’s
compliance with all applicable covered
order(s) as necessary to make the
written statement(s) required in
paragraph (d) of this section.
(d) Annual requirement to submit
written statement to the Bureau for each
covered order. On or before March 31 of
each calendar year, the supervised
registered entity shall, in the form and
manner specified by the Bureau, submit
to the nonbank registry a written
statement with respect to each covered
order described in paragraph (a)(1) of
this section to which it is subject. The
written statement shall be signed by the
attesting executive on behalf of the
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supervised registered entity. In the
written statement, the attesting
executive shall:
(1) Generally describe the steps that
the attesting executive has undertaken
to review and oversee the supervised
registered entity’s activities subject to
the applicable covered order for the
preceding calendar year; and
(2) Attest whether, to the attesting
executive’s knowledge, the supervised
registered entity during the preceding
calendar year identified any violations
or other instances of noncompliance
with any obligations that were imposed
in a public provision of the covered
order by the applicable agency or court
based on a violation of a covered law.
(e) Requirement to maintain and
make available related records. A
supervised registered entity shall
maintain documents and other records
sufficient to provide reasonable support
for its written statement under
paragraph (d) of this section and to
otherwise demonstrate compliance with
the requirements of this section with
respect to any submission under this
section, for five years after such
submission is required. The supervised
registered entity shall make such
documents and other records available
to the Bureau upon request.
(f) Notification of entity’s good-faith
belief that requirements do not apply. A
person may submit a notice to the
nonbank registry stating that it is neither
designating an attesting executive nor
submitting a written statement pursuant
to this section because it has a goodfaith basis to believe that it is not a
supervised registered entity or that an
order in question is not a covered order.
Such person shall promptly comply
with this section upon becoming aware
of facts or circumstances that would not
permit it to continue representing that it
has a good-faith basis to believe that it
is not a supervised registered entity or
that an order in question is not a
covered order.
§ 1092.205 Publication and correction of
registration information.
(a) Internet publication of registration
information. The Bureau may make
available to the public the information
submitted to the nonbank registry
pursuant to §§ 1092.202 and 1092.203
by means that include publishing such
information on the Bureau’s publicly
available internet site within a
timeframe determined by the Bureau in
its discretion, except that:
(1) The publication described in this
paragraph (a) will not include the
written statement submitted under
§ 1092.204, which will be treated as
Bureau confidential supervisory
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information subject to the provisions of
12 CFR part 1070 of this chapter; and
(2) The publication described in this
paragraph (a) will not include
administrative information.
(b) Other publications of information.
In addition to the publication described
in paragraph (a) of this section, the
Bureau may, at its discretion, compile
and aggregate information submitted by
persons pursuant to this subpart and
make any compilations or aggregations
of such information publicly available
as the Bureau deems appropriate.
(c) Correction of submissions to the
nonbank registry. If any information
submitted to the nonbank registry under
this subpart was inaccurate when
submitted and remains inaccurate, the
covered nonbank shall file a corrected
report in the form and manner specified
by the Bureau within 30 days after the
date on which such covered nonbank
becomes aware or has reason to know of
the inaccuracy. In addition, the Bureau
may at any time and in its discretion
direct a covered nonbank to correct
errors or other non-compliant
submissions to the nonbank registry
made under this subpart.
§ 1092.206 Nonbank registry
implementation dates.
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(a) Applicable dates. The applicable
nonbank registry implementation date
for purposes of this subpart shall be as
follows:
(1) For a covered nonbank that is a
larger participant of a market for
consumer financial products or services
described under 12 U.S.C. 5514(a)(1)(B)
as defined by one or more rules issued
by the Bureau, 30 days after this subpart
takes effect with respect to that covered
nonbank;
(2) For a covered nonbank described
under any other provision of 12 U.S.C.
5514(a)(1), 120 days after this subpart
takes effect with respect to that covered
nonbank; and
(3) For any other covered nonbank,
210 days after this subpart takes effect
with respect to that covered nonbank.
(b) Calculation of dates. If paragraph
(a) of this section would establish a
nonbank registry implementation date
on a date that is a Saturday, Sunday, or
Federal holiday, the applicable nonbank
registry implementation date will be the
next day that is not a Saturday, Sunday,
or Federal holiday.
Subpart C—[Reserved]
Appendix A to Part 1092—List of State
Covered Laws
Alabama
• Ala. Code sec. 5–18A–13(j).
• Ala. Code sec. 8–19–5.
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• Fla. Stat. sec. 560.406(2).
• Fla. Stat. sec. 687.141(2), (3).
• Fla. Stat. sec. 817.801 to 817.806.
Alaska
• Alaska Stat. sec. 06.20.200.
• Alaska Stat. sec. 06.40.090.
• Alaska Stat. sec. 06.60.320.
• Alaska Stat. sec. 06.60.340.
• Alaska Stat. sec. 45.50.471.
Arizona
• Ariz. Rev. Stat. sec. 6–611.
• Ariz. Rev. Stat. sec. 6–710(8).
• Ariz. Rev. Stat. sec. 6–909(C).
• Ariz. Rev. Stat. sec. 6–947(D).
• Ariz. Rev. Stat. sec. 6–984(D).
• Ariz. Rev. Stat. sec. 6–1309(A).
• Ariz. Rev. Stat. sec. 44–1522(A).
• Ariz. Rev. Stat. sec. 44–1703(4).
Arkansas
• Ark. Code Ann. sec. 4–75–208(a).
• Ark. Code Ann. sec. 4–88–107.
• Ark. Code Ann. sec. 4–88–108(a)(1).
• Ark. Code Ann. sec. 4–88–304(a).
• Ark. Code Ann. sec. 4–90–705.
• Ark. Code Ann. sec. 4–107–203.
• Ark. Code Ann. sec. 4–112–101 to 4–
112–114.
• Ark. Code Ann. sec. 4–115–102.
• Ark. Code Ann. sec. 23–39–405.
California
• Cal. Bus. & Prof. Code sec. 17200 to
17209.
• Cal. Bus. & Prof. Code sec. 17500.
• Cal. Civ. Code sec. 1770.
• Cal. Civ. Code sec. 1788.101(a), (b)(1),
(7), (8), (9), (10).
• Cal. Fin. Code sec. 4995.3(b).
• Cal. Fin. Code sec. 22755(b), (i).
• Cal. Fin. Code sec. 90003.
Colorado
• Colo. Rev. Stat. sec. 5–3.1–121.
• Colo. Rev. Stat. sec. 5–20–109(b).
• Colo. Rev. Stat. sec. 6–1–105.
Connecticut
• Conn. Gen. Stat. sec. 36a–267.
• Conn. Gen. Stat. sec. 36a–498(g)(2).
• Conn. Gen. Stat. sec. 36a–539(d)(2), (6).
• Conn. Gen. Stat. sec. 36a–561(3), (4).
• Conn. Gen. Stat. sec. 36a–580 to 36a–
589.
• Conn. Gen. Stat. sec. 36a–607(c)(2)(5).
• Conn. Gen. Stat. sec. 36a–646.
• Conn. Gen. Stat. sec. 36a–700.
• Conn. Gen. Stat. sec. 42–110b.
• Conn. Gen. Stat. sec. 42–240 to 42–253.
Delaware
• Del. Code Ann. tit. 5, sec. 2114.
• Del. Code Ann. tit. 5, sec. 2209(a)(3).
• Del. Code Ann. tit. 5, sec. 2315(a)(3).
• Del. Code Ann. tit. 5, sec. 2418(2), (9).
• Del. Code Ann. tit. 5, sec. 2904(a)(3).
• Del. Code Ann. tit. 6, sec. 2513.
• Del. Code Ann. tit. 6, sec. 2532, 2533.
District of Columbia
• D.C. Code sec. 26–1114(d)(2), (9).
• D.C. Code sec. 28–3814.
• D.C. Code sec. 28–3904.
Florida
• Fla. Stat. sec. 501.97.
• Fla. Stat. sec. 501.204.
• Fla. Stat. sec. 560.114(1)(d).
• Fla. Stat. sec. 560.309(10).
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Georgia
• Ga. Code Ann. sec. 7–7–2(1), (3), (4).
• Ga. Code Ann. sec. 10–1–372.
• Ga. Code Ann. sec. 10–1–393.
Hawaii
• Haw. Rev. Stat. sec. 443B–18.
• Haw. Rev. Stat. sec. 454F–17(2), (9), (14).
• Haw. Rev. Stat. sec. 477E–1 to 477E–6.
• Haw. Rev. Stat. sec. 480–2.
• Haw. Rev. Stat. sec. 480J–45(7), (10).
• Haw. Rev. Stat. sec. 481A–3.
• Haw. Rev. Stat. sec. 489D–23(2), (4).
Idaho
• Idaho Code sec. 26–31–317(2), (9).
• Idaho Code sec. 26–2505(2).
• Idaho Code sec. 28–46–413(8).
• Idaho Code sec. 48–603.
• Idaho Code sec. 48–603A.
Illinois
• 815 Ill. Comp. Stat. sec. 122/4–5(3), (8).
• 815 Ill. Comp. Stat. sec. 505/2 to 505/
2AAAA.
• 815 Ill. Comp. Stat. sec. 510/2.
• 815 Ill. Comp. Stat. sec. 635/7–13(2), (9).
Indiana
• Ind. Code sec. 24–4.4–3–104.6(b), (i).
• Ind. Code sec. 24–4.5–7–410(c), (g).
• Ind. Code sec. 24–5–0.5–3.
• Ind. Code sec. 24–5–0.5–10.
Iowa
• Iowa Code sec. 535D.17(2), (9).
• Iowa Code sec. 537.3209(1).
• Iowa Code sec. 538A.3(4).
• Iowa Code sec. 714.16(2)(a).
• Iowa Code sec. 714H.3.
Kansas
• Kan. Stat. Ann. sec. 50–626.
• Kan. Stat. Ann. sec. 50–1017(2), (3).
Kentucky
• Ky. Rev. Stat. Ann. sec. 286.9–100(7).
• Ky. Rev. Stat. Ann. sec. 286.11–039(f).
• Ky. Rev. Stat. Ann. sec. 286.12–
110(1)(a)(4).
• Ky. Rev. Stat. Ann. sec. 365.050.
• Ky. Rev. Stat. Ann. sec. 367.170.
• Ky. Rev. Stat. Ann. sec. 367.381(2).
• Ky. Rev. Stat. Ann. sec. 380.010 to
380.990.
Louisiana
• La. Rev. Stat. Ann. sec. 6:1055.
• La. Rev. Stat. Ann. sec. 6:1092(D)(2), (9).
• La. Rev. Stat. Ann. sec. 6:1393(A)(3)(b).
• La. Rev. Stat. Ann. sec. 6:1412(A)(2).
• La. Rev. Stat. Ann. sec. 9:3574.3(2), (3).
• La. Rev. Stat. Ann. sec. 51:1405.
• La. Rev. Stat. Ann. sec. 51:1915.
Maine
• Me. Rev. Stat. tit. 5, sec. 207.
• Me. Rev. Stat. tit. 9–A, sec. 5–118(2), (3),
(4).
• Me. Rev. Stat. tit. 9–B, sec. 242.
• Me. Rev. Stat. tit. 10, sec. 1212.
• Me. Rev. Stat. tit. 32, sec. 6155(1).
• Me. Rev. Stat. tit. 32, sec. 6198(5).
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Maryland
• Md. Code Ann., Com. Law sec. 12–
1208(2).
• Md. Code Ann., Com. Law sec. 13–303.
• Md. Code Ann., Com. Law sec. 14–
1302(b).
• Md. Code Ann., Com. Law sec. 14–1323.
• Md. Code Ann., Com. Law sec. 14–
1914(a).
• Md. Code Ann., Com. Law sec. 14–3807.
• Md. Code Ann., Educ. sec. 26–601 to 26–
604.
• Md. Code Ann., Fin. Inst. sec. 12–1001
to 12–1017.
• Md. Code Ann., Real Prop. sec. 7–501 to
7–511.
Massachusetts
• Mass. Gen. Laws ch. 93, sec. 105(d).
• Mass. Gen. Laws ch. 93A, sec. 2.
• Mass. Gen. Laws ch. 93L, sec. 8.
Michigan
Minnesota
Minn. Stat. sec. 58B.07(2).
Minn. Stat. sec. 325D.09.
Minn. Stat. sec. 325D.44.
Minn. Stat. sec. 325F.67.
Minn. Stat. sec. 325F.69.
Minn. Stat. sec. 332A.02–332A.19.
Miss. Code Ann. sec. 75–24–5.
Miss. Code Ann. sec. 75–67–109.
Miss. Code Ann. sec. 75–67–445.
Miss. Code Ann. sec. 75–67–516.
Miss. Code Ann. sec. 75–67–617.
Miss. Code Ann. sec. 81–18–27(h).
Miss. Code Ann. sec. 81–19–23(b)(i).
Missouri
• Mo. Rev. Stat. sec. 407.020.
• Mo. Rev. Stat. sec. 443.737(2), (9).
Montana
• Mont. Code Ann. sec. 30–14–103.
• Mont. Code Ann. sec. 30–14–2001 to 30–
14–2015.
• Mont. Code Ann. sec. 30–14–2103(1)(f).
• Mont. Code Ann. sec. 31–1–723(5), (7),
(18).
• Mont. Code Ann. sec. 31–1–724(2).
• Mont. Code Ann. sec. 32–5–309.
Nebraska
•
•
•
•
•
Neb. Rev. Stat. sec. 45–804(5).
Neb. Rev. Stat. sec. 45–812.
Neb. Rev. Stat. sec. 45–919(1)(j).
Neb. Rev. Stat. sec. 59–1602.
Neb. Rev. Stat. sec. 87–302.
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Nevada
• Nev. Rev. Stat. sec. 598.746(5).
• Nev. Rev. Stat. sec. 598.787.
• Nev. Rev. Stat. sec. 598.0915 to
598.0925.
• Nev. Rev. Stat. sec. 604A.5021(5), (6).
• Nev. Rev. Stat. sec. 604A.5049(5), (6).
• Nev. Rev. Stat. sec. 604A.5072(5), (6).
• Nev. Rev. Stat. sec. 604A.582.
• Nev. Rev. Stat. sec. 604A.592.
• Nev. Rev. Stat. sec. 675.280.
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New Mexico
• N.M. Stat. Ann. sec. 57–12–3.
• N.M. Stat. Ann. sec. 58–7–8(C).
• N.M. Stat. Ann. sec. 58–15–3(G).
• N.M. Stat. Ann. sec. 58–21–21.
• N.M. Stat. Ann. sec. 58–21A–12.
• N.M. Stat. Ann. sec. 58–21B–13(C)(2),
(9).
North Carolina
• N.C. Gen. Stat. sec. 25A–44(4).
• N.C. Gen. Stat. sec. 53–180(g).
• N.C. Gen. Stat. sec. 53–270(4).
• N.C. Gen. Stat. sec. 66–106 to 66–112.
• N.C. Gen. Stat. sec. 75–1.1.
• N.C. Gen. Stat. sec. 75–121.
• N.C. Gen. Stat. sec. 75–122.
Mississippi
•
•
•
•
•
•
•
New Jersey
• N.J. Stat. Ann. sec. 17:11C–41(g).
• N.J. Stat. Ann. sec. 17:16F–39(b).
• N.J. Stat. Ann. sec. 17:16ZZ–9(b).
• N.J. Stat. Ann. sec. 56:8–2.
New York
• N.Y. Banking Law sec. 719(2), (9).
• N.Y. Exec. Law sec. 63(12).
• N.Y. Fin. Serv. sec. 702(i).
• N.Y. Gen. Bus. Law sec. 349.
• N.Y. Gen. Bus. Law sec. 458–e.
• N.Y. Gen. Bus. Law sec. 458–h.
• N.Y. Gen. Bus. Law sec. 521–d.
• N.Y. Gen. Bus. Law sec. 741.
• N.Y. Real Prop. Law sec. 280–b(2).
• Mich. Comp. Laws sec. 445.903.
• Mich. Comp. Laws sec. 445.1823(e).
•
•
•
•
•
•
New Hampshire
• N.H. Rev. Stat. Ann. sec. 358–A:2.
• N.H. Rev. Stat. Ann. sec. 383:10–h.
• N.H. Rev. Stat. Ann. sec. 397–A:14(g),
(n).
• N.H. Rev. Stat. Ann. sec. 399–A:14(I).
• N.H. Rev. Stat. Ann. sec. 399–F:4(III).
North Dakota
• N.D. Cent. Code sec. 13–04.1–09(4), (10).
• N.D. Cent. Code sec. 13–08–12(9).
• N.D. Cent. Code sec. 13–10–17(2).
• N.D. Cent. Code sec. 13–11–23(1)(p).
• N.D. Cent. Code sec. 51–15–02.
• N.D. Cent. Code sec. 51–15–02.3.
Ohio
• Ohio Rev. Code Ann. sec. 1321.11.
• Ohio Rev. Code Ann. sec. 1321.41(N).
• Ohio Rev. Code Ann. sec. 1321.44.
• Ohio Rev. Code Ann. sec. 1321.60(A).
• Ohio Rev. Code Ann. sec. 1321.651(B).
• Ohio Rev. Code Ann. sec. 1322.40(I).
• Ohio Rev. Code Ann. sec. 1345.02.
• Ohio Rev. Code Ann. sec. 1345.21 to
1345.28.
• Ohio Rev. Code Ann. sec. 4165.02.
• Ohio Rev. Code Ann. sec. 4710.02(F)(1).
• Ohio Rev. Code Ann. sec. 4710.04.
Oklahoma
• Okla. Stat. Ann. tit. 15, sec. 753(21), (29).
• Okla. Stat. Ann. tit. 59, sec. 2095.18(2),
(9).
• Okla. Stat. Ann. tit. 59, sec. 3111.
• Okla. Stat. Ann. tit. 78, sec. 53.
Oregon
• Or. Rev. Stat. sec. 86A.163.
• Or. Rev. Stat. sec. 86A.236(3), (5), (13).
• Or. Rev. Stat. sec. 646.607.
• Or. Rev. Stat. sec. 646.608(1)(d), (u).
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• Or. Rev. Stat. sec. 646A.720(10).
• Or. Rev. Stat. sec. 725.060.
• Or. Rev. Stat. sec. 725A.058.
Pennsylvania
• 7 PA. Cons. Stat. sec. 6123(a)(3).
• 18 PA. Cons. Stat. sec. 7311(b.1).
• 73 PA. Cons. Stat. sec. 201–3.
• 73 PA. Cons. Stat. sec. 2183(4).
• 73 PA. Cons. Stat. sec. 2188(c)(2).
• 73 PA. Cons. Stat. sec. 2270.4.
• 73 PA. Cons. Stat. sec. 2270.5.
• 73 PA. Cons. Stat. sec. 2501 to 2511.
Rhode Island
• R.I. Gen. Laws sec. 5–80–8(5).
• R.I. Gen. Laws sec. 6–13.1–2.
• R.I. Gen. Laws sec. 6–13.1–21 to 6–13.1–
23.
• R.I. Gen. Laws sec. 6–13.1–25.
• R.I. Gen. Laws sec. 6–13.1–30.
• R.I. Gen. Laws sec. 19–14–21(a).
• R.I. Gen. Laws sec. 19–14.3–3.8(8), (9).
• R.I. Gen. Laws sec. 19–14.8–28(a)(16).
• R.I. Gen. Laws sec. 19–14.10–17(2), (9).
• R.I. Gen. Laws sec. 19–14.11–4(2).
• R.I. Gen. Laws sec. 19–33–12(2).
South Carolina
• S.C. Code Ann. sec. 34–29–120.
• S.C. Code Ann. sec. 34–36–10 to 34–36–
80.
• S.C. Code Ann. sec. 34–39–200(3), (5).
• S.C. Code Ann. sec. 34–41–80(3), (5).
• S.C. Code Ann. sec. 37–2–304(1).
• S.C. Code Ann. sec. 37–3–304(1).
• S.C. Code Ann. sec. 37–6–118.
• S.C. Code Ann. sec. 37–7–101 to 37–7–
122.
• S.C. Code Ann. sec. 39–5–20.
South Dakota
• S.D. Codified Laws sec. 37–24–6.
• S.D. Codified Laws sec. 37–25A–43.
• S.D. Codified Laws sec. 54–4–63.
Tennessee
• Tenn. Code Ann. sec. 45–13–401(8).
• Tenn. Code Ann. sec. 45–17–112(k).
• Tenn. Code Ann. sec. 45–18–121(g).
• Tenn. Code Ann. sec. 47–16–101 to 47–
16–110.
• Tenn. Code Ann. sec. 47–18–104.
• Tenn. Code Ann. sec. 47–18–120.
• Tenn. Code Ann. sec. 47–18–1003(4).
• Tenn. Code Ann. sec. 47–18–5402(a)(1).
Texas
• Tex. Bus. & Com. Code Ann. sec. 17.46.
• Tex. Bus. & Com. Code Ann. sec. 17.50.
• Tex. Bus. & Com. Code Ann. sec. 17.501.
• Tex. Fin. Code Ann. sec. 180.153(2), (11).
• Tex. Fin. Code Ann. sec. 308.002.
• Tex. Fin. Code Ann. sec. 341.403.
• Tex. Fin. Code Ann. sec. 392.303 to
392.304.
• Tex. Fin. Code Ann. sec. 393.305.
• Tex. Fin. Code Ann. sec. 394.207.
• Tex. Fin. Code Ann. sec. 394.212(a)(9).
Utah
• Utah Code Ann. sec. 13–11–4.
• Utah Code Ann. sec. 13–11–4.1.
• Utah Code Ann. sec. 13–11a–4.
• Utah Code Ann. sec. 13–21–3(1)(g).
Vermont
• Vt. Stat. Ann. tit. 8, sec. 2121.
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•
•
•
•
•
(d).
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Vt. Stat. Ann. tit. 8, sec. 2241(2), (9).
Vt. Stat. Ann. tit. 8, sec. 2251 to 2260.
Vt. Stat. Ann. tit. 8, sec. 2760b(b).
Vt. Stat. Ann. tit. 8, sec. 2922.
Vt. Stat. Ann. tit. 9, sec. 2453.
Vt. Stat. Ann. tit. 9, sec. 2481w(b), (c),
Virginia
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•
•
•
•
•
•
•
•
•
•
•
Va. Code. Ann. sec. 6.2–1524(B).
Va. Code. Ann. sec. 6.2–1614(8)(a).
Va. Code. Ann. sec. 6.2–1629(A).
Va. Code. Ann. sec. 6.2–1715(A)(1).
Va. Code. Ann. sec. 6.2–1816(26).
Va. Code. Ann. sec. 6.2–1819(A).
Va. Code. Ann. sec. 6.2–2017.
Va. Code. Ann. sec. 6.2–2107(3), (4).
Va. Code. Ann. sec. 6.2–2610(A)(2), (C).
Va. Code. Ann. sec. 59.1–200(A).
Va. Code. Ann. sec. 59.1–335.5(4).
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Washington
• Wash. Rev. Code sec. 18.28.120(6).
• Wash. Rev. Code sec. 18.44.301(2), (4).
• Wash. Rev. Code sec. 19.16.110.
• Wash. Rev. Code sec. 19.16.250.
• Wash. Rev. Code sec. 19.16.260.
• Wash. Rev. Code sec. 19.16.440.
• Wash. Rev. Code sec. 19.86.020.
• Wash. Rev. Code sec. 19.134.020(1)(e).
• Wash. Rev. Code sec. 19.146.0201(2), (7).
• Wash. Rev. Code sec. 19.144.080(1)(a)(ii).
• Wash. Rev. Code sec. 19.146.100.
• Wash. Rev. Code sec. 19.230.340(2), (4).
• Wash. Rev. Code sec. 19.265.050(3).
• Wash. Rev. Code sec. 31.04.027.
• Wash. Rev. Code sec. 31.45.105(1)(a), (b).
West Virginia
• W. Va. Code sec. 31–17–10.
• W. Va. Code sec. 31–17A–16(2), (9).
• W. Va. Code sec. 32A–2–26.
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• W. Va. Code sec. 46A–6–104.
• W. Va. Code sec. 46A–6C–3(4).
Wisconsin
• Wis. Stat. sec. 100.18.
• Wis. Stat. sec. 100.20.
• Wis. Stat. sec. 100.55(3).
• Wis. Stat. sec. 138.14(12)(e).
• Wis. Stat. sec. 224.77(1)(b), (c).
• Wis. Stat. sec. 422.503(c).
• Wis. Stat. sec. 423.301.
• Wis. Stat. sec. 427.104(1)(m).
Wyoming
• Wyo. Stat. Ann. sec. 40–12–105.
Rohit Chopra,
Director, Consumer Financial Protection
Bureau.
[FR Doc. 2024–12689 Filed 7–5–24; 8:45 am]
BILLING CODE 4810–AM–P
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]]>Agencies
- CONSUMER FINANCIAL PROTECTION BUREAU
[Federal Register Volume 89, Number 130 (Monday, July 8, 2024)]
[Rules and Regulations]
[Pages 56028-56156]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-12689]
[[Page 56027]]
Vol. 89
Monday,
No. 130
July 8, 2024
Part II
Consumer Financial Protection Bureau
-----------------------------------------------------------------------
12 CFR Part 1092
Registry of Nonbank Covered Persons Subject to Certain Agency and Court
Orders; Final Rule
Federal Register / Vol. 89 , No. 130 / Monday, July 8, 2024 / Rules
and Regulations
[[Page 56028]]
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CONSUMER FINANCIAL PROTECTION BUREAU
12 CFR Part 1092
[Docket No. CFPB-2022-0080]
RIN 3170-AB13
Registry of Nonbank Covered Persons Subject to Certain Agency and
Court Orders
AGENCY: Consumer Financial Protection Bureau.
ACTION: Final rule.
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SUMMARY: Under the Consumer Financial Protection Act of 2010 (CFPA),
the Consumer Financial Protection Bureau (Bureau or CFPB) is issuing
this final rule to require certain types of nonbank covered persons
subject to certain final public orders obtained or issued by a
government agency in connection with the offering or provision of a
consumer financial product or service to report the existence of the
orders and related information to a Bureau registry. The Bureau is also
requiring certain supervised nonbanks to file annual reports regarding
compliance with registered orders.
DATES:
Effective date: This rule is effective on September 16, 2024.
Implementation dates: For implementation dates, see Sec. 1092.206.
FOR FURTHER INFORMATION CONTACT: George Karithanom, Regulatory
Implementation and Guidance Program Analyst, Office of Regulations, at
202-435-7700. If you require this document in an alternative electronic
format, please contact [email protected].
SUPPLEMENTARY INFORMATION:
I. Summary of the Final Rule
The Bureau is adopting this final rule to establish and maintain a
registry that will collect information about certain publicly available
agency and court orders and facilitate the Bureau's supervision of
certain companies. In this way, the Bureau will more effectively be
able to monitor and to reduce the risks to consumers posed by entities
that violate consumer protection laws. The final rule also authorizes
the Bureau to consolidate this information in an online registry for
use by the public and other regulators.
The final rule requires certain nonbank covered person entities
(with exclusions for insured depository institutions, insured credit
unions, related persons, States, certain other entities, and natural
persons) to register with the Bureau upon becoming subject to a public
written order imposing obligations based on violations of certain
consumer protection laws. Those entities will be required to register
in a system established by the Bureau, provide basic identifying
information about the company and the order (including a copy of the
order), and periodically update the registry to ensure its continued
accuracy and completeness. The Bureau intends to publish this
information on its website and potentially in other forms.
The Bureau will also require certain nonbanks subject to the
Bureau's supervisory authority under section 1024(a) of the Consumer
Financial Protection Act of 2010 (CFPA) \1\ annually to identify an
executive (or executives) responsible for and knowledgeable of the
firm's efforts to comply with the orders identified in the registry.
The supervised nonbank entity will also be required to submit on an
annual basis a written statement signed by the applicable executive
regarding the entity's compliance with each order in the registry.
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\1\ 12 U.S.C. 5514(a).
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Nonbanks that are subject to an order published on the Nationwide
Multistate Licensing System's Consumer Access website (except for
orders issued or obtained at least in part by the Bureau) may elect to
comply with a one-time registration option in lieu of complying with
the rule's notification and written-statement requirements with respect
to that order.
Nonbank registrants will have to register with the Bureau starting
after an applicable implementation date for the registry specified in
the rule. Different implementation dates are specified for larger
participants, other supervised nonbanks, and other nonbanks not subject
to Bureau supervision. Details on how to register will be provided
through filing instructions.
II. Background
A. The Bureau and Other Agencies Take Enforcement Actions Against
Nonbanks To Protect Consumers
The Bureau administers and enforces Federal consumer financial laws
against nonbanks in consumer financial markets. In addition to the
Bureau, Congress has authorized multiple other Federal and State
agencies to enforce Federal consumer financial laws, including the CFPA
prohibition against unfair, deceptive, or abusive acts or practices
(UDAAP) and enumerated statutes including the Truth in Lending Act, the
Electronic Fund Transfer Act, the Fair Credit Reporting Act, the Equal
Credit Opportunity Act, and other statutes.\2\ Several Federal
agencies, most notably the Federal Trade Commission, also enforce
section 5 of the Federal Trade Commission Act (FTC Act), which
similarly prohibits unfair or deceptive acts or practices (UDAP).\3\
The prohibitions against unfair and deceptive acts or practices in the
CFPA were modeled after the same prohibitions in the FTC Act.
Furthermore, States across the country began codifying State UDAP
statutes modeled after the FTC Act starting in the 1960s and 1970s.\4\
Many State UDAP statutes contain rules of construction requiring State
courts to use interpretations of the FTC Act by the Federal courts and
the FTC as a guide to interpreting their State UDAP statutes.\5\ These
laws differ in many respects from each other, but generally they hail
from a common consumer protection tradition originating with the FTC
Act, similar to the CFPA's prohibition on UDAAP.
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\2\ See 12 U.S.C. 5481(12), 5552; 12 CFR part 1082; Bureau
Interpretive Rule, Authority of States to Enforce the Consumer
Financial Protection Act of 2010, 87 FR 31940 (May 26, 2022).
\3\ 15 U.S.C. 45.
\4\ Dee Pridgen, The Dynamic Duo of Consumer Protection: State
and Private Enforcement of Unfair and Deceptive Trade Practices
Laws, 81 Antitrust L.J. 911, 912 (2017).
\5\ See, e.g., Ariz. Rev. Stat. Ann. sec. 44-1522(C) (courts
``may use as a guide'' FTC and Federal court interpretations of the
FTC Act); Fla. Stat. sec. 501.204(2) (expressing the intent of the
legislature that ``due consideration and great weight'' be given to
interpretations of the FTC Act when interpreting Florida's State
UDAP statute).
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The Bureau was created in the wake of the 2008 financial crisis,
which was caused by a variety of overlapping factors, including
systemic malfeasance in the mortgage industry.\6\ Since passage of the
CFPA, the Bureau has brought nearly 350 enforcement actions against
nonbanks. When the Bureau issues an order against a covered person
(often, but not always, as a consent order), or brings an action in a
court of law that results in an order, the Bureau often follows up with
supervisory or enforcement action to ensure the company's compliance
with the order. On numerous occasions, the Bureau has uncovered
companies that failed to comply with consent orders that the
[[Page 56029]]
companies entered into with the Bureau voluntarily.\7\
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\6\ See U.S. Fin. Crisis Inquiry Comm'n, The Financial Crisis
Inquiry Report, at 104-11, 113-18 (2011), https://www.govinfo.gov/content/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf; see also S. Rep. No. 111-176,
at 11 (2010) (``Th[e] financial crisis was precipitated by the
proliferation of poorly underwritten mortgages with abusive terms,
followed by a broad fall in housing prices as those mortgages went
into default and led to increasing foreclosures.'').
\7\ See, e.g., RMK Financial Corp. d/b/a Majestic Home Loan or
MHL, CFPB No. 2023-CFPB-0002 (Feb. 27, 2023); CFPB v. American
Advisors Group, No. 21-cv-01674-JLS-JDEx (C.D. Cal. Oct. 25, 2021);
Discover Bank, CFPB No. 2020-BCFP-0026 (Dec. 22, 2020); Bureau of
Consumer Fin. Prot. v. Encore Capital Grp., No. 3:20-cv-01750-GPC-
KSC (S.D. Cal. Oct. 16, 2020); Sec. Nat'l Automotive Acceptance Co.,
CFPB No. 2017-CFPB-0013 (Apr. 26, 2017); Military Credit Servs.,
LLC, CFPB No. 2016-CFPB-0029 (Dec. 20, 2016).
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B. Congress Instructed the Bureau To Monitor Markets for Consumer
Financial Products and Services
Congress established the Bureau to regulate (among other things)
the offering and provision of consumer financial products and services
under the Federal consumer financial laws, and it granted the Bureau
authority to ensure that the Bureau could achieve that mission.\8\ But
it also understood that the Bureau could not fully and effectively
achieve that mission unless it developed a clear window into the
markets for and persons involved in offering and providing such
products and services. To that end, Congress mandated that the Bureau
``shall monitor for risks to consumers in the offering or provision of
consumer financial products or services, including developments in
markets for such products or services.'' \9\
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\8\ See 12 U.S.C. 5511.
\9\ See 12 U.S.C. 5512(c)(1).
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Notably, Congress directed the Bureau to engage in such monitoring
``to support its rulemaking and other functions,'' \10\ instructing the
Bureau to use monitoring to inform all of its work. Congress separately
described the Bureau's ``primary functions'' as ``conducting financial
education programs''; ``collecting, investigating, and responding to
consumer complaints''; ``collecting, researching, monitoring, and
publishing information relevant to the functioning of markets for
consumer financial products and services to identify risks to consumers
and the proper functioning of such markets''; ``supervising covered
persons for compliance with Federal consumer financial law, and taking
appropriate enforcement action to address violations of Federal
consumer financial law''; ``issuing rules, orders, and guidance
implementing Federal consumer financial law''; and ``performing such
support activities as may be necessary or useful to facilitate the
other functions of the Bureau.'' \11\ Put simply, Congress envisioned
that the Bureau would use its market-monitoring work to inform its
activities, all with the express purpose of ``ensuring that all
consumers have access to markets for consumer financial products and
services and that markets for consumer financial products and services
are fair, transparent, and competitive.'' \12\
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\10\ Id. (emphasis added).
\11\ 12 U.S.C. 5511(c).
\12\ 12 U.S.C. 5511(a).
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To achieve these ends, Congress took care to ensure that the Bureau
had the tools necessary to effectively monitor for risks in the markets
for consumer financial products and services. It granted the Bureau
authority ``to gather information from time to time regarding the
organization, business conduct, markets, and activities of covered
persons and service providers.'' \13\ In particular, Congress
authorized the Bureau to ``require covered persons and service
providers participating in consumer financial services markets to file
with the Bureau, under oath or otherwise, in such form and within such
reasonable period of time as the Bureau may prescribe by rule or order,
annual or special reports, or answers in writing to specific
questions,'' that would furnish the Bureau with such information ``as
necessary for the Bureau to fulfill the monitoring . . .
responsibilities imposed by Congress.'' \14\
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\13\ 12 U.S.C. 5512(c)(4)(A).
\14\ 12 U.S.C. 5512(c)(4)(B)(ii) (emphasis added).
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To assist the Bureau in allocating resources to perform its
monitoring, Congress also identified a non-exhaustive list of factors
that the Bureau may consider, including ``likely risks and costs to
consumers associated with buying or using a type of consumer financial
product or service''; \15\ ``understanding by consumers of the risks of
a type of consumer financial product or service''; \16\ ``the legal
protections applicable to the offering or provision of a consumer
financial product or service, including the extent to which the law is
likely to adequately protect consumers''; \17\ ``rates of growth in the
offering or provision of a consumer financial product or service'';
\18\ ``the extent, if any, to which the risks of a consumer financial
product or service may disproportionately affect traditionally
underserved consumers''; \19\ and ``the types, number, and other
pertinent characteristics of covered persons that offer or provide the
consumer financial product or service.'' \20\
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\15\ 12 U.S.C. 5512(c)(2)(A).
\16\ 12 U.S.C. 5512(c)(2)(B).
\17\ 12 U.S.C. 5512(c)(2)(C).
\18\ 12 U.S.C. 5512(c)(2)(D).
\19\ 12 U.S.C. 5512(c)(2)(E).
\20\ 12 U.S.C. 5512(c)(2)(F).
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Congress also anticipated that the insights the Bureau would gain
from such market monitoring should at times become available to a wider
audience than just Bureau employees. Not only did Congress mandate that
the Bureau ``publish not fewer than 1 report of significant findings of
its monitoring . . . in each calendar year,'' but it also instructed
that the Bureau may make non-confidential information available to the
public ``as is in the public interest.'' \21\ Congress gave the Bureau
discretion to determine the format of publication, authorizing the
Bureau to make the information available ``through aggregated reports
or other appropriate formats designed to protect confidential
information in accordance with [specified protections in this
section].'' \22\ These instructions regarding public release of market-
monitoring information align with one of the Bureau's ``primary
functions'' mentioned above--to ``publish[ ] information relevant to
the functioning of markets for consumer financial products and services
to identify risks to consumers and the proper functioning of such
markets.'' \23\
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\21\ 12 U.S.C. 5512(c)(3).
\22\ 12 U.S.C. 5512(c)(3)(B).
\23\ 12 U.S.C. 5511(c)(3).
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The Bureau takes its market-monitoring obligations seriously, and
it has incorporated valuable insights gained to date from such
monitoring in conducting the multiple functions assigned to it under
the CFPA, including its supervisory and enforcement efforts, as well as
its rulemaking, consumer education, and other functions.\24\ As
discussed in further detail below, this final rule seeks to continue
and build upon that commitment by creating an order registry to
accomplish a number of goals, with a particular focus on
[[Page 56030]]
monitoring for risks to consumers related to repeat offenders of
consumer protection law. A public registry of agency and court orders
issued or obtained in connection with violations of law will help the
Bureau and the broader public monitor trends concerning corporate
recidivism relating to consumer protection law, including areas where
prior violations of law are indicia of risk to consumers.
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\24\ See, e.g., CFPB Semiannual Regulatory Agenda, 87 FR 5326,
5328 (Jan. 31, 2022) (``The Bureau's market monitoring work assists
in identifying issues for potential future rulemaking work.'');
Payday, Vehicle, and Certain High-Cost Installment Loans, 82 FR
54472, 54475, 54488, 54498 (Nov. 17, 2017) (citing information
obtained through Bureau market-monitoring efforts); Arbitration
Agreements, 82 FR 33210, 33220 (July 19, 2017) (same). See also,
e.g., Consumer Fin. Prot. Bureau, Buy Now, Pay Later: Market trends
and consumer impacts (Sept. 2022), https://files.consumerfinance.gov/f/documents/cfpb_buy-now-pay-later-market-trends-consumer-impacts_report_2022-09.pdf (publishing information
obtained through Bureau market-monitoring efforts); Consumer Fin.
Prot. Bureau, Consumer Credit Trends: Credit Card Line Decreases
(June 2022), https://files.consumerfinance.gov/f/documents/cfpb_credit-card-line-decreases_report_2022-06.pdf (same); Consumer
Fin. Prot. Bureau, Data Point: Checking Account Overdraft at
Financial Institutions Served by Core Processors (Dec. 2021),
https://files.consumerfinance.gov/f/documents/cfpb_overdraft-core-processors_report_2021-12.pdf (same).
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More generally, entities subject to such public orders relating to
the offering or provision of consumer financial products and services
may pose ongoing risks to consumers in the markets for those products
and services. A broad collection of such public orders will shed light
on how laws are being enforced across consumer protection laws,
jurisdictions, and markets, and help identify trends and potential gaps
in enforcement. Both heightened enforcement and the absence of
enforcement could possibly provide information regarding risks to
consumers--the former as evidence that government agencies with various
jurisdictions have identified the need to enforce consumer protection
laws, and the latter as potential evidence of less risk to consumers,
or perhaps of inattention by regulatory agencies. A centralized, up-to-
date repository of such public orders will provide valuable market-
based insight that the Bureau could use both to identify concerning
trends in these markets that it otherwise might miss and to decide
which of several different policy tools would best address the consumer
risks presented by these trends. In short, the information sought will
significantly increase the Bureau's ability to identify, understand,
and ultimately prevent harm in the markets for consumer financial
products and services. These and other core goals of the information
the Bureau will collect are discussed further below at part IV.
Consistent with an approach suggested by commenters, the Bureau is
adopting a one-time registration option for nonbanks that are
identified by name as a party subject to an order that is published on
the Nationwide Multistate Licensing System (NMLS) Consumer Access
website, www.NMLSConsumerAccess.org (except for orders issued or
obtained by the Bureau). Such nonbanks may choose to submit certain
information to the Bureau in lieu of complying with the other ongoing
requirements of the final rule with respect to the order. The
information provided to the Bureau in connection with such orders will
notify the Bureau about the nonbank and the relevant order and will
enable the Bureau to follow up with the NMLS's operator and any
applicable agency as appropriate.
C. Congress Authorized the Bureau To Supervise Certain Nonbank Covered
Persons
One of the Bureau's key responsibilities under the CFPA is the
supervision of very large banks, thrifts, and credit unions, and their
affiliates, and certain nonbank covered persons. Congress has
authorized the Bureau to supervise certain categories of nonbank
covered persons under CFPA section 1024.\25\ Congress provided that the
Bureau ``shall require reports and conduct examinations on a periodic
basis'' of nonbank covered persons subject to its supervisory authority
for purposes of ``assessing compliance with the requirements of Federal
consumer financial law''; ``obtaining information about the activities
and compliance systems or procedures of such person[s]''; and
``detecting and assessing risks to consumers and to markets for
consumer financial products and services.'' \26\ Pursuant to the CFPA,
the Bureau implements a risk-based supervision program under which it
prioritizes nonbank covered persons for supervision in accordance with
its assessment of risks posed to consumers.\27\ In making
prioritization determinations, the Bureau considers several factors,
including ``the asset size of the covered person,'' \28\ ``the volume
of transactions involving consumer financial products or services in
which the covered person engages,'' \29\ ``the risks to consumers
created by the provision of such consumer financial products or
services,'' \30\ ``the extent to which such institutions are subject to
oversight by State authorities for consumer protection,'' \31\ and
``any other factors that the Bureau determines to be relevant to a
class of covered persons.'' \32\ CFPA section 1024(b)(7)(A)-(C) further
authorizes the Bureau to prescribe rules to facilitate supervision and
assessing and detecting risks to consumers, as well as to ensure that
supervised nonbanks ``are legitimate entities and are able to perform
their obligations to consumers.'' \33\
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\25\ 12 U.S.C. 5514.
\26\ 12 U.S.C. 5514(b)(1).
\27\ 12 U.S.C. 5514(b)(2).
\28\ 12 U.S.C. 5514(b)(2)(A).
\29\ 12 U.S.C. 5514(b)(2)(B).
\30\ 12 U.S.C. 5514(b)(2)(C).
\31\ 12 U.S.C. 5514(b)(2)(D).
\32\ 12 U.S.C. 5514(b)(2)(E).
\33\ 12 U.S.C. 5514(b)(7)(A)-(C).
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Under CFPA section 1024(b)(7)(A)-(C), the Bureau is requiring that
certain supervised nonbanks annually submit a written statement
regarding the company's compliance with any outstanding registered
orders. The statement must be signed by a designated senior executive.
In the written statement, the attesting executive must generally
describe the steps the executive has undertaken to review and oversee
the company's activities subject to the applicable order for the
preceding calendar year. The executive must then provide an attestation
regarding the company's compliance with the order.
The required written statement will assist the Bureau in achieving
each of the statutory objectives listed in CFPA section 1024(b)(7)(A)-
(C). Therefore, each of those objectives provides a distinct,
independently sufficient basis for the final rule's written-statement
requirements.\34\
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\34\ For a more extended discussion of these matters, see part
IV(D) and the section-by-section discussion of Sec. 1092.204 below.
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First, requiring submission of an annual written statement will
facilitate Bureau supervision and the Bureau's assessment and detection
of risks to consumers. In particular, as part of the Bureau's risk-
based supervision program, the Bureau considers supervised nonbanks'
compliance record regarding consumer protection law when prioritizing
supervisory resources. The annual written statement, including the
steps taken by the executive to review and oversee activity related to
the order, will provide the CFPB valuable information in understanding
how compliance is managed at the supervised entity. The requirement
will also provide valuable information in connection with other aspects
of the Bureau's supervisory work and will assist the Bureau's
monitoring efforts. For example, in 2022 the Bureau announced that it
was increasing its supervisory focus on repeat offenders, particularly
those which violate agency or court orders.\35\ As part of that focus,
it created a Repeat Offender Unit within its supervision program
focused on: (i) reviewing and monitoring the activities of repeat
offenders; (ii) identifying the root cause of recurring violations;
(iii) pursuing and recommending solutions and remedies that hold
entities accountable for failing to consistently comply with Federal
consumer financial law; and (iv) designing a model for order review and
monitoring that reduces the occurrences
[[Page 56031]]
of repeat offenses.\36\ The Repeat Offender Unit is tasked more
generally with enhancing detection of repeat offenses, developing
processes for rapid review and response designed to address root causes
of violations, and recommending corrective actions designed to stop
recidivist behavior.\37\ The Bureau believes that the annual written
statement will greatly facilitate that work, among other things.
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\35\ See Consumer Fin. Prot. Bureau, Supervisory Highlights:
Issue 28, Fall 2022, at 2-3 (Nov. 2022), https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-28_2022-11.pdf.
\36\ Id.
\37\ Id. at 3.
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Second, the final rule's written-statement requirements will help
ensure the company providing the statement is a legitimate entity and
is able to perform its obligations to consumers. Information regarding
a company's compliance with outstanding orders is probative of whether
the company is willing and able to satisfy its legal obligations and of
whether the company treats potential sanctions for repeat violations of
relevant consumer protection laws as a mere cost of doing business. The
written-statement requirements will also provide an incentive for
supervised nonbanks to perform their obligations to consumers by
requiring supervised nonbanks to specify which individual executives
are responsible for achieving compliance with particular orders.
Publication of the identity of this executive as intended by the Bureau
will enhance the incentive.
III. Legal Authority
The Bureau is issuing this final rule pursuant to its authority
under the CFPA. This section includes a general discussion of several
CFPA provisions on which the Bureau relies in this rulemaking.
Additional description of these authorities, and the final rule's
reliance on them, is also contained in part II above and part IV below
as well as in the section-by-section analysis.
A. CFPA Section 1022(b)
CFPA section 1022(b)(1) authorizes the Bureau to prescribe rules
``as may be necessary or appropriate to enable the Bureau to administer
and carry out the purposes and objectives of the Federal consumer
financial laws, and to prevent evasions thereof.'' \38\ Among other
statutes, the CFPA--i.e., title X of the Dodd-Frank Wall Street Reform
and Consumer Protection Act (Dodd-Frank Act)--is a Federal consumer
financial law.\39\ Accordingly, in issuing the final rule, the Bureau
is exercising its authority under CFPA section 1022(b) to prescribe
rules that carry out the purposes and objectives of the CFPA and
prevent evasions thereof. CFPA section 1022(b)(2) prescribes certain
standards for rulemaking that the Bureau must follow in exercising its
authority under section 1022(b)(1).\40\ For a discussion of the
Bureau's standards for rulemaking under CFPA section 1022(b)(2), see
part VIII below.
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\38\ 12 U.S.C. 5512(b)(1).
\39\ See 12 U.S.C. 5481(14) (defining ``Federal consumer
financial law'' to include the provisions of title X of the Dodd-
Frank Act).
\40\ See 12 U.S.C. 5512(b)(2).
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B. CFPA Section 1022(c)(1)-(4) and (7)
The provisions of the final rule that (1) require nonbank covered
persons to inform the Bureau that they have an applicable order entered
against them, (2) provide basic identifying and administrative
information and information regarding the orders (including copies of
the orders), and (3) authorize publication of this information, are
authorized under CFPA sections 1022(c)(1) through (4) and 1022(c)(7),
as well as CFPA section 1022(b).\41\
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\41\ 12 U.S.C. 5512(b), (c)(1)-(4), (c)(7).
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CFPA sections 1022(c)(1)-(4) authorize the Bureau to prescribe
rules to collect information from covered persons for purposes of
monitoring for risks to consumers in the offering or provision of
consumer financial products or services. The Bureau is collecting this
information to monitor, on an ongoing basis, both individual and
market-wide compliance with consumer protection laws and orders for
alleged violations of those laws. The Bureau considers violations of
consumer protection laws probative of ``risks to consumers in the
offering and provision of consumer financial products or services.''
\42\ In particular, the Bureau believes that entities subject to public
orders enforcing the law relating to the offering or provision of
consumer financial products and services may pose heightened and
ongoing risks to consumers in the markets for those products and
services. It further believes that monitoring for such orders will
allow the Bureau to track specific instances of, and more general
developments regarding, potential corporate recidivism, which presents
special risks to consumers for reasons discussed in greater detail
below. The Bureau also believes that enforcement trends, as shown by
public orders enforcing the law across consumer protection laws,
jurisdictions, and markets, will potentially shed light on risks to
consumers in the offering or provision of consumer financial products
or services. Heightened enforcement could indicate areas where numerous
regulators have identified risk of harm to consumers. Conversely, the
absence of enforcement in other areas could indicate less risk to
consumers, or perhaps a lack of attention by regulators that shows a
need for further monitoring.
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\42\ 12 U.S.C. 5512(c)(1).
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More specifically, in order to support its rulemaking and other
functions, section 1022(c)(1) of the CFPA requires the Bureau to
monitor for risks to consumers in the offering or provision of consumer
financial products or services, including developments in the markets
for such products or services.\43\ As discussed further below at part
IV(B), section 1022(c)(2) of the CFPA authorizes the Bureau to allocate
resources to perform the monitoring required by section 1022 by
considering ``likely risks and costs to consumers associated with
buying or using a type of consumer financial product or service,''
``understanding by consumers of the risks of a type of consumer
financial product or service,'' ``the legal protections applicable to
the offering or provision of a consumer financial product or service,
including the extent to which the law is likely to adequately protect
consumers,'' ``rates of growth in the offering or provision of a
consumer financial product or service,'' ``the extent, if any, to which
the risks of a consumer financial product or service may
disproportionately affect traditionally underserved consumers,'' and
``the types, number, and other pertinent characteristics of covered
persons that offer or provide the consumer financial product or
service.'' \44\ Section 1022(c)(4)(A) of the CFPA authorizes the Bureau
to conduct the monitoring required by section 1022 by ``gather[ing]
information from time to time regarding the organization, business
conduct, markets, and activities of covered persons and service
providers.'' \45\ The Bureau is authorized to gather this information
by, among other things, requiring covered persons participating in
consumer financial services markets to file annual or special reports,
or answers in writing to specific questions, that furnish information
``as necessary for the Bureau to fulfill the monitoring . . .
responsibilities imposed by Congress.'' \46\ The Bureau
[[Page 56032]]
may require such information to be filed ``in such form and within such
reasonable period of time as the Bureau may prescribe by rule or
order.'' \47\
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\43\ 12 U.S.C. 5512(c)(1) (``In order to support its rulemaking
and other functions, the Bureau shall monitor for risks to consumers
in the offering or provision of consumer financial products or
services, including developments in markets for such products or
services.'').
\44\ 12 U.S.C. 5512(c)(2)(A)-(F).
\45\ 12 U.S.C. 5512(c)(4)(A).
\46\ 12 U.S.C. 5512(c)(4)(B)(ii) (``In order to gather
information described in subparagraph (A), the Bureau may . . .
require covered persons and service providers participating in
consumer financial services markets to file with the Bureau, under
oath or otherwise, in such form and within such reasonable period of
time as the Bureau may prescribe by rule or order, annual or special
reports, or answers in writing to specific questions, furnishing
information described in paragraph (4), as necessary for the Bureau
to fulfill the monitoring, assessment, and reporting
responsibilities imposed by Congress.'').
\47\ 12 U.S.C. 5512(c)(4)(B)(ii).
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Section 1022(c)(7)(A) of the CFPA further authorizes the Bureau to
``prescribe rules regarding registration requirements applicable to a
covered person, other than an insured depository institution, insured
credit union, or related person.'' \48\ Section 1022(c)(7)(B) provides
that, ``[s]ubject to rules prescribed by the Bureau, the Bureau may
publicly disclose registration information to facilitate the ability of
consumers to identify covered persons that are registered with the
Bureau.'' \49\ The Bureau interprets section 1022(c)(7)(B) as
authorizing it to publish registration information required by Bureau
rule under section 1022(c)(7)(A) so that consumers may identify the
nonbank covered persons on which the Bureau has imposed registration
requirements.
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\48\ 12 U.S.C. 5512(c)(7)(A).
\49\ 12 U.S.C. 5512(c)(7)(B).
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Finally, CFPA section 1022(c)(3) authorizes the Bureau to publicly
release information obtained pursuant to CFPA section 1022, subject to
limitations specified therein.\50\ Specifically, section 1022(c)(3)
states that the Bureau ``may make public such information obtained by
the Bureau under [section 1022] as is in the public interest, through
aggregated reports or other appropriate formats designed to protect
confidential information in accordance with [specified protections in
section 1022].'' \51\ Information submitted to the Bureau's registry is
protected by, among other things, CFPA section 1022(c)(8), which states
that ``[i]n collecting information from any person, publicly releasing
information held by the Bureau, or requiring covered persons to
publicly report information, the Bureau shall take steps to ensure that
proprietary, personal, or confidential consumer information that is
protected from public disclosure under [the Freedom of Information Act,
5 U.S.C. 552(b),] or [the Privacy Act of 1974, 5 U.S.C. 552a,] or any
other provision of law, is not made public under [the CFPA].'' \52\ The
Bureau's registry is designed to not collect any protected proprietary,
personal, or confidential consumer information, and thus, the Bureau
will not publish, or require public reporting of, any such information.
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\50\ See 12 U.S.C. 5512(c)(3).
\51\ 12 U.S.C. 5512(c)(3)(B).
\52\ 12 U.S.C. 5512(c)(8). In the remainder of this preamble,
the Bureau refers to information protected from disclosure under
CFPA section 1022(c)(8) as ``protected proprietary, personal, or
confidential consumer information.''
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See the introduction to the section-by-section analysis of Sec.
1092.202 for a discussion of certain comments received by the Bureau
about the discussion in the Bureau's proposed rule \53\ of the Bureau's
authorities under CFPA section 1022(b)(1)-(4) and (7).
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\53\ See 88 FR 6088 (Jan. 30, 2023). For further discussion of
the Bureau's proposed rule, see part V(C) below.
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C. CFPA Section 1024(b)
As explained above, section 1024(b) of the CFPA authorizes the
Bureau to exercise supervisory authority over certain nonbank covered
persons.\54\ Section 1024(b)(1) requires the Bureau to periodically
require reports and conduct examinations of persons subject to its
supervisory authority to assess compliance with Federal consumer
financial law, obtain information about the activities and compliance
systems or procedures of persons subject to its supervisory authority,
and detect and assess risks to consumers and to markets for consumer
financial products and services.\55\ Section 1024(b)(2) requires that
the Bureau exercise its supervisory authority over nonbank covered
persons under section 1024(b)(1) based on its assessment of risks posed
to consumers in the relevant product markets and geographic markets,
and taking into consideration, as applicable: ``(A) the asset size of
the covered person; (B) the volume of transactions involving consumer
financial products or services in which the covered person engages; (C)
the risks to consumers created by the provision of such consumer
financial products or services; (D) the extent to which such
institutions are subject to oversight by State authorities for consumer
protection; and (E) any other factors that the Bureau determines to be
relevant to a class of covered persons.'' \56\
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\54\ The nonbank covered persons over which the Bureau has
supervisory authority are listed in section 1024(a)(1) of the CFPA.
They include covered persons that: offer or provide origination,
brokerage, or servicing of loans secured by real estate for use by
consumers primarily for personal, family, or household purposes, or
loan modification or foreclosure relief services in connection with
such loans; are larger participants of a market for consumer
financial products or services, as defined by Bureau rule; the
Bureau has reasonable cause to determine, by order, that the covered
person is engaging, or has engaged, in conduct that poses risks to
consumers with regard to the offering or provision of consumer
financial products or services; offer or provide private education
loans; or offer or provide payday loans. 12 U.S.C. 5514(a)(1).
\55\ 12 U.S.C. 5514(b)(1) provides: ``The Bureau shall require
reports and conduct examinations on a periodic basis of persons
described in subsection (a)(1) for purposes of--(A) assessing
compliance with the requirements of Federal consumer financial law;
(B) obtaining information about the activities and compliance
systems or procedures of such person; and (C) detecting and
assessing risks to consumers and to markets for consumer financial
products and services.''
\56\ 12 U.S.C. 5514(b)(2).
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Section 1024(b)(7) of the CFPA in turn identifies three independent
sources of Bureau rulemaking authority. First, section 1024(b)(7)(A)
requires the Bureau to prescribe rules to facilitate the supervision of
nonbank covered persons subject to the Bureau's supervisory authority
and assessment and detection of risks to consumers.\57\ Second, section
1024(b)(7)(B) authorizes the Bureau to require nonbank covered persons
subject to its supervisory authority to ``generate, provide, or retain
records for the purposes of facilitating supervision of such persons
and assessing and detecting risks to consumers.'' \58\ As explained
below in the introduction to the section-by-section analysis of Sec.
1092.204, the Bureau interprets this section as authorizing it to
require nonbank covered persons subject to its supervisory authority to
``generate''--i.e., create \59\--reports regarding their activities and
then ``provide'' them to the Bureau.
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\57\ 12 U.S.C. 5514(b)(7)(A) (``The Bureau shall prescribe rules
to facilitate supervision of persons described in subsection (a)(1)
and assessment and detection of risks to consumers.'').
\58\ 12 U.S.C. 5514(b)(7)(B) (``The Bureau may require a person
described in subsection (a)(1), to generate, provide, or retain
records for the purposes of facilitating supervision of such persons
and assessing and detecting risks to consumers.'').
\59\ See Generate, Webster's Third New International Dictionary
(1981) (defining ``generate'' as ``to bring into existence'').
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The third source of authority, CFPA section 1024(b)(7)(C),
authorizes the Bureau to prescribe rules regarding nonbank covered
persons subject to its supervisory authority ``to ensure that such
persons are legitimate entities and are able to perform their
obligations to consumers.'' \60\ The Bureau interprets this section as
authorizing it to prescribe substantive rules to ensure that supervised
entities are willing and able to comply with their legal, financial,
[[Page 56033]]
and other obligations to consumers, including those imposed by Federal
consumer financial law. The term ``obligations'' encompasses ``anything
that a person is bound to do or forbear from doing,'' including duties
``imposed by law, contract, [or] promise.'' \61\ The Bureau construes
the phrase ``legitimate entities'' as encompassing an inquiry into
whether an entity takes seriously its duty to ``[c]omply[ ] with the
law.'' \62\ Legitimate entities do not presume they will break the law
and treat the risk of enforcement actions for violations of legal
obligations as a mere cost of doing business. Instead, legitimate
entities work in good faith to have protocols in place aimed at
ensuring compliance with their legal obligations and detecting and
appropriately addressing any legal violations that the entity may
commit.
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\60\ 12 U.S.C. 5514(b)(7)(C) (``The Bureau may prescribe rules
regarding a person described in subsection (a)(1), to ensure that
such persons are legitimate entities and are able to perform their
obligations to consumers. Such requirements may include background
checks for principals, officers, directors, or key personnel and
bonding or other appropriate financial requirements.'').
\61\ Obligation, Black's Law Dictionary (11th ed. 2019).
\62\ Legitimate, Black's Law Dictionary (11th ed. 2019)
(defining ``legitimate'' as ``[c]omplying with the law; lawful'');
see also Legitimate, Webster's Second New International Dictionary
(1934) (defining ``legitimate'' as ``[a]ccordant with law or with
established legal forms and requirements; lawful''); Legitimate,
Webster's Third New International Dictionary (1981) (similar).
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While each of the three subparagraphs of section 1024(b)(7)
discussed above operates as independent sources of rulemaking
authority, the subparagraphs also overlap in several respects, such
that a particular rule may be (and, in the case of this final rule, is)
authorized by more than one of the subparagraphs. For example, rules
requiring the generation, provision, or retention of records generally
will be authorized under both subparagraphs 1024(b)(7)(A) and (B). That
is so because subparagraph 1024(b)(7)(B) makes clear that the Bureau's
authority under subparagraph 1024(b)(7)(A) to prescribe rules to
facilitate supervision and assessment and detection of risks to
consumers extends to requiring covered persons subject to the Bureau's
supervisory authority ``to generate, provide or retain records for the
purposes of facilitating supervision of such persons and assessing and
detecting risks to consumers.'' \63\
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\63\ 12 U.S.C. 5514(b)(7)(B); see also, e.g., Barton v. Barr,
140 S. Ct. 1442, 1453 (2020) (``redundancies . . . in statutory
drafting'' may reflect ``a congressional effort to be doubly
sure''); Atlantic Richfield Co. v. Christian, 140 S. Ct. 1335, 1350
n.5 (2020) (concluding that ``Congress employed a belt and
suspenders approach'' in statute); Marx v. Gen. Revenue Corp., 568
U.S. 371, 383-85 (2013) (statutory language is ``not . . .
superfluous if Congress included it to remove doubt'' about an
issue).
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See the introduction to the section-by-section analysis of Sec.
1092.204 below for a discussion of certain comments received by the
Bureau about the proposal's discussion of the Bureau's authorities
under CFPA section 1024(b).
IV. Why the Bureau Is Issuing This Final Rule
A. Overview
The Bureau is issuing this final rule to require nonbanks to report
certain public agency and court orders because the Bureau believes that
not only the Bureau, but also consumers, the public, and other
potential users of the Bureau's registry will benefit from the creation
and maintenance of a central public repository for information
regarding certain public orders that have been imposed upon nonbank
covered persons.
Agency and court orders are not suggestions. They are legally
binding orders intended to prevent and remedy violations of the law.
When an agency issues such an order, or seeks a court order, it
typically has determined that the problems at the applicable entity are
sufficiently serious to merit the expenditure of that agency's limited
resources and perhaps the attention of the courts.
By establishing an effective registry for collecting public orders
enforcing the law across different sectors of entity misconduct, the
final rule will allow the Bureau to more effectively monitor for
potential risks to consumers arising from both individual instances and
broader patterns of recidivism. Persons that are subject to one or more
orders that would require registration under the final rule may pose
greater risks to consumers than others. And the existence of multiple
orders may serve as a particular ``red flag'' with respect to risks to
consumers and as a signal of potential recidivism. The existence of
multiple orders may also indicate broader problems at the entity that
pose related risks to consumers--including lack of sufficient controls
related to the offering and provision of consumer financial products
and services, inadequate compliance management systems and processes,
and an unwillingness or inability of senior management to comply with
laws subject to the Bureau's jurisdiction.
The Bureau also concludes that collecting information regarding
public agency and court orders enforcing the law will help it identify
broader trends related to risks to consumers in the offering and
provision of consumer financial products and services. For example,
collecting this information would inform the Bureau about enforcement
activity across geographic or product markets with respect to
particular consumer protection laws, increases and decreases over time
in such activity, and many other relevant matters. Notably, by studying
how laws are being enforced across consumer protection laws,
jurisdictions, and markets, the Bureau will be able to identify
indications of risks to consumers. For example, the existence of
enforcement activity in multiple jurisdictions among certain products,
services, or features, or related to certain legal requirements, or
concerning certain consumer risks, could indicate areas of heightened
consumer risk that warrant further attention by regulators. Or such
enforcement activity might be an indication of appropriate attention by
other regulators, which might be an indication that applicable nonbanks
are subject to adequate oversight, or that risk to consumers in certain
areas may otherwise be reduced. By contrast, the absence of enforcement
activity in certain areas could potentially indicate less risk to
consumers or could be evidence of less attention by regulators and a
need to increase monitoring activities. The Bureau thus concludes that
obtaining information regarding such orders will enable it to better
monitor risks to consumers in the offering or provision of consumer
financial products and services, including developments in the markets
for such products and services, under its authority at CFPA section
1022(c).\64\
---------------------------------------------------------------------------
\64\ 12 U.S.C. 5512(c).
---------------------------------------------------------------------------
As described further below, the Bureau intends to make a registry
of these orders publicly available. The Bureau anticipates that
publishing such a registry will, among other things, allow other
regulators at the Federal, State, and local level tasked with
protecting consumers to realize many of the same market-monitoring
benefits that the Bureau anticipates obtaining from this rule.
Publication will also facilitate the ability of consumers to identify
the covered persons that are registered with the Bureau. In addition,
publication will enhance the ability of investors, research
organizations, firms conducting due diligence, and the media to locate,
review, and monitor orders enforcing the law.
The final rule also will assist the Bureau's supervisory work by
collecting additional information in the form of a written statement
from certain entities that are subject to the Bureau's supervision and
examination authority. As explained in greater detail below, requiring
certain supervised entities to designate a senior executive officer
with knowledge of, and control over, the entity's efforts to comply
with each relevant order, and requiring that
[[Page 56034]]
executive to submit the information required to be contained in the
written statement, will facilitate Bureau supervision efforts by
providing important information about the entity, helping to prioritize
the Bureau's supervisory activities, and otherwise assisting the
Bureau's supervisory work. These requirements will also help ensure
that the relevant entities are ``legitimate'' and ``are able to perform
their obligations to consumers'' under CFPA section 1024(b)(7)(C), in
part by incentivizing entities who might otherwise not take seriously
their obligations to instead endeavor to comply with consumer
protection laws and by highlighting the designated senior executive
whose duties include ensuring such compliance.\65\
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\65\ 12 U.S.C. 5514(b)(7)(C).
---------------------------------------------------------------------------
General Comments Received
This section discusses certain general comments received by the
Bureau regarding the proposal.
Various industry, consumer advocate, and other commenters generally
agreed with the Bureau's statements in the proposal about the need for
a new Bureau registry for nonbank entities that are subject to the
Bureau's jurisdiction and that are subject to certain agency and court
orders. A consumer advocate commenter stated that the registry would be
immensely useful for the Bureau and other Federal and State regulators
alike, and agreed that the proposed registry would advance a wide
variety of statutory objectives, streamline regulatory processes, and
create efficiencies that will result in greater consumer protection. An
industry commenter stated that the proposed registry would help to
compile and track violations and provide a basis from which to initiate
risk-based supervision of nonbanks. Industry and consumer advocate
commenters stated that the proposed registry would appropriately
respond to a dearth of information about nonbank financial companies,
including their number and type and the practices they engage in.
Consumer advocate commenters stated that the proposal would, among
other things, help unify efforts across regulators, help regulators and
policymakers develop additional reforms to consumer protection, and
help prevent future financial crises.
Other commenters objected to the Bureau's proposal on various
grounds, as discussed elsewhere in this preamble. Among other things,
commenters stated the proposed registry would be duplicative of the
NMLS and overly burdensome for registered entities.
Industry commenters stated that the Bureau should either not
finalize the proposal, or should carefully consider not finalizing the
proposal, in light of the Fifth Circuit's decision in Consumer
Financial Protection Bureau (CFPB) v. Community Financial Services
Association of America \66\ and the U.S. Supreme Court's grant of the
petition for certiorari in that case.\67\
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\66\ See Cmty. Fin. Servs. Ass'n of Am., Ltd. v. CFPB, 51 F.4th
616 (5th Cir. 2022).
\67\ No. 22-448 (U.S. argued Oct. 3, 2023).
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A consumer advocate commenter stated that the Bureau should clarify
in the final rule the monetary penalties it will seek for each day of
non-compliance, and that these penalties should be large. In the
commenter's view, the failure to register as required under the final
rule also should be an aggravating factor when assessing monetary
penalties against the entity for other violations.
Response to General Comments Received
The Bureau agrees with commenters regarding the need for a new
Bureau registry for nonbank entities that are subject to the Bureau's
jurisdiction and that are subject to certain agency and court orders.
The final rule will establish a valuable Bureau registry that will
provide the Bureau and other users with important information regarding
such companies and the orders they are subject to. Comments objecting
to the proposal are addressed elsewhere in this preamble.
With respect to comments addressing the U.S. Court of Appeals for
the Fifth Circuit's decision regarding the constitutionality of the
Bureau's funding structure, the Supreme Court has reversed that
decision, holding that the Bureau's funding structure does not violate
the Appropriations Clause.\68\
---------------------------------------------------------------------------
\68\ See CFPB v. Cmty. Fin. Servs. Ass'n of Am., Ltd., 601 U.S.
416 (2024).
---------------------------------------------------------------------------
The Bureau declines the consumer advocate commenter's suggestion to
establish special rules or remedies for violation of the rule. The
final rule is a Federal consumer financial law under the CFPA.\69\
Violation of the final rule would be an independent violation of
Federal consumer financial law subject to enforcement as provided in
the CFPA, and applicable remedies under law, including potential civil
money penalties.\70\
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\69\ See 12 U.S.C. 5481(14) (defining term ``Federal consumer
financial law'' as including ``any rule . . . prescribed by the
Bureau'' under the CFPA).
\70\ Violation of the final rule may also violate 12 U.S.C.
5536(a)(2), which provides that it shall be unlawful for ``any
covered person or service provider to fail or refuse, as required by
Federal consumer financial law, or any rule or order issued by the
Bureau thereunder--[] ] (A) to permit access to or copying of
records; [] ] (B) to establish or maintain records; or [] ] (C) to
make reports or provide information to the Bureau.''
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B. Why the Bureau Is Issuing a Rule To Monitor for Risks Associated
With Certain Agency and Court Orders
Requiring registration and submissions regarding certain agency and
court orders as provided in the final rule will assist the Bureau in
monitoring for risks to consumers in the offering or provision of
consumer financial products or services, in accordance with CFPA
section 1022(c).\71\ The final rule's requirements to submit and update
information regarding such agency and court orders related to the
provision or offering of consumer financial products or services will
provide important support for a variety of Bureau functions.
---------------------------------------------------------------------------
\71\ 12 U.S.C. 5512(c).
---------------------------------------------------------------------------
As the principal Federal regulator responsible for administering
the Federal consumer financial laws, the Bureau's ability to
effectively identify and monitor for potential risks to consumers
arising out of apparent violations of core Federal and State consumer
laws is important to the Bureau achieving its statutory purposes and
objectives. Such information will help the Bureau satisfy its statutory
obligation to monitor for risks to consumers in the markets for
consumer financial products and services.\72\ For example, the registry
will enable the Bureau to better identify an increase in the number of
orders in a particular product market, in a particular geographic
market, addressing similar consumer risks, or with other common
features. The Bureau will be able to use this information to identify
areas of heightened consumer risk that warrant further attention, as
well as areas that are receiving adequate attention from other
regulators. By contrast, the absence of enforcement activity in certain
areas could indicate less risk to consumers, or it potentially could be
evidence of less attention by regulators and a need to increase
monitoring and other supervisory or regulatory activities. Over time,
the Bureau's collection and review of information under the final rule
will better enable the Bureau to evaluate, assess, and understand the
relationship between such matters and the consumer risk that is related
to covered orders. Thus, this information would help to inform and
prioritize the Bureau's other market-monitoring efforts, including
research regarding particular markets and the
[[Page 56035]]
risks to consumers presented in such markets.\73\
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\72\ See 12 U.S.C. 5512(c)(1).
\73\ See 12 U.S.C. 5511(c)(3) (identifying as one of the
``primary functions of the Bureau . . . collecting, researching,
monitoring, and publishing information relevant to the functioning
of markets for consumer financial products and services to identify
risks to consumers and the proper functioning of such markets'').
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Likewise, the Bureau's rulemaking efforts will benefit from
information about such orders, so that the Bureau might, for example,
consider drafting rules to address identified consumer risks.\74\ The
Bureau's consumer response function will be informed by increased
monitoring of risks and trends, as the Bureau could direct resources or
investigate risks in a certain area or on a certain topic.\75\ And the
Bureau may choose to direct its consumer education efforts toward
educating consumers about risks identified via the registry.\76\
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\74\ See 12 U.S.C. 5511(c)(5) (identifying as one of the
``primary functions of the Bureau . . . issuing rules, orders, and
guidance implementing Federal consumer financial law'').
\75\ See 12 U.S.C. 5511(c)(2) (identifying as one of the
``primary functions of the Bureau . . . collecting, investigating,
and responding to consumer complaints''); see also Consumer Fin.
Prot. Bureau, Consumer Response Annual Report: January 1-December
31, 2021, at 5-8 (Mar. 2022), https://files.consumerfinance.gov/f/documents/cfpb_2021-consumer-response-annual-report_2022-03.pdf
(describing the Bureau's consumer-complaint process and how the
Bureau uses complaint information).
\76\ See 12 U.S.C. 5511(c)(1) (identifying as one of the
``primary functions of the Bureau . . . conducting financial
education programs'').
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The information that the Bureau will obtain under the final rule
will also be valuable to the Bureau in exercising its supervisory and
enforcement functions.\77\ Among other things, the information may be
informative when the Bureau makes determinations whether a covered
person is engaging, or has engaged, in conduct that poses risk to
consumers with regard to the offering or provision of consumer
financial products or services under CFPA section 1024(a)(1)(C), such
that the Bureau may determine to subject the covered person to Bureau
supervision under that provision.\78\ The information contained in the
registry may also be relevant in assessing civil penalties for
violations of Federal consumer financial laws, given that Congress has
provided that such penalties should take into account an entity's
``history of previous violations'' and ``such other matters as justice
may require.'' \79\
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\77\ See 12 U.S.C. 5511(c)(4) (identifying as one of the
``primary functions of the Bureau . . . supervising covered persons
for compliance with Federal consumer financial law, and taking
appropriate enforcement action to address violations of Federal
consumer financial law''). Part IV(D) and the section-by-section
discussion of Sec. 1092.204 below contain additional discussion of
how the final rule will facilitate the Bureau's supervisory efforts.
\78\ See 12 U.S.C. 5514(a)(1)(C) (authorizing Bureau orders
subjecting nonbanks to supervision based upon consumer complaints
``or information from other sources''); 12 CFR part 1091 (Bureau
procedural rule to establish supervisory authority over certain
nonbank covered persons based on risk determination).
\79\ See 12 U.S.C. 5565(c)(3)(D), (E). The Bureau may consider
certain matters identified in orders collected under the final rule
to be relevant under these provisions.
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Furthermore, there is a heightened likelihood that entities that
are subject to public orders enforcing the law and relating to the
offering or provision of consumer financial products and services may
pose risks to consumers in the markets for those products and services,
and risk of consumer harm is a significant factor that weighs heavily
in the Bureau's decisions regarding the general allocation of its
resources. Knowledge of whether a covered person has engaged in
previous violations of consumer financial protection laws is valuable
information that the Bureau considers when evaluating the risk of
consumer harm. In the Bureau's experience, entities that have
previously been subject to enforcement actions, including those brought
by local, State, and other Federal authorities, present an increased
risk of committing violations of laws subject to the Bureau's
jurisdiction, and thus causing the additional consumer harm associated
with such violations. Prior enforcement actions are also likely to be a
good indication of continuing risks to consumers present in a
particular market for consumer financial products or services. Because
the orders that would be covered by the final rule are regularly
issued, modified, and terminated, the Bureau needs to collect this
information regularly and on a timely basis in order to stay abreast of
developments.
Although referrals from and other information provided by other
agencies have been valuable to the Bureau's work, the Bureau currently
often relies on other agencies to take proactive steps to contact it.
As discussed in part IV(E) below, under the final rule, nonbanks that
are subject to agency and court orders that are published on the NMLS
Consumer Access website will have an option to notify the Bureau and
provide information that will flag the relevant order and nonbank for
the Bureau's attention. Having access to targeted information regarding
relevant orders entered against nonbanks, whether such orders are
listed on the Bureau's own registry or available through the NMLS, will
significantly increase the Bureau's ability to monitor markets so that
the Bureau can identify, better understand, and ultimately, prevent
further consumer harm, particularly from repeat offenders.
Recidivism--whether in the form of a company that repeatedly
violates the law and as a result becomes subject to multiple orders, or
in the form of a company that violates the orders to which it is
subject--poses particular risks to consumers. Companies that repeatedly
violate the law do more than just deprive consumers of protections in
the marketplace; these companies may also charge their customers more
in order to cover the costs of any fines or other costs resulting from
the company's legal violations. In other words, consumers may end up
subsidizing corporate malfeasance. When government orders fail to deter
future misconduct by a company, that company's operations are more
likely to present risk to consumers. Thus, the existence of multiple
orders may be highly probative of heightened risks to consumers in the
markets for consumer financial products and services, including the
risk of noncompliance with laws subject to the Bureau's jurisdiction.
Collecting information about such public orders across markets and
agencies as provided in the final rule will improve the Bureau's
efforts to determine where entities, either as a group or individually,
are repeatedly violating the law. The Bureau particularly needs to be
made aware of entities that become subject to multiple orders, or that
are found to be out of compliance with existing orders, as well as of
trends in such developments. Systematic or repeat violations of the law
may indicate broader problems within a market for consumer financial
products and services. Such problems might include lack of sufficient
controls related to the offering and provision of certain consumer
financial products and services, inadequate compliance management
systems and processes within a set of market participants, and an
unwillingness or inability of senior management at certain entities to
comply with Federal consumer financial laws. The registry established
in the final rule will provide a valuable mechanism to help ensure that
the Bureau is rapidly made aware of such repeat offenders across a
range of markets and enforcement agencies.
The Bureau believes that the registry will be especially useful
with respect to the particular nonbank markets that are subject to the
Bureau's supervision and examination authority under CFPA section
1024(a). In those markets, the Bureau will be able to take account of
[[Page 56036]]
risks identified through the registry in conducting its risk-based
supervisory prioritization and enforcement work. The existence of an
order that would require registration under the final rule would be
probative of a potential need for supervisory examination, to the
extent that the nonbank is subject to the Bureau's supervision and
examination authorities. Under CFPA section 1024(b)(2), the Bureau is
required to exercise its supervisory authority in a manner designed to
ensure that such exercise, with respect to persons described in CFPA
section 1024(a), is based on the assessment by the Bureau of the risks
posed to consumers in the relevant product markets and geographic
markets and taking into consideration the factors enumerated at CFPA
section 1024(b)(2)(A)-(E).\80\
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\80\ 12 U.S.C. 5514(a), (b)(2).
---------------------------------------------------------------------------
Depending upon the circumstances, the Bureau may consider the
existence of an order requiring registration under the final rule to be
a risk factor under these provisions for covered persons subject to the
rule. CFPA section 1024(b)(2)(C) refers to ``the risks to consumers
created by the provision of such consumer financial products or
services.'' \81\ The existence of one or more orders that would require
registration under the final rule would be probative of such risks to
consumers because it indicates that an entity may not be willing or
able to ensure compliance with the law. CFPA section 1024(b)(2)(D)
provides that the Bureau shall also take into account ``the extent to
which such institutions are subject to oversight by State authorities
for consumer protection.'' \82\ The existence of one or more orders
issued or obtained by the types of State agencies described in the
final rule in connection with violations of law would provide important
and directly relevant information regarding the extent to which
nonbanks are subject to oversight by State authorities for consumer
protection. CFPA section 1024(b)(2)(E) provides that the Bureau shall
also take into account ``any other factors that the Bureau determines
to be relevant to a class of covered persons.'' \83\ For the classes of
covered persons subject to the final rule, the Bureau believes that the
existence of an order that would require registration under the final
rule would be a relevant factor under this statutory provision for the
Bureau to take into consideration when exercising its supervisory
authorities under CFPA section 1024. Thus, for the reasons described
above, the existence of such orders would be relevant information in
prioritizing and scoping the Bureau's supervisory activities under CFPA
section 1024(b) with respect to the markets subject to that provision.
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\81\ 12 U.S.C. 5514(b)(2)(C).
\82\ 12 U.S.C. 5514(b)(2)(D).
\83\ 12 U.S.C. 5514(b)(2)(E).
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In crafting the final rule's requirements to register and submit
certain agency and court orders, the Bureau has considered (among
others) the factors listed at CFPA section 1022(c)(2), to the extent
relevant here to the allocation of Bureau resources to perform market
monitoring. For example, the Bureau considered the ``likely risks and
costs to consumers associated with buying or using a type of consumer
financial product or service.'' \84\ As discussed above, the Bureau
believes companies that violate the law, especially repeatedly,
generally pose more risk to consumers. The final rule will assist the
Bureau in identifying and evaluating such risks--and their associated
costs--across companies, industries, products, and regions.
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\84\ 12 U.S.C. 5512(c)(2)(A).
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The Bureau also considered the ``understanding by consumers of the
risks of a type of consumer financial product or service.'' \85\ The
Bureau is concerned that consumers currently may not adequately
understand risks posed by certain institutions, including risks arising
from recidivism. With a clear window into nationwide trends and gaps in
nonbank covered persons' compliance with consumer protection laws, the
Bureau can target its various functions--including consumer education--
to ensure that consumers understand the risks and associated costs of
such conduct on their use of certain consumer financial products or
services.
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\85\ 12 U.S.C. 5512(c)(2)(B).
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The Bureau further considered ``the legal protections applicable to
the offering or provision of a consumer financial product or service,
including the extent to which the law is likely to adequately protect
consumers.'' \86\ The final rule will enhance the Bureau's ability to
effectively assess whether and to what extent the orders themselves, as
well as other relevant laws, in practice adequately protect consumers.
Information collected in connection with the final rule will aid the
Bureau in better understanding how effectively the nation's consumer
protection laws operate in practice, which should assist the Bureau in
determining (among other things) how best to allocate its resources to
ensure consumers are adequately protected from unlawful conduct.
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\86\ 12 U.S.C. 5512(c)(2)(C).
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The Bureau also considered ``rates of growth in the offering or
provision of a consumer financial product or service.'' \87\ Commenters
expressed concern about a dearth of information regarding nonbank
financial companies and stated that nonbanks may be obtaining an
increased market share in certain markets for consumer financial
products and services. The Bureau likewise believes that at least in
certain markets, there has been rapid growth in consumer offerings by
nonbanks. The Bureau intends to use the information obtained under the
final rule in assessing and monitoring the rates of such growth and any
associated risks, as evidenced by information regarding relevant
consumer protection orders issued against nonbanks.
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\87\ 12 U.S.C. 5512(c)(2)(D).
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The Bureau also considered ``the extent . . . to which the risks of
a consumer financial product or service may disproportionately affect
traditionally underserved consumers.'' \88\ The Bureau generally is
concerned that traditionally underserved communities may be
disproportionately the target of consumer protection violations--
particularly, unfair, deceptive, or abusive acts or practices--in the
offering or provision of consumer financial products or services. The
information collected should provide the Bureau with robust nationwide
data to identify and evaluate the extent to which this is the case.
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\88\ 12 U.S.C. 5512(c)(2)(E).
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Finally, the Bureau considered ``the types, number, and other
pertinent characteristics of covered persons that offer or provide the
consumer financial product or service.'' \89\ For the reasons
discussed, law violator status--and especially repeat law violator
status--is a highly pertinent characteristic. The Bureau believes that
risks to consumers posed by law violators warrant market monitoring. In
particular, it will provide greater visibility into nonbank covered
persons' compliance with consumer protection laws in the offering or
provision of consumer financial products and services, in addition to
more generally aiding the Bureau's overall understanding of nonbank
covered persons and the products or services they provide.
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\89\ 12 U.S.C. 5512(c)(2)(F).
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As discussed further below in part IV(E), the Bureau is adopting a
modification to the proposed rule in order to provide an option for
one-time registration of orders published on the NMLS Consumer Access
website (except for orders issued or obtained by
[[Page 56037]]
the Bureau). The Bureau will be notified regarding such orders and the
nonbank entities that are subject to them, and, using the information
provided by the nonbank via the registry, will be able to obtain
additional information from applicable Federal, State, and local
authorities, including through the NMLS. Thus, the Bureau will have
access to a comprehensive collection of relevant orders and entities,
accessible either through the Bureau's registry or via the Bureau's
existing access to NMLS and its ability to reach out to other agencies.
The Bureau has concluded that alternative means of collecting the
information subject to the final rule would be inadequate.\90\ For
example, the Bureau considered requesting the information on an ad hoc
basis from entities that are subject to relevant orders through a
Bureau order issued pursuant to CFPA section 1022(c)(4)(B)(ii).\91\
However, the Bureau concludes this alternative would be inadequate.
There is no existing comprehensive list of covered persons subject to
Bureau regulation, so the Bureau would be unable to issue a standing
order to such entities to produce information. It is not clear how the
Bureau would obtain this information without issuing a rule. Also, the
Bureau wishes to collect information that changes over time--for
example, information regarding new orders and changes to orders, as
well as with respect to changes in registration information. An order
that required submission of information at a single point in time--
assuming that the Bureau could identify the entities to which such an
order should be addressed--would be inadequate to capture such changes
in information. While the Bureau might issue frequently recurring
orders under its market-monitoring authority, such an approach would be
less reliable and predictable for all parties than a rule-based
approach.
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\90\ For additional discussion of comments received in
connection with other alternative means of collecting this
information, see the section-by-section discussion of Sec. Sec.
1092.202(b) and 1092.203(a) below.
\91\ 12 U.S.C. 5512(c)(4)(B)(ii).
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The Bureau further considered using its supervisory and examination
authority to obtain information solely from entities that are subject
to that authority. However, there is no existing comprehensive list of
nonbank entities subject to Bureau supervision, so the Bureau would be
unable to issue a standing order to such entities to produce such
information. Moreover, the Bureau has concluded that collecting
information from a wider range of covered persons, including those that
are not subject to the Bureau's supervisory and examination authority,
is appropriate to achieve its market-monitoring objectives.
C. Why the Bureau Has Identified Orders Issued Under the Types of Laws
Described in the Proposal as Posing Particular Risk
The final rule prescribes registration requirements with reference
to certain types of ``covered laws'' that served as the basis for an
applicable order. As discussed herein, the Bureau concludes that orders
issued under the types of covered laws described in the proposal are
likely to be probative of risks to consumers in the offering or
provision of consumer financial products or services, including
developments in markets for such products or services.\92\
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\92\ See also the discussion of the definition of the term
``covered law'' in the section-by-section discussion of Sec.
1092.201(c) below.
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First, the Bureau is requiring registration in connection with
orders issued under the Federal consumer financial laws, to the extent
that the violation of law found or alleged arises out of conduct in
connection with the offering or provision of a consumer financial
product or service. As explained above, numerous Federal and State
agencies besides the Bureau have authority to enforce Federal consumer
financial laws. In matters where an agency other than the Bureau has
issued or obtained a final public order concluding that a covered
person has violated Federal consumer financial law, the Bureau also
will generally have jurisdiction over the conduct that resulted in that
order. Requiring registration of such orders will facilitate effective
market monitoring by providing the Bureau a tool to identify and
understand the nature of the risks to consumers presented by the
conduct addressed in those orders, including the risk that the conduct
might continue unabated outside of the particular jurisdiction that
issued the order. For example, such information may inform the Bureau's
supervisory or enforcement activities, as the Bureau may consider
bringing its own action in connection with the same or related conduct.
Or the conduct may be probative of a more systemic problem with one or
more entities' overall willingness or capacity to comply with Federal
consumer financial law across different product lines or aspects of
their operations. Likewise, requiring registration of orders involving
Federal consumer financial law will facilitate effective market
monitoring by ensuring that the Bureau can quickly and effectively
identify patterns of similar conduct across multiple nonbank covered
persons. The identification of such patterns may indicate a problem
that the Bureau could best address by engaging in rulemaking to clarify
or expand available consumer protections to address emerging consumer
risk trends. It may also prompt the Bureau to use other tools, such as
consumer education, to address the identified risks.
Second, the Bureau is requiring registration of orders in
connection with a violation of any other law as to which the Bureau may
exercise enforcement authority, to the extent such violation arises out
of conduct in connection with the offering or provision of a consumer
financial product or service. The Bureau may enforce certain laws other
than Federal consumer financial laws, as that term is defined in CFPA
section 1002(14).\93\ The Bureau concludes that the registry should
collect information regarding orders issued under any law that the
Bureau may enforce, where the violation of law found or alleged arises
out of conduct in connection with the offering or provision of a
consumer financial product or service. By definition, the conduct
addressed in such orders will generally fall within the scope of the
Bureau's enforcement authority. More generally, the Bureau concludes
that evidence of such conduct could be probative of a broader risk that
the entity has engaged or will engage in conduct that may violate
Federal consumer financial law. For example, violations of the Military
Lending Act, as to which the Bureau has enforcement authority, may
overlap with, or be closely associated with, violations of the CFPA's
UDAAP prohibitions \94\ or the Truth in Lending Act,\95\ among other
Federal consumer
[[Page 56038]]
financial laws. In addition, in the Bureau's experience, a violation of
one law within the Bureau's enforcement authority may be indicative of
broader inadequacies in an entity's compliance systems that are
resulting or could result in other legal violations, including
violations of Federal consumer financial laws. Furthermore, including
in the registry orders issued under any law that the Bureau may enforce
(where the violation of law found or alleged arises out of conduct in
connection with the offering or provision of a consumer financial
product or service) will further the Bureau's objective of creating a
cross-market registry that could serve as a reference tool for use in
monitoring for risks to consumers, thereby increasing the Bureau's
ability to use the registry to monitor for patterns of risky conduct of
nonbank covered persons across entities, industries, and product
offerings.
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\93\ See, e.g., 10 U.S.C. 987(f)(6) (authorizing Bureau
enforcement of the Military Lending Act). As the Bureau has
explained in an interpretive rule, it also has authority to
supervise nonbanks subject to its supervision regarding risks to
consumers arising from conduct that violates the Military Lending
Act. See Bureau Interpretive Rule, Examinations for Risks to Active-
Duty Servicemembers and Their Covered Dependents, 86 FR 32723 (June
23, 2021). In this rulemaking, however, the Bureau does not need to
rely on the authority described in that interpretive rule. Instead,
to the extent that the final rule would collect information
regarding orders issued under laws described in Sec. 1092.201(c)(2)
for the purpose of facilitating the Bureau's supervisory activities,
the Bureau would do so because the Bureau believes such orders may
be probative of a broader risk that an entity has engaged or will
engage in conduct that may violate Federal consumer financial law.
\94\ 15 U.S.C. 5531, 5536(a)(1)(B).
\95\ 15 U.S.C. 1601 et seq.
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Third, the Bureau is requiring registration in connection with
orders issued under the prohibition on unfair or deceptive acts or
practices under section 5 of the FTC Act, 15 U.S.C. 45, or any rule or
order issued for the purpose of implementing that prohibition, to the
extent that the violation of law found or alleged arises out of conduct
in connection with the offering or provision of a consumer financial
product or service. In matters where a government agency has reached a
determination that an entity has violated section 5 of the FTC Act in
connection with the offering or provision of a consumer financial
product or service, the Bureau has reason to be concerned that the
entity poses heightened risks to consumers in financial markets. For
one thing, the conduct resulting in the order may have violated Federal
consumer financial law. CFPA section 1031, for example, authorizes the
Bureau to take action ``to prevent a covered person or service provider
from committing or engaging in an unfair, deceptive, or abusive act or
practice under Federal law in connection with any transaction with a
consumer for a consumer financial product or service, or the offering
of a consumer financial product or service.'' \96\ And CFPA section
1036(a)(1)(B) provides that ``[i]t shall be unlawful'' for a covered
person ``to engage in any unfair, deceptive, or abusive act or
practice.'' \97\ Congress modeled the CFPA's prohibition of unfair or
deceptive acts or practices after the similar prohibition in section 5
of the FTC Act.\98\ Therefore, violations of FTC Act section 5 in
connection with the provision or offering of a consumer financial
product or service are highly probative of a heightened risk that UDAAP
violations subject to the Bureau's jurisdiction have occurred or are
occurring.
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\96\ 12 U.S.C. 5531(a).
\97\ 12 U.S.C. 5536(a)(1)(B).
\98\ See 15 U.S.C. 45; see also, e.g., Consumer Fin. Prot.
Bureau v. ITT Educ. Servs., Inc., 219 F. Supp. 3d 878, 902-04 (S.D.
Ind. 2015).
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Moreover, the high probative value of such orders is not simply a
function of the likelihood that underlying conduct could violate
Federal consumer financial law. The Bureau concludes that, where an
entity has engaged in conduct prohibited under FTC Act section 5 in
connection with offering or providing a consumer financial product or
service, there is a significant risk that upon closer inspection of the
entity's activities it has engaged in other acts or omissions that
either violate Federal consumer financial law or otherwise present
risks to consumers in the consumer financial markets. For example,
inadequacies in compliance systems are not likely limited to a
particular Federal or State consumer protection law, and compliance-
system inadequacies that result in FTC Act section 5 violations
indicate a heightened risk of similar inadequacies related to the
prevention of violations of Federal consumer financial laws. And, as
described above, a registry of orders is particularly useful because a
core purpose of the Bureau's monitoring efforts is to analyze patterns
of risky conduct across entities, industries, product offerings, and
jurisdictions. Such patterns would help the Bureau identify risks to
consumers that warrant further action, such as more monitoring,
increased supervisory attention in the case of supervised persons,
regulation, or consumer education.
Fourth, the Bureau is requiring registration in connection with
orders issued under State laws prohibiting unfair, deceptive, or
abusive acts or practices that are identified in appendix A to part
1092, to the extent that the violation of law found or alleged arises
out of conduct in connection with the offering or provision of a
consumer financial product or service.\99\ State UDAP/UDAAP laws are
generally modeled after--or otherwise prohibit conduct similar to that
prohibited by--FTC Act section 5 or CFPA sections 1031 and
1036(a)(1)(B).\100\ Therefore, violations of State UDAP/UDAAP law in
connection with the provision or offering of a consumer financial
product or service are similarly highly probative of a heightened risk
that UDAAP violations subject to the Bureau's jurisdiction have
occurred or are occurring. In addition, violations of State UDAP/UDAAP
law may be probative of the existence of violations of other laws
within the Bureau's jurisdiction.\101\
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\99\ The Bureau is adopting a final version of appendix A to
part 1092 with certain changes to the version in the proposal. For a
discussion of these changes to the proposal, see the section-by-
section discussion of Sec. 1092.201(c) below.
\100\ 15 U.S.C. 45; 12 U.S.C. 5531. See Request for Information
on Payday Loans, Vehicle Title Loans, Installment Loans, and Open-
End Lines of Credit, 81 FR 47781, 47783 (July 22, 2016) (``In the
1960s, States began passing their own consumer protection statutes
modeled on the [Federal Trade Commission] Act to prohibit unfair and
deceptive practices.''); see also Cal. Fin. Code sec. 90009(c)(3)
(providing that ``the term `abusive' shall be interpreted consistent
with Title X of the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010''); Michael Greenfield, Unfairness Under
Section 5 of the FTC Act and Its Impact on State Law, 46 Wayne L.
Rev. 1869, 1899 (2000) (noting that ``the state statutes actually
were drafted and promoted by the Federal Trade Commission, which,
one supposes, had a special interest in uniform, nationwide
interpretation of the standards'').
\101\ To take just one example, UDAAP violations in connection
with debt-collection efforts may also violate the Fair Debt
Collection Practices Act's prohibition against unfair, deceptive, or
abusive debt-collection practices. See 15 U.S.C. 1692d-1692f.
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Obtaining a better understanding of entities' compliance with State
UDAP/UDAAP laws will assist the Bureau in the assessment and detection
of risks for the same general reasons described with respect to alleged
or found violations of FTC Act section 5--namely, that (i) conduct that
violates State UDAP/UDAAP prohibitions commonly also violates laws
under the Bureau's jurisdiction; and (ii) the Bureau believes that
evidence of such conduct may be highly probative of a broader risk that
the entity has engaged or will engage in similar conduct that may
violate laws within the Bureau's jurisdiction, either as a result of a
willingness to violate such laws or a lack of sufficient protections in
place to prevent violations. Registration of State UDAP/UDAAP orders
will facilitate effective market monitoring by ensuring that the Bureau
can quickly and effectively identify patterns of risky conduct across
entities, industries, consumer financial product or service offerings,
and jurisdictions. The Bureau could then decide which Bureau functions
are best suited to address the consumer risks raised by the
orders.\102\
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\102\ For discussion of the final rule's requirements with
respect to State laws amending or otherwise succeeding a law
identified in appendix A, and rules or orders issued by State
agencies for the purpose of implementing State UDAP/UDAAP laws, see
the section-by-section discussion of Sec. 1092.201(c) below.
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[[Page 56039]]
D. Why the Bureau Is Requiring Supervised Nonbanks To Designate
Attesting Executives and Submit Written Statements
The final rule will also require certain entities that are subject
to the Bureau's supervision and examination authority to annually
submit a written statement signed by a designated attesting executive
regarding each covered order to which they are subject. In the written
statement, the attesting executive will be required to (i) generally
describe the steps that the executive has undertaken to review and
oversee the entity's activities subject to the applicable covered order
for the preceding calendar year, and (ii) attest whether, to the
executive's knowledge, the entity during the preceding calendar year
has identified any violations or other instances of noncompliance with
any of the obligations that were imposed in a public provision of the
covered order by the applicable agency or court based on a violation of
a covered law. The final rule further requires that the entity
designate as the attesting executive for each covered order its
highest-ranking duly appointed senior executive officer (or, if the
entity does not have any duly appointed officers, the highest-ranking
individual charged with managerial or oversight responsibility for the
entity) whose assigned duties include ensuring the entity's compliance
with Federal consumer financial law, who has knowledge of the entity's
systems and procedures for achieving compliance with the covered order,
and who has control over the entity's efforts to comply with the
covered order. The Bureau intends to publish the name and title of that
executive in the public registry.
The Bureau concludes these requirements will serve two sets of
distinct purposes relating to its exercise of its supervisory and
examination authorities under CFPA section 1024.
First, the Bureau concludes the final rule's requirements that
certain supervised entities (which are referred to in the rule as
``supervised registered entities'') designate attesting executives and
provide written statements will facilitate the Bureau's supervision
efforts, including its efforts to assess compliance with the
requirements of Federal consumer financial law, obtain information
about supervised entities' activities and compliance systems or
procedures, and detect and assess risks to consumers and to markets for
consumer financial products and services.\103\ As discussed, the
existence of one or more covered orders involving a supervised
registered entity already raises red flags regarding the entity's
compliance with Federal consumer financial law and the overall risk
posed by such entity to consumers in the offering or provision of
consumer financial products and services. Submission of a written
statement regarding either compliance or noncompliance with such an
order will provide the Bureau with important additional information
regarding risks to consumers that may be associated with the order and
the applicable supervised registered entity's compliance systems and
procedures. Covered orders frequently contain provisions aimed at
ensuring an entity's future legal compliance, such as reporting
requirements, recordkeeping requirements, and provisions requiring the
entity to obtain the issuing agency's nonobjection before adopting or
amending relevant policies and procedures. An entity's sustained
compliance with such provisions may mitigate the continuing risks to
consumers presented by the entity and thus reduce the potential need
for current supervisory activities. By contrast, an entity's
noncompliance with the terms of an order may indicate a heightened need
for current supervisory activities. And if an entity is committing
significant or repeated violations of a covered order, or it is failing
to take appropriate steps to address such violations and prevent their
recurrence, that may indicate that the entity lacks the protocols and
institutional commitment necessary to ensure compliance with legal
obligations aimed at protecting consumers and ultimately with the
Federal consumer financial laws. Entities that fail to comply with
orders enforcing the law may be at greater risk of violating one or
more laws within the Bureau's jurisdiction. Submission of the proposed
written statements will enable the Bureau to conduct additional
supervisory reviews or to otherwise investigate the matter in order to
identify any such violations and related risks.
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\103\ See 12 U.S.C. 5514(b)(1), (7)(A)-(B). As explained in the
``legal authority'' section, 12 U.S.C. 5514(b)(7)(A) authorizes the
Bureau to prescribe rules to facilitate Bureau supervision and the
assessment and detection of risks to consumers, and 12 U.S.C.
5514(b)(7)(B) authorizes the Bureau to require supervised registered
entities to ``generate''--i.e., create--reports regarding their
activities (including the required written statements) and then
``provide'' them to the Bureau.
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As a result, the final rule's written statements will be
particularly relevant when prioritizing the Bureau's supervisory
activities under CFPA section 1024(b). As discussed above at part
III(C) and below in the section-by-section discussion of Sec.
1092.204, CFPA section 1024(b)(2) requires that the Bureau exercise its
authority under CFPA section 1024(b)(1) in a manner designed to ensure
that such exercise, with respect to persons described in section
1024(a), is based on the assessment by the Bureau of certain identified
risks.\104\ For the reasons discussed above, the final rule's written
statements will inform the Bureau's risk-based prioritization of its
supervisory program under CFPA section 1024(b)(2). The Bureau
anticipates that the written statements would be particularly helpful
in assessing, among other things, ``the risks to consumers created by
the provision of . . . consumer financial products or services'' and
``the extent to which such institutions are subject to oversight by
State authorities for consumer protection.'' \105\
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\104\ 12 U.S.C. 5514(a), (b)(2).
\105\ 12 U.S.C. 5514(b)(2)(C)-(D). See additional discussion of
the factors for risk-based supervisory prioritization in part IV(B)
above.
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The final rule's written-statement requirements also will improve
the Bureau's ability to conduct its supervisory and examination
activities with respect to the supervised nonbank, when it does choose
to exercise its supervisory authority. The Bureau exercises its
supervisory authority with respect to supervised nonbanks for certain
purposes, including assessing compliance with the requirements of
Federal consumer financial law, obtaining information about the
activities and compliance systems or procedures of supervised nonbanks,
and detecting and assessing risks to consumers and markets for consumer
financial products and services.\106\ Assessing whether entities have
adequate compliance management systems in place is a long-standing and
standard component of the Bureau's examination process, and that
assessment depends in part on understanding with whom certain
responsibilities lie and how a compliance program is carried out.\107\
The Bureau concludes a supervised nonbank's written statements as
required under the proposal will provide important information relevant
[[Page 56040]]
to all of these statutory purposes. As explained below, a supervised
nonbank's failure to comply with a relevant order under a covered law
could indicate that the entity more generally lacks the will or ability
to comply with its legal obligations, including its obligations under
Federal consumer financial law. Such noncompliance may also indicate
that the entity generally lacks adequate compliance systems or
procedures, which in turn would create risks to consumers and to the
markets for consumer financial products and services that the entity
participates in. Conversely, written statements indicating that the
entity had not identified any instances of noncompliance with a
relevant order would also provide the Bureau with similarly useful
information about the entity's efforts to comply with such orders and
the entity's compliance systems and procedures related to the entity's
offering and provision of consumer financial products and services.
Thus, in cases where the Bureau determines to exercise its supervisory
authorities with respect to a supervised nonbank required to submit
written statements under the proposal, the Bureau would expect those
written statements to be of value in conducting its examination work.
For example, the Bureau may use the written statements in determining
what information to require from a supervised nonbank, in determining
the content of supervisory communications and recommendations, or in
making other decisions regarding the use of its supervisory
authority.\108\
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\106\ 12 U.S.C. 5514(b)(1).
\107\ See CFPB Supervision and Examination Manual at CMR 1 (``To
maintain legal compliance, an institution must develop and maintain
a sound compliance management system . . . that is integrated into
the overall framework for product design, delivery, and
administration across their entire product and service
lifecycle.'').
\108\ As explained below in the section-by-section discussion of
Sec. 1092.204(e), the Bureau is requiring supervised registered
entities to maintain records to support their written statements.
That recordkeeping requirement will further facilitate the Bureau's
supervisory and examination activities because it will ensure the
availability of records for the Bureau to review regarding the
matters addressed in the written statements.
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Second, the final rule's written-statement requirements will help
ensure that supervised registered entities ``are legitimate entities
and are able to perform their obligations to consumers.'' \109\ As
discussed in part VIII below, the Bureau believes that most supervised
registered entities subject to covered orders endeavor in good faith to
comply with consumer protection laws and, accordingly, have put in
place some manner of systems and procedures to help achieve such
compliance. But the Bureau also expects that other supervised
registered entities will not take their legal obligations seriously,
including their obligations under Federal consumer financial law.\110\
The final rule's written-statement requirements will provide
information that would help the Bureau assess in which category a
particular entity falls. If, after reviewing a written statement, the
Bureau concludes that an entity is not working in good faith to comply
with its legal obligations, that conclusion might provide grounds for
prioritizing the entity for supervisory examinations to assess its
compliance with Federal consumer financial law. The Bureau expects that
the risk of such increased supervisory scrutiny will provide an
incentive for some entities to improve their compliance efforts so that
they can submit a written statement that is less likely to result in
increased scrutiny from the Bureau. Thus, by making it more difficult
to quietly disregard the law, the Bureau concludes that the written-
statement requirement will likely motivate at least a few supervised
entities with substandard compliance practices to enhance their
compliance efforts and comply with their legal obligations, including
their obligations under Federal consumer financial law. The Bureau
likewise believes that the final rule's requirement to designate an
attesting executive with knowledge of the entity's systems and
procedures for achieving compliance with the covered order and with
control over the efforts to comply with the covered order will likely
provide an incentive to pay more attention to the entity's legal
obligations.
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\109\ 12 U.S.C. 5514(b)(7)(C). As explained in the ``legal
authority'' section above, 12 U.S.C. 5514(b)(7)(A), (B), and (C)
provide independent sources of rulemaking authority.
\110\ As explained above, in several cases, the Bureau has found
that entities have violated prior orders that the Bureau has issued
or obtained. See supra note 7.
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To be clear, the final rule does not establish any minimum
procedures or otherwise specify the steps the attesting executive must
take in order to review and oversee the supervised registered entity's
activities. Nor does the final rule establish any minimum level of
compliance management or expectation for compliance systems and
procedures at such entities, or purport to impose any restrictions on
the manner in which supervised registered entities address such
matters. However, as explained above, the Bureau expects that most
supervised registered entities will be at least somewhat hesitant to
repeatedly report the absence of good faith efforts to comply with
covered orders. Also, the rule will require supervised registered
entities to identify, on an annual basis, a high-level executive with
knowledge and responsibility regarding an entity's efforts to comply
with a covered order, which will facilitate any Bureau supervisory
efforts related to the order or the matters addressed therein.
The Bureau is finalizing its preliminary findings that requiring
certain supervised nonbanks to designate attesting executives and to
submit written statements relating to compliance with reported orders
will facilitate the Bureau's supervisory efforts and better ensure that
supervised registered entities are legitimate entities and are able to
perform their obligations to consumers.
E. Why the Bureau Is Adopting an Option for One-Time Registration of
Orders Published on the NMLS Consumer Access Website
The Bureau received multiple comments on the proposal stating that
the proposed registry was redundant with existing registries and other
published information, and in particular with the NMLS. See the
section-by-section analysis of Sec. 1092.203 below for a discussion of
these comments and the Bureau's response. Some consulting parties
expressed similar concerns during the Bureau's interagency consultation
process, as discussed in part V below. In light of those comments and
concerns, the Bureau is adopting a one-time registration option for
orders that are published on the NMLS Consumer Access website, which
may be exercised at the election of the covered nonbank. Nonbanks that
exercise this option may submit a one-time registration regarding
certain agency and court orders that are published on the NMLS Consumer
Access website maintained at www.NMLSConsumerAccess.org (except for
orders issued or obtained by the Bureau), in lieu of complying with
other requirements of the rule with respect to the order. Such nonbanks
will be required to submit certain limited information to the Bureau's
nonbank registry regarding the order to enable the Bureau to identify
the relevant nonbank and order and otherwise coordinate the nonbank
registry with the NMLS. Upon exercising this option and submitting the
required information about the relevant order, a nonbank will have no
further obligation under subpart B to provide information to, or update
information provided to, the Bureau's nonbank registry regarding the
order.
The one-time registration option established in the final rule will
ensure that the Bureau is informed regarding risks to consumers in the
offering or provision of consumer financial products and services,
including developments in markets for such
[[Page 56041]]
products and services, in a manner that promotes coordination and
cooperation with the States while reducing potential burden on the
companies that are required to register. This option is not available
for orders that are issued or obtained at least in part by the Bureau
itself.
The one-time registration option is consistent with Sec.
1092.102(b), which provides that in administering the nonbank registry,
the Bureau may rely on information a person previously submitted to the
nonbank registry under part 1092 and may coordinate or combine systems
in consultation with State agencies as described in CFPA sections
1022(c)(7)(C) and 1024(b)(7)(D). Those statutory provisions provide
that the Bureau shall consult with State agencies regarding
requirements or systems (including coordinated or combined systems for
registration), where appropriate. As Sec. 1092.102(b) makes clear, the
Bureau may develop or rely on such systems as part of maintaining the
nonbank registry and may also rely on previously submitted information.
F. Why the Bureau Intends To Publish Certain Information Collected
Under the Registration Requirements
The Bureau intends to publish a registry that contains certain
information about nonbanks and orders collected under the rule.
However, the Bureau is reserving the option not to publish information
based on operational considerations, such as resource constraints.\111\
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\111\ For additional discussion regarding the Bureau's
discretion not to publish information under Sec. 1092.205(a), see
the section-by-section discussion of that provision below.
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While the orders subject to the rule will already be public,
information about the orders may not be readily accessible in a
comprehensive and collected manner, and some of the information
submitted to the registry may not be readily available to the public.
The Bureau intends to publish this information because it believes
publication will provide benefits to the general public, other
regulators, and to consumers, and would be consistent with Federal
Government efforts to make government data assets publicly
available.\112\ The Bureau has authority to publish the registration
information under CFPA section 1022(c)(3)(B), which authorizes it to
publish information obtained under section 1022 ``as is in the public
interest,'' \113\ and under CFPA section 1022(c)(7)(B), which
authorizes the Bureau to ``publicly disclose registration information
to facilitate the ability of consumers to identify covered persons that
are registered with the Bureau.'' \114\ As discussed further in the
section-by-section discussion of Sec. 1092.205(a) below, the Bureau
finds that, except under certain circumstances, it will be in the
public interest to publish certain information collected by the nonbank
registry.
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\112\ See also the discussion of these issues in the section-by-
section discussion of Sec. 1092.205 below.
\113\ 12 U.S.C. 5512(c)(3)(B).
\114\ 12 U.S.C. 5512(c)(7)(B).
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A variety of Federal regulators, including the prudential
regulators, as well as State attorneys general and other State
agencies, all have authority to issue orders to address legal
violations in the provision or offering of consumer financial products
or services. Consequently, similar conduct may be addressed through
separate orders, by separate regulators, or across separate lines of
business. Again, the orders that would be published under the proposal
would already be public. But such orders, while public, are currently
subject to distinct publication regimes. The distinct enforcement and
publication regimes for the various agencies with authority over
nonbank covered persons make it more difficult for the Bureau,
consumers, and other interested parties to identify entities that
engage in misconduct and repeatedly violate the law. The final rule
will address that issue by creating a registry of orders that relate to
offering or providing consumer financial products or services and the
nonbanks that are subject to them. The registry will enable users of
the nonbank registry to become better informed about those orders and
nonbanks and promote transparency in the markets for consumer financial
products and services.
The Bureau recognizes that much public information about such
orders already exists. In particular, some information is available to
potential users through the NMLS Consumer Access website, which is
owned and operated by the State Regulatory Registry LLC, which is a
wholly owned subsidiary of the Conference of State Bank Supervisors. In
addition, the applicable Federal and State regulators generally each
publish their own orders enforcing consumer financial law; thus,
potential users may be able to access some of this information by means
of the various websites and other databases maintained by individual
agencies or other multiagency websites. And still other information is
published and maintained by private actors.
As discussed in part IV(E) above and in the section-by-section
discussion of Sec. 1092.203 below, the Bureau is adopting a one-time
registration option with respect to orders that are published on the
NMLS Consumer Access website, www.NMLSConsumerAccess.org (except for
orders issued or obtained by the Bureau). This option will reduce
burden on eligible entities that are subject to the rule, help avoid
confusion, and promote coordination with the States in exercising the
Bureau's nonbank registration authorities by leveraging information
already gathered and published by the States. The Bureau intends to
publish certain limited information collected under this one-time
registration option for the purposes of informing users of the registry
of particular orders published on the NMLS Consumer Access website and
the applicable nonbanks subject to them. The Bureau's registry will
alert users of the NMLS that orders have been issued against nonbanks
subject to the Bureau's jurisdiction in connection with the offering or
provision of consumer financial products or services. Where an order
has been registered with the Bureau's registry under the option
discussed in part IV(E) above, users may also refer to the NMLS for
additional information about that order, to the extent consistent with
any terms of use or other conditions of access that the NMLS's operator
may impose.
The Bureau is authorizing the establishment of its own public
registry in order to provide access to a new centralized and publicly
available database containing information about applicable nonbanks and
the orders to which they are subject, specifically in connection with
the offering and provision of consumer financial products and services.
While certain State regulators provide information about certain public
enforcement actions through the NMLS, including in some cases
publishing related orders on the NMLS Consumer Access website, such
information does not extend to all of the orders and all of the
agencies that are addressed by the final rule, including orders issued
by Federal agencies. It is also limited to only certain industry
sectors. Therefore, there appears to be limited collective information
regarding all of the orders that have been issued by multiple
regulators to particular entities across multiple product markets and
geographic markets related to consumer financial products and services.
To the Bureau's knowledge, there is currently no public government
registry at the Federal or State level for the collection
[[Page 56042]]
of information about such orders across the entities subject to the
Bureau's jurisdiction (though privately maintained databases may
exist). No government agency appears to maintain a publicly available
repository of such orders and other related information with respect to
particular entities as they relate to consumer financial products and
services. The Bureau believes that consumers would benefit from a
registry that is maintained by the Federal Government for the purpose
of providing information regarding such orders.
The Bureau believes that there will be significant value in
creating a public repository of information related to public agency
and court orders that impose obligations based on violations of
consumer protection laws, and the nonbanks under the Bureau's
jurisdiction that are subject to them.\115\ Publication of certain data
collected pursuant to this rule is in the public interest in a variety
of ways. By improving public transparency, the Bureau intends to
mitigate recidivism and more effectively deter unlawful behavior.
Providing better tools to monitor repeat law violators and corporate
recidivism is in the public interest. Researchers will be able to use
published information to better understand the markets regulated by the
Bureau and the participants in those markets, and their efforts may
result in more thorough understanding and promote compliance with the
law. Non-government entities will likewise be able to use published
information in conducting their work and in identifying potential
issues and risks affecting consumers in the markets for consumer
financial protection and services. Industry can use a public registry
as a convenient source of information regarding regulator actions and
trends across jurisdictions, helping industry actors to better
understand legal risks and compliance obligations. A public registry
will also provide potential investors, contractual partners, financial
firms, and others that are conducting due diligence on a registered
nonbank a consolidated source of information regarding public orders.
Establishing a source for public data on entity lawbreaking and
recidivism will promote tracking and awareness of such matters by
consumer groups, trade associations, firms conducting due diligence,
the media, and other parties.
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\115\ See also the discussion of these issues in the section-by-
section discussions of Sec. Sec. 1092.202(b) and 1092.205(a) below.
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Government agencies--including, but not limited to, the Bureau--
will also benefit from the public registry. While the orders that the
Bureau intends to publish under the rule will already be public, every
Federal, State, and local agency with jurisdiction over a covered
nonbank will benefit from access to a regularly maintained database
providing up-to-date information on relevant public orders that have
been issued against such entities. Such information will help agencies
to detect risks to consumers, and to coordinate and maintain
consistency with the Bureau and other agencies in their enforcement
strategies and approaches. Agencies can use the published information
to better identify registered nonbanks and determine their legal
structure and organization, since the registry will (subject to the
option for NMLS-published covered orders) require registered nonbanks
to submit and maintain up-to-date identifying information, including
legal name and principal place of business. Also, publication of
registration information and information regarding orders will assist
other agencies in assessing the potential risks to consumers that may
be posed by registered nonbanks and in making their own determinations
regarding whether to conduct examinations or investigations, bring
enforcement actions against nonbanks, or engage in other regulatory
activities. For example, a State regulator attempting to improve its
assessments of consumer risk trends among nonbank payday lenders in its
State should be able to use the Bureau's registry to identify what
other regulators of the same or similar nonbank providers or products
have recently identified in terms of such risks. In addition, the
Bureau believes that many agencies would find the published information
useful in making other determinations regarding the nonbanks registered
under the proposal. For example, an agency may be able to use this
information when making determinations regarding an application or
license, or to ask relevant questions regarding the information that is
published. Thus, the Bureau believes that, with access to a public
Bureau registry of these orders, those similarly tasked with protecting
consumers in the markets for consumer financial products and services
would obtain many of the same powerful market-monitoring benefits that
the Bureau anticipates obtaining from this rule.\116\
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\116\ As described in part V below, certain consulting parties
confirmed to the Bureau during the interagency consultation process
that they would find the registry useful in conducting their own
operations, while certain other consulting parties stated that they
would not.
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In developing the proposal, the Bureau considered whether it might
be better to use confidential channels, or perhaps a private electronic
portal, to exchange this information with other government agencies.
However, the Bureau believes that such an approach likely would be
impractical. Not every agency that would be able to use the information
would be aware of the need to request access to the information from
the Bureau or would necessarily be able to expend the resources to
maintain access. The Bureau would need to expend its own resources to
establish and maintain such channels. And the Bureau believes that such
a system would not achieve the benefits of disclosure to consumers and
the public discussed in this section. Publication also would formally
align the proposed registry with Federal Government standards calling
for publishing information online as open data.\117\
---------------------------------------------------------------------------
\117\ See, e.g., Open, Public, Electronic, and Necessary
Government Data Act, in title II of Public Law 115-435 (Jan. 14,
2019).
---------------------------------------------------------------------------
Consumers may also benefit from the collection and publication of
the information collected by the registry, including information about
orders that are already public. At least in certain cases, publishing
information about the entity and its applicable orders in a public
registry as intended by the Bureau will potentially help certain
consumers make informed decisions regarding their choice of consumer
financial products or services. As discussed at part VIII below, the
Bureau does not necessarily expect a wide group of consumers to rely
routinely on the Bureau's registry when selecting consumer financial
products or services. However, the Bureau believes that the registry
will benefit certain consumers if the information in the registry is
recirculated, compiled, or analyzed by other users such as consumer
advocacy organizations, researchers, or the media. For example, media
outlets can use the registry to report which entities have the most
government orders enforcing the law against them, which would inform
consumers about such repeat offenders.
Publication of the registry as intended by the Bureau will also
facilitate private enforcement of the Federal consumer financial laws
by consumers, to the extent those laws provide private rights of
action, where consumers have been harmed by a registered nonbank. Such
publication will be useful in helping consumers understand the identity
of a company that has offered or provided a particular consumer
financial product or service, and in determining whether to file suit
or otherwise make choices
[[Page 56043]]
regarding how to assert their legal rights. And availability of this
information could lead consumers and other persons to report to the
Bureau instances of similar conduct for the Bureau to investigate.
Under the final rule, the Bureau will not publish the written
statement submitted by a supervised registered entity but will instead
treat the written statement as Bureau confidential supervisory
information subject to the provisions of its rule on the disclosure of
records and information at 12 CFR part 1070. The Bureau does intend to
publish the name and title of the attesting executive(s) submitted by
the supervised registered entity. The Bureau intends to disclose this
name and title information because it concludes that, except as
described in the section-by-section discussion of Sec. 1092.205 below,
publication of this information will be in the public interest. In
particular, it will help ensure accountability at the entity for
noncompliance. The Bureau concludes that the publication of the
executive's name and title will provide an incentive to pay more
attention to covered orders. The Bureau believes that designating an
attesting executive will prompt that executive to focus greater
attention on ensuring the entity's compliance with a covered order, and
in turn increase the likelihood of compliance. Publication of this
designation as intended by the Bureau will increase the likelihood of
these effects. Such publication of the designation will identify for
other regulators (and the general public) the highest-ranking executive
at the supervised registered entity who has control over the entity's
efforts to comply with the covered order and otherwise satisfies the
rule's designation requirements. Just as the possibility of Bureau
scrutiny of the attesting executive's conduct is likely to motivate the
executive to devote greater attention to compliance efforts, the
additional scrutiny from others outside the Bureau will further promote
compliance. Publishing the attesting executive's name and title thus
dovetails with the supervisory goals discussed above in part IV(D).
Publishing the name and title of the executive who has knowledge
and control of the supervised entity's efforts to comply with the
covered order, as intended by the Bureau, will benefit users of the
registry in other ways. For example, publishing this information may
help certain consumers better understand and monitor the conduct of the
entities with whom they do business, including how the company assigns
responsibility for compliance with Federal consumer financial law.
Researchers, media, and other users of the information may be able to
detect trends or patterns associated with such information. Publication
as intended by the Bureau may also help whistleblowers and consumers
better understand the operations and structure of the supervised
entity, such as to which department or division of the company to
direct whistleblowing complaints, information about violations, or
requests for information with respect to the covered order in order to
ensure that their complaint, information, or request is being sent to
the appropriate part of the organization. Clients or other companies
that do business with the entity will also have a better understanding
of which areas of the company are affected by a covered order and who
is responsible for compliance with it.
Publishing such name and title information will also facilitate
coordination and communication regarding the order between the Bureau,
other government agencies, and the nonbank entity. Other regulators,
especially those that have issued orders regarding the supervised
entity, would likely benefit from understanding which executive(s) have
been tasked with ensuring compliance with their orders. And disclosure
of this information would increase transparency regarding how the
Bureau processes and verifies information submitted as part of the
registry.
V. Summary of Rulemaking Process
A. Consultation With Other Agencies in Exercising the Authorities
Relied Upon in the Proposal and Final Rule
One of the authorities cited as a basis for components of the
Bureau's proposed rule and final rule is CFPA section 1022(c)(7), which
provides that the ``Bureau may prescribe rules regarding registration
requirements applicable to a covered person, other than an insured
depository institution, insured credit union, or related person.''
\118\ Congress provided that ``[i]n developing and implementing
registration requirements under [section 1022(c)(7)], the Bureau shall
consult with State agencies regarding requirements or systems
(including coordinated or combined systems for registration), where
appropriate.'' \119\ CFPA section 1024(b)(7)--the statutory basis for
the written-statement requirement--includes a similar consultation
provision.\120\
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\118\ 12 U.S.C. 5512(c)(7)(A).
\119\ 12 U.S.C. 5512(c)(7)(C).
\120\ 12 U.S.C. 5514(b)(7)(D) (``In developing and implementing
requirements under this paragraph, the Bureau shall consult with
State agencies regarding requirements or systems (including
coordinated or combined systems for registration), where
appropriate.'').
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Accordingly, the Bureau has consulted with State agencies,
including State agencies involved in supervision of nonbanks and State
agencies charged with law enforcement, in crafting the proposal's and
final rule's registration requirements and system. In developing the
proposal and this final rule, the Bureau considered the input it
received from State agencies, including concerns expressed regarding
possible duplication between any registration system the Bureau might
build and existing registration systems.
In addition, before proposing a rule under the Federal consumer
financial laws, including CFPA sections 1022(b)-(c) and 1024(b), and
during the applicable comment process, the Bureau must consult with
appropriate prudential regulators or other Federal agencies regarding
consistency with prudential, market, or systemic objectives
administered by such agencies.\121\ In developing the proposal and this
final rule, the Bureau consulted with prudential regulators and other
Federal agencies and considered the input it received.
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\121\ 12 U.S.C. 5512(b)(2)(B) (``In prescribing a rule under the
Federal consumer financial laws . . . the Bureau shall consult with
the appropriate prudential regulators or other Federal agencies
prior to proposing a rule and during the comment process regarding
consistency with prudential, market, or systemic objectives
administered by such agencies . . . .'').
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The Bureau also consulted with Tribal governments regarding this
rulemaking pursuant to CFPA sections 1022(c)(7)(C) and
1024(b)(7)(D).\122\ In addition, the Bureau consulted with tribal
governments in accordance with applicable Bureau policy.\123\ In
developing this final rule, the Bureau considered the input of Tribal
governments, including concerns tribal governments expressed regarding
maintaining Tribal sovereignty.
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\122\ See 12 U.S.C. 5512(c)(7)(C), 5514(b)(7)(D) (requiring
consultation with ``State agencies''); see also 12 U.S.C. 5481(27)
(term ``State'' includes ``any federally recognized Indian tribe, as
defined by the Secretary of the Interior under'' 25 U.S.C. 5131(a)).
\123\ See Consumer Fin. Prot. Bureau, Policy for Consultation
with Tribal Governments, https://files.consumerfinance.gov/f/201304_cfpb_consultations.pdf.
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Each of the Bureau's outreach efforts is discussed in turn below.
B. Pre-Proposal Outreach
The Bureau received feedback from external stakeholders in
developing the
[[Page 56044]]
notice of proposed rulemaking. The following is a summary of that
effort.
1. State Agencies and Tribal Governments
As required by CFPA sections 1022(c)(7) and 1024(b)(7),\124\ the
Bureau consulted with State agencies and Tribal governments, including
agencies involved in supervision of nonbanks and agencies charged with
law enforcement, in crafting the proposed registration requirements and
registry. Among other meetings, the Bureau's consultation efforts
included presentations to State and Tribal governments on October 13,
October 20, October 27, November 3, November 10, November 17, and
November 21, 2022, explaining proposals then under consideration and
requesting feedback. In addition, on October 31, 2022, Bureau staff met
with State financial regulators and staff of the Conference of State
Bank Supervisors to discuss technical questions to better understand
whether and how the Bureau could combine or coordinate its proposed
registry with the NMLS.\125\ In developing its proposed rule, the
Bureau considered the input it received from State agencies and Tribal
governments. This input included concerns State agencies expressed
regarding possible duplication between any registration system the
Bureau might build and existing registration systems. This input also
included concerns Tribal governments expressed regarding maintaining
Tribal sovereignty.
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\124\ 12 U.S.C. 5512(c)(7)(C); 12 U.S.C. 5514(b)(7)(D).
\125\ In addition to the listed meetings, the Bureau
participated in other meetings with one or more representatives of
State financial regulators regarding the Bureau's proposed registry,
including meetings in August and September 2022.
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2. Federal Regulators
Before proposing a rule under the Federal consumer financial laws,
including CFPA sections 1022(c) and 1024(b), the Bureau must consult
with appropriate prudential regulators or other Federal agencies
regarding consistency with prudential, market, or systemic objectives
administered by such agencies.\126\ In developing this proposal, the
Bureau consulted with prudential regulators and other Federal agencies
and considered the input it received.
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\126\ 12 U.S.C. 5512(b)(2)(B).
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C. Notice of Proposed Rulemaking
On December 12, 2022, the Bureau issued its proposed rule to
establish a public registration system for nonbank covered persons
subject to certain agency and court orders. The proposal was published
in the Federal Register on January 30, 2023, and the public comment
period closed on March 31, 2023.\127\ The Bureau received more than 60
comments on the proposal during the comment period. Commenters included
individual consumers, consumer advocate commenters, tribes, the U.S.
Small Business Administration Office of Advocacy (SBA Office of
Advocacy), industry, and others, including a joint comment letter from
State regulators.
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\127\ 88 FR 6088 (Jan. 30, 2023).
---------------------------------------------------------------------------
In addition, the Bureau also received three ex parte
communications, one from a journalist commenter, one from a consumer
advocate commenter, and another from an industry commenter.\128\
Summaries of those ex parte communications are available on the public
docket for this rulemaking.\129\ The Bureau also received a joint
comment letter from Members of Congress related to the proposed rule,
which is also available on the public docket.
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\128\ See CFPB, Policy on Ex Parte Presentations in Rulemaking
Proceedings, 82 FR 18687 (Apr. 21, 2017).
\129\ See https://www.regulations.gov/docket/CFPB-2022-0080.
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Relevant information received via comment letters, as well as ex
parte submissions, is discussed above in part IV, as well as the
section-by-section analysis and subsequent parts of this document, as
applicable. The Bureau considered all comments it received regarding
the proposal, made certain modifications, and is adopting the final
rule set forth herein. Comments regarding the Bureau's impact analyses
are discussed in parts VIII and IX below.
D. Further Outreach
Before finalizing a proposed rule under the Federal consumer
financial laws, including CFPA sections 1022(c) and 1024(b), the Bureau
must consult with appropriate prudential regulators or other Federal
agencies regarding consistency with prudential, market, or systemic
objectives administered by such agencies.\130\ In developing this final
rule, the Bureau consulted with prudential regulators and other Federal
agencies and considered the input it received.
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\130\ 12 U.S.C. 5512(b)(2)(B).
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As required by CFPA sections 1022(c)(7) and 1024(b)(7),\131\ the
Bureau also consulted with State agencies and Tribal governments,
including agencies involved in supervision of nonbanks and agencies
charged with law enforcement, in crafting the registration requirements
and system.\132\ Among other meetings, the Bureau's consultation
efforts included presentations to State agencies and Tribal governments
on February 21, 22, and 23, 2024, explaining proposals then under
consideration and requesting feedback, as well as a meeting between
representatives of the Bureau and State agencies on April 18, 2024. In
developing the final rule, the Bureau considered the public comments it
received from tribes and via a joint comment letter from State
regulators, as well as the input it received from State agencies and
Tribal governments during the consultation process.
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\131\ 12 U.S.C. 5512(c)(7)(C); 12 U.S.C. 5514(b)(7)(D).
\132\ As explained above, during the rulemaking process for
issuing rules under the Federal consumer financial laws, Bureau
policy is to consult with appropriate Tribal governments. See
https://files.consumerfinance.gov/f/201304_cfpb_consultations.pdf.
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In interagency consultations, several consulting parties reasserted
issues that had been raised in the comment letters. Those comments are
addressed elsewhere in the applicable sections of this preamble.
Consistent with an approach suggested by commenters, including in a
joint comment letter submitted by a group of State regulators, the
Bureau is adopting a one-time registration option for nonbanks to
submit certain information about orders published on the NMLS Consumer
Access website (except for orders issued or obtained by the Bureau), in
lieu of complying with the other requirements of the rule with respect
to such orders.\133\
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\133\ See part IV(E) and the section-by-section discussion of
Sec. 1092.203 below.
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Consulting partners also raised certain additional issues that the
Bureau addresses in this section. During consultation, some consulting
parties expressed concerns with aspects of the final rule and stated
that they would not use the information collected by the Bureau and
potentially published as provided in the rule.\134\ However, other
consulting parties expressed general support for the Bureau's adoption
of the final rule, and confirmed to the Bureau during the interagency
consultation process that they would find the registry useful in
conducting their own operations.
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\134\ For further discussion regarding the final rule's approach
to authorizing publication of registry information by the Bureau,
including the ability of other agencies to use such information, see
part IV(F) and the section-by-section discussion of Sec. 1092.205
below.
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The Bureau satisfied all applicable statutory requirements with
respect to interagency consultations, including CFPA sections
1022(c)(7) and
[[Page 56045]]
1024(b)(7). As described in this section, the Bureau engaged in oral
and written discussions with State regulators as it developed the
proposal, during the notice-and-comment process, and before finalizing
the rule. Throughout the consultation process, it has solicited the
views of State regulators regarding the combination and coordination of
systems as well as other matters relating to both the proposal and the
final rule. Some consulting parties sought further engagement with the
Bureau on aspects of the rulemaking, which the Bureau granted.
The Bureau also offered the States an opportunity to give specific,
concrete feedback on the proposed registry, including providing
feedback regarding how that system might be combined or further
coordinated with other registration systems, as contemplated by CFPA
sections 1022(c)(7)(C) and 1024(b)(7)(D).
Certain consulting parties raised questions about the one-time
registration option for NMLS-published covered orders in Sec.
1092.203, stating that any final rule should strike reporting and
registration requirements for any violations of State consumer
financial laws, rules, and agency orders. As discussed in part IV(E)
above and the section-by-section discussion of Sec. 1092.203 below,
the Bureau concluded that the option provided under Sec. 1092.203 is
an appropriate means of furthering the purposes of the final rule,
including the final rule's provisions restricting the availability of
that option to ``NMLS-published covered orders'' as that term is
defined at Sec. 1092.201(k). For discussion of the application of the
final rule to State laws and orders, see the section-by-section
discussions of Sec. 1092.201(c) and (d) below.
Certain consulting parties urged the Bureau to exempt from its rule
any nonbank entity meeting the Small Business Administration's
definition of ``small business'' because, in the consulting parties'
view, the rule would be overly expansive and particularly burdensome
for small nonbank entities not subject to Bureau supervision. As
explained in parts VIII and IX below, however, the Bureau has
determined that the rule will not impose significant burdens on a
substantial number of small entities. The Bureau thus declines to
exempt all small businesses from the rule's requirements. As explained
below, however, entities with less than $5 million in annual receipts
resulting from offering or providing all consumer financial products
and services described in CFPA section 1024(a) \135\ are not subject to
the requirements imposed in Sec. 1092.204 of the rule.
---------------------------------------------------------------------------
\135\ 12 U.S.C. 5514(a).
---------------------------------------------------------------------------
One consulting party asserted that the final rule's treatment of
Tribal instrumentalities or entities wholly owned by tribes was
inconsistent with the treatment proposed by the Bureau in its 2023
proposed rule regarding registration of nonbanks that use certain terms
and conditions.\136\ The Bureau disagrees with the consulting party's
characterization of its other proposal. The present final rule does not
adopt a different or narrower approach to issues related to tribally
affiliated entities than the Bureau proposed in its other proposed
rule. That proposed rule, like the present final rule, did not propose
to exempt entities that are not part of the tribe itself from its
proposed registration requirements. As discussed further in the
section-by-section discussion of Sec. 1092.201(d) below, the Bureau
declines to provide an express exemption from the final rule for Tribal
instrumentalities or entities wholly owned by tribes because the Bureau
does not choose to use this rulemaking as the vehicle for determining
the circumstances under which tribally affiliated entities qualify as
part of the tribe itself. As discussed in the section-by-section
discussion of Sec. Sec. 1092.202(g) and 1092.204(f) below, the Bureau
believes that the voluntary good-faith filing option established in
those sections of the final rule provides a satisfactory mechanism for
tribally affiliated entities to avoid the risk of an enforcement action
where they decide not to register an order or submit a written
statement based on a good-faith belief that they are not a covered
nonbank or a supervised registered entity, such as on the grounds that
they qualify as part of a federally recognized tribe and thus as a
``State.''
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\136\ See Registry of Supervised Nonbanks That Use Form
Contracts To Impose Terms and Conditions That Seek To Waive or Limit
Consumer Legal Protections, 88 FR 6906, 6937-38 (Feb. 1, 2023).
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Consulting parties also expressed concerns, including
confidentiality and privacy concerns, regarding the notifications of
non-registration provided for in Sec. Sec. 1092.202(g) and 1092.204(f)
of the final rule. As discussed in the section-by-section discussion of
those sections below, the option to file notifications of non-
registration under these provisions is voluntary and does not impose
any mandatory process or other obligation on tribes or any other
persons. Nor would a decision not to file a voluntary good-faith
notification change or enlarge the coverage of the rule. Certain
consulting parties stated that the Bureau should adopt a more informal
mechanism for submitting such notifications, such as via electronic
mail or regular mail to a designated Bureau representative. The Bureau
does not believe that eliminating the voluntary option to file
notifications of non-registration via the nonbank registry under
Sec. Sec. 1092.202(g) and 1092.204(f), or soliciting separate
communications from persons that may wish to notify the Bureau of the
type of information that would be submitted to the Bureau under those
sections of the final rule, would improve the confidentiality or
privacy of those communications. Nor would such an informal approach
enhance the efficiency or effectiveness of the nonbank registry.
Instead, such an approach would add complexity to the process of
notifying the Bureau about issues relevant to the registry and thus
deter the submission of relevant information to the Bureau. The Bureau
concludes that a system-based approach to such matters will be more
efficient and effective in accomplishing the purposes of the final
rule. Nor is it clear that it would be less burdensome for either a
tribe or the Bureau to engage in such informal and ad hoc
communications than it would be for the tribe to submit a succinct
electronic notification of non-registration under Sec. Sec.
1092.202(g) and 1092.204(f) via the nonbank registry.
A consulting party stated that the Bureau should specify whether or
not, in what level of detail, and how the Bureau intends to make
registry information publicly available. For discussions addressing
these matters, see part IV(F) and the section-by-section discussion of
Sec. 1092.205(a) regarding the information the Bureau intends to
publish under Sec. 1092.205(a) of the final rule.
See the section-by-section discussion of Sec. Sec. 1092.201(d),
1092.202(g), and 1092.204(f) below for additional discussion of issues
related to tribes and the notifications of non-registration provided
for in the final rule.
VI. Section-by-Section Analysis
Part 1092
Subpart A--General
Section 1092.100 Authority and Purpose
Proposed Rule
Proposed Sec. 1092.100(a) would have set forth the legal authority
for proposed 12 CFR part 1092, including all subparts. Proposed Sec.
1092.100 would have referred to CFPA sections 1022(b)
[[Page 56046]]
and (c) and 1024(b),\137\ which were discussed in section III of the
proposal.
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\137\ 12 U.S.C. 5512(b), (c); 12 U.S.C. 5514(b).
---------------------------------------------------------------------------
Proposed Sec. 1092.100(b) would have explained that the purpose of
part 1092 is to prescribe rules regarding nonbank registration
requirements, to prescribe rules concerning the collection of
information from registered entities, and to provide for public release
of that information as appropriate.
Comments Received and Final Rule
The Bureau solicited comment on proposed Sec. 1092.100 and did not
receive any comments specifically regarding proposed Sec. 1092.100.
See part III above for a general discussion of several CFPA provisions
on which the Bureau relies in this rulemaking. The Bureau is finalizing
Sec. 1092.100 as proposed, with minor technical changes.
Section 1092.101 General Definitions
Section 1092.101(a)
Proposed Sec. 1092.101(a) would have defined the terms
``affiliate,'' ``consumer,'' ``consumer financial product or service,''
``covered person,'' ``Federal consumer financial law,'' ``insured
credit union,'' ``person,'' ``related person,'' ``service provider,''
and ``State'' as having the meanings set forth in the CFPA, 12 U.S.C.
5481. The Bureau solicited comment on this proposed provision and
received no comments. The Bureau is finalizing Sec. 1092.101(a) as
proposed.
Section 1092.101(b)
Proposed Sec. 1092.101(b) would have defined the term ``Bureau''
as a reference to the Consumer Financial Protection Bureau. The Bureau
solicited comment on this proposed definition and received no comments
on this proposed definition. The Bureau is finalizing Sec. 1092.101(b)
as proposed.
Section 1092.101(c)
Proposed Sec. 1092.101(c) would have clarified that the terms
``include,'' ``includes,'' and ``including'' throughout part 1092 would
denote non-exhaustive examples covered by the relevant provision.\138\
The Bureau solicited comment on proposed Sec. 1092.101(c). No
commenters addressed proposed Sec. 1092.101(c). The Bureau is
finalizing Sec. 1092.101(c) as proposed. As used in the final rule,
these terms should not be construed more restrictively than the
ordinary usage of such terms so as to exclude any other thing not
referred to or described.\139\
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\138\ See, e.g., Christopher v. SmithKline Beecham Corp., 567
U.S. 142, 162 (2012) (use of ``includes'' indicates that ``the
examples enumerated in the text are intended to be illustrative, not
exhaustive'').
\139\ See 12 U.S.C. 5301(18)(A) (similarly defining the term
``including'' for purposes of the Dodd-Frank Act by reference to 12
U.S.C. 1813).
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Section 1092.101(d)
Proposed Sec. 1092.101(d) would have defined the term ``nonbank
registration system'' to mean the Bureau's electronic registration
system identified and maintained by the Bureau for the purposes of part
1092. The Bureau solicited comment on this proposed definition and
received no comments on the proposed definition.
The Bureau is finalizing Sec. 1092.101(d) as proposed, with minor
revisions to change this term to ``nonbank registry,'' which as adopted
in the final rule means ``the Bureau's electronic registry identified
and maintained by the Bureau for the purposes of part 1092.'' The
Bureau is adopting the revised definition for stylistic reasons, with
no change in meaning from the term ``nonbank registration system'' that
was used in the proposed rule. The Bureau is also adopting
corresponding changes to the proposed rule to use the term ``nonbank
registry'' instead of the term ``nonbank registration system''
throughout the final rule, including at Sec. Sec. 1092.102(a) through
(c); 1092.201(a); 1092.202(b), (c), (f), (g); 1092.204(d), (f); and
1092.205(a), (c) of the final rule.
Section 1092.101(e)
Proposed Sec. 1092.101(e) would have defined the term ``nonbank
registration system implementation date'' to mean, for a given
requirement or subpart of part 1092, the date(s) determined by the
Bureau to commence the operations of the nonbank registration (NBR)
system in connection with that requirement or subpart. The Bureau
anticipated that the nonbank registration system implementation date
with respect to proposed subpart B would occur sometime after the
effective date of the final rule and no earlier than January 2024. The
Bureau explained that the actual nonbank registration system
implementation date would depend, in significant part, upon the
Bureau's ability to develop and launch the required technical systems
that would support the submission and review of applicable filings, and
on feedback provided by commenters regarding the time registrants would
need to implement proposed part 1092's requirements. The Bureau
proposed to provide advance public notice regarding the nonbank
registration system implementation date with respect to subpart B to
enable entities subject to subpart B to prepare and submit timely
filings to the NBR system. No comments addressed this proposal.
The Bureau is finalizing Sec. 1092.101(e) largely as proposed with
two revisions as follows.
First, for stylistic reasons, the Bureau is adopting a revision to
change this term to ``nonbank registry implementation date'' (without
any change in meaning). This revision corresponds with the Bureau's
adoption of the term ``nonbank registry'' in Sec. 1092.101(d) as
discussed above. The Bureau is also adopting corresponding changes to
the proposed rule to use the term ``nonbank registry implementation
date'' instead of the term ``nonbank registration system implementation
date'' throughout the final rule, including at Sec. Sec. 1092.202(b)
and 1092.204(a) of the final rule.
Second, the final rule provides that the definition of the term
``nonbank registry implementation date'' in Sec. 1092.101(e) means,
for a given requirement or subpart of part 1092, or a given person or
category of persons, the date(s) determined by the Bureau to commence
the operations of the nonbank registry in connection with that
requirement or subpart. Thus, the final rule clarifies that the nonbank
registry implementation date may be different for different persons or
categories of persons.
Also, in connection with this change, the Bureau is adopting a new
section of the final rule at Sec. 1092.206 that specifies the nonbank
registry implementation date in connection with the requirements of
subpart B for three different categories of covered persons subject to
the final rule. While the proposal would have provided for a separate
later determination by the Bureau of the ``nonbank registration system
implementation date,'' the Bureau concludes that specifying the nonbank
registry implementation date in the final rule will provide registrants
and the Bureau with more information and certainty regarding the timing
of the launch of the registry and the requirements imposed under the
final rule. Section 1092.206 of subpart B establishes different nonbank
registry implementation dates for covered nonbanks that are larger
participants in supervised markets, other supervised nonbanks, and
other covered nonbanks for registrations under subpart B. For further
information, see the section-by-section analysis of Sec. 1092.206
below.
[[Page 56047]]
Section 1092.102 Submission and Use of Registration Information
Section 1092.102(a) Filing Instructions
Proposed Rule
Proposed Sec. 1092.102(a) would have provided that the Bureau
shall specify the form and manner for electronic filings and
submissions to the NBR system that are required or made voluntarily
under part 1092. The Bureau explained that it would issue specific
guidance for filings and submissions. The Bureau anticipated that its
filing instructions may, among other things, specify information that
filers must submit to verify that they have authority to act on behalf
of the entities for which they are purporting to register. The Bureau
proposed to accept electronic filings and submissions to the NBR system
only and did not propose to accept paper filings or submissions.
Proposed Sec. 1092.102(a) also would have stated that the Bureau
may provide for extensions of deadlines or time periods prescribed by
the proposed rule for persons affected by declared disasters or other
emergency situations. The Bureau explained in the proposal that such
situations could include natural disasters such as hurricanes, fires,
or pandemics, and also could include other emergency situations or
undue hardships including technical problems involving the NBR system.
For example, the Bureau could defer deadlines during a presidentially
declared emergency or major disaster under the Robert T. Stafford
Disaster Relief and Emergency Assistance Act (42 U.S.C. 5121 et seq.)
or a presidentially declared pandemic-related national emergency under
the National Emergencies Act (50 U.S.C. 1601 et seq.). The Bureau
stated that it would issue guidance regarding such situations.
Comments Received and Final Rule
The Bureau did not receive comments specifically about proposed
Sec. 1092.102(a). The Bureau is finalizing Sec. 1092.102(a) as
proposed.\140\
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\140\ See the section-by-section discussion of Sec. 1092.101(d)
above regarding the Bureau's adoption of the revised term ``nonbank
registry.''
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Section 1092.102(b) Coordination or Combination of Systems
Proposed Rule
Proposed Sec. 1092.102(b) would have provided that in
administering the NBR system, the Bureau may rely on information a
person previously submitted to the NBR system under part 1092. This
proposed section would have clarified, for example, that the
registration process for proposed subpart B may take account of
information previously submitted, such as in a prior registration under
subpart B or, if applicable, a registration of nonbanks that use
certain terms and conditions and related information under subpart C.
Proposed Sec. 1092.102(b) also would have provided that in
administering the NBR system, the Bureau may coordinate or combine
systems in consultation with State agencies as described in CFPA
sections 1022(c)(7)(C) and 1024(b)(7)(D). Those statutory provisions
provide that the Bureau shall consult with State agencies regarding
requirements or systems (including coordinated or combined systems for
registration), where appropriate. The Bureau sought comment on the
types of coordinated or combined systems that would be appropriate and
the types of information that could be obtained from or provided to
State agencies.
Comments Received
In connection with proposed Sec. 1092.102(b), the Bureau sought
comment on the types of coordinated or combined systems that would be
appropriate under CFPA sections 1022(c)(7)(C) and 1024(b)(7)(D) and the
types of information that could be obtained from or provided to State
agencies. For a discussion of certain comments related to this topic,
and the Bureau's response thereto, see the section-by-section
discussion of Sec. 1092.203.
A consumer advocate commenter agreed that the Bureau, in
administering the NBR system, should rely on information an entity
previously submitted to the registry under part 1092 and coordinate or
combine systems with State agencies, as provided in proposed Sec.
1092.102(b). The commenter stated that not only would this provision
allow for more efficient implementation of the registry by avoiding
duplicative or redundant efforts but would also reflect the importance
of this registry to both Federal and State regulators, and that the
Bureau should consider coordination with existing State consumer
financial protection agencies.
Response to Comments Received
As required by CFPA sections 1022(c)(7)(C) and 1024(b)(7)(D) and
described in part V, the Bureau has consulted with State agencies on
requirements and systems related to the nonbank registry. The Bureau
also intends to continue to consult with State agencies in implementing
the nonbank registry. Under Sec. 1092.203, with respect to any NMLS-
published covered order, a covered nonbank that is identified by name
as a party subject to the order may elect to comply with the one-time
registration option described in that section in lieu of complying with
the requirements of Sec. Sec. 1092.202 and 1092.204. As discussed in
the section-by-section discussion of Sec. 1092.203, the Bureau is
adopting this option partly in recognition of the statutory mandates to
consult with State agencies regarding combined or coordinated systems
for registration in CFPA sections 1022(c)(7)(C) and 1024(b)(7)(D).
Final Rule
For the reasons discussed above, the Bureau is finalizing Sec.
1092.102(b) as proposed.\141\
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\141\ See the section-by-section discussion of Sec. 1092.101(d)
above regarding the Bureau's adoption of the revised term ``nonbank
registry.''
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Section 1092.102(c) Bureau Use of Information
Proposed Rule
Proposed Sec. 1092.102(c) would have provided that the Bureau may
use the information submitted to the NBR system under this part to
support its objectives and functions, including in determining when to
exercise its authority under CFPA section 1024 to conduct examinations
and when to exercise its enforcement powers under subtitle E of the
CFPA.
The Bureau proposed to establish the NBR system under its
registration and market-monitoring rulemaking authorities under CFPA
section 1022(b)(1), (c)(1)-(4) and (c)(7), and under its supervisory
rulemaking authorities under CFPA section 1024(b)(7)(A), (B), and (C).
The Bureau explained in its proposal that it intended to use the
information submitted under the NBR system to monitor for risks to
consumers in the offering or provision of consumer financial products
or services, and to support all of its functions as appropriate,
including its supervisory, rulemaking, enforcement, and other
functions. The Bureau stated that it may, among other things, rely on
the information submitted under part 1092 as it considers whether to
initiate supervisory activity at a particular entity, in determining
the frequency and nature of its supervisory activity with respect to
particular entities or markets, in prioritizing and scoping its
supervisory, examination, and enforcement activities, and otherwise in
assessing and detecting risks to consumers. In particular, the Bureau
[[Page 56048]]
explained that it could consider this information in developing its
risk-based supervision program and in assessing the risks posed to
consumers in relevant product markets and geographic markets and the
factors described in 12 U.S.C. 5514(b)(2) with respect to particular
covered persons, and for enforcement purposes.\142\
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\142\ See, e.g., 12 U.S.C. 5514(b)(2)(C), (D), (E) (providing
that in prioritizing examinations the Bureau shall consider ``the
risks to consumers created by the provision of such consumer
financial products or services,'' ``the extent to which such
institutions are subject to oversight by State authorities for
consumer protection,'' and ``any other factors that the Bureau
determines to be relevant to a class of covered persons''); see
also, e.g., 12 U.S.C. 5565(c)(3)(D), (E) (providing that in
determining the amount of civil money penalties the Bureau shall
consider ``the history of previous violations'' and ``such other
matters as justice shall require'').
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Proposed Sec. 1092.102(c) also would have provided that part 1092,
and registration under that part, would not alter any applicable
process whereby a person may dispute that it qualifies as a person
subject to Bureau authority. As an example of such a process, the
Bureau cited in the proposal 12 CFR 1090.103, which establishes a
Bureau administrative process for assessing a person's status as a
larger participant under CFPA section 1024(a)(1)(B) and (2) and 12 CFR
part 1090. The Bureau explained that, under proposed Sec. 1092.102(c),
a person could dispute its status as a larger participant under 12 CFR
1090.103 notwithstanding any registration or information submitted to
the NBR system under part 1092. Submission of such a dispute regarding
larger participant status to the Bureau under 12 CFR 1090.103,
including the Bureau's processes regarding the treatment of such
disputes and the effect of any determinations regarding the person's
supervised status, would be governed by the provisions of 12 CFR part
1090. The Bureau explained that it could use the information provided
to the NBR system in connection with making any determination regarding
a person's supervised status under 12 CFR 1090.103, along with the
affidavit submitted by the person and other information as provided in
that section. However, the submission of information to the NBR system
would not have prevented a person from also submitting other
information under 12 CFR 1090.103.
Comments Received and Final Rule
The Bureau received no comments on proposed Sec. 1092.102(c) and
is finalizing it as proposed.\143\
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\143\ See the section-by-section discussion of Sec. 1092.101(d)
above regarding the Bureau's adoption of the revised term ``nonbank
registry.''
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Section 1092.102(d) Calculation of Time Periods
The Bureau is finalizing Sec. 1092.102(d), which the Bureau did
not propose, to clarify how dates and time periods prescribed in part
1092 are calculated.
In calculating dates and time periods, the day of the event that
triggers the time period is excluded. Every day, including intermediate
Saturdays, Sundays, and Federal holidays, is included. If any provision
of part 1092 would establish a deadline for an action that is a
Saturday, Sunday, or Federal holiday, the deadline is extended to the
next day that is not a Saturday, Sunday, or Federal holiday. The
clarifications for calculation of dates and time periods apply to all
such calculations in subpart B.
Section 1092.103 Severability
Proposed Rule
Proposed Sec. 1092.103 would have provided that the provisions of
the proposed rule are separate and severable from one another, and that
if any provision is stayed or determined to be invalid, the remaining
provisions shall continue in effect. As the Bureau stated in the
proposal, this is a standard severability clause of the kind that is
included in many regulations to clearly express agency intent about the
course that is preferred if such events were to occur. The Bureau
explained that it carefully considered the requirements of the proposed
rule, both individually and in their totality, including their
potential costs and benefits to covered persons and consumers. The
Bureau further explained that in the event a court were to stay or
invalidate one or more provisions of the proposed rule as finalized,
the Bureau would have wanted the remaining portions of the rule as
finalized to remain in full force and legal effect.
Comments Received and Final Rule
The Bureau received no comments on proposed Sec. 1092.103. It is
finalizing proposed Sec. 1092.103 with revisions to clarify that
applications of provisions are also severable. The Bureau has carefully
considered the requirements of the final rule, both individually and in
their totality, including their potential costs and benefits to covered
persons and consumers. The Bureau intends that, if any provision of
this rule, 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.
Subpart B--Registry of Nonbank Covered Persons Subject to Certain
Agency and Court Orders
Section 1092.200 Scope and Purpose
Proposed Rule
Proposed Sec. 1092.200(a) and (b) would have described the scope
and purpose of proposed subpart B. Proposed subpart B would have
required nonbank covered persons that are subject to certain public
agency and court orders enforcing the law to register with the Bureau
and to submit copies of the orders to the Bureau. It also would have
described the registration information the Bureau would make publicly
available. Proposed Sec. 1092.200(a) also explained that subpart B
would have required certain nonbank covered persons that are supervised
by the Bureau to prepare and submit an annual written statement. The
requirements regarding annual written statements were described in
proposed Sec. 1092.203.
Proposed Sec. 1092.200(b) would have explained that the purposes
of the information collection requirements in proposed subpart B were
to support Bureau functions by monitoring for risks to consumers in the
offering or provision of consumer financial products or services,
including developments in markets for such products or services,
pursuant to CFPA section 1022(c)(1); to prescribe rules regarding
registration requirements applicable to nonbank covered persons,
pursuant to CFPA section 1022(c)(7); and to facilitate the supervision
of persons described in CFPA section 1024(a)(1), to ensure that such
persons are legitimate entities and are able to perform their
obligations to consumers, and to assess and detect risks to consumers,
pursuant to CFPA section 1024(b).
Comments Received and Final Rule
Comments addressing CFPA section 1024(b)(3) and (4) \144\ are
addressed in the section-by-section discussion of Sec.
1092.202(b).\145\ The Bureau received no other comments specifically
addressing proposed Sec. 1092.200.
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\144\ 12 U.S.C. 5514(b)(3), (4).
\145\ See also the section-by-section discussion of Sec. Sec.
1092.201(e) and 1092.203(a) below.
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The Bureau is finalizing Sec. 1092.200(a) and (b) as proposed,
with a revision to reflect the Bureau's adoption of a revised Sec.
1092.205(a) that provides that the Bureau ``may'' publish the
information submitted to the nonbank registry pursuant to Sec. Sec.
1092.202 and 1092.203.
[[Page 56049]]
Section 1092.201 Definitions
In its proposal, the Bureau sought comment on various definitions
set forth in proposed subpart B and any suggested clarifications,
modifications, or alternatives.
The Bureau is finalizing a number of definitions for terms used in
subpart B in Sec. 1092.201. These definitions are each discussed in
detail below. These definitions supplement the general definitions for
the entirety of part 1092 provided in Sec. 1092.101.
Section 1092.201(a) Administrative Information
Proposed Rule
Proposed Sec. 1092.201(a) would have defined the term
``administrative information'' to mean contact information regarding
persons subject to subpart B and other information submitted or
collected to facilitate the administration of the NBR system. The
Bureau explained that administrative information would have included
information such as date and time stamps of submissions to the NBR
system, contact information for nonbank personnel involved in making
submissions, filer questions and other communications regarding
submissions and submission procedures, reconciliation or correction of
errors, information submitted under proposed Sec. Sec. 1092.202(g) and
1092.203(f),\146\ and other information that would be submitted or
collected to facilitate the administration of the NBR system. Proposed
Sec. 1092.204(a) would have provided that the Bureau may determine not
to publish such administrative information. The Bureau sought comment
on whether any other information that might be collected through the
NBR system should also be treated as administrative information.
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\146\ See discussion in the section-by-section discussion of
these provisions below.
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Comments Received
A trade association commenter stated that the proposal's definition
of ``administrative information'' was unclear and thus could include a
limitless breadth of information. As a result, the commenter argued,
the proposal's estimate of the rule's burden was inaccurate. In
particular, the commenter stated that entities would need to hire
outside legal counsel in order to determine what constitutes
``administrative information.''
Several Tribal commenters commented that good-faith notifications
to the Bureau under proposed Sec. Sec. 1092.202(g) and 1092.204(f)
should not be published, as publishing such notifications would invite
debate and disagreement on the issues addressed in those notifications,
require the utilization of limited Tribal resources to support the
tribe's position, and invite frivolous litigation.
Comments addressing the publication of information more generally
are addressed in the section-by-section discussion of Sec. 1092.205
below.
Response to Comments Received
The Tribal commenters expressed concern regarding publication of
information with respect to good faith notifications submitted under
proposed Sec. Sec. 1092.202(g) and 1092.204(f). Under the final rule,
the Bureau will not publish under Sec. 1092.205(a) the administrative
information collected under subpart B; for a discussion of this issue
see the section-by-section discussion of Sec. 1092.205 below. In
addition, in the final rule, the Bureau has codified in the text of
Sec. 1092.201(a) its proposal to treat good faith notifications
submitted under Sec. Sec. 1092.202(g) and 1092.204(f) as
``administrative information.'' Thus, under the final rule, the Bureau
will not publish the good faith notification information described in
Sec. 1092.201(a) under Sec. 1092.205.
As discussed in the section-by-section discussion of Sec.
1092.202(d) below, the Bureau is finalizing Sec. 1092.202(d)(2)
without proposed Sec. 1092.202(d)(2)(v), under which the Bureau would
have collected and published the names of a registered entity's
affiliates registered under subpart B with respect to the same covered
order. Under the final rule, however, the Bureau may still collect such
information under Sec. 1092.202(c), which provides for the collection
of ``administrative information.'' Should the Bureau determine to
collect such information regarding affiliates, the Bureau's filing
instructions under Sec. 1092.102(a) will categorize this information
as ``administrative information,'' meaning that the Bureau will not
publish the information under Sec. 1092.205. For more information, see
the section-by-section discussions of Sec. Sec. 1092.202(d) and
1092.205(a) below.
The trade association commenter expresses concern that it will not
be clear to covered nonbanks what ``administrative information'' they
are required to submit under the rule. That comment, however, ignores
that Sec. 1092.202(c) only requires registered entities to submit the
specific ``administrative information'' that is ``required by'' the
nonbank registry, and the Bureau has made clear that it will ``specify
the types of . . . administrative information registered entities would
be required to submit'' in ``filing instructions . . . issue[d] under .
. . Sec. 1092.102(a).'' \147\ Therefore, covered nonbanks should have
no need to hire outside legal counsel to ascertain what information
qualifies as ``administrative information'' required to be submitted
under the rule. Instead, the Bureau's filing instructions will specify
what categories of information covered nonbanks must submit as
``administrative information.''
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\147\ 88 FR 6088 at 6118.
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Further reducing potential uncertainty, the Bureau has identified
certain categories of information that it currently intends to
categorize as ``administrative information'' in its filing
instructions--e.g., ``contact information for nonbank personnel
involved in making submissions.'' \148\ And, as discussed above, the
Bureau is also finalizing the definition to expressly treat as
``administrative information'' good faith notification information
submitted under Sec. Sec. 1092.202(g) and 1092.204(f). Under Sec.
1092.201(a), any new categories of administrative information that the
Bureau might address in its filing instructions, and which were not
already discussed in the Bureau's notice of proposed rulemaking and
this preamble, would include only contact information regarding persons
subject to subpart B or other information submitted or collected to
facilitate the administration of the nonbank registry. For example, the
Bureau may require entities to comply with a login or identity-
authentication process, and the Bureau may categorize information
submitted in connection with such a process as ``administrative
information.'' \149\ Submitting required administrative information
should not impose significant substantive burdens on covered nonbanks.
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\148\ 88 FR 6088 at 6104.
\149\ The Bureau has retained the discretion to adjust the
contents of required administrative information through filing
instructions in order to maintain the viability of the nonbank
registry over time. For example, if some new form of electronic
communication were to replace email as the preferred method for
business communications, the Bureau's filing instructions might
designate as required administrative information contact information
associated with that new medium.
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Final Rule
For the reasons discussed above and as follows, the Bureau is
finalizing Sec. 1092.201(a) as proposed, with a revision to expressly
include ``[i]nformation submitted under Sec. Sec. 1092.202(g) and
1092.203(f)'' within the definition of ``administrative
[[Page 56050]]
information.'' \150\ The Bureau's filing instructions under Sec.
1092.102(a) will also categorize this information as ``administrative
information.'' The Bureau has already identified this information as
information that it intended to categorize as ``administrative
information'' in its filing instructions,\151\ but is finalizing this
provision in the text of the regulation to provide further clarity that
the Bureau will treat this information as ``administrative
information.'' In addition to the notifications themselves, the Bureau
may also choose to collect information to facilitate the administration
of the notification process.
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\150\ See also the section-by-section discussion of Sec.
1092.101(d) above regarding the Bureau's adoption of the revised
term ``nonbank registry.''
\151\ 88 FR 6088 at 6104.
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In addition, the Bureau does not intend to publish under Sec.
1092.205(a) any Federal employer identification numbers (EIN) that may
be obtained from covered nonbanks. The Bureau will not collect this
information from covered nonbanks as ``identifying information,'' as
that term is defined at Sec. 1092.201(g), but may determine to collect
this information as ``administrative information'' under Sec.
1092.202(c). In filing instructions issued under Sec. 1092.102(a), the
Bureau will specify whether and how it will collect such information.
The Bureau understands that EINs are not commonly used to identify
covered nonbanks in covered orders and in related public databases that
are maintained by relevant Federal, State, and local agencies. Thus, as
with other administrative information, the publication of EINs may not
in all instances be especially useful to external users of the
registry, although the Bureau may find such information useful in its
administration of the nonbank registry.
Section 1092.201(b) Attesting Executive
Proposed Rule
Proposed Sec. 1092.201(b) would have defined the term ``attesting
executive'' to mean, with respect to any covered order regarding a
supervised registered entity, the individual designated by the
supervised registered entity to perform the supervised registered
entity's duties with respect to the covered order under proposed Sec.
1092.203. In the section-by-section discussion of proposed Sec.
1092.203, the Bureau proposed requirements regarding attesting
executives.
Comments Received and Final Rule
The Bureau did not receive any comments specifically regarding
proposed Sec. 1092.201(b)'s definition of ``attesting executive.''
Comments addressing the proposal's approach to the written statement,
including requirements regarding designation of attesting executives
and associated criteria for such a designation, are addressed in the
section-by-section discussion of Sec. 1092.204 below.
The Bureau is finalizing Sec. 1092.201(b) as proposed, with a
revision to reflect the renumbering of Sec. 1092.204 in the final
rule.
Section 1092.201(c) Covered Law
Proposed Rule
Proposed Sec. 1092.201(c) would have defined the term ``covered
law'' to mean one of several types of laws, as described. The proposed
term ``covered law'' would have been central to defining which orders
and portions of orders would be subject to the requirements of proposed
subpart B. Proposed Sec. 1092.201(e) would have defined the term
covered order to include certain orders that impose certain obligations
on a covered nonbank based on an alleged violation of a covered law.
Thus, the proposed term ``covered law'' would have helped determine the
application of proposed subpart B's registration requirements.
Under the proposal, a law listed in proposed Sec. 1092.201(c)(1)
through (6) would have qualified as a covered law only to the extent
that the violation of law found or alleged arose out of conduct in
connection with the offering or provision of a consumer financial
product or service. The Bureau was interested in registering orders
that relate to offering or providing consumer financial products or
services. The Bureau recognized that the laws listed in proposed Sec.
1092.201(d)(1) through (6) may apply to a wide range of conduct not
involving consumer financial products or services. While the Bureau
believed that reporting on such violations could still be probative of
risks to consumers in the markets for consumer financial products and
services--as misconduct in one line of business is not necessarily
cabined to that line of business--the Bureau believed that a more
limited definition of covered law would strike the right balance
between ensuring that the Bureau remains adequately informed of risks
to consumers in the offering or provision of consumer financial
products and services and minimizing the potential burden of the
reporting requirements on nonbank covered persons.
The proposal listed categories of laws that would have constituted
``covered laws'' to the extent that the violation of law found or
alleged arose out of conduct in connection with the offering or
provision of a consumer financial product or service. For the reasons
discussed in section V(C) of the proposal, the Bureau believed that
orders issued under the types of covered laws described in the proposal
are likely to be probative of risks to consumers in the offering or
provision of consumer financial products or services, including
developments in markets for such products or services.
First, proposed Sec. 1092.201(c)(1) would have defined the term
``covered law'' to include a Federal consumer financial law, as that
term was defined in proposed Sec. 1092.101(a) and the CFPA.\152\ The
Bureau explained that it is charged with administering, interpreting,
and enforcing the Federal consumer financial laws, which include the
CFPA itself, 18 enumerated consumer laws (such as the Fair Credit
Reporting Act and the Truth in Lending Act),\153\ and the laws for
which authorities were transferred to the Bureau under subtitles F and
H of the CFPA, as well as rules and orders issued by the Bureau under
any of these laws.\154\
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\152\ See 12 U.S.C. 5481(14).
\153\ See 12 U.S.C. 5481(12).
\154\ 12 U.S.C. 5481(14).
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The Bureau believed that requiring registration of covered nonbanks
in connection with certain orders issued under Federal consumer
financial laws would further the purposes of proposed subpart B. As the
Bureau discussed in section IV of the proposal, ``to support [the
Bureau's] rulemaking and other functions,'' Congress mandated that the
Bureau ``shall monitor for risks to consumers in the offering or
provision of consumer financial products or services, including
developments in markets for such products or services.'' \155\ The
Bureau noted that, in matters where an agency other than the Bureau has
issued or obtained a final public order concluding that an entity has
violated Federal consumer financial law in connection with the offering
or provision of a consumer financial product or service, the Bureau
will generally have jurisdiction over the conduct that resulted in that
order. The Bureau explained that it therefore has a clear interest in
identifying and understanding the nature of the risks to consumers
presented by such conduct,
[[Page 56051]]
including the risk that the conduct continues outside the particular
jurisdiction or in connection with other consumer financial products or
services that are offered or provided by the covered nonbank. A pattern
of similar alleged or found violations of Federal consumer financial
law across multiple nonbank covered persons may indicate a problem that
the Bureau can best address by engaging in rulemaking to clarify or
expand available consumer protection to address emerging consumer risk
trends, or by using other tools, such as consumer education, to address
the identified risks. And, depending on the facts and circumstances,
the Bureau may consider bringing its own supervisory or enforcement
action in connection with the same or related conduct.\156\ Thus, the
Bureau believed that violations of the Federal consumer financial laws,
and especially repeat violations of such laws, may be probative of
risks to consumers and may indicate more systemic problems at an entity
or in the relevant market related to the offering or provision of
consumer financial products or services.
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\155\ 12 U.S.C. 5512(c)(1).
\156\ The Bureau also proposed to require registration of orders
that the Bureau has obtained or issued for violations of Federal
consumer financial laws. In the proposal, the Bureau explained that,
while it is of course aware of such orders, collecting all orders
for violations of covered laws--including those obtained or issued
by the Bureau--within the proposed registry would benefit the
Bureau, other regulators, and the general public by providing a
single point of reference for such orders. The Bureau explained that
it would also benefit from receiving the written statements required
under proposed Sec. 1092.203 with respect to orders it obtains or
issues.
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Second, proposed Sec. 1092.201(c)(2) would have defined the term
``covered law'' to include any other law as to which the Bureau may
exercise enforcement authority. As explained in section IV(C) of the
proposal, the Bureau may enforce certain laws other than Federal
consumer financial laws, such as the Military Lending Act.\157\
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\157\ 10 U.S.C. 987(f)(6) (authorizing Bureau enforcement of the
Military Lending Act).
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The Bureau believed that the proposed registry should collect
information regarding agency and court orders issued under any law that
the Bureau may enforce, where the violation of law found or alleged
arises out of conduct in connection with the offering or provision of a
consumer financial product or service. By definition, the conduct
addressed in such orders would generally fall within the scope of the
Bureau's enforcement authority. More generally, the Bureau noted that
in its experience, evidence of such conduct could be highly probative
of a broader risk that the entity has engaged or will engage in conduct
that may violate Federal consumer financial laws. For example,
violations of the Military Lending Act may overlap with, or be closely
associated with, violations of the CFPA's UDAAP prohibitions \158\ or
the Truth in Lending Act,\159\ among other Federal consumer financial
laws. In addition, the Bureau noted that a violation of one law within
the Bureau's enforcement authority may be indicative of broader
inadequacies in an entity's compliance systems that are resulting in or
could result in other legal violations, including violations of Federal
consumer financial laws. Furthermore, the Bureau believed that
including in the registry orders issued under any law that the Bureau
may enforce (where the violation of law found or alleged arises out of
conduct in connection with the offering or provision of a consumer
financial product or service) would further the Bureau's objective of
creating a registry that could serve as a single, consolidated
reference tool for use in monitoring for risks to consumers, thereby
increasing the Bureau's ability to use the registry to monitor for
patterns of risky conduct of nonbank covered persons across entities,
industries, and product offerings.
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\158\ 15 U.S.C. 5531, 5536(a)(1)(B).
\159\ 15 U.S.C. 1601 et seq.
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Third, proposed Sec. 1092.201(c)(3) would have defined the term
``covered law'' to include the prohibition of unfair or deceptive acts
or practices under section 5 of the FTC Act, 15 U.S.C. 45, or any rule
or order issued for the purpose of implementing that prohibition. The
proposal would not have included within the definition of ``covered
law'' FTC Act section 5's prohibition of ``[u]nfair methods of
competition in or affecting commerce,'' or rules or orders issued
solely pursuant to that prohibition.\160\ The Bureau explained that it
expected that entities would be aware in any specific case whether a
provision of an applicable order has been issued under FTC Act section
5's prohibition of unfair or deceptive acts or practices (or a rule or
order issued for the purpose of implementing that prohibition), as
opposed to section 5's prohibition of ``[u]nfair methods of competition
in or affecting commerce'' (or a rule or order issued thereunder), and
thus whether the order provision was issued under a ``covered law'' or
not. The Bureau understood that orders issued in connection with
violations of FTC Act section 5 routinely distinguish between these two
authorities, and that orders issued under FTC Act section 5's
prohibition of ``[u]nfair methods of competition in or affecting
commerce'' rarely, if ever, relate to UDAP violations involving the
offering or provision of a consumer financial product or service.
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\160\ 15 U.S.C. 45(a)(1).
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As discussed further in section IV(C) of the proposal, the Bureau
believed that an order issued under FTC Act section 5's prohibition of
unfair or deceptive acts or practices may be probative of violations of
Federal consumer financial law, including CFPA sections 1031 and
1036(a)(1)(B).\161\ Because the CFPA's prohibition of unfair or
deceptive acts or practices is modeled after FTC Act section 5's
similar prohibition,\162\ conduct in connection with the offering or
provision of a consumer financial product or service that constitutes a
UDAP violation under FTC Act section 5 also likely violates the CFPA's
UDAAP provisions. The Bureau also believed that FTC Act section 5
unfairness and deception violations related to the offering or
provision of consumer financial products or services may indicate more
systemic problems at an entity that may impact the offering or
provision of consumer financial products or services other than those
issues specifically identified in the order. The Bureau noted that it
would need to know about such findings so that it can assess whether
the violation is indicative of a larger and potentially more systemic
problem at the covered nonbank, or potentially throughout an entire
market. And, the Bureau explained, information about such violations
would inform the Bureau's exercise of its various rulemaking,
supervisory, enforcement, consumer education, and other functions.
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\161\ 12 U.S.C. 5531, 5536(a)(1)(B).
\162\ See, e.g., Consumer Fin. Prot. Bureau v. ITT Educ. Servs.,
219 F. Supp. 3d at 902-04.
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``Covered law'' under the proposal would have included not only FTC
Act section 5, but also any rules or orders issued for the purpose of
implementing FTC Act section 5's UDAP prohibition.\163\ Section 18 of
the FTC Act, 15 U.S.C. 57a, authorizes the FTC to prescribe ``rules
which define with specificity acts or practices which are unfair or
deceptive acts or practices in or affecting commerce'' within the
meaning of FTC Act section 5(a)(1).\164\ These FTC rules, which are
known as ``trade regulation rules,'' would have been covered laws under
the proposed
[[Page 56052]]
definition to the extent the conduct found or alleged to violate such
rules relates to the offering or provision of a consumer financial
product or service. Violations of these rules generally constitute
violations of FTC Act section 5 itself.\165\ And the Bureau believed
that, like violations of FTC Act section 5 itself, violations of the
rules issued under FTC Act section 5, where they arise out of conduct
in connection with the offering or provision of consumer financial
products or services, would likely be probative of risks to consumers
and warrant attention by the Bureau.
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\163\ In certain circumstances, the Bureau may enforce a rule
prescribed under the FTC Act by the FTC with respect to an unfair or
deceptive act or practice. See 12 U.S.C. 5581(b)(5)(B)(ii). Such an
FTC rule, where issued by the FTC to implement FTC Act section 5,
would be a covered law under the proposed definition.
\164\ 15 U.S.C. 57a(a)(1)(B).
\165\ 15 U.S.C. 57a(d)(3) (``When any rule under subsection
(a)(1)(B) takes effect a subsequent violation thereof shall
constitute an unfair or deceptive act or practice in violation of
section 45(a)(1) of this title, unless the Commission otherwise
expressly provides in such rule.'').
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The proposed definition of ``covered law'' would also have included
orders issued by the FTC itself under FTC Act section 5's UDAP
prohibition, as well as by other agencies. The Bureau believed that
violations of such orders present similar risks to consumers as those
presented by violations of FTC Act section 5 and the rules issued
thereunder.
Fourth, proposed Sec. 1092.201(c)(4) would have defined the term
``covered law'' to include a State law prohibiting unfair, deceptive,
or abusive acts or practices that is identified in appendix A to part
1092. Proposed appendix A provided a list of State statutes that
prohibit unfair, deceptive, or abusive acts or practices and that the
Bureau had reviewed and proposed to define as a covered law under this
provision. As with the other laws described in proposed Sec.
1092.201(c), a State UDAAP law would only have qualified as a covered
law to the extent the conduct found or alleged to violate the State
UDAAP law relates to the offering or provision of a consumer financial
product or service. The Bureau reviewed the State statutes identified
in proposed appendix A, and as explained below, it believed that
requiring registration of covered nonbanks that are subject to covered
orders issued under such statutes would likely further the purposes of
proposed subpart B.
Proposed appendix A included State laws of general applicability
that prohibit unfair, deceptive, or abusive acts or practices and that
might apply to the offering or provision of consumer financial products
or services. Although the scope and content of these State laws may
vary at the margin, the Bureau explained that it believed these
statutes cover a core concept of unfairness, deception, or abusiveness
that makes violations of them likely probative of risks to consumers in
the offering or provision of consumer financial products and services.
These statutes may commonly be referred to as ``UDAP'' or ``UDAAP''
statutes, or ``little FTC Acts,'' and are often labeled in State
statutes as State ``consumer protection acts'' or as laws addressing
``unfair'' or ``deceptive'' ``trade practices.'' State or local
agencies may use these statutes to bring cases or actions with respect
to practices that injure consumers. While these State statutes may also
authorize private suits by consumers and other persons, the proposal
would have only required registration with respect to covered orders
issued at least in part in any action or proceeding brought by any
Federal agency, State agency, or local agency (as described further
below in the section-by-section discussion of Sec.
1092.201(e)(1)(ii)).
The Bureau proposed to list these statutes in appendix A, and thus
to include them in the proposed rule's definition of covered law, in
part because these statutes are generally analogous to CFPA sections
1031 and 1036(a)(1)(B) and FTC Act section 5.\166\ Several of these
State statutes specifically provide that ``it is the intent of the
legislature that in construing [the State statute], the courts will be
guided by the interpretations given by the Federal Trade Commission and
the Federal courts to section 5(a)(1) of the Federal Trade Commission
Act,'' or words to this effect.\167\ The Bureau noted that obtaining a
better understanding of entities' compliance with State UDAP/UDAAP laws
would assist the Bureau in the assessment and detection of risks for
the same general reasons described with respect to alleged or found
violations of FTC Act section 5. The Bureau believed that entities that
have violated one of these State statutes, and especially repeat
violators of such statutes, may pose heightened risks to consumers in
the offering or provision of consumer financial products and services,
including the risk that they have engaged, and may continue to engage,
in unfair, deceptive, or abusive acts and practices in violation of
CFPA section 1031. The Bureau also explained that information
identifying patterns of such risky conduct across entities, industries,
product offerings, or jurisdictions would be highly informative to the
Bureau's monitoring work. The Bureau attempted to identify all of the
applicable State UDAP/UDAAP statutes of general applicability in
appendix A of the proposal but requested comment on whether it had
comprehensively done so. The Bureau proposed to include in appendix A
all such State statutes and sought comment on any additions,
subtractions, or modifications to the State UDAP/UDAAP statutes of
general applicability in appendix A.
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\166\ 12 U.S.C. 5531, 5536(a)(1)(B); 15 U.S.C. 45.
\167\ E.g., Mass. Gen. Laws ch. 93A, sec. 2(b); Conn. Gen. Stat.
sec. 42-110b(b).
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The Bureau also proposed to include in appendix A, and thus to
include in the definition of the term covered law, certain other
industry-specific State statutes that prevent unfair, deceptive, or
abusive conduct in connection with certain specific consumer financial
industries or markets. For example, proposed appendix A included New
York Banking Law section 719(2), regarding prohibited practices by
student loan servicers. This State statutory provision prohibits
``[e]ngag[ing] in any unfair, deceptive or predatory act or practice
toward any person or misrepresent[ing] or omit[ting] any material
information in connection with the servicing of a student loan.'' \168\
The Bureau proposed to include this New York State law and others like
it in appendix A, to the extent that the conduct found or alleged to
violate such law relates to the offering or provision of a consumer
financial product or service.
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\168\ New York Banking Law sec. 719(2).
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As with State UDAP/UDAAP laws of general applicability, the Bureau
believed that violation of such industry-specific State statutes that
prohibit unfair, deceptive, or abusive acts or practices in connection
with consumer financial industries or markets and in connection with
the offering or provision of consumer financial products or services
would be probative of potential violations of CFPA sections 1031 and
1036, and also of other related risks to consumers within the scope of
the Bureau's jurisdiction. The Bureau believed that omitting these
industry-specific statutes from the definition of ``covered law'' may
cause the information submitted to the proposed registry to be
incomplete. Among other things, the Bureau understood that many State
agencies typically rely upon such industry-specific statutes to enforce
prohibitions on conduct by covered nonbanks that is similar to that
prohibited under UDAP/UDAAP laws of general applicability. Thus, the
Bureau believed registration of orders issued under such State statutes
would provide information that is probative of the types of risks the
Bureau believed to be associated with orders issued under State UDAP/
UDAAP laws of general applicability. The Bureau attempted to
[[Page 56053]]
identify applicable State UDAP/UDAAP statutes related to applicable
consumer financial industries or markets in proposed appendix A but
requested comment on whether it had comprehensively done so. The Bureau
proposed to include in appendix A all such State statutes.
The Bureau proposed to require registration of all orders issued
under State laws listed in appendix A, as long as the conduct at issue
related to the offering or provision of a consumer financial product or
service, and the order satisfied the definition of ``covered order'' in
proposed Sec. 1092.201(e). The Bureau recognized that some State UDAP/
UDAAP statutes listed in appendix A may prohibit conduct that regulated
entities might argue is not prohibited under CFPA sections 1031 and
1036(a)(1)(B). For example, State UDAP/UDAAP statutes modeled after FTC
Act section 5 may include provisions that, in addition to prohibiting
``unfair'' and ``deceptive'' conduct, also prohibit ``unfair methods of
competition'' in connection with antitrust or anticompetition matters.
While the Bureau acknowledged that it is possible that such orders
might be less probative than other orders, the Bureau believed that
limiting the scope of such covered laws to those involving the offering
or provision of consumer financial products and services would
sufficiently assure that most orders reported would be valuable in
effectively monitoring for risks to consumers in the offering or the
provision of such products and services. Moreover, the Bureau
anticipated that it would not always be the case that an agency or
court order will clearly distinguish whether it is issued under State
statutory provisions preventing ``unfair,'' ``deceptive,'' or
``abusive'' acts and practices on the one hand, or ``anticompetitive''
acts or practices on the other--especially in cases where a State
statute addresses all of them. Unlike orders issued under FTC Act
section 5, it was not clear to the Bureau that orders issued under such
State laws routinely distinguish between these two types of
authorities. Therefore, the Bureau believed that attempting to carve
out portions of State UDAP/UDAAP statutes that extend beyond the
conduct prohibited by CFPA sections 1031 and 1036(a)(1)(B) would be
impracticable and would risk undermining the effectiveness of the rule.
The Bureau thus proposed to define the term ``covered law'' by listing
specific State statutes. Where a State statute was listed in proposed
appendix A and otherwise satisfied proposed Sec. 1092.201(c), the
Bureau proposed to treat it as a covered law, regardless of whether any
specific order issued under that law expressly referred to the State
law's prohibition of ``unfair,'' ``deceptive,'' or ``abusive'' acts and
practices. In most cases, the Bureau anticipated that violations of the
listed State statutes that relate to the offering or provision of a
consumer financial product or service would be probative of risks to
consumers within the Bureau's jurisdiction.
The Bureau did not include laws of Tribal governments in appendix A
of the proposal. While the Bureau believed that many orders issued
under such laws may be highly probative of risks to consumers and could
assist the Bureau in carrying out its market-monitoring obligations--as
well as assist the Bureau in assembling an effective nonbank registry--
the Bureau preliminarily concluded that considerations of
administrative efficiency favored focusing on other orders.
Fifth, proposed Sec. 1092.201(c)(5) would have included in the
definition of the term ``covered law'' a State law amending or
otherwise succeeding a law identified in appendix A, to the extent that
such law is materially similar to its predecessor, and the conduct
found or alleged to violate such law relates to the offering or
provision of a consumer financial product or service.
The Bureau proposed Sec. 1092.201(c)(5) in order to clarify that
appendix A is intended to capture certain future changes made by States
to the State laws listed therein. As the Bureau explained in the
proposal, States may make immaterial changes from time to time,
including renumbering or amending the statutes listed in appendix A, in
a manner that could cause appendix A to become technically
``incorrect'' or ``obsolete'' in the view of some regulated entities.
Proposed Sec. 1092.201(c)(5) would have made clear that is not the
Bureau's intent. To the extent the amended or otherwise succeeding law
is materially similar to its predecessor, proposed Sec. 1092.201(c)(5)
would have ensured that it would still qualify as a ``covered law.''
The proposed definition of covered law thus would have captured a
successor to a law listed in appendix A if, for example, the conduct
found or alleged to violate the successor law would have constituted a
violation of the predecessor law were it still in effect.
Finally, proposed Sec. 1092.201(c)(6) would have included in the
definition of the term ``covered law'' a rule or order issued by a
State agency for the purpose of implementing a State law described in
proposed Sec. 1092.201(c)(4) or (5), to the extent the conduct found
or alleged to violate such regulation relates to the offering or
provision of a consumer financial product or service. As the Bureau
explained, various State statutes authorize one or more State agencies
to issue regulations implementing the terms of those statutes, thereby
authorizing the State agency to further define specific unfair,
deceptive, or abusive acts or practices.\169\ Proposed Sec.
1092.201(c)(6) would have included such State agency regulations within
the meaning of the term ``covered law.''
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\169\ See, e.g., Cal. Fin. Code sec. 90009(c).
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Comments Received
A consumer advocate commenter stated that the rule should clarify
that, under certain specific circumstances, such as those involving
certain misrepresentations by schools, orders would ``arise out of
conduct related to consumer financial products and services'' as
required under the definition of the term ``covered order.''
An industry commenter stated that the registry should not require
publication of orders or decisions involving the FTC's authority under
FTC Act section 5, on the grounds that such orders are outside the
Bureau's authority. Another industry commenter and a consumer advocate
commenter supported including orders related to violations of the
prohibition of unfair or deceptive acts or practices under FTC Act
section 5, on the grounds of similarity to the CFPA's UDAAP
prohibitions. The consumer advocate commenter also supported the
inclusion of State UDAP laws and the Military Lending Act, stating that
violations of the Military Lending Act may overlap with, or be closely
associated with, violations of the CFPA's UDAAP prohibitions \170\ or
the Truth in Lending Act.
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\170\ 15 U.S.C. 5531, 5536(a)(1)(B).
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Several commenters stated that the definition of ``covered law''
should not include State laws. Commenters described the inclusion of
such laws, which were included in the definition of ``covered law'' at
proposed Sec. 1092.202(c)(4) through (6), as an improper attempt by
the Bureau to enforce laws that it lacks the authority to enforce or
otherwise administer. In the opinion of the commenters, requiring
covered nonbanks to register and submit information regarding orders
issued under State laws would usurp the role of the appropriate State
or local agency in issuing, enforcing, publishing, and interpreting its
own State laws or its own orders. Commenters stated that the
[[Page 56054]]
registry would lead to the Bureau adjudicating whether a covered entity
was in compliance with an order issued by another independent agency
and would violate principles of federalism. Commenters--including an
industry commenter, a joint letter from State regulators, and Members
of Congress--stated that imposing the written-statement requirements
described in proposed Sec. 1092.203 would be particularly
inappropriate with respect to orders issued under State laws for these
reasons.
Commenters stated that the Bureau's assertions that violations of
State law would be probative of risk to consumers were not supported or
were highly speculative. An industry commenter stated that the Bureau
should consider whether certain State laws are subject to Federal
preemption in determining whether those laws should qualify as
``covered laws.''
Industry commenters stated that including State or local laws as
``covered laws'' would improperly distort or shift the focus of
compliance programs, which could result in other aspects of compliance
programs becoming deprioritized, create unnecessary risks for
consumers, or raise costs that would ultimately be passed on to
consumers.
Multiple consumer advocate commenters supported including both
State and Federal laws because violations of both types of laws are
probative of heightened risks to consumers and markets. A consumer
advocate commenter stated that violations of the State laws listed in
the proposal are almost certainly probative of potential violations of
CFPA sections 1031 and 1036, and that the registry would be incomplete
without their inclusion.
A joint letter from State regulators commented that the Bureau
should clarify whether violations of certain administrative laws might
be interpreted by the Bureau to be violations of ``covered laws.'' The
commenters voiced skepticism that this question could be adequately
addressed in a final rule to the extent necessary for covered nonbanks
to understand their obligations.
The notice of proposed rulemaking sought specific comment on
whether to require registration, and to list in appendix A, additional
State statutes that prohibit ``unconscionable'' conduct but do not also
contain a specific reference to ``unfair,'' ``deceptive,'' or
``abusive'' conduct. A consumer advocate commenter stated that such
``unconscionability'' laws should be included, pointing to what it
described as the similarity between the standards of
``unconscionability'' and ``unfairness'' under UDAP law as recognized
by courts. An industry commenter stated that the Bureau should not
include State ``unconscionability'' laws.
A joint comment letter from State regulators stated that proposed
appendix A, which lists State laws that are included as ``covered
laws'' under Sec. 1092.201(c)(4), did not adequately represent State
consumer protection efforts, and contained laws that may be
inapplicable or outdated in certain States. The comment did not specify
any inapplicable or outdated State laws, but referred to payday lending
laws in States that have recently enacted usury laws that cap rates at
36 percent. A consumer advocate commenter stated that proposed appendix
A should be expanded to include other laws, specifically the Federal
Racketeer Influenced and Corrupt Organizations Act (``RICO'') and State
counterparts. This consumer advocate commenter also stated that the
rule should require that the Bureau periodically seek comment and
update appendix A. An industry commenter stated that proposed appendix
A was unmanageably large.
In the notice of proposed rulemaking the Bureau specifically sought
comment on whether Tribal UDAP/UDAAP laws should be included among the
list of ``covered laws,'' and if so, which specific Tribal UDAP/UDAAP
laws should be included in the list. A Tribal commenter stated that
proposed appendix A should be expanded to include laws that have been
enacted or may be enacted by federally recognized Indian tribes on the
grounds that doing so would reflect the status of Tribal governments as
equals to State governments under the Dodd-Frank Act. The commenter did
not state which specific Tribal UDAP/UDAAP laws should be included.
Response to Comments Received
For the reasons given in the description of the proposal above, the
Bureau is finalizing Sec. 1092.201(c)'s requirement that a law listed
in Sec. 1092.201(c)(1) through (6) would qualify as a covered law only
to the extent that the violation of law found or alleged arises out of
conduct in connection with the offering or provision of a consumer
financial product or service. The Bureau does not choose to use the
final rule as the vehicle for determining the circumstances under which
violations of covered laws arise out of conduct ``in connection with
the offering or provision of a consumer financial product or service.''
The term ``consumer financial product or service'' has a well-
established statutory definition.\171\ While the question of whether a
legal violation related to the offering or provision of a consumer
financial product or service depends on the particular facts and
circumstances involved, the answer to that question should be clear in
most cases. The Bureau declines to provide further, general guidance on
this issue in the context of this rulemaking. If a person has a good
faith basis to believe that an order issued against it does not qualify
as a ``covered order'' because it does not arise out of conduct in
connection with the offering or provision of a consumer financial
product or service, the person could choose not to register that order
and instead submit a notification under Sec. 1092.202(g). As explained
in the section-by-section analysis of Sec. 1092.202(g), in the event
of a non-frivolous filing under that provision, the Bureau would not
bring an enforcement action against the person based on the person's
failure to register the order unless the Bureau first notifies the
person that the Bureau believes registration is required and provides
the person with a reasonable opportunity to comply with Sec. 1092.202.
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\171\ See 12 U.S.C. 5481(5); see also 12 U.S.C. 5481(15)
(defining ``financial product or service'').
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The Bureau is finalizing a definition of ``covered law'' at Sec.
1092.201(c)(3) that includes the prohibition on unfair or deceptive
acts or practices under FTC Act section 5, as well as any rule or order
issued for the purpose of implementing that prohibition. As described
in part IV, among other things, such orders may be probative of
violations of Federal consumer financial law, including CFPA sections
1031 and 1036(a)(1)(B). Such orders also may indicate more systemic
problems at an entity that may impact the offering or provision of
consumer financial products or services, and will inform the Bureau's
exercise of its various rulemaking, supervisory, enforcement, consumer
education, and other functions. The Bureau does not see the force of
any argument that including FTC Act section 5 in the definition of
``covered law'' usurps the role of the FTC in issuing, enforcing, or
interpreting the FTC's public orders. Rather, the Bureau's rule is
intended to collect and potentially publish information regarding such
orders where they are relevant to the Bureau's assessment of risks to
consumers within its jurisdiction, as well as information about the
covered nonbanks that are
[[Page 56055]]
subject to such orders. The Bureau will continue to coordinate with the
FTC as required by the CFPA, including CFPA sections 1024(c)(3) and
1061(b)(5).\172\
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\172\ 12 U.S.C. 5514(c)(3), 5581(b)(5).
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The final rule requires registration in connection with orders
issued under State laws prohibiting unfair, deceptive, or abusive acts
or practices that are identified in appendix A to part 1092, to the
extent that the violation of law found or alleged arises out of conduct
in connection with the offering or provision of a consumer financial
product or service. The Bureau declines to finalize a definition of
``covered laws'' that does not include State laws. The Bureau
concludes, as stated by consumer advocate commenters, that violations
of both Federal and State consumer financial laws may be probative of
heightened risks for consumers and borrowers. In particular, the Bureau
concludes that orders based on violations of the State laws described
in Sec. 1092.202(c)(4) through (6) are likely to be probative of risk
to consumers.
The final rule will not thereby empower the Bureau to enforce or
interpret State laws (or orders). In particular, the Bureau does not
intend to assert any jurisdiction to enforce the State laws described
in Sec. 1092.201(c)(4) through (6) and appendix A. For the reasons
described in more detail in part IV(C), the Bureau concludes orders
based on violations of these State laws are probative of the types of
risks to consumers that the CFPA authorizes the Bureau to monitor, but
the Bureau does not assert that it may directly enforce any of these
laws. Rather, the final rule includes these State laws within the
definition of ``covered law'' in order to define the covered orders
that will require covered nonbanks to report identifying,
administrative, and order information to the nonbank registry.
The Bureau finalizes its conclusion in the notice of proposed
rulemaking \173\ that collecting and registering public agency and
court orders imposing obligations based upon violations of consumer
law, including applicable State laws, would assist with monitoring for
risks to consumers in the offering or provision of consumer financial
products and services. The CFPA does not confine the Bureau to
monitoring or supervising for risks related to violations of Federal
consumer financial law. Neither the Bureau's authority to monitor for
risks to consumers in the offering or provision of consumer financial
products or services under 12 U.S.C. 5512(c) nor the Bureau's
supervisory authorities under 12 U.S.C. 5514 are limited solely to
assessing entities' compliance with Federal consumer financial law.
Instead, the Bureau is charged with monitoring for risks to consumers
more broadly in the offering or provision of consumer financial
products or services, including developments in markets for such
products or services.\174\ In allocating its resources to perform
market monitoring, the Bureau may consider ``the legal protections
applicable to the offering or provision of a consumer financial product
or service, including the extent to which the law is likely to
adequately protect consumers.'' \175\ The types of ``legal
protections'' to be considered by the Bureau are not restricted to
protections under Federal law.
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\173\ 88 FR 6088 at 6094-6098.
\174\ See 12 U.S.C. 5512(c)(1).
\175\ 12 U.S.C. 5512(c)(2)(C).
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Likewise, the CFPA requires that the Bureau prioritize the use of
its supervisory authority ``in a manner designed to ensure that such
exercise . . . is based upon the assessment by the Bureau of the risks
posed to consumers in the relevant product markets and geographic
markets.'' \176\ In addition, the Bureau is tasked with requiring
reports and conducting examinations under 12 U.S.C. 5514 for purposes
not just of ``assessing compliance with the requirements of Federal
consumer financial law,'' \177\ but also of ``obtaining information
about the activities and compliance systems and procedures of'' persons
described in 12 U.S.C. 5514(a) \178\ and ``detecting and assessing
risks to consumers and to markets for consumer financial products and
services.'' \179\ And the CFPA authorizes the Bureau to issue rules
under 12 U.S.C. 5514(b)(7)(A) to ``facilitate supervision of persons
described in [12 U.S.C. 5514(a)(1)] and assessment and detection of
risks to consumers,'' and under 12 U.S.C. 5514(b)(7)(B) ``for the
purposes of facilitating supervision of such persons and assessing and
detecting risks to consumers.'' None of these provisions state or even
imply that the Bureau may not collect information regarding orders
issued under State law that are probative of risks to consumers in the
offering or provision of consumer financial products and services
within the scope of the Bureau's jurisdiction. The Bureau has its own
expertise and authorities with respect to such risks. The Bureau needs
to collect information regarding such risks as relevant to its own
purposes and the exercise of its own powers as provided under Federal
law.
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\176\ 12 U.S.C. 5514(b)(2). See the discussion of this provision
in parts II, III, and IV(B) above.
\177\ 12 U.S.C. 5514(b)(1)(A).
\178\ 12 U.S.C. 5514(b)(1)(B).
\179\ 12 U.S.C. 5514(b)(1)(C).
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The imposition of Sec. 1092.204's written-statement requirements
in connection with orders issued under State UDAP/UDAAP laws is
similarly appropriate and will further the purposes of those
requirements, as described in part IV(D) above and the section-by-
section discussion of Sec. 1092.204 below. Violations of such orders
may be probative of heightened risks for consumers and borrowers that
are relevant to the Bureau's exercise of its supervisory authority;
thus, for the reasons discussed in part IV(D) above and the section-by-
section discussion of Sec. 1092.204 below, the written-statement
requirements will facilitate the Bureau's supervision of supervised
registered entities subject to such orders. The information collected
under Sec. 1092.204 regarding risks to consumers that may be
associated with the orders, including potential violations of CFPA
sections 1031 and 1036, and the applicable supervised registered
entity's compliance systems and procedures will be relevant to the
Bureau's supervisory authority even where those risks are associated
with orders issued under State UDAP/UDAAP laws. In addition, for the
reasons discussed in part IV(D) above and the section-by-section
discussion below, Sec. 1092.204's requirements with respect to orders
issued under State UDAP/UDAAP laws will also help ensure that
supervised registered entities are legitimate entities and are able to
perform their obligations to consumers. Contrary to commenters'
suggestions, the Bureau is not adopting the written-statement
requirements to administer or enforce State laws or orders issued under
such laws, but rather to further its statutory purposes under CFPA
section 1024(b)(7)(A)-(C) with respect to risks to consumers that are
relevant under Federal law, that are associated with entities that are
subject to the Bureau's supervisory and examination authority under
CFPA section 1024(a), and that arise in connection with the offering or
provision of consumer financial products and services subject to the
Bureau's jurisdiction.
The Bureau concludes that the final rule will not result in the
Bureau usurping the role of any State or local agency in issuing,
enforcing, or interpreting State law or orders issued or obtained by a
State or local agency. Nor will the final rule violate principles of
federalism or lead to the Bureau supplanting the proper role of State
or other regulators with respect to such
[[Page 56056]]
orders. The final rule requires that covered nonbanks submit
identifying information and other specified information related to such
orders, but the Bureau's collection of that information via the nonbank
registry will not interfere with any State or local agency's own
actions related to enforcement of such orders.\180\ To the contrary,
the Bureau concludes that including the State laws described in Sec.
1092.201(c)(4) through (6) within the definition of ``covered law''
will promote interagency coordination and cooperation among the various
Federal, State, and local agencies that have an interest in financial
consumer protection because the Bureau intends to establish under the
rule a public, up-to-date, and easily accessible and searchable
registry that contains relevant and useful information about covered
orders and the covered nonbanks that are subject to them.
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\180\ See 12 U.S.C. 5551(a)(1) (``This title, other than
sections 1044 through 1048, may not be construed as annulling,
altering, or affecting, or exempting any person subject to the
provisions of this title from complying with, the statutes,
regulations, orders, or interpretations in effect in any State,
except to the extent that any such provision of law is inconsistent
with the provisions of this title, and then only to the extent of
the inconsistency.'') (emphasis added); see also 12 U.S.C.
5552(d)(1) (``No provision of this section shall be construed as
altering, limiting, or affecting the authority of a State attorney
general or any other regulatory or enforcement agency or authority
to bring an action or other regulatory proceeding arising solely
under the law in effect in that State.'').
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As discussed in part IV and in this section-by-section discussion,
violations of covered laws are likely to be probative of the type of
risk to consumers the Bureau is tasked with monitoring. The Bureau does
not intend to utilize the final rule or the nonbank registry
established under subpart B as a mechanism to opine regarding the
proper application of any particular State law to covered nonbanks or
any legal defenses, such as preemption, that might have been available
to a covered nonbank. The Bureau concludes that, where all of the
criteria established by the rule for registration of a covered order
have been met, including that an applicable agency or court has issued
or obtained a final and otherwise covered order against a covered
nonbank based on one or more violations by the covered nonbank of a
State law described at Sec. 1092.201(c)(4) through (6), registration
in connection with that covered order would serve the purposes of the
rule. If a covered nonbank believes in good faith that any particular
order is not a covered order, it may submit a notification under
Sec. Sec. 1092.202(g) and 1092.204(f).
The Bureau concludes that the final rule will not cause covered
nonbanks to pay inappropriate attention to compliance with the types of
State laws identified at Sec. 1092.201(c)(4) through (6).\181\ First,
an entity can (and should) comply with the law whether or not the
Bureau is monitoring it, and other agencies also monitor compliance
with covered orders issued or obtained under these State laws. Thus,
covered nonbanks should already be dedicating appropriate resources to
ensure compliance with such State laws, and the Bureau does not agree
that the registration components of the rule will distort compliance
programs, lead to compliance programs becoming deprioritized, or lead
to related additional risks or costs for consumers. Likewise, were the
Bureau to publish the information collected as described under Sec.
1092.205, the Bureau does not believe such publication would provide an
inappropriate incentive to dedicate unnecessary resources to compliance
with these State laws. By definition, the covered orders that would be
made available on the registry are already published or required to be
published (Sec. 1092.201(e) and (m)); therefore, republication of
those orders on the nonbank registry by the Bureau will not provide a
meaningful incentive to covered nonbanks to reallocate their compliance
resources.
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\181\ With respect to one commenter's reference to ``local
laws,'' Sec. 1092.201(c)'s definition of ``covered law'' refers to
specific types of Federal and State laws but does not include any
laws issued by local agencies. Therefore, an order that imposes
applicable obligations on the covered nonbank based solely on
alleged violations of a law issued by a local agency that does not
qualify as a ``covered law'' under Sec. 1092.201(c) would not
satisfy Sec. 1092.201(e)(1)(iv), and therefore would not be a
``covered order'' under the final rule. However, an order issued by
a local agency (as that term is defined at Sec. 1092.201(i)) under
a State law that did qualify as a ``covered law'' under Sec.
1092.201(c)(4) through (6) might constitute a ``covered order''
under Sec. 1092.201(e) if the other elements of that provision were
also satisfied.
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Second, even if a covered nonbank were to view the final rule as a
reason to dedicate additional resources to complying with the State
laws described at Sec. 1092.201(c)(4) through (6), so much the better.
Enhanced compliance with those State laws, while not a goal of the
final rule, will also likely reduce risk to consumers in the offering
or provision of consumer financial products and services within the
scope of the Bureau's jurisdiction. The Bureau does not agree that it
should refrain from collecting or publishing information that may help
it monitor for risks to consumers on the grounds that its efforts might
also have the ancillary benefit of inducing covered nonbanks to comply
with the described State consumer protection laws.
The proposal's requirements to submit information in connection
with covered orders were specific to the proposal and were not intended
to impose any requirements on a covered nonbank's compliance management
system or any of the covered nonbank's internal affairs, or to require
any particular approach of allocating responsibility for complying with
covered orders or with the law generally. The Bureau understands that
compliance management at covered nonbanks will likely be managed
differently from entity to entity and that compliance management
systems will and should be adapted to a covered nonbank's business
strategy and operations. The proposal did not purport to impose any
restrictions on the manner in which covered nonbanks address such
matters.
The final rule clearly establishes which laws are ``covered laws.''
The Bureau has reviewed the State laws described in appendix A to part
1092 and has assessed whether they are probative of risk to consumers
and otherwise should be included in appendix A at this time. State laws
that are not listed in appendix A to part 1092 and not otherwise
described at Sec. 1092.201(c)(4) through (6) are not covered laws
under the final rule. Therefore, commenters' concerns that the Bureau
might treat as covered laws certain State ``administrative'' or other
laws not described in Sec. 1092.201(c)(4) through (6) are misplaced.
As provided at Sec. 1092.202(e)(4), an order that does not impose
obligations that are described in Sec. 1092.202(e)(3) on the covered
nonbank based on an alleged violation of a ``covered law'' is not a
``covered order'' under the final rule. But an order that does impose
such obligations based on a violation of a covered law may fall under
Sec. 1092.202(e)(3), even if the State agency issued its order under
authority granted by other provisions of law. Additional discussion
regarding when obligations are imposed ``based on'' violations of a
covered law is contained in the section-by-section discussion of Sec.
1092.201(e) below.
Commenters did not provide any citations for specific State laws
that should either be added to or deleted from appendix A to part 1092.
However, the Bureau has reviewed appendix A as proposed and is
finalizing an appendix A to part 1092 that contains both additions and
deletions from the version proposed. The Bureau is listing these
additional statutes in appendix A, and thus including them in the final
rule's
[[Page 56057]]
definition of covered law, for the reasons discussed in the description
of the proposal above with respect to the inclusion of other State laws
in the proposed appendix A. As with the State laws that were included
in the version of appendix A contained in the proposed rule, the Bureau
believes that violation of the additional State UDAP/UDAAP laws
included in the final appendix A to part 1092 that prohibit unfair,
deceptive, or abusive acts or practices in connection with consumer
financial industries or markets and in connection with the offering or
provision of consumer financial products or services would be probative
of potential violations of CFPA sections 1031 and 1036, and also of
other related risks to consumers within the scope of the Bureau's
jurisdiction. The Bureau believes that omitting these industry specific
statutes from the definition of ``covered law'' may cause the
information submitted to the proposed registry to be incomplete.
The Bureau is also finalizing several minor revisions to appendix A
to part 1092 in order to correct several clerical errors in the
proposed rule, such as duplicate listings, and to reflect certain
changes to the State laws, such as the renumbering and repeal of
certain provisions.
Other than these revisions, the Bureau declines to finalize other
changes to appendix A at this time. The Bureau concludes appendix A to
the final rule, as revised from the proposal in the ways discussed
above, is appropriate and is not so large as to be unusable or
unwieldy. Covered nonbanks should be able to quickly refer to appendix
A in order to help determine whether any particular State law is a
``covered law.''
As the Bureau indicated in the notice of proposed rulemaking,
orders based on conduct that violates State unconscionability laws may
be probative of risk to consumers. But the Bureau declines at this time
to include State unconscionability laws in appendix A to the final
rule. Likewise, the Bureau declines at this time to include RICO laws
in appendix A to the final rule. And the Bureau also declines to
include in appendix A State payday lending laws imposing usury limits.
Violations of State unconscionability, RICO, and usury laws may be
indicative of risk to consumers within the Bureau's jurisdiction,
especially in situations where the applicable violation of law found or
alleged arises out of conduct in connection with the offering or
provision of a consumer financial product or service. But unlike the
State UDAP/UDAAP laws included in appendix A, State unconscionability,
RICO, and usury laws are generally not modeled after FTC Act section 5
or CFPA sections 1031 and 1036(a)(1)(B), and the Bureau at this time
has not determined whether such laws, as a class, are generally
sufficiently similar in scope to FTC Act section 5 or CFPA sections
1031 and 1036(a)(1)(B) to warrant inclusion in appendix A. Considering
RICO laws in particular, they often prohibit a wide range of criminal
activity, including kidnapping, robbery, and dealing in narcotic
drugs.\182\ The Bureau is concerned that including such laws as
``covered laws'' would result in an overinclusive and thus less useful
and more burdensome registry.
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\182\ See, e.g., 18 U.S.C. 1961.
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Also, as the Bureau indicated in the notice of proposed rulemaking,
orders based on conduct that violates certain Tribal laws may be
probative of risk to consumers. But the Bureau declines at this time to
include such Tribal laws in appendix A to the final rule. The Bureau
finalizes its preliminary conclusion in the proposal \183\ that
considerations of administrative efficiency favor focusing on other
orders.
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\183\ See 88 FR 6088 at 6107.
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The Bureau intends to monitor the orders submitted under the final
rule and may determine at a later date to expand appendix A to include
the categories of laws discussed above or other laws. The Bureau also
agrees that it may prove useful to periodically review and update
appendix A in order to enhance the usefulness and effectiveness of the
nonbank registry and the information it collects. However, the Bureau
declines to adopt such a requirement in the final rule obligating
itself to do so. Among other things, such a requirement is unnecessary
and would complicate the Bureau's administration of the nonbank
registry.
Comments regarding the scope of the written-statement requirements
are addressed in the section-by-section discussion of Sec. 1092.204
below.
Final Rule
For the reasons set forth above, the Bureau is finalizing Sec.
1092.201(c) as proposed, with minor technical edits. In addition, for
the reasons described above, the Bureau is finalizing appendix A to
part 1092 with several changes from the proposed version. Section
1092.201(c)(4) defines the term ``covered law'' to include a State law
prohibiting unfair, deceptive, or abusive acts or practices that is
identified in appendix A.
Section 1092.201(d) Covered Nonbank
Proposed Rule
The proposal would have defined the term ``covered nonbank'' to
mean a covered person \184\ that does not fall into one of five
categories. First, the Bureau proposed to exclude from the definition
insured depository institutions, insured credit unions, or related
persons. The Bureau considered proposing to collect information about
relevant orders in place against such persons under its authority to
issue rules mandating collection of information set forth in CFPA
section 1022(c)(4)(B)(ii). While the Bureau noted that it might at some
point consider collecting or publishing the information described in
the proposal from such persons, the Bureau believed that there is
currently greater need to collect this information from the nonbanks
under its jurisdiction. Among other things, the identity and size of
all insured depository institutions and insured credit unions is known
to the Bureau due to registration regimes maintained by the prudential
regulators, which track and make public such information. Also, there
are only four prudential regulators, and they regularly publish their
consumer financial protection orders. In contrast, the Bureau explained
that comprehensive, readily accessible information is currently lacking
about the identity of, and orders issued against, nonbanks subject
either to the Bureau's market-monitoring authority or to its
supervisory authority across the various markets for consumer financial
products and services. As a result, the Bureau believed that there is a
unique need to identify nonbanks subject to orders through this
proposed registry. In addition, the proposal would have conformed with
the Bureau's registration authority under CFPA section 1022(c)(7),
which states that the Bureau may impose registration requirements
applicable to a covered person, other than an insured
[[Page 56058]]
depository institution, insured credit union, or related person.\185\
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\184\ As provided in proposed Sec. 1092.101(a), the proposal
would have defined the term ``covered person'' to have the same
meaning as in 12 U.S.C. 5481(6). The proposal would not have defined
``service providers,'' as defined in 12 U.S.C. 5481(26), as covered
nonbanks per se. Entities that are service providers, however, may
nevertheless also be covered persons under the CFPA. Among other
things, a person that is a service provider shall be deemed to be a
covered person to the extent that such person engages in the
offering or provision of its own consumer financial product or
service. See 12 U.S.C. 5481(26)(C). And a service provider that acts
as a service provider to its covered person affiliate is itself
deemed to be a covered person as provided in 12 U.S.C. 5481(6)(B).
\185\ The Bureau explained that an affiliate of an insured
depository institution, insured credit union, or related person
could be subject to the proposed rule if it is not itself an insured
depository institution, insured credit union, or related person.
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Second, the proposal would have excluded from the definition of the
term ``covered nonbank'' a ``State,'' as defined in CFPA section
1002(27)--a term that includes ``any federally recognized Indian tribe,
as defined by the Secretary of the Interior'' under section 104(a) of
the Federal Recognized Indian Tribe List Act of 1994, 25 U.S.C.
5131(a).\186\ The Bureau has other avenues of collaborating with State
partners (including Tribal partners) and, out of considerations of
comity, did not seek to subject them to an information collection
requirement in the proposal.
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\186\ 12 U.S.C. 5481(27).
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Third, the proposal excluded natural persons from the definition of
``covered nonbank.'' The Bureau was not proposing to impose subpart B's
registration requirements on natural persons, even though natural
persons may be covered persons and may be subject to the types of
orders described in the proposal. (For example, a sole proprietor not
incorporated as a legal entity could qualify as a covered person.)
Under the proposed exclusion, for example, natural persons subject to
orders issued under FTC Act section 5, removal and prohibition orders
or orders assessing civil money penalties issued by an appropriate
Federal banking agency under section 8 of the Federal Deposit Insurance
Act,\187\ or State licensing orders or orders issued under the S.A.F.E.
Mortgage Licensing Act of 2008 \188\ would not be subject to the
proposal's registration requirements. The ``natural person'' exception
in proposed Sec. 1092.201(c)(3) was intended only to exclude
individual human beings from the definition of ``covered nonbank.'' The
definition of ``covered nonbank'' would have included trusts and other
entities that meet the definition of ``covered person'' under CFPA
section 1002(6).\189\ The Bureau was primarily interested in obtaining
information regarding orders that apply to entities because it believed
such orders will be most useful in identifying relevant risks to
consumers. The Bureau believed that many of the agency and court orders
enforcing the law issued against individuals are highly specific to the
facts and circumstances relevant to the individual's conduct and are
less likely to implicate broader risks to consumers and markets. In
addition, the Bureau was primarily interested in obtaining and
publishing registration information regarding nonbank entities that are
subject to its jurisdiction, which among other things would enable
consumers to better identify such entities and would provide
information to the public and other regulators. The Bureau was
concerned that, if the Bureau should extend the registration
requirement to natural persons, the information provided would be less
relevant to consumers and the other users of the registry. Therefore,
the Bureau believed that the potential benefit of extending the
registration requirement to natural persons likely would not justify
the additional Bureau resources that would need to be allocated to
implement and administer such an expansion of the Bureau's registry.
The Bureau also believed that proposed Sec. 1092.203's requirements to
designate one or more attesting executives and submit written
statements would not be appropriate for natural persons.
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\187\ 12 U.S.C. 1818.
\188\ 12 U.S.C. 5101 et seq.
\189\ See 12 U.S.C. 5481(6). See also 12 U.S.C. 5481 (defining
the term ``person'' to include, in addition to individuals, any
``partnership, company, corporation, association (incorporated or
unincorporated), trust, estate, cooperative organization, or other
entity'').
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Fourth, the proposal excluded from the definition of ``covered
nonbank'' a motor vehicle dealer that is predominantly engaged in the
sale and servicing of motor vehicles, the leasing and servicing of
motor vehicles, or both, within the meaning of 12 U.S.C. 5519(a),
except to the extent such a person engages in functions that are
excepted from the application of 12 U.S.C. 5519(a) as described in 12
U.S.C. 5519(b). CFPA section 1029 provides an exclusion from the
Bureau's rulemaking authority for certain motor vehicle dealers.\190\
However, CFPA section 1029(b) exempts certain persons from this
exclusion. Persons covered by section 1029(a) would have qualified as
``covered nonbanks'' under the proposal so long as they engage in the
functions described in section 1029(b)--in which case they would be
``covered nonbanks.'' Proposed Sec. 1092.201(e), discussed below,
would have further provided that the only orders issued to such motor
vehicle dealers that would require registration would be those issued
in connection with the functions that are excepted from the application
of 12 U.S.C. 5519(a) as described in 12 U.S.C. 5519(b).
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\190\ 12 U.S.C. 5519 (``Exclusion for Auto Dealers'').
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Fifth, the proposal excluded a person from the definition of
``covered nonbank'' if the person qualifies as a covered person based
solely on conduct that is the subject of, and that is not otherwise
exempted from, an exclusion from the Bureau's rulemaking authority
under 12 U.S.C. 5517.\191\ This provision would have clarified that
persons whose activities are wholly excluded from the rulemaking
authority of the Bureau under one or more of the provisions of section
1027 of the CFPA are not ``covered nonbanks.'' However, where the CFPA
provides that any of the activities engaged in by such persons are
subject to the Bureau's rulemaking authority, this limitation would not
have excluded the person from qualifying as a ``covered nonbank.'' For
example, the Bureau explained, CFPA section 1027(l)(1) provides an
exclusion from the Bureau's rulemaking authority for certain persons
engaging in certain activities relating to charitable
contributions.\192\ Under the proposal, a covered person would not have
been deemed a ``covered person'' if it qualifies for this statutory
exclusion and is not otherwise exempt from it. But CFPA section
1027(l)(2) exempts certain activities from this statutory exclusion by
providing that ``the exclusion in [CFPA section 1027(l)(1)] does not
apply to any activities not described in [CFPA section 1027(l)(1)] that
are the offering or provision of any consumer financial product or
service, or are otherwise subject to any enumerated consumer law or any
law for which authorities are transferred under subtitle F or H.''
\193\ As proposed, persons described in CFPA section 1027(l)(1)
engaging in the activities described therein would have qualified as
``covered nonbanks'' so long as they engage in any of the activities
described in CFPA section 1027(l)(2), and they would thus be subject to
all of the information-collection requirements of the rule applicable
to ``covered nonbanks,'' regardless of whether the applicable ``covered
order'' addressed the conduct subject to the statutory exclusion.
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\191\ 12 U.S.C. 5517.
\192\ 12 U.S.C. 5517(l)(1) (``Exclusion for Activities Relating
to Charitable Contributions'').
\193\ 12 U.S.C. 5517(l)(2).
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Among other things, the Bureau sought comment regarding the overall
scope of the proposed definition of ``covered nonbank,'' including
whether the definition should be expanded or limited in light of the
purposes and objectives of subpart B. The Bureau further sought comment
on whether a more limited or expanded approach to the registration of
covered persons would be appropriate instead of the proposed
requirements, whether it should consider any other modifications to the
scope of the rule, and how such
[[Page 56059]]
modifications would match the Bureau's policy goals.
Comments Received
The Bureau specifically sought comment as to whether it should
adopt an alternative approach that would limit all of the proposal's
registration requirements to covered persons that are subject to the
Bureau's supervision and examination authority under CFPA section
1024(a). An industry commenter supported limiting the registration
requirements to entities with annual receipts of more than $10 million,
which is the Bureau's larger participant threshold for the consumer
debt collection market under section 1024(a).\194\ While conceding that
this approach would limit the number of orders subject to the rule, the
commenter stated that it would greatly reduce the compliance burden on
small businesses.
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\194\ See 12 U.S.C. 5514(a)(1)(B); 12 CFR 1090.105.
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A consumer advocate commenter stated that the proposal should be
modified in order to clarify that schools and State-affiliated student
loan servicers satisfy the definition of ``covered nonbanks.'' The
commenter stated that such clarification was particularly desirable in
light of the exception for States from the definition of ``covered
nonbank,'' as according to the commenter, certain entities accused of
illegal conduct often falsely assert that they are agents or appendages
of States.
The Bureau specifically requested comment on whether to include
natural persons in the term ``covered nonbank,'' even though natural
persons may be covered persons and may be subject to the types of
orders described in the proposal. A consumer advocate commenter stated
that the proposal should be modified in order to include natural
persons who otherwise meet the definition of ``covered person.'' The
commenter stated that including natural persons would provide consumers
with an additional resource to identify bad actors in consumer
financial services.
Commenters, including the SBA Office of Advocacy, stated that the
proposal was insufficiently clear with respect to affiliates of insured
depository institutions and insured credit unions. Commenters noted
that certain bank holding companies and other nonbank affiliates of
such entities meet the CFPA's definition of ``covered person,'' \195\
but they would not have fallen within the exemptions to the term
``covered nonbank'' provided in proposed Sec. 1092.201(d). Commenters
requested clarification as to which affiliates of banks and credit
unions would qualify as ``covered nonbanks'' under the proposal. One
industry commenter stated that the Bureau should ensure that the
regulatory text expressly clarified the application of this definition
to bank affiliates. Industry commenters also stated that the Bureau
should exempt some or all of these bank-affiliated ``covered persons''
from the scope of the definition, and industry commenters stated that
if the Bureau were to include affiliates of insured depository
institutions and insured credit unions in the definition of the term
``covered nonbank,'' the Bureau should issue a supplementary proposal
in order to provide for additional notice and comment on that approach.
A consumer advocate commenter stated that the Bureau should take an
expansive approach in addressing this question.
---------------------------------------------------------------------------
\195\ 12 U.S.C. 5481(6).
---------------------------------------------------------------------------
Several industry and consumer advocate commenters approved of the
proposal to collect and publish information about nonbanks, stating
that the proposed registry would shed light on the large and growing
nonbank financial sector. An industry commenter and a consumer advocate
commenter stated that the proposed registry would help the Bureau
identify nonbanks to bring under Bureau supervision. Industry
commenters and a joint comment letter from members of Congress agreed
that excepting banks and insured credit unions from the proposal was
appropriate, although some commenters objected to the proposal's
statement that the Bureau might consider including banks and credit
unions in a future registry, stating that the Bureau lacked authority
to do so or that collecting information from banks or credit unions
would be unduly burdensome and duplicative. On the other hand, several
commenters stated that the Bureau should not exempt banks and credit
unions from the proposed rule's requirements. Industry commenters
stated that this exemption was contrary to the proposal's rationale,
and unfairly targeted nonbanks and put them at a competitive
disadvantage. A consumer advocate commenter stated that the exemption
was inconsistent with the publication of certain orders regarding
nonbanks, and that nonbanks might attempt to evade the proposed rule's
registration requirements by acquiring a banking charter.
A joint letter from State regulators stated that States have not
witnessed widespread issues with or a growing trend of recidivism among
nonbanks that would necessitate the creation of the proposed nonbank
registry, and stated that previous remarks by the Bureau's Director had
not emphasized a recidivism problem among nonbanks. However, consumer
advocate commenters stated that recidivism by nonbanks did pose risks
to consumers and that the registry would help users identify such risks
and would otherwise help prevent recidivism.
While noting the exclusion of federally recognized tribes from the
proposed definition, Tribal commenters suggested that the proposal's
use of the term ``State'' to define the exemption from proposed Sec.
1092.201(d)'s definition of ``covered nonbank'' was inadequate to
protect Tribal sovereignty, and stated that the rule should adopt a
more specific and clear exclusion for economic arms of the tribe, or
for Tribal instrumentalities or entities wholly owned by tribes. These
commenters asserted that tribes, as self-determining bodies, are the
only ones competent to determine the status of an entity as enjoying
Tribal sovereignty. Thus, in their view, U.S. government institutions--
whether the Bureau, other U.S. regulators, or U.S. courts--lack
competence to make such determinations. Tribal commenters also stated
that application of the rule to Tribal instrumentalities would expose
Tribal treasuries to unfounded attacks that the registry would
generate.
Industry commenters stated that in addition to the exemption in
proposed Sec. 1092.201(d)(1) for insured credit unions, the Bureau
should also exempt from the definition of ``covered nonbank'' credit
union service organizations (CUSOs). The commenters stated that CUSOs
must register with the National Credit Union Administration (NCUA) and
report financial activity, with annual affirmations and updates, that
NCUA and State regulators regularly exercise established authority to
request information regarding CUSO activity, that requiring
registration of CUSOs would be duplicative and burdensome, and that
consumers would be unlikely to find such registration useful.
An industry commenter stated that the Bureau should exempt
institutions that are supervised by the Farm Credit Administration from
the definition of ``covered nonbank.'' The commenter stated that the
reasons the proposal gives for excluding depository institutions and
credit unions apply equally to Farm Credit institutions, and that such
an exemption would be consistent with the unique treatment of such
institutions under the CFPA.
An industry commenter stated that the Bureau should exempt
attorneys and law firms from the scope of the proposal
[[Page 56060]]
on the grounds that regulation of lawyers is properly placed not with
the Bureau but with the judiciary and State bar associations, because
of concerns that covered nonbanks that are attorneys or law firms could
be required to divulge privileged communications between the lawyer and
their client as well as information regarding their clients'
confidential and proprietary business practices, and on the grounds
that they are already heavily regulated and should otherwise not be
subject to the rule.
Two industry commenters stated that the Bureau should exempt
mortgage lenders and mortgage services from the scope of the proposal,
or at a minimum, exempt such entities where they have satisfied the
existing NMLS requirements for mortgage lenders/servicers to disclose
such agency and court orders to the NMLS. These commenters stated that
the proposed rule would have a disproportionate burden on such entities
and would be largely duplicative of the orders that such entities
report to the NMLS.
Response to Comments Received
Under the final rule, the Bureau will collect information under the
nonbank registry in order to be informed about risks regarding a wide
range of nonbank covered persons, and not just regarding the entities
that are subject to its supervisory jurisdiction under CFPA section
1024(a). The Bureau finalizes its conclusion in the proposal \196\ that
collecting information from a wider range of covered persons is
appropriate to achieve its market-monitoring objectives. The Bureau
declines to finalize the alternative approach discussed in the notice
of proposed rulemaking that would have limited the scope of the
definition to covered persons that are subject to the Bureau's
supervision and examination authority under CFPA section 1024(a). The
Bureau's market-monitoring information collection authority under CFPA
section 1022(c)(4)(B)(ii) applies to ``covered persons'' and ``service
providers'' as defined at CFPA section 1002,\197\ and the Bureau's
registration authority under CFPA section 1022(c)(7) applies to all
covered persons ``other than an insured depository institution, insured
credit union, or related person.'' \198\ The Bureau concludes that the
information that will be collected under the nonbank registry will be
useful for purposes beyond conducting its supervisory work, and that it
should collect information in order to inform its regulatory,
enforcement, and other functions, where the Bureau's authority extends
to numerous entities that are not subject to its supervisory
jurisdiction. Even with respect to informing the Bureau's supervisory
work, it will be necessary to collect information from entities that
are not subject to Bureau supervision under CFPA section 1024(a). For
example, the Bureau could use information submitted to the nonbank
registry to inform its decisions regarding whether to issue new larger
participant rules under CFPA section 1024(a)(2) or whether to exercise
its authority to designate a covered person for supervision because the
Bureau has reasonable cause to determine that the covered person is
engaging or has engaged in conduct that poses risk to consumers.\199\
Thus, the Bureau will need to be informed about risks to consumers
arising with respect to entities that are not presently supervised.
---------------------------------------------------------------------------
\196\ See 88 FR 6088 at 6109.
\197\ See 12 U.S.C. 5481(6), (26); 12 U.S.C. 5512(c)(4)(B)(ii).
\198\ See 12 U.S.C. 5512(c)(7).
\199\ See 12 U.S.C. 5514(a)(1)(B), (C), (a)(2); 12 CFR part
1091.
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The Bureau declines to adopt a registration threshold or other
exception from the rule's registration requirements based upon annual
receipts or other size considerations. That approach would lead to the
omission of relevant covered nonbanks from the registry, which would
mean that the Bureau would not be notified regarding the existence of
such entities and would not learn that they were subject to a covered
order. Such an exception would unnecessarily limit the information that
is provided to the Bureau and provide the Bureau with only a partial
view of related risks. The Bureau concludes that the limited burden
that will be imposed on such entities due to such information-
collection requirements is warranted in light of the benefits to the
Bureau and other users of the nonbank registry.\200\
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\200\ See also the section-by-section discussion of Sec.
1092.201(q) below.
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The Bureau declines to use this rulemaking as an opportunity to
finalize a position regarding whether any particular type of entity is
a covered person or otherwise falls under the regulatory definition of
the term ``covered nonbank.'' The Bureau expects all entities subject
to its jurisdiction to assess their own compliance obligations and to
comply with the law. An entity that believes it has a good faith basis
that it is not a covered nonbank or supervised registered entity, or
that an order is not a covered order, but has concerns about whether
the Bureau would agree, may file a good faith notification under Sec.
1092.202(g) or Sec. 1092.204(f).
The Bureau declines at this time to include natural persons in the
term ``covered nonbank.'' For the reasons discussed in the proposal,
the Bureau is primarily concerned about the risk to consumers that is
presented by entities that are not natural persons, although it may
consider expanding the registry in future. As the Bureau discussed in
its proposal, the ``natural person'' exception in Sec. 1092.201(c)(3)
is intended only to exclude individual human beings from the definition
of ``covered nonbank.'' The definition of ``covered nonbank'' would
include trusts and other entities that meet the definition of ``covered
person'' under CFPA section 1002(6).
The Bureau declines to finalize an exemption for affiliates of
insured depository institutions or insured credit unions from Sec.
1092.201(d)'s definition of the term ``covered nonbank.'' (As discussed
in the section-by-section discussion of Sec. 1092.201(q) below, that
section's definition of the term ``supervised registered entity'' will
not apply to an affiliate of an insured depository institution or
insured credit union with total assets of more than $10 billion as
described in CFPA section 1025(a).\201\ Therefore, such affiliates,
even if they are ``covered nonbanks,'' are not subject to the final
rule's written-statement requirements.) As the notice of proposed
rulemaking indicated,\202\ an affiliate of an insured depository
institution or insured credit union could be subject to the proposed
rule if it is not itself an insured depository institution or insured
credit union. While proposed Sec. 1092.201(d)(1) would have excluded
from the definition of ``covered nonbank'' insured depository
institutions and insured credit unions (as well as ``related persons,''
a term defined in CFPA section 1002(25)), the proposal did not contain
an exemption from the definition of ``covered nonbank'' for affiliates
of such persons where they otherwise would meet that definition. Like
other covered nonbanks, such an affiliate would only be subject to the
rule if it qualified as a ``covered nonbank'' under the criteria
established in Sec. 1092.201(d), including the requirement that the
affiliate satisfy the CFPA definition of the term ``covered person.''
With respect to the application of the final rule's written-statement
requirements to such an affiliate, see the
[[Page 56061]]
section-by-section discussion of Sec. 1092.201(q) below.
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\201\ 12 U.S.C. 5515(a).
\202\ 88 FR 6088 at 6108 n.139.
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The Bureau finalizes the approach described in the proposal. The
Bureau acknowledges that, like the insured depository institutions and
insured credit unions that are exempt from the definition of ``covered
nonbank'' under Sec. 1092.201(d)(1), affiliates of those entities are
subject to certain requirements imposed by the prudential regulators.
And those regulators make certain information available to the public
regarding such affiliates, including information regarding their
identity and certain orders to which such affiliates are subject.
Nevertheless, the Bureau concludes that requiring such affiliates that
otherwise meet the definition of ``covered nonbank'' to submit
information to the nonbank registry as required under Sec. 1092.202
will serve the purposes of the final rule described in part IV above.
Covered nonbanks that are affiliates of insured depository institutions
and insured credit unions present a different set of risks to consumers
than do insured depository institutions and insured credit unions. For
example, they are generally neither chartered nor insured by the
Federal Government; they are generally subject to a general corporate
or business charter as opposed to a more restrictive banking or credit
union charter; and they are generally not subject to the same
restrictions on corporate form and powers that apply to insured
depository institutions and insured credit unions.\203\
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\203\ See, e.g., 12 U.S.C 24a (authorizing financial
subsidiaries of national banks to engage in nonbanking activities);
12 U.S.C. 1843 (authorizing bank holding company interests in
nonbanking organizations), 1864 (authorizing bank service companies
to engage in nonbanking activities). See also, e.g., Patricia A.
McCoy, 1 Banking Law Manual: Federal Regulation of Financial Holding
Companies, Banks, and Thrifts (3rd ed. 2023) Sec. Sec. 5.02-5.03
(discussing powers of national banks, bank holding companies, and
financial holding companies). In addition, such affiliates are not
subject by statute to the same frequency of examination by a Federal
agency as are insured depository institutions. See 12 U.S.C. 1820(d)
(generally requiring a ``full-scope, on-site examination of each
insured depository institution'' either annually or, for certain
small institutions, every 18 months). And certain affiliates are
subject to a different system of ratings and supervision by the
prudential regulators than are insured depository institutions. See,
e.g., Large Financial Institution Rating System; Regulations K and
LL, 83 FR 58724 (Nov. 21, 2018) (adopting ratings system for certain
holding companies). See also the discussion below regarding credit
union service organizations (CUSOs).
---------------------------------------------------------------------------
The Bureau concludes that it is appropriate to distinguish
affiliated nonbanks engaged in the offering or provision of consumer
financial products and services from their affiliates that hold a bank
or credit union charter, are federally insured, and are engaged
directly in the business of banking or providing credit union services,
and to register and collect additional information from affiliated
nonbanks for the purposes of identifying and assessing risk to
consumers.
Furthermore, the approach taken in the final rule is consistent
with CFPA section 1022(c)(7),\204\ which does not exempt such affiliate
covered persons from the nonbank registration requirements that may be
imposed by the Bureau under that statutory provision. In this case,
Congress made a determination to extend the Bureau's registration
authority over such persons, which are nonbanks subject to the Bureau's
jurisdiction. Among other things, the Bureau needs to monitor risks to
consumers presented by such nonbank affiliates in order to exercise its
broad enforcement, supervisory, and regulatory authority over such
persons. For example, Congress provided supervisory authority over
nonbanks to the Bureau in order to ensure that the Bureau could
exercise consistent Federal oversight of nondepository institutions
based upon its assessment of the risk they pose to consumers.\205\ With
respect to the affiliates of very large insured depository institutions
and insured credit unions, Congress intended to address the preexisting
``fragmented regulatory structure'' by creating ``one Federal regulator
with consolidated consumer protection authority'' that would monitor
such entities.\206\ Consistent with this goal, the final rule will
create a unified registry that will identify covered nonbanks that
themselves participate in the markets for consumer financial products
and services, as well as the orders to which they are subject, whether
or not those covered nonbanks happen to be affiliates of banks or
credit unions.
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\204\ 12 U.S.C. 5512(c)(7).
\205\ See S. Rep. No. 111-176, at 167 (2010) (``The authority
provided to the Bureau in this section will establish for the first
time consistent Federal oversight of nondepository institutions,
based on the Bureau's assessment of the risks posed to consumers and
other criteria set forth in this section.'').
\206\ See S. Rep. No. 111-176, at 168 (2010).
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The Bureau is adopting an exception for insured depository
institutions, insured credit unions, and related persons in Sec.
1092.201(d)'s definition of the term ``covered nonbank.'' \207\ For the
reasons stated in the proposal, the Bureau concludes that there is
currently greater need to collect information from the nonbanks under
its jurisdiction than from insured depository institutions, insured
credit unions, and related persons, that there is a unique need to
identify nonbanks subject to orders through the nonbank registry, and
that the final rule will conform with the Bureau's registration
authority under CFPA section 1022(c)(7), which states that the Bureau
may impose registration requirements applicable to a covered person,
other than an insured depository institution, insured credit union, or
related person.\208\ As discussed at parts III and IV above, the Bureau
is issuing this rule under separate authorities under CFPA sections
1022 and 1024. However, for clarity, the final rule will not cover
persons who are not subject to the Bureau's CFPA section 1022(c)(7)(A)
authority.
---------------------------------------------------------------------------
\207\ As explained below, the Bureau has adopted a revision to
the proposed rule to clarify that a related person is excluded from
the definition of ``covered nonbank'' only if the person qualifies
as a ``covered person'' solely due to its related-person status.
\208\ 12 U.S.C. 5512(c)(7).
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In addition, the Bureau concludes that the final rule will
facilitate the purposes of the nonbank registry described in part IV
above even without registering insured depository institutions, insured
credit unions, or related persons at this time. In light of the modest
obligations imposed under the final rule, the Bureau does not think
that the final rule will cause nonbanks to undergo the expense and
effort involved in obtaining a banking charter to avoid their
registration obligations under the final rule. The Bureau chooses at
this time not to collect information from banks not only because orders
against insured depository institutions and insured credit unions are
public or required to be public--as are all covered orders, as provided
at Sec. 1092.201(e)--but also because the insured depository
institutions and insured credit unions themselves are already subject
to a comprehensive public Federal registration regime that identifies
them to the public and is kept up to date.\209\ These requirements
generally serve to distinguish orders issued against insured depository
institutions and insured credit unions from orders issued against the
covered nonbanks that the Bureau will register under the final
rule.\210\
---------------------------------------------------------------------------
\209\ See, e.g., 12 U.S.C. 1786(s) (insured credit unions),
1818(u) (insured depository institutions).
\210\ In addition, for the reasons discussed above and in the
section-by-section discussion of Sec. 1092.201(q), affiliates of
insured depository institutions and insured credit unions may
qualify as ``covered nonbanks'' subject to the final rule, and
affiliates of insured depository institutions and insured credit
unions with total assets of $10 billion or less may qualify as
``supervised registered entities'' subject to Sec. 1092.204. As
discussed in those sections, the Bureau is concerned that such
affiliates may present different types of risks to consumers than
insured depository institutions and insured credit unions do.
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[[Page 56062]]
As discussed in part IV above, the registry will accomplish a
number of goals, with a particular focus on monitoring for risks to
consumers related to repeat offenders of consumer protection law. As
discussed above, recidivism poses particular risks to consumers, and
the Bureau believes that adoption of the final rule is appropriate for
the purposes of monitoring for recidivism and publishing information
that may help potential users of the nonbank registry identify
recidivism by nonbanks. The joint comment letter from State regulators
neither asserts nor demonstrates that recidivism by nonbanks does not
present risks to consumers, and consumer advocate commenters stated
that recidivism by nonbanks does present risks to consumers. The Bureau
intends to use the information collected via the nonbank registry to
help detect and assess relevant risks to consumers related to
recidivism by nonbanks. In addition, the Bureau is adopting the final
rule not just to monitor and deter recidivism by nonbanks but also more
generally to serve all of the purposes described under part IV,
pursuant to its legal authorities as described in part III. For
example, as discussed in the section-by-section discussion of Sec.
1092.205(a) below and elsewhere in this preamble, even one covered
order may be probative of significant risk to consumers, and the
written-statement requirements will serve the purposes described in
part IV(D) whether or not an applicable supervised registered entity is
subject to multiple covered orders. Thus, the Bureau believes its
adoption of the final rule is appropriate even if recidivism among
nonbanks currently presents only limited risks to consumers.
Section 1092.201(d)(2) excludes from the definition of the term
``covered nonbank'' a ``State,'' as defined in CFPA section 1002(27)--a
term that includes ``any federally recognized Indian tribe, as defined
by the Secretary of the Interior'' under section 104(a) of the Federal
Recognized Indian Tribe List Act of 1994, 25 U.S.C. 5131(a). The Bureau
declines to provide an express exemption from the final rule for Tribal
instrumentalities or entities wholly owned by tribes because the Bureau
does not choose to use this rulemaking as the vehicle for determining
the circumstances under which tribally affiliated entities qualify as
part of the tribe itself or are appropriately exempt from covered laws.
At a minimum, where a covered nonbank becomes subject to a final court
or agency order enforcing a covered law and otherwise satisfies the
requirements of the rule, the Bureau believes that it is appropriate to
register the entity and the order. The Bureau acknowledges that certain
tribally affiliated entities may from time to time believe a court or
agency has erred in imposing a covered order on them, based on grounds
of sovereign immunity or otherwise. However, the Bureau believes that
providing a blanket exemption for all such cases would improperly omit
covered orders that are in fact probative of risk to consumers posed by
entities subject to the Bureau's jurisdiction and thus should be
registered under the final rule.
In requiring registration in connection with such orders, the
Bureau takes no position on the merits of the underlying case,
proceeding, or order, or any related arguments, including any arguments
regarding sovereign immunity or Tribal status. As discussed in the
section-by-section discussion of Sec. Sec. 1092.202(g) and 1092.204(f)
below, the Bureau believes that the voluntary good-faith filing option
provides a satisfactory mechanism for tribally affiliated entities to
avoid the risk of an enforcement action where they decide not to
register an order or submit a written statement based on a good-faith
belief that they are not a covered nonbank or a supervised registered
entity, such as on the grounds that they qualify as part of a federally
recognized tribe and thus as a ``State,'' or that an order is not a
covered order. Also as discussed in those sections, an entity may
choose whether or not it wishes to submit such a filing, and the Bureau
will treat such filings as ``administrative information'' that it will
not publish under Sec. 1092.205(a). Thus, the Bureau does not agree
that application of the rule to tribally affiliated entities would
expose Tribal treasuries to unfounded attacks.
The Bureau declines to finalize an exemption for CUSOs in Sec.
1092.201(d)'s definition of ``covered nonbank.'' \211\ Unlike insured
credit unions, which are exempt from the definition, CUSOs are not
directly subject to the NCUA's full examination and enforcement
authority, and are not chartered or insured by the NCUA.\212\ And while
presently the NCUA requires a federally insured credit union investing
in or lending to a CUSO to obtain a written agreement requiring the
applicable CUSO to ``provide the NCUA with complete access to its books
and records and the ability to review the CUSO's internal controls''
and to supply the NCUA with ``operational and financial information''
via a CUSO Registry,\213\ the NCUA nevertheless has previously
emphasized in Congressional testimony that ``this does not provide
access to examine all of the CUSO's operations.'' \214\ The Bureau
concludes that requiring covered nonbanks that are CUSOs to register
will provide valuable information to the Bureau and others regarding
risks such covered nonbanks may present to consumers. Among other
things, if--as the Bureau intends--the Bureau publishes registry
information, requiring CUSOs that qualify as covered nonbanks to
register with the nonbank registry will facilitate credit union due
diligence in using a CUSO to provide services to the credit union in
connection with the offering or provision of consumer financial
products and services.
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\211\ Like other covered nonbanks, a CUSO would only be subject
to the rule if it qualified as a ``covered nonbank'' under the
criteria established in Sec. 1092.201(d), including the requirement
that the CUSO satisfy the CFPA definition of the term ``covered
person.'' And a CUSO would only be subject to Sec. 1092.204's
written-statement requirements if it qualified as a ``supervised
registered entity'' under the criteria established in Sec.
1092.201(q). Under Sec. 1092.201(q)(1), a CUSO that is subject to
Bureau examination and supervision solely in its capacity as a
service provider and that is not otherwise subject to Bureau
supervision and examination will not be deemed to be a ``supervised
registered entity'' under Sec. 1092.201(q).
As discussed above, entities that are service providers may
nevertheless also be covered persons under the CFPA. For example, a
CUSO, such as a CUSO wholly owned by a credit union, that acts as a
service provider under the CFPA to its covered person credit union
affiliate would itself be deemed to be a covered person as provided
in 12 U.S.C. 5481(6)(B), and thus would qualify as a ``covered
nonbank'' under Sec. 1092.201(d) if the other criteria of that
definition are satisfied.
\212\ See NCUA Office of Inspector General, Report #OIG-20-07,
``Audit of the NCUA's Examination and Oversight Authority Over
Credit Union Service Organizations and Vendors'' 4 (Sept. 1, 2020),
https://ncua.gov/files/audit-reports/oig-audit-cusos-vendors-2020.pdf (OIG Report) (``CUSOs are not directly subject to NCUA
regulation or examination and are not chartered or insured by the
NCUA.'').
\213\ OIG Report at 6-8; see also 12 CFR 712.3; CUSO Registry,
https://ncua.gov/regulation-supervision/regulatory-reporting/cuso-registry.
\214\ OIG Report at 16 (describing NCUA testimony seeking
additional statutory authority from Congress).
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The Bureau also notes that the credit union exemption provided
under Sec. 1092.201(d)(1) applies only to insured credit unions, as
that term is defined by Sec. 1092.101(a), which in turn defines the
term ``insured credit union'' to have the meaning given to that term in
the CFPA.\215\ Thus, this exemption does not apply to credit unions,
such as certain uninsured or privately insured credit unions, that do
not meet the definition of ``insured credit union'' under the CFPA and
the final rule. Such credit unions must comply with the rule's
[[Page 56063]]
registration and other provisions with respect to covered nonbanks and
supervised registered entities where they would otherwise be
applicable.\216\
---------------------------------------------------------------------------
\215\ See 12 U.S.C. 5481(17).
\216\ Likewise, the exemption at Sec. 1092.201(d)(1) would not
apply to any bank or savings association that is not an ``insured
depository institution'' or ``insured credit union'' as defined in
the final rule. See Sec. 1092.101(a), 201(h) of the final rule.
---------------------------------------------------------------------------
The Bureau declines to adopt an express exemption from the
definition of ``covered nonbank'' for institutions supervised by the
Farm Credit Administration. The industry commenter that requested such
an exemption has not shown that it is necessary or appropriate.\217\
The commenter discusses one category of orders that institutions
regulated by the Farm Credit Administration might register under the
rule--namely, orders from the Farm Credit Administration enforcing
compliance with certain Federal consumer financial laws. Under current
Farm Credit Administration policy, however, the agency does not
``identify the institution and/or persons involved'' when it issues an
order enforcing the law against an institution it regulates.\218\ An
order that does not publicly ``[i]dentif[y] a covered nonbank by name
as a party subject to the order'' would not qualify as a ``covered
order'' required to be registered under the final rule.\219\ Moreover,
in the event a person regulated by the Farm Credit Administration has
concerns that it may be deemed a covered nonbank or that any particular
order may be deemed a covered order notwithstanding its good-faith
belief to the contrary, it may file one or more good-faith
notifications under Sec. 1092.202(g) or Sec. 1092.204(f), as
applicable.
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\217\ The industry commenter states that institutions regulated
by the Farm Credit Administration do not fall within other
exclusions from the definition of ``covered nonbank'' in Sec.
1092.202(d), such as the exclusion for a ``person that qualifies as
a covered person based solely on conduct that is the subject of, and
that is not otherwise exempted from, an exclusion from the Bureau's
rulemaking authority under 12 U.S.C. 5517.'' Cf. 12 U.S.C. 5517(k)
(providing that the Bureau ``shall have no authority to exercise any
power to enforce this title with respect to a person regulated by
the Farm Credit Administration,'' but not referring to the Bureau's
rulemaking authority (emphasis added)).
\218\ Farm Credit Administration, Policy Statement: Disclosure
of the Issuance and Termination of Enforcement Documents (effective
Jan. 27, 2005), https://ww3.fca.gov/readingrm/Handbook/_layouts/15/WopiFrame.aspx?sourcedoc={920F0A1E-1839-493C-BE19-
E13751EA460D{time} &file=Disclosure%20of%20the%20Issuance%20and%20Ter
mination%20of%20Enforcement%20Documents.docx&action=default.
\219\ See Sec. 1092.201(e)(1)(i) of the final rule.
---------------------------------------------------------------------------
The Bureau also does not choose to finalize an express exemption
for attorneys or law firms in the final rule. Individual attorneys
already fall outside the definition of covered nonbank under the Sec.
1092.201(d)(4) exclusion for natural persons. Where a law firm
satisfies the final rule's definition of the term ``covered nonbank,''
the Bureau concludes that entry of a covered order against such a
covered nonbank is likely to be probative of risk to consumers, and
that it is appropriate to require registration under such
circumstances, consistent with the Bureau's statutory jurisdiction and
authority. In addition, the final rule does not require the submission
of any information to the nonbank registry that is protected by the
attorney-client privilege or any other legal privilege. As stated in
part III(B), the Bureau's registry is designed to not collect any
protected proprietary, personal, or confidential consumer information,
and thus, the Bureau will not publish, or require public reporting of,
any such information. Further discussion of the publication provisions
of the final rule is provided in the section-by-section discussion of
Sec. 1092.205 below.
With respect to commenters' requests for exemptions for mortgage
lenders and servicers, the Bureau is finalizing a one-time registration
option for NMLS-published covered orders at Sec. 1092.203; this
provision is discussed in more detail in part IV(E) and the section-by-
section discussion of Sec. 1092.203 below. Under the final rule, with
respect to any NMLS-published covered order, a covered nonbank that is
identified by name as a party subject to the order may elect to comply
with the one-time registration option described in Sec. 1092.203 in
lieu of complying with the requirements of Sec. Sec. 1092.202 and
1092.204. The Bureau is adopting this provision in part to address the
concerns of commenters that requiring mortgage lenders and servicers to
register orders that are already available on the public NMLS Consumer
Access website would be duplicative and burdensome.
The Bureau declines to finalize an additional express exemption
from Sec. 1092.202(d) for covered nonbanks that are mortgage lenders
or mortgage servicers. The CFPA expressly subjects these entities to
the Bureau's supervisory authority,\220\ and the legislative history of
the CFPA indicates that Congress viewed this authority as integral to
the Bureau's mandate.\221\ In addition, the Bureau is the only Federal
regulator with supervisory and enforcement jurisdiction over all of
these entities, which are chartered by the various States. The option
provided at Sec. 1092.203 will help eliminate redundant filings by
nonbank mortgage lenders and mortgage servicers while notifying the
nonbank registry when an applicable order has been issued or obtained
against a covered nonbank. Thus, the Bureau believes that requiring
such entities to register covered orders, subject to the one-time
registration option described in Sec. 1092.203 for NMLS-published
covered orders where it applies, would serve the purposes of the final
rule described in part IV above.
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\220\ See 12 U.S.C. 5514(a)(1).
\221\ See, e.g., S. Rep. No. 111-176 at 11-14 (2010) (discussing
the ``mortgage crisis'' that began in the 2000s), 167
(``Specifically, the Bureau will have the authority to supervise all
participants in the consumer mortgage arena, including mortgage
originators, brokers, and servicers and consumer mortgage
modification and foreclosure relief services. These entities
contributed to the housing crisis that led to the near collapse of
the financial system.''), 229 (``The CFPB would have been able to
head off the subprime mortgage crisis that directly led to the
financial crisis, because the CFPB would have been able to see and
take action against the proliferation of poorly underwritten
mortgages with abusive terms.''). As discussed in part II(A) above,
the Bureau was created in the wake of the 2008 financial crisis,
which was caused by a variety of overlapping factors including
systemic malfeasance in the mortgage industry.
---------------------------------------------------------------------------
Final Rule
For the reasons set forth above and as follows, the Bureau is
finalizing Sec. 1092.201(d) as proposed, with revisions to clarify the
treatment of ``related persons.'' The final rule renumbers the items in
Sec. 1092.201(d) accordingly.
The Bureau had proposed to exclude ``related persons,'' as that
term is defined at Sec. 1092.101(a) and CFPA section 1002(25), from
the proposed definition of ``covered nonbank.'' \222\ Final Sec.
1091.201(d)(1) and (2) have been revised to retain this exclusion, but
to clarify these provisions to provide that the final rule does not
include within the definition of ``covered nonbank'' a person who is a
covered person solely by virtue of being a related person as defined in
CFPA section 1002(25). Under CFPA section 1002(25), certain persons are
``deemed to [be] a covered person for all purposes of any provision of
Federal consumer financial law[.]'' \223\ However, CFPA section
1022(c)(7)(A) excludes related persons from the type of covered persons
covered by Bureau rules regarding registration issued under CFPA
section 1022(c)(7) authority.\224\ As discussed at parts III and IV
above, the Bureau is issuing this rule under separate authorities under
CFPA sections 1022 and 1024. However, for clarity, the final rule will
not cover persons who are not subject to the
[[Page 56064]]
Bureau's CFPA section 1022(c)(7)(A) authority. Therefore, the final
rule excludes related persons from the definition of ``covered
nonbank,'' to the extent that they are not covered persons for any
other reason than being deemed covered persons pursuant to CFPA section
1002(25). For example, this exclusion generally would not apply to a
nonbank entity that qualifies as a covered person because it offers or
provides a consumer financial product or service,\225\ even if that
entity also happens to be a related person.
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\222\ 88 FR 6088 at 6108.
\223\ 12 U.S.C. 5481(25)(B).
\224\ 12 U.S.C. 5512(c)(7)(A).
\225\ See 12 U.S.C. 5481(6)(A).
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Section 1092.201(e) Covered Order
Proposed Rule
The Bureau proposed Sec. 1092.201(e) to define the term ``covered
order.'' The proposal would have defined the term to include only
orders that are both public and final. The term ``public'' was defined
at proposed Sec. 1092.201(k). The proposed term ``covered order'' was
intended to cover only final settlement or consent orders, or final
agency or court orders resulting from litigation or adjudicated agency
proceedings. By ``final'' order, the proposal meant to exclude such
orders as preliminary injunctions, temporary restraining orders, orders
partially granting and partially denying motions to dismiss or summary-
judgment motions, and other interlocutory orders.\226\ The proposed
term would also have excluded temporary cease-and-desist orders that
come into effect pending the resolution of an underlying contested
matter but would have included a related final cease-and-desist or
other order resolving the matter. The proposed term would have also
excluded notices of charges, accusations, or complaints that are part
of disciplinary or enforcement proceedings but do not constitute a
final order. The Bureau proposed to include orders that are final by
their own terms or under applicable law, even where Federal, State, or
local law allows for the appeal of such orders. Proposed Sec.
1092.201(f), defining the term ``effective date,'' would have addressed
situations where an order is subject to a stay following issuance. The
Bureau sought comment on whether the term ``final'' should be further
defined in the regulatory text.
---------------------------------------------------------------------------
\226\ See, e.g., Gelboim v. Bank of Am. Corp., 574 U.S. 405,
408-09 (2015) (discussing the meaning of ``final decision'' under 28
U.S.C. 1291).
---------------------------------------------------------------------------
The proposed definition included orders issued by either an agency
or a court. The proposal would have clarified that the definition would
include an otherwise covered order whether or not issued upon consent.
Accordingly, under the proposal, ``covered orders'' could have been
issued upon consent or settlement. They could also have been issued
after the filing of a lawsuit or complaint and a process of litigation
or adjudication. The proposed term would not have included corporate
resolutions adopted by an entity and not issued by an agency or court.
Nor would the proposed term have generally included licenses, including
conditional licenses; but the term would have included an order
suspending, conditioning, or revoking a license based on a violation of
law. Nor would the proposed term have included related stipulations or
consents, where those documents are not incorporated into or otherwise
made part of the order.
Proposed Sec. 1092.201(e)(1) would also have included, as a
component of the definition of the term ``covered order'' for a given
covered nonbank, a requirement that the order identify the covered
nonbank by name as a party subject to the order. Thus, for example,
orders that indirectly refer to a covered nonbank as an ``affiliate''
of a named party, but do not name the covered nonbank as itself a party
subject to the order, would not have been covered orders under proposed
Sec. 1092.201(e) with respect to the covered nonbank. Nor would orders
that apply to a covered nonbank only as a ``successor and assign'' of a
named party, where the order does not expressly identify the covered
nonbank by name as a party subject to the order. The proposal would
have included in the definition a covered nonbank that is listed by
name as a party somewhere within the body of the order, even if the
covered nonbank is not listed in the order's title or caption. In other
words, to fall within the proposed Sec. 1092.201(e) definition, it
would have been sufficient that the order identifies the covered
nonbank by name as a party subject to the order even if the covered
nonbank is not listed in the title or caption of the order, or as the
primary respondent, defendant, or subject of the order. A covered
nonbank may have satisfied the proposed definition even if the issuing
agency or court did not list the covered nonbank as a party in related
press releases or internet links.
Proposed Sec. 1092.201(e)(2) would have included, as a component
of the definition of the term ``covered order,'' a requirement that the
order have been issued at least in part in any action or proceeding
brought by any Federal agency, State agency, or local agency. The
Bureau believed that limiting the registration requirement to orders
involving such agencies would provide sufficient information to support
Bureau functions. This proposed requirement would have included orders
issued by the Bureau itself, the ``prudential regulators,'' as that
term is defined at CFPA section 1002(24),\227\ and any ``Executive
agency,'' as that term is defined at 5 U.S.C. 105. The proposed
requirement would have also included orders issued by ``State
agencies'' as defined at proposed Sec. 1092.201(n) and ``local
agencies'' as defined at proposed Sec. 1092.201(i). An order issued by
a local agency would have satisfied this proposed requirement, but such
an order would not have satisfied the requirement set forth in proposed
Sec. 1092.201(e)(4) (described below) unless the order imposed the
obligations described in proposed Sec. 1092.201(e)(3) on the covered
nonbank based on one or more violations of a covered law. While certain
Federal and State laws were included in the Sec. 1092.201(c)
definition of the term covered law, local laws were not.
---------------------------------------------------------------------------
\227\ 12 U.S.C. 5481(24).
---------------------------------------------------------------------------
Proposed Sec. 1092.201(e)(3) further would have included, as a
component of the definition of the term ``covered order,'' a
requirement that the order contain public provisions that impose
obligations on the covered nonbank to take certain actions or to
refrain from taking certain actions. Such obligations may have
included, for example, injunctions or other obligations to cease and
desist from violations of the law; to pay civil money penalties,
refunds, restitution, disgorgement, or other money; to amend certain
policies and procedures, including but not limited to instances where
the order requires submission of the proposed amendments to policies
and procedures for nonobjection; to maintain records or to provide them
upon request; or to take or to refrain from taking other actions. An
order suspending, conditioning, or revoking a license based on a
violation of law would have met this requirement. An order that lacks
any public provision imposing such an obligation on the covered nonbank
would not have met the requirement in proposed Sec. 1092.201(e)(3).
The Bureau explained that an example of the type of orders that might
not have satisfied this requirement would be a declaratory judgment
order finding that an entity has violated the law, but not imposing any
remedial obligations. Other examples, the Bureau explained, might
include orders whose only public provisions are releases and general
contractual terms frequently contained in consent orders, such as
severability and counterpart signature provisions, but only to the
extent these provisions
[[Page 56065]]
do not impose any other obligations described by proposed Sec.
1092.201(e)(3).
The proposed Sec. 1092.201(e)(3) requirement would have excluded
order provisions that are not ``public'' as that term was defined in
proposed Sec. 1092.201(k). For example, obligations imposed by non-
public provisions that constitute confidential supervisory information
of another agency would not have been considered when determining
whether a particular order satisfies this proposed requirement.
Proposed Sec. 1092.201(e)(3) would have also excluded orders that lack
any public provision imposing an obligation on the covered nonbank to
take certain actions or to refrain from taking certain actions. The
Bureau explained that, for example, an order that describes unlawful
conduct but does not contain any such public provisions imposing
obligations described at proposed Sec. 1092.201(e)(3) would not have
satisfied this requirement. The Bureau proposed to exclude from the
rule's information-collection requirements nonpublic orders and
portions of orders in order to help protect the confidential processes
of other agencies, including their supervisory processes. The Bureau
was concerned that requiring registration of confidential supervisory
information might have interfered with the functions and missions of
other agencies and did not believe that requiring such registration was
necessary to accomplish the purposes of the proposed rule. The Bureau
noted that, to the extent that it has a need to review nonpublic orders
or nonpublic portions of orders, the Bureau may seek access to relevant
information through inter-agency information sharing that protects
applicable privileges and confidentiality. In addition, as discussed in
the section-by-section discussion of Sec. 1092.201(m) below, the
Bureau believed that publication of nonpublic information, including
but not limited to confidential supervisory information of the Bureau
or other agencies, would be inappropriate.
Proposed Sec. 1092.201(e)(4) would have also included, as a
component of the definition of the term covered order, a requirement
that the order impose one or more of the obligations described in
proposed Sec. 1092.201(e)(3) on the covered nonbank based on an
alleged violation of a covered law. The Bureau explained that, under
the proposal, a covered order need not have included an admission of
liability or any particular factual predicate. The Bureau anticipated
that agency and court orders would vary widely in form and content,
depending in part on such matters as the relevant individual laws being
enforced, the historical practices of the various enforcement agencies,
and the negotiations and facts and circumstances underlying specific
orders. Because of these expected variations in form and content in the
orders that the Bureau expected to be registered under the proposal,
the Bureau believed that requiring registration only of orders that
contain an admission of liability, or a statement setting forth certain
types of findings or other factual predicates underlying the order,
would omit relevant orders. The Bureau believed that an order that
contains neither an admission of liability nor a statement setting
forth the factual predicate underlying the order may nevertheless be
probative of risks to consumers of the type that the Bureau is
obligated to monitor.
The Bureau explained that, for purposes of this proposed
definition, an obligation would have been ``based on'' an alleged
violation where the order identifies the covered law in question,
asserts or otherwise indicates that the covered nonbank has violated
it, and imposes the obligation on the covered nonbank at least in part
as a result of the alleged violation.\228\ This would have included,
for example, obligations imposed as ``fencing-in'' or injunctive
relief, so long as those obligations were imposed at least in part as a
result of the entity's violation of a covered law. This element of the
proposed definition would also have been satisfied, for example, by any
obligation imposed as part of other legal or equitable relief granted
with respect to the violation, as well as by any obligation imposed in
order to prevent, remedy, or otherwise address a violation of a covered
law, or the conditions resulting from the violation. The Bureau noted,
however, that an order that does not identify a covered law as at least
one of the legal bases for the obligations it imposes on a covered bank
would not satisfy the requirement set forth at proposed Sec.
1092.201(e)(4). The Bureau explained that an order may identify a
covered law as a legal basis for the obligations imposed by referencing
another document, such as a written opinion, stipulation, or complaint,
that shows that a covered law served as the legal basis for the
obligations imposed in the order. The Bureau, however, stated that the
requirements of proposed Sec. 1092.201(e)(4) would not have been
satisfied where the legal basis for the obligations imposed is
specified only in extrinsic documents not referenced in the order at
issue, such as a press release or blog post.
---------------------------------------------------------------------------
\228\ The Bureau explained that an obligation imposed based on
multiple violations, some of covered laws and some of other laws,
would qualify as an ``obligation[ ] . . . based on an alleged
violation of a covered law'' within the meaning of proposed Sec.
1092.201(e)(4), even if the violations of the non-covered laws would
themselves have sufficed to warrant the imposition of the
obligation.
---------------------------------------------------------------------------
The Bureau explained that the proposed Sec. 1092.201(e)(4)
requirement would have included an order issued by an agency exercising
any powers conferred on such agency by applicable law to enforce a
covered law, so long as the order imposes one or more of the
obligations described in proposed Sec. 1092.201(e)(4) on the covered
nonbank based on an alleged violation of a covered law. For example,
the Bureau noted, certain Federal agencies may issue an order
predicated on violation of a Federal consumer financial law under the
authority of another enabling enforcement or licensing statute. Among
other examples, an appropriate Federal banking agency may issue orders
in connection with certain violations of Federal consumer financial law
under section 8 of the Federal Deposit Insurance Act (12 U.S.C. 1818),
the Administrator of the National Credit Union Administration may issue
such orders under the Federal Credit Union Act (12 U.S.C. 1751 et
seq.), and the Securities and Exchange Commission may issue such orders
under the Federal securities laws. The Bureau noted that such an order
issued in connection with violations of Federal consumer financial law
would satisfy the requirement set forth in proposed Sec.
1092.201(e)(4) in cases where the order imposes the obligations
described in proposed Sec. 1092.201(e)(3) on the covered nonbank based
on one or more violations of Federal consumer financial law (or another
covered law).
The Bureau noted that other agencies also may rely upon their
enforcement authorities under other laws in issuing orders in
connection with violations of FTC Act section 5 (and rules and orders
issued thereunder). For example, an appropriate Federal banking agency
may issue orders in connection with violations of FTC Act section 5 by
relying on its enforcement authorities under section 8 of the Federal
Deposit Insurance Act (12 U.S.C. 1818). The Bureau explained that such
an appropriate Federal banking agency order would have satisfied the
requirement set forth in proposed Sec. 1092.201(e)(4) in cases where
the order imposed the obligations described in proposed Sec.
1092.201(e)(3) on the covered nonbank based on one or more violations
of the prohibition on unfair or deceptive acts or practices under FTC
Act section 5 (or a rule or order issued for the purpose of
implementing that
[[Page 56066]]
prohibition) or another covered law. The order, the Bureau explained,
would satisfy the requirement provided in proposed Sec. 1092.201(e)(4)
even though the FTC Act does not expressly authorize the Federal
banking agencies to enforce FTC Act section 5.
Similarly, the Bureau considered an obligation to be ``based on''
an alleged violation of a covered law where: (i) a State agency issues
an order pursuant to certain State statutes that treat violations of
Federal or State laws as violations of the State statute; \229\ and
(ii) the order (or, as discussed above, an extrinsic document
referenced in the order) states that one or more violations of a
covered law (e.g., a Federal consumer financial law) served as the
legal basis for imposing the obligations under such statute. In such
cases, while the majority of these State laws would not themselves have
qualified as covered laws under proposed subpart B--and therefore were
not captured in appendix A--the underlying law violation would have so
qualified. The Bureau believed including such instances was important,
as it understood that State agencies sometimes issue orders in
connection with violations of Federal consumer financial law relying on
their authorities under these State licensing and other statutes that
do not themselves satisfy the definition of covered law. Importantly,
however, such an order would not have met the proposed definition of
``covered order'' unless the order itself (or, as discussed above, an
extrinsic document referenced in the order) stated that a covered law
served as the legal basis for the obligations imposed in the order. A
State order that relied upon such a statute, but that did not identify
a covered law as the legal basis for the obligations imposed
thereunder, would not have satisfied the requirement set forth in
proposed Sec. 1092.201(e)(4).\230\ Nor would an order that imposed
obligations solely based on violations of other laws, even laws that
are analogous to covered laws but do not themselves qualify as covered
laws under proposed subpart B. Section 1092.201(e)(4), the Bureau
explained, was intended to capture only orders that impose obligations
based upon an agency's or court's determination that the applicable
covered nonbank has actually violated the covered law itself.
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\229\ See, e.g., Wash. Rev. Code sec. 19.146.0201(11).
\230\ The Bureau explained that the obligations imposed in an
order issued or obtained by a State agency under a State law that
incorporates Federal law may be ``based on'' an alleged violation of
Federal consumer financial law under proposed Sec. 1092.201(e)(4),
even if the Federal consumer financial law itself does not expressly
authorize that State agency to enforce it. The Bureau noted that, so
long as the State agency states that the relevant order provisions
are based on one or more violations of the Federal consumer
financial law, it would be a covered order under the proposed
definition.
---------------------------------------------------------------------------
Under proposed Sec. 1092.201(e)(5), the proposal would also have
defined ``covered order'' to mean an order that has an effective date
on or later than January 1, 2017. The Bureau believed that limiting the
registration requirement to orders with more recent effective dates
would provide sufficient information to support Bureau functions. The
Bureau explained that many orders issued by Federal, State, and local
agencies do not have expiration dates or do not expire until after the
passage of many years. While the Bureau believed that many earlier-in-
time orders remain highly probative of ongoing risks to consumers and
could assist the Bureau in carrying out its market-monitoring
obligations--as well as assist the Bureau in assembling an effective
nonbank registry--the Bureau preliminarily concluded that
considerations of administrative efficiency favored focusing on orders
issued within approximately the first several years preceding any final
rule. The Bureau sought comment on this proposed approach.
Finally, proposed Sec. 1092.201(e) would have provided that the
term ``covered order'' would not include an order issued to a motor
vehicle dealer that is predominantly engaged in the sale and servicing
of motor vehicles, the leasing and servicing of motor vehicles, or
both, within the meaning of CFPA section 1029(a),\231\ except to the
extent such order is in connection with the functions that are excepted
from the application of CFPA section 1029(a) as described in CFPA
section 1029(b).\232\ This provision would have excluded certain orders
issued to motor vehicle dealers that are described in CFPA section
1029(a), and would have incorporated the definitions provided at CFPA
section 1029(f).\233\ CFPA section 1029(a) establishes a statutory
exclusion from the Bureau's authority; CFPA section 1029(b) excepts
certain functions of motor vehicle dealers from that exclusion.\234\
The Bureau noted, therefore, that an order that is issued to a motor
vehicle dealer that relates to the functions described in section
1029(a)--that is, the sale and servicing of motor vehicles, the leasing
and servicing of motor vehicles, or both--generally would not have been
a ``covered order'' under the proposed definition. However, if the
order related at least in part to a function excepted from the
application of CFPA section 1029(a) as described in CFPA section
1029(b), this limitation would not apply, and the order would have
qualified as a ``covered order.'' The functions described in 1029(b)
include: ``provid[ing] consumers with any services related to
residential or commercial mortgages or self-financing transactions
involving real property;'' ``operat[ing] a line of business--(A) that
involves the extension of retail credit or retail leases involving
motor vehicles; and (B) in which--(i) the extension of retail credit or
retail leases are provided directly to consumers; and (ii) the contract
governing such extension of retail credit or retail leases is not
routinely assigned to an unaffiliated third party finance or leasing
source;'' and ``offer[ing] or provid[ing] a consumer financial product
or service not involving or related to the sale, financing, leasing,
rental, repair, refurbishment, maintenance, or other servicing of motor
vehicles, motor vehicle parts, or any related or ancillary product or
service.'' \235\
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\231\ 12 U.S.C. 5519(a).
\232\ 12 U.S.C. 5519(b).
\233\ 12 U.S.C. 5519(f).
\234\ 12 U.S.C. 5519(a), (b).
\235\ 12 U.S.C. 5519(b).
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Comments Received
The Bureau specifically sought comment on whether certain types of
orders should be categorically excluded from registration.\236\
Commenters stated that the registry should not collect or publish
information regarding consent orders. Commenters stated that including
consent orders would unfairly include orders that do not involve any
adjudication of wrongdoing; that such orders often are based on errors
or inaccurate or contested allegations, or result from a change in a
regulator's interpretation of the law; and that such orders often
contain provisions clearly stating that the entity does not concede or
admit liability. Commenters also stated that companies often only
settle matters in order not to incur the cost, delay, and uncertainty
of litigation, that consent orders often involve matters that might not
have been determined to be violations if fully litigated, and that
regulators are often uncertain about whether they can prove the
violations alleged. Industry commenters stated that consent orders
represent only a crude predictor of risk, and including them would
provide an inaccurate, inconsistent, or misleading picture of risk to
consumers. Industry commenters stated that including consent orders
[[Page 56067]]
would penalize companies that have agreed to settle matters instead of
litigating them, and that including consent orders would be unfair
because it would lead to registering only those businesses who are not
able to afford defending themselves from government attacks.
---------------------------------------------------------------------------
\236\ See 88 FR 6088 at 6110.
---------------------------------------------------------------------------
Commenters, including the SBA Office of Advocacy, specifically
objected to the Bureau's publication of consent orders, stating that
such publication would be unfair because it would have negative
reputational consequences and lead to a decrease of business; would
prejudice the entities involved; would otherwise provide inaccurate
information to the Bureau and to consumers; would lead to higher
compliance costs; would likely encourage class action lawsuits and
spurious litigation claims; and could result in unintended
consequences.
Commenters stated that, in particular, publication of consent
orders would deter covered nonbanks from consenting to covered orders
in future. Commenters stated that the deleterious effects of being
identified on the registry would have a chilling effect on consents and
would discourage settlement in future proceedings, including those
brought by agencies other than the Bureau, and would induce covered
nonbanks to litigate enforcement or civil actions instead of settling.
Thus, commenters argued, the registry would prolong litigation, raise
costs, and worsen outcomes, and could be disruptive to the State and
local oversight process, in particular as regulators might become less
likely to bring enforcement actions. Commenters stated that these
effects would be especially pronounced for smaller settlements. The
joint letter from State regulators stated the imposition of the
proposed written-statement requirements, in particular, could frustrate
a State regulator's ability to effectively resolve supervisory matters
or to finalize enforcement matters. An industry commenter stated that
the proposed registry would create a disincentive for entities to self-
report violations, for fear of becoming subject to the proposed rule's
registration requirements. Commenters stated that because of these
effects, the registry would lead to additional harm to consumers. But a
consumer advocate commenter stated that the argument that the registry
will deter entities from being cooperative or forthcoming is an
inappropriate threat not to cooperate that should not be rewarded with
lax oversight.
Industry commenters stated that the proposed registry would be
unfair because other companies are likely engaging in conduct similar
to the conduct that resulted in a covered order but are not getting
caught.
An industry commenter objected to the Bureau's proposal to register
orders issued or obtained by the Bureau itself, stating that an
additional registry of such orders would be superfluous.
Commenters objected to the Bureau's proposal to register orders
issued by State agencies and local agencies, and by State courts, and
to impose written-statement requirements in connection with such
orders. Commenters stated that the Bureau lacks authority, expertise,
and knowledge of relevant circumstances applicable to such orders, and
has no legitimate interest in them. An industry commenter indicated
that the proposal would give the Bureau enforcement power over other
agencies' orders for violations of State and Federal laws that the
Bureau has no jurisdiction to enforce. A Tribal commenter stated that
including such orders in a public database would interfere with the
other government's sovereign decision regarding whether and how to
publish its own orders. An industry commenter stated that orders issued
by local agencies should not be included because local regulatory and
enforcement agencies may be subject to more local, provincial issues,
local control, and local political trends, and be less likely to
produce orders that are based on broader consumer financial protection
issues.
A Tribal commenter stated that the definition of ``covered order''
should be amended to require that the order be ``enforceable'' in
addition to final and public. The Tribal commenter also stated that the
rule should clarify when an order is issued ``at least in part'' in an
action or proceeding brought by an applicable agency.
An industry commenter stated that it was unclear under the proposed
definition whether nonpublic NCUA letters of recommendation would be
covered.
An industry commenter stated the Bureau should further clarify the
definition of ``covered order'' because State agencies vary in their
approaches to enforcing and interpreting orders. The commenter stated
that one State agency may consider a final order that involves a
corrected issue to be closed, while another State may not.
The Bureau specifically sought comment on the scope of proposed
Sec. 1092.201(e)(1), which included a requirement that the covered
order identify a covered nonbank by name as a party subject to the
order, and whether proposed Sec. 1092.201(e)(1) should also include
affiliates, successors and assigns, or other methods of identifying
entities subject to orders, even though they are not expressly named in
the order. A consumer advocate commenter stated that the rule should
apply to successors and assigns, not just named parties as provided
under proposed Sec. 1092.201(e)(1).
Commenters stated generally that the proposed registry was
overbroad and too prescriptive. Industry commenters suggested that the
Bureau attempt to limit those covered orders that require registration
to orders that involve more serious or direct consumer harm, as opposed
to those that involve only clerical or administrative errors, or that
do not meet a minimum threshold of harm to consumers. Commenters stated
that the proposed registry should not lump small orders together with
large important orders. Commenters stated that the proposal's approach
would result in overreporting of minor infractions that would confuse
or mislead the public, overwhelm the nonbank registry, or render the
nonbank registry less useful, and would improperly impose reputational
harm.
Under proposed Sec. 1092.201(e)(5), the proposal would have
defined ``covered order'' to mean an order that has an effective date
on or later than January 1, 2017. A consumer advocate commenter stated
that the term ``covered order'' should include all orders for 10 years
prior to the effective date of the final rule. The commenter stated
that this change would correspond with proposed Sec. 1092.202(e),
which would have provided that a covered order shall cease to be a
covered order for purposes of this subpart as of the later of: (1) ten
years after its effective date; or (2) if the covered order expressly
provides for a termination date more than ten years after its effective
date, the expressly provided termination date.
An industry commenter stated that the 2017 date should be moved
forward to 2019 or later to better distinguish nonbanks with only a few
consent orders, or that have taken appropriate remedial steps related
to the order, from actors with a clear record of consistent consumer or
other abuse.
Industry commenters stated that the nonbank registry should not
apply to prior orders at all, but only to orders issued after the
effective date of the rule. An industry commenter stated that the
proposal would violate the right to due process, as entities would not
have agreed to consent to covered orders if they had been aware of the
Bureau's registry. Another commenter stated that the proposal's
registration of existing orders contravened legal tradition barring ex
post facto laws.
[[Page 56068]]
Tribal and industry commenters stated that orders should not be
considered ``final'' as provided under proposed Sec. 1092.201(e) until
all avenues of appeal have been exhausted.
A joint letter by State regulators stated that the proposal
introduced other complexities and confusion for covered entities and
consumers due to ambiguities relating to the rule's registration
requirement, and that these ambiguities could not be satisfactorily
addressed because most covered orders will not be issued by the Bureau.
In particular, the joint comment letter questioned how the same or
similar violations across different business lines would be treated,
and how the registration requirements would apply if multiple States
take unilateral action for a firm's violation of the same consumer
financial law. The comment expressed concern that nonbanks would be
unable to understand or comply with the obligations of the rule due to
questions about if, when, and how a nonbank might be required to report
an order to the Bureau.
An industry commenter stated that the Bureau should clarify that an
affiliate of a covered person need not register with respect to a
covered order unless it is itself named in the covered order.
The Bureau received a question in interagency consultation
regarding whether ``assurances of voluntary compliance'' would be
covered orders.
Response to Comments Received
The Bureau is finalizing the definition of ``covered order'' to
include an otherwise covered order whether or not issued upon consent.
Accordingly, ``covered orders'' may be issued upon consent or
settlement. The Bureau is adopting this approach for several reasons.
First, under Sec. 1092.201(e)(1)(iv), the final rule will only apply
to orders in which an agency or court has imposed applicable
obligations on the covered nonbank based on an alleged violation of a
covered law. Where a court or agency makes a decision to issue an order
based on one or more violations of a covered law, such an order is
clearly relevant to and probative of risk to consumers (including risks
related to developments in markets for consumer financial products and
services), whether or not the entity agrees with the issuing agency or
court's determination. The Bureau acknowledges that certain covered
nonbanks may from time to time believe a court or agency has erred in
issuing or obtaining a covered order against them, even in cases where
the entity has consented to the imposition of the order. For example,
the entity may believe that the order is based on inaccurate or
contested allegations of fact or law, or that it resulted from an
improper change in a regulator's interpretation of the law. The Bureau
concludes that a covered order is likely probative of risk to consumers
even in such cases. In most cases, the fact that an agency has devoted
its limited resources to an action to enforce a covered law, and a
covered nonbank has agreed to take on obligations based on the alleged
violation rather than litigate the issue, indicates a heightened
likelihood that the covered nonbank may present risks to consumers that
may warrant the Bureau's attention, even if the covered nonbank
believes that it had arguments for why it was not liable. Excluding
consent orders or orders that do not contain an admission of liability
from the rule would unduly restrict the information that would be
collected regarding many orders that are highly probative of risk to
consumers, such as orders based upon clearly established and
significant violations of covered laws, and would limit the rule's
usefulness. Collecting information about consent orders also will
assist the Bureau in identifying and evaluating patterns of risks
associated with orders across companies, industries, products, and
regions. For example, in conducting its assessments of consumer risk,
the Bureau will often find it useful to know whether a covered nonbank,
or type of nonbank, has (or has not) become subject to multiple orders
across a period of time, or from multiple agencies, or based on
violations of multiple covered laws, or across product lines, or in
particular geographic regions, even where such orders were entered into
upon consent. Thus, it is appropriate to collect information about such
orders and the entities subject to such orders, and to publish such
information as provided under Sec. 1092.205.
Second, the Bureau's collection of information regarding consent
orders, and its potential republication of those consent orders, does
not imply any admission of fault or additional liability by the
applicable covered nonbank. The Bureau acknowledges that many consent
orders do not contain admissions of wrongdoing, and that entities may
consent to the imposition of such orders while disagreeing with the
findings of the agency or court. Such orders may contain provisions
clearly stating that the entity does not concede or admit liability.
However, the final rule is intended to provide the Bureau with the
ability to monitor relevant orders and to inform relevant nonbank
registry users and the public about them. As stated in the notice of
proposed rulemaking,\237\ the Bureau believes that requiring
registration only of orders that contain an admission of liability, or
a statement setting forth certain types of findings or other factual
predicates underlying the order, would omit relevant orders. The Bureau
believes that an order that contains neither an admission of liability
nor a statement setting forth the factual predicate underlying the
order may nevertheless be probative of risks to consumers of the type
that the Bureau is obligated to monitor. Just as entities may consent
to an order in order not to incur the cost, delay, and uncertainty of
litigation, so to a Federal agency, State agency, or local agency may
accept an entity's consent to an order without requiring an admission
of liability, for similar reasons. Therefore, the final rule includes
as ``covered orders'' consent orders as well as orders obtained after a
contested or litigated hearing, lawsuit, or other process. As discussed
in the description of the proposal above, for purposes of this
definition, an obligation is ``based on'' an alleged violation where
the order identifies the covered law in question, asserts or otherwise
indicates that the covered nonbank has violated it, and imposes the
obligation on the covered nonbank at least in part as a result of the
alleged violation, even where the order contains provisions clearly
stating that the entity does not concede or admit liability. But the
Bureau's collection and potential publication of information about a
consent order does not somehow imply that the covered nonbank admits
liability with respect to the order. Nor does the final rule otherwise
affect the entity's obligations under the order or any other liability
that may result from the matters addressed by the order.
---------------------------------------------------------------------------
\237\ 88 FR 6088 at 6111.
---------------------------------------------------------------------------
Third, the Bureau concludes that its potential publication of
information related to consent orders as described at Sec. 1092.205
will not impose unfair costs on consenting entities. As discussed in
part VIII, the final rule will not make public any non-public orders,
limiting the likely costs on covered nonbanks of publishing consent
orders. Nor will the Bureau's potential publication of information
relating to consent orders as described at Sec. 1092.205 provide
inaccurate, inconsistent, or misleading information to consumers, as
the Bureau will simply be collecting and presenting factual information
regarding such orders that are already published (or required to be
published) elsewhere. For
[[Page 56069]]
further discussion of publication, see the section-by-section
discussion of Sec. 1092.205 below.
Fourth, the Bureau disagrees with the assertions by commenters that
the potential deleterious effects of being listed on the registry will
materially deter entities from agreeing to consent orders or otherwise
impair the ability of other agencies to administer and enforce the laws
subject to their jurisdiction. Covered orders are already public. The
Bureau expects that the disincentive effect of the additional
visibility for these orders via the nonbank registry would be minimal
and would be outweighed by benefits of the registry. Likewise, the
Bureau does not believe that the additional burden associated with
either the information-collection or the written-statement requirements
of the final rule is so great as to deter a covered nonbank from self-
reporting, or from entering into a consent agreement or stipulation
that would otherwise be in its best interests.
Covered orders are probative of risk to consumers (including risks
related to developments in markets for consumer financial products and
services), even if it may be true that not all violations of covered
laws result in covered orders. The Bureau still has an interest in
collecting and publishing information regarding such covered orders,
and in imposing the other requirements of the rule in connection with
such orders, even if there are other violations of covered laws
occurring that the nonbank registry does not detect.
The Bureau is finalizing the definition of the term ``covered
order'' to include orders issued or obtained by the Bureau itself. The
Bureau believes the final rule's requirements will provide additional
useful information in connection with such orders. The identifying
information submitted by covered nonbanks, and the final rule's
obligation to update that information in the event of changes, could
provide new and useful information to the Bureau and the registry. For
example, a company that moves or changes its name will be required to
update the registry. Also, Sec. 1092.204's written-statement
requirements will provide new information on an annual basis about the
Bureau's orders and the applicable supervised registered entity's
compliance with them, including the name and title of the supervised
registered entity's attesting executive. In addition, including orders
issued or obtained by the Bureau will contribute to the registry's
comprehensiveness, which in turn will make the registry a more useful
resource for the Bureau and others in conducting research regarding
general trends in the enforcement of consumer financial protection
laws.\238\
---------------------------------------------------------------------------
\238\ See also the section-by-section discussion of Sec.
1092.201(k) below regarding the exclusion of orders issued or
obtained by the Bureau from the final rule's definition of the term
``NMLS-published covered order.''
---------------------------------------------------------------------------
Final Sec. 1092.201(e) includes orders issued or obtained by State
or local agencies. As also discussed in the section-by-section
discussion of Sec. 1092.201(c) above, the final rule will not provide
the Bureau with enforcement power over other agencies' orders or with
authority with respect to violations of Federal and State laws that the
Bureau lacks jurisdiction to enforce. The Bureau defers to other
agencies' and courts' interpretations of the orders they have issued or
obtained under their own authority against persons subject to their
jurisdiction, and to those agencies' and courts' decisions about
whether and how to enforce such orders. The Bureau has not and does not
assert that it may enforce all covered orders or covered laws, nor is
the final rule a mechanism for it to do so. (To be sure, the definition
of ``covered order'' does encompass certain orders that the Bureau may
enforce, such as its own orders issued under Federal consumer financial
law or the other laws described in Sec. 1092.201(c)(2). But the final
rule does not affect the Bureau's authority to do so.) \239\
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\239\ Excluding orders issued or obtained by State agencies from
the definition of ``covered order'' would also improperly exclude
orders issued or obtained by State attorneys general and State
regulators under 12 U.S.C. 5552.
---------------------------------------------------------------------------
Instead, the purposes of the final rule are as described herein,
including to inform the Bureau regarding risks related to covered
orders issued or obtained by State agencies and local agencies.\240\
The Bureau has a legitimate interest in learning about such orders and
the entities that are subject to them. Collecting and registering such
orders will assist with monitoring for risks to consumers in the
offering or provision of consumer financial products and services. The
Bureau concludes that the information that will be provided via the
nonbank registry regarding orders issued or obtained by State agencies
and local agencies will inform the Bureau's functions even though the
Bureau may lack jurisdiction to enforce the order and may not be
involved in the issuance or implementation of the order. For the
reasons described in part IV, covered orders are nevertheless probative
of risk to consumers (including risks related to developments in
markets for consumer financial products and services) that is of
concern to the Bureau, and the Bureau has a legitimate interest in
becoming informed regarding such orders even where they have been
issued or obtained by State or local agencies (as opposed to Federal
agencies). And the identifying information submitted to the nonbank
registry will help the Bureau identify and monitor the covered nonbanks
that are subject to such orders, which will also inform the Bureau's
functions.
---------------------------------------------------------------------------
\240\ For discussion of the purposes of the final rule's
written-statement requirements, see part IV(D) and the section-by-
section discussion of Sec. 1092.204 below.
---------------------------------------------------------------------------
Nothing in the CFPA confines the risks to consumers that must be
monitored by the Bureau to risks related solely to the Federal
Government, or solely to orders issued or obtained by Federal agencies.
To the contrary, the Bureau is tasked with monitoring a wide range of
sources to inform its assessments of risks to consumers, specifically
including matters within the jurisdiction of State agencies and local
agencies. For example, as discussed in part IV(B), CFPA section
1024(b)(2)(D) provides that the Bureau, in making risk-based
supervisory prioritization determinations, shall take into account
``the extent to which . . . institutions are subject to oversight by
State authorities for consumer protection.'' \241\ The existence of one
or more orders issued or obtained by the types of State agencies
described in the final rule in connection with violations of covered
law would provide important and directly relevant information regarding
the extent to which nonbanks are subject to oversight by State
authorities for consumer protection.\242\ Likewise, in allocating its
resources to perform market monitoring, the Bureau may consider ``the
legal protections applicable to the offering or provision of a consumer
financial product or service, including the extent to which the law is
likely to adequately protect consumers.'' \243\ As the types of ``legal
[[Page 56070]]
protections'' to be considered by the Bureau are not restricted solely
to protections related to Federal agencies, the Bureau concludes that
it may consider the information that will be obtained under the final
rule regarding covered orders issued or obtained by State agencies or
local agencies under this provision. Another provision, CFPA section
1024(b)(3), requires coordination with State supervisory authorities
with respect to nonbanks supervised by the Bureau.\244\ The final rule
will enhance the Bureau's ability to stay informed and up to date
regarding recent covered orders issued or obtained by State agencies
and local agencies against covered nonbanks that are subject to its
jurisdiction, and thus will facilitate coordination with relevant State
authorities.
---------------------------------------------------------------------------
\241\ 12 U.S.C. 5514(b)(2)(D).
\242\ In addition, as discussed in part IV(B), the Bureau
concludes that the existence of an order issued or obtained by a
State agency or a local agency requiring registration under the
final rule would be probative of risks to consumers as described in
12 U.S.C. 5514(b)(2)(C) (referring to ``the risks to consumers
created by the provision of such consumer financial products or
services''), and determines that the existence of such an order is a
relevant factor for the class of covered persons subject to the
final rule under 12 U.S.C. 5514(b)(2)(E) (providing that the Bureau
shall also take into account ``any other factors that the Bureau
determines to be relevant to a class of covered persons''). Thus,
knowledge of such orders issued or obtained by State agencies or
local agencies will be relevant information in prioritizing and
scoping the Bureau's supervisory activities under CFPA section
1024(b) with respect to the covered persons subject to that
provision.
\243\ 12 U.S.C. 5512(c)(2)(C).
\244\ 12 U.S.C. 5514(b)(3).
---------------------------------------------------------------------------
For similar reasons, the Bureau concludes that it is appropriate to
impose the final rule's written-statement requirements in connection
with covered orders issued or obtained by State agencies and local
agencies against supervised registered entities. The Bureau disagrees
with commenters' assertions that the Bureau lacks authority to impose
these requirements with respect to such State agency and local agency
orders or that such imposition is otherwise inappropriate. As discussed
above, such orders are probative of the risks to consumers that the
Bureau is tasked with detecting and assessing as part of its
supervisory work. Violations of such orders may be probative of
heightened risks for consumers and borrowers that are relevant to the
Bureau's exercise of its supervisory authority; thus, for the reasons
discussed in part IV(D) above and the section-by-section discussion of
Sec. 1092.204 below, the written-statement requirements will
facilitate the Bureau's supervision of supervised registered entities
subject to such orders. The information collected under Sec. 1092.204
regarding risks to consumers that may be associated with the orders,
including potential violations of CFPA sections 1031 and 1036, and the
applicable supervised registered entity's compliance systems and
procedures will be relevant to the Bureau's supervisory authority even
where those risks are associated with State agency and local agency
orders. For the reasons discussed in part IV(D) and the section-by-
section discussion of Sec. 1092.204, imposing Sec. 1092.204's
requirements with respect to orders issued or obtained by State or
local agencies also will help ensure that the supervised registered
entities subject to such orders are legitimate entities and are able to
perform their obligations to consumers. Contrary to commenters'
suggestions, the Bureau is not adopting the written-statement
requirements to administer or enforce orders issued or obtained by
State or local agencies, but rather to further its statutory purposes
under CFPA section 1024(b)(7)(A)-(C) with respect to risks to consumers
that are relevant under Federal law, that are associated with entities
that are subject to the Bureau's supervisory and examination authority
under CFPA section 1024(a), and that arise in connection with the
offering or provision of consumer financial products and services
subject to the Bureau's jurisdiction.
In the proposal, the Bureau described a number of types of orders
that would and would not be considered ``final'' orders under the
proposal. The Bureau finalizes these descriptions, which are recounted
in the summary of the proposed rule above. The Bureau's discussion of
examples of non-final orders, however, was not intended to be
exhaustive. Other orders that are not final orders are also excluded
from Sec. 1092.201(e)'s definition of the term ``covered order.''
The Bureau is finalizing Sec. 1092.201(e) to include orders issued
or obtained by local agencies. Even if, as a commenter suggests, such
agencies are less likely than are other agencies to issue or obtain
relevant consumer protection orders,\245\ information about such
covered orders as they do issue will be relevant and informative to the
Bureau. As stated in the description of the proposal above, some local
agencies have authority to enforce State consumer protection laws, and
the Bureau believes it is important to include orders issued or
obtained by such local agencies in the definition.
---------------------------------------------------------------------------
\245\ The Bureau does not express an opinion on this question.
The Bureau intends to use the information it obtains through the
final rule to better understand the quantity and content of covered
orders and the types of agencies that issue them.
---------------------------------------------------------------------------
Also, as discussed in part IV(B), it is important for the Bureau to
collect information about such public orders across markets and
agencies as provided in the final rule, which will improve the Bureau's
efforts to determine where entities, either as a group or individually,
are repeatedly violating the law. The registry will provide a valuable
mechanism to help ensure that the Bureau is rapidly made aware of such
repeat offenders across a range of markets and enforcement agencies,
including State agencies and local agencies. Confining the orders
collected to those issued or obtained only by Federal agencies would
unnecessarily limit the information that is provided to the Bureau and
provide the Bureau with only a partial view of such risks.
With respect to publication, final Sec. 1092.201(e) requires that
a ``covered order'' be ``public'' as defined at Sec. 1092.201(m).
Thus, the covered orders issued or obtained by a State agency or local
agency that may be published by the nonbank registry under Sec.
1092.205 will have already been published, or are required to be
published under governing laws, rules, or orders. As a result, the
registry will not interfere with but rather reflect the decisions of
State or local agencies in that regard.
The Bureau is finalizing the definition of ``covered order''
without a requirement that the order be ``enforceable.'' Such a
requirement would lead to confusion and imprecision as to the final
rule's submission requirements, as it will not always be clear whether
any particular covered order is ``enforceable.'' The Bureau does not
wish to invite arguments from covered nonbanks as to whether any
particular covered order is or is not actually ``enforceable.'' For
example, an entity may consent to the imposition of an order while
privately believing that the order may not properly be enforced against
it under the correct understanding of the law. The Bureau concludes
that the nonbank registry should collect and potentially publish
information about such orders and that they should not be excepted from
the final rule's definition of ``covered order.'' Moreover, as
discussed in the section-by-section discussion of Sec. 1092.202(f)
below, a covered nonbank must submit a final filing to the nonbank
registry if a covered order is terminated, modified, or abrogated
(whether by its own terms, by action of the applicable agency, or by a
court). Amending the definition of ``covered order'' to require that
the order be ``enforceable'' would reduce the information provided by
these final filings, at least under certain circumstances. For example,
where a covered nonbank has registered a covered order with the nonbank
registry and the order is subsequently terminated, modified, or
abrogated by action of the applicable agency or court, the order would
at least theoretically no longer satisfy the ``enforceability''
requirement and would therefore no longer qualify as a ``covered
order.'' Thus, the covered nonbank would not be required to submit the
final filing required by Sec. 1092.202(f), which is a valuable
mechanism to clarify the current status of covered orders to the
[[Page 56071]]
Bureau and other users of the nonbank registry.
Section 1092.201(e)(1)(ii) includes, as a component of the
definition of the term ``covered order,'' a requirement that the order
have been issued at least in part in any action or proceeding brought
by any Federal agency, State agency, or local agency. By requiring that
the order be issued ``at least in part'' in such an action or
proceeding, the Bureau will require registration of orders that may
include certain elements that are not directly related to the action or
proceeding brought by the agency. For example, an order may impose
obligations on a covered nonbank in a lawsuit brought by both an agency
and a set of private plaintiffs. So long as the agency brought the
action or proceeding, and the order was issued at least in part in that
action or proceeding, this component of the definition would be
satisfied with respect to the entire order.
The commenter's question about nonpublic NCUA letters of
recommendation appears to refer to a type of confidential NCUA
supervisory communication. First, ``insured credit unions'' as that
term is defined at Sec. 1092.101(a) are not covered nonbanks and thus
are not subject to any of the requirements of the rule. Second, only
``public'' orders, as the term ``public'' is defined at Sec.
1092.201(k), are covered orders. To the extent an entity receives a
confidential letter or other communication from the NCUA that is not
``public'' as defined, the communication would not be a covered order.
This would include any order (or portion of any order) that constitutes
confidential supervisory information of any Federal or State regulator.
One industry commenter stated the definition of ``covered order''
should be clarified because State agencies vary in their approaches to
enforcing and interpreting orders. While the Bureau does not
necessarily disagree with the latter statement, the Bureau does not
believe these differences among State agencies require modification of
the definition. The Bureau does not believe, and does not intend by
finalizing the rule to suggest, that all covered orders are somehow
equivalent. The Bureau has considered the types of orders that it
believes are probative of risk to consumers and require registration.
The final rule contains a number of elements, each of which must be
satisfied in order to cause an order to require registration. An order
that satisfies the definition of the term ``covered order'' is subject
to the final rule's requirements with respect to such orders, to the
extent they apply. It is not clear how any differences among State
interpretations or approaches would be relevant to determining whether
an entity must comply with the rule's requirements. Nor does the Bureau
believe that any such differences would render publication of such
orders or the other registration information required by the rule to be
misleading or inappropriate. Differences among State treatment of when
orders are resolved or closed should not affect filing obligations
under the final rule. Under Sec. 1092.202(f)(1), if a covered order is
terminated, modified, or abrogated (whether by its own terms, by action
of the applicable agency, or by a court), the applicable covered
nonbank should submit a final filing under that section. The covered
nonbank should not submit such a final filing based solely on a State
supervisory or other communication that does not result in the
termination, modification, or abrogation of the order. Finally, where
an entity believes in good faith it is not subject to a covered order,
but is not certain the Bureau would agree with its interpretation, it
may file a good faith notification under Sec. 1092.202(g).
The Bureau is finalizing Sec. 1092.201(e)(1) (renumbered as Sec.
1092.201(e)(1)(i)) without revisions that would have the effect of
requiring successors or assigns who are not named as parties in an
order to continue satisfying the rule's requirements with respect to
that order. The Bureau finalizes its preliminary conclusion in the
proposal \246\ that the approach described in the proposed rule will
effectively achieve the Bureau's market-monitoring objectives with
greater administrative ease. The Bureau is concerned that in many cases
the application of covered orders to successors and assigns may be
unclear, and that registration of new entities that are not expressly
named in the order may cause confusion for the Bureau and other users.
Also, the Bureau anticipates that, at least in some cases, the issuing
agency or court will modify its order to ensure that a successor or
assignee entity will remain subject to the order, and that the new
entity would then be required to register under Sec. 1092.202.
However, the Bureau notes that while a new successor or assignee entity
would not be subject to the rule's requirements with respect to an
order that did not expressly identify it by name as a party subject to
the order, the Bureau does not intend to exclude entities that simply
change their legal name or doing-business-as name following the
issuance of the order, so long as the same legal entity remains subject
to the order.\247\
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\246\ 88 FR 6088 at 6117.
\247\ See also the section-by-section discussion of Sec.
1092.202(b) below.
---------------------------------------------------------------------------
The Bureau is finalizing Sec. 1092.201(e) without narrowing the
definition to encompass only orders that involve direct consumer harm,
as opposed to those that involve only clerical or administrative
errors. The Bureau also declines to adopt any specific minimum
quantitative or other thresholds for consumer harm with respect to the
covered orders that require registration under the final rule. While
the Bureau agrees that not every covered order will represent an
equivalent amount of risk, the Bureau is finalizing the rule in a
manner designed to capture relevant risks. As explained above, when an
agency issues an order, or seeks a court order, enforcing the law, it
typically has determined that the problems at the applicable entity are
sufficiently serious to merit the expenditure of that agency's limited
resources and perhaps the attention of the courts. Further, in the
Bureau's experience, the existence of an order identifying a legal
violation is often probative of broader potential inadequacies in an
entity's compliance systems, even if the violation addressed in the
order might be described as ``clerical,'' ``administrative,'' or
otherwise technical in nature. The Bureau thus concludes that covered
orders as defined at Sec. 1092.201(e) are likely to be probative of
relevant risk to consumers. The final rule establishes multiple
criteria for an order to be a ``covered order'' that is subject to the
rule's requirements. The Bureau believes these criteria are sufficient
to identify and distinguish certain kinds of orders that are likely to
be probative of risk to consumers and that the Bureau has the authority
to monitor. The Bureau declines to adopt additional criteria that would
further narrow this definition.
In addition, the Bureau is concerned that adopting the types of
distinctions commenters propose would not be administrable. It is not
clear what would constitute a violation of law that only amounted to a
``clerical'' or ``administrative'' error, as opposed to a more
``serious'' violation of a covered law. The Bureau believes that the
final rule appropriately describes and encapsulates orders that are
likely to be probative of risk to consumers without adding a carveout
for ``clerical'' or ``administrative'' violations. Thus, the collection
and publication of information about such orders, even ones that
address matters that could appear to some audiences as
[[Page 56072]]
comparatively ``minor,'' will serve the purposes of the final rule
described in part IV above. Providing for a minimum threshold would
also add undue complexity to the final rule, depending upon the
criteria that might be adopted, and could make compliance more
difficult or burdensome. For example, if the Bureau were to impose
registration only with respect to orders where a minimum dollar
threshold of consumer harm or number of consumers affected was related
to the order, it is not clear that such dollar amounts or numbers would
be calculated in all cases. Even where such an amount might be
determined, the full extent of related consumer harm might not be known
for some time after the issuance of the order, or might be confidential
supervisory information or otherwise confidential (and the Bureau does
not intend to reveal such confidential information to the public via
the nonbank registry). The Bureau declines to introduce such
complexities into the final rule. While such questions might be
reasonably answerable with respect to certain types of orders, and many
individual orders may be structured to permit calculation and public
disclosure of such threshold amounts, the Bureau intends the
requirements of the final rule to be sufficiently flexible to collect
information regarding a wide range of agency and court orders that may
provide evidence regarding risk to consumers. The Bureau also declines
to impose materiality requirements as to the type of violations that
must be declared in written statements submitted under Sec. 1092.204;
see the section-by-section discussion of this section below for
additional discussion of these issues.
Publication of information collected by the registry as intended by
the Bureau will enable users of the registry to access relevant and
accurate information about covered orders, including the violations
that may be associated with such orders, and will not cause but rather
help prevent confusion and the distribution of misleading information.
See the section-by-section discussion of Sec. 1092.205 below for
additional discussion of related issues involving the potential
publication of registry information.
The Bureau finalizes Sec. 1091.201(e)(5) (renumbered as Sec.
1091.201(e)(1)(v)) as proposed. For the reasons stated in the proposal,
the Bureau believes that registering orders with an effective date on
or after January 1, 2017, is likely to lead to collecting useful
information and otherwise will best serve the purposes of the final
rule described in part IV above. The Bureau declines at this time to
amend the definition of covered order to include orders with an
effective date prior to January 1, 2017. While, as discussed in the
proposal, the Bureau believes earlier orders are highly probative of
consumer risk, the Bureau finalizes its preliminary conclusion in the
proposal \248\ that considerations of administrative efficiency favor
focusing on orders issued within approximately the first several years
preceding the final rule.
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\248\ 88 FR 6088 at 6112.
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The Bureau also declines to finalize a later date for this
provision. This approach would lead to the omission of covered orders
that are recent enough to be relevant to risk to consumers, and would
impair the ability of the Bureau and others to identify trends and
patterns in the information collected. The Bureau acknowledges that in
the intervening time following the issuance of a covered order and
before registration, it is possible that many entities will have taken
steps to address the violations and other issues identified in the
covered order. The Bureau encourages covered nonbanks to take the steps
necessary to protect consumers and comply with covered orders and other
laws. Nevertheless, the Bureau concludes that registration of such
orders will serve the purposes of the final rule described in part IV
above. Information regarding the existence of past covered orders will
inform the Bureau regarding risk to consumers posed by the applicable
covered nonbank. The issuance of a covered order, and the information
that will be collected under the final rule about the covered nonbank
and the order, such as the violations of covered law and related
obligations identified in such an order, are not rendered irrelevant
for the purposes of the final rule simply because a covered nonbank has
taken steps to address the underlying violations or issues. In some
cases, the existence of a past covered order might prompt the Bureau to
seek additional information, from the covered nonbank itself or other
sources, to assess whether the remedial steps taken by the covered
nonbank have been successful. In other cases, the Bureau might include
the past covered order in a more general research project aimed at
assessing trends in orders enforcing the law over time. See the
section-by-section discussion of Sec. 1092.205 below for additional
discussion of related issues involving the potential publication of
registry information.
The Bureau disagrees with commenters' suggestions that the registry
would impose an unlawfully retroactive effect or is incompatible with
constitutional principles relating to ex post facto laws. The mere fact
that the Bureau is requiring registration based on previously issued
public orders does not render that requirement impermissibly
retroactive.\249\ ``[T]he judgment whether a particular [law] acts
retroactively should be informed and guided by familiar considerations
of fair notice, reasonable reliance, and settled expectations.'' \250\
Taking into account those considerations, the registration and
publication provisions of Sec. Sec. 1092.202, 1092.203, and 1092.205
do not operate in an impermissibly retroactive manner. The Bureau is
requiring covered nonbanks prospectively to register information with
the Bureau. Going forward, the Bureau plans to use that information as
a source of market intelligence to use in identifying areas of
greater--or reduced--risk to consumers, to inform the allocation of the
Bureau's own resources, and to better understand the entities'
compliance management systems and processes. Further, Sec. 1092.202
merely requires covered nonbanks to report covered orders that are
already published (or required by law, rule, or order to be published).
Requiring covered nonbanks to submit to the Bureau information about
such public orders imposes little meaningful burden, and thus does not
present significant concerns regarding fair notice or upsetting
reasonable reliance or settled expectations. Nor would any publication
by the Bureau of registration information as provided at Sec. 1092.205
impose a meaningful additional burden on entities, given that
registered orders would already be a matter of public record. It is
therefore highly unlikely that covered nonbanks would have made
different decisions with respect to past enforcement actions--e.g.,
whether to settle or vigorously litigate such actions--had they known
that the enforcement actions could one day subject them to such a low-
burden registration requirement. As a result, the imposition of the
registration requirement does not have impermissible retroactive
effect.\251\
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\249\ See Landgraf v. USI Film Prods., 511 U.S. 244, 269 n.24
(1994) (``[A] statute `is not made retroactive merely because it
draws upon antecedent facts for its operation.''' (quoting Cox v.
Hart, 260 U.S. 427, 435 (1922)).
\250\ INS v. St. Cyr, 533 U.S. 289, 321 (2001) (citation
omitted).
\251\ Commenters do not appear to argue that Sec. 1092.204's
written statement requirements would have impermissible retroactive
effect. Nor could they. As discussed in the section-by-section
discussion of Sec. 1092.204 below, that section's written statement
requirements apply only to covered orders with an effective date
after the applicable nonbank registry implementation date (and thus
after the final rule's effective date as well). While some covered
orders with an effective date after the applicable nonbank registry
implementation date might relate to violations of covered laws
committed before the final rule's effective date, the Bureau does
not believe that the prospect of becoming subject to the written-
statement requirements would have had a significant marginal impact
on a supervised registered entity's decision whether to engage in
conduct that risked violating covered laws, given the negative
consequences already associated with committing such legal
violations.
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[[Page 56073]]
Nor does the Bureau believe the U.S. Constitution's prohibition on
ex post facto laws would apply to the rule, which is adopted under the
Bureau's civil rulemaking authorities in the CFPA. Under longstanding
precedent, civil laws generally are not within the protective reach of
the Ex Post Facto Clause.\252\
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\252\ See, e.g., Smith v. Doe, 538 U.S. 84, 92 (2003); Calder v.
Bull, 3 U.S. (3 Dall.) 386, 391 (1798); see also U.S. CONST. art. I,
sec. 9, cl. 3 (prohibiting Congress from enacting ex post facto
laws). While the Bureau believes that the final rule neither is
unlawfully retroactive nor violates the Ex Post Facto Clause, if a
court were to conclude that the Bureau cannot apply the rule's
registration requirements to previously issued covered orders ``that
remain in effect as of the effective date'' of subpart B, as Sec.
1092.202(a) provides, the Bureau intends for that language in Sec.
1092.202(a) to be severable under Sec. 1092.103. Under the
remaining language of Sec. 1092.202(a), the rule's registration
requirements would apply after severance ``only with respect to
covered orders with an effective date on or after the effective
date'' of subpart B.
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For the reasons discussed in the proposal, the final rule includes
orders that are final by their own terms or under applicable law, even
where Federal, State, or local law allows for the appeal of such
orders. The Bureau declines to exempt a broader category of orders as
to which Federal, State, or local law allows for an appeal. Section
1092.201(f) states, ``If the issuing agency or a court stays or
otherwise suspends the effectiveness of the covered order, the
effective date [of the covered order] shall be delayed until such time
as the stay or suspension of effectiveness is lifted.'' The
requirements set forth in Sec. 1092.202(b)(2) with respect to any
applicable covered order are tied to the order's effective date as
defined. Thus, Sec. 1092.202 already adequately addresses situations
where a reviewing agency or court has issued a stay or has otherwise
suspended the effectiveness of a covered order. In such cases, the
covered nonbank will not be required to register the covered order
until 90 days after its new effective date. In contrast, the Bureau
believes that a covered order that has not been stayed by the issuing
agency or a court, and has been allowed to come into effect, is likely
to be probative of risk to consumers, even if avenues of appeal remain
available.\253\ For that reason, the Bureau has determined not to
exempt such orders from the rule's requirements. A covered nonbank
should register such an order within 90 days of its effective date as
required by Sec. 1092.202(b)(2)(i). Should the covered order be
terminated, modified, or abrogated, including by a reviewing court's
decision that renders the order ineffective or void, the covered
nonbank should submit a final filing under Sec. 1092.202(f)(1), after
which it would have no further obligation to update its registration
information. The Bureau is also finalizing a revision to Sec.
1092.204(a) to clarify that a supervised registered nonbank is not
required to comply with Sec. 1092.204's written-statement requirements
in cases where the applicable covered order has not been registered
under Sec. 1092.202 due to a stay or other agency or court
action.\254\
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\253\ The Bureau's determination on this issue accords with the
general principle that an unstayed judgment can be enforced even
while an appeal is pending. See, e.g., Acevedo-Garcia v. Vera-
Monroig, 368 F.3d 49, 58 (1st Cir. 2004) (``The federal rules
contemplate that, absent a stay, a victorious plaintiff may execute
on the judgment even while an appeal of that judgment is
pending.''); 16A Catherine T. Struve, Federal Practice and Procedure
Sec. 3949.1 (5th ed. 2023) (``Unless the judgment is stayed, the
district court may (pending appeal) act to enforce the judgment . .
. .'').
\254\ See the section-by-section discussion of Sec. 1092.204(a)
below.
---------------------------------------------------------------------------
The Bureau does not share the concern expressed in the joint letter
from State regulators that covered nonbanks will be unable to
understand or comply with the final rule. With respect to the comment
that ambiguities in the rule's registration requirements could not be
satisfactorily addressed because most covered orders will not be issued
by the Bureau, the Bureau agrees that covered nonbanks will need to
apply Sec. 1092.201(e)'s definition of ``covered order'' in connection
with a wide range of orders, many of which will not be drafted by the
Bureau. However, the Bureau believes that, in the vast majority of
cases, entities subject to the final rule will be able to clearly
discern whether they must comply with the registration and written-
statement requirements in connection with any particular order, and
that such registration will serve the purposes of the rule as stated.
Moreover, in the event a covered nonbank has concerns that any
particular order may be deemed a covered order notwithstanding its
good-faith belief to the contrary, it may file one or more good-faith
notifications under Sec. 1092.202(g) or Sec. 1092.204(f) with respect
to that order.
Regarding the comments in the joint letter questioning how the same
or similar violations across different business lines would be treated
as well as how the registration requirements would apply if multiple
States take unilateral action for a firm's violation of the same
consumer financial law, a covered nonbank must satisfy the rule's
requirements with respect to all applicable covered orders that satisfy
Sec. 1092.201(e)'s definition. For a discussion of the final rule's
treatment of multiple orders, see the section-by-section discussion of
Sec. 1092.201(l) below.
If the public portions of an order do not ``identify [the
applicable] covered nonbank by name as a party subject to the order''
as provided at Sec. 1092.201(e)(1)(i), then the order is not a covered
order with respect to that covered nonbank. Thus, under the final rule,
an affiliate of a covered person need not register with respect to a
covered order unless it is itself named as a party in the public
portions of the covered order. As discussed in the proposal,\255\
orders that indirectly refer to a covered nonbank as an ``affiliate''
of a named party, but do not name the covered nonbank as itself a party
subject to the order, would not be covered orders under final Sec.
1092.201(e) with respect to the covered nonbank. While Sec.
1092.202(c) provides that the Bureau's filing instructions may require
joint or combined submissions to the nonbank registry by covered
nonbanks that are affiliates as defined in Sec. 1092.101(a), the final
rule will not require an affiliate to submit information to the nonbank
registry under this provision in connection with a covered order unless
public portions of the order identify the affiliate by name as a party
subject to the order.
---------------------------------------------------------------------------
\255\ 88 FR 6088 at 6110.
---------------------------------------------------------------------------
Under Sec. 1092.201(e), the term ``covered order'' may include
legally enforceable written agreements under sections 8 and 50 of the
Federal Deposit Insurance Act \256\ or any State counterparts, as well
as assurances of discontinuances embodied in orders or judgments issued
by agencies or courts. Likewise, an ``assurance of voluntary
compliance'' (AVC) accepted by a State agency under State law may
qualify as a ``covered order'' where it satisfies all of the criteria
established under Sec. 1092.201(e), including that the AVC contains
public provisions that impose obligations on the covered nonbank to
take certain actions or to refrain from taking certain actions, and
imposes such obligations on the covered nonbank
[[Page 56074]]
based on an alleged violation of a covered law. As with other orders,
an AVC is not excepted from the definition of ``covered order'' solely
because it contains neither an admission of liability nor a statement
setting forth the factual predicate underlying the order. A State
agency's acceptance of a legally enforceable AVC, as with an agency's
acceptance of a legally enforceable written agreement, would generally
occur in an ``action or proceeding brought by any Federal agency, State
agency, or local agency'' for purposes of Sec. 1092.201(e)(1)(ii).
---------------------------------------------------------------------------
\256\ 12 U.S.C. 1818, 1831aa.
---------------------------------------------------------------------------
Final Rule
For the reasons discussed above, the Bureau is finalizing Sec.
1092.201(e) as proposed, with minor technical edits. The Bureau
finalizes its preliminary conclusion in the proposal that these
categories of public orders would assist with monitoring for risks to
consumers in the offering or provision of consumer financial products
and services.
Section 1092.201(f) Effective Date
Proposed Rule
The proposal would have defined the term ``effective date'' to
mean, in connection with a covered order, the effective date as
identified in the covered order; however, if no other effective date is
specified, then the date on which the covered order was issued would
have been treated as the effective date for purposes of subpart B of
the proposal. The Bureau anticipated that the effective date for many
covered orders would be evident from the face of the order, and in
nearly all cases should be relatively easy to identify.
Proposed Sec. 1092.201(f) would also have provided that if the
issuing agency or a court stays or otherwise suspends the effectiveness
of the covered order, the effective date shall be delayed until such
time as the stay or suspension of effectiveness is lifted. Thus, the
registration obligations under proposed subpart B would also have been
delayed accordingly. The Bureau anticipated that such situations would
be rare and sought comment on whether this proposal would adequately
address them.
Comments Received and Final Rule
The Bureau did not receive any comments specifically regarding
proposed Sec. 1092.201(f)'s definition of the term ``effective date.''
See the section-by-section discussion of Sec. 1092.201(e) above for a
discussion of comments addressing which orders should be included in
the term ``covered orders.'' For the reasons set forth in the
description of the proposed rule above, the Bureau is finalizing Sec.
1092.201(f) as proposed.
Section 1092.201(g) Identifying Information
Proposed Rule
Proposed Sec. 1092.201(g) would have defined the term
``identifying information.'' This term would have described the scope
of identifying information a covered nonbank may be required to submit
pursuant to proposed Sec. 1092.202(c). Proposed Sec. 1092.201(g)
would have limited this information to information that is already
available to the covered nonbank, and which uniquely identifies the
covered nonbank. As described in proposed Sec. 1092.201(g), this
information would have included, to the extent already available to the
covered nonbank, legal name, State of incorporation or organization,
principal place of business address, and any unique identifiers issued
by a government agency or standards organization. The Bureau explained
that examples of the latter identifiers that entities might have been
required to provide under proposed Sec. 1092.202(c) would include an
NMLS identifier, a Home Mortgage Disclosure Act (HMDA) Reporter's
Identification Number, the Legal Entity Identifier (LEI) issued by a
utility endorsed by the LEI Regulatory Oversight Committee or endorsed
or otherwise governed by the Global LEI Foundation (GLEIF, or any
successor of the GLEIF),\257\ and a Federal Tax Identification number.
---------------------------------------------------------------------------
\257\ See 12 CFR 1003.4(a)(1)(i)(A) (addressing LEIs).
---------------------------------------------------------------------------
The Bureau believed that this information would help it to identify
covered nonbanks with specificity, including ensuring that the Bureau
can identify covered nonbanks' submissions to other registries and
databases where applicable, such as the NMLS, and HMDA submissions.
Furthermore, the Bureau believed that, upon publication, this
information would facilitate the ability of consumers to identify
covered persons that are registered with the Bureau. The proposal would
not have required the entity to obtain an identifier. Thus, for
example, if the proposed NBR system were to have asked about a
particular type of identifier and that type of identifier had not been
assigned to the covered nonbank, then under the proposal, the covered
nonbank would have been able to indicate the identifier is not
applicable.
Comments Received
A nonprofit commenter supported the inclusion of the legal entity
identifier (LEI) in proposed Sec. 1092.201(g) and the inclusion of the
LEI as a public data element in the nonbank registry. The commenter
suggested that the Bureau, when an LEI is submitted, could also obtain
the applicable covered nonbank's legal name, legal address, and
headquarters address from the Global LEI System.
Response to Comments Received
In response to the comment about using LEI information, the Bureau
may require covered nonbanks to submit such information to the registry
and will consider further opportunities to obtain relevant information
from other sources including the Global LEI System.
Final Rule
For the reasons set forth above, the Bureau is finalizing Sec.
1092.201(g) as proposed, with revisions as described below.
The proposal would have collected information regarding a covered
nonbank's State of incorporation or organization. The Bureau is
adopting a revision to provide that the Bureau may require a covered
nonbank that is not incorporated or organized in a State to submit to
the registry the names of any other jurisdiction in which it is
incorporated or organized. For example, a covered nonbank that is
incorporated or organized under Federal law or the laws of a foreign
government should provide that information. If collected, such
information would be categorized as ``identifying information'' under
filing instructions issued under Sec. 1092.102(a). The Bureau
concludes that since certain covered nonbanks may not be incorporated
or organized under State law, collecting and potentially publishing
such information may be useful to the Bureau and to other potential
users of the registry information that the Bureau intends to publish
under Sec. 1092.205(a).\258\ Under the final rule, where applicable,
this information will include information regarding the State or other
jurisdiction where a covered nonbank that is not organized as a
corporation was formed--for example, where a covered nonbank organized
as a partnership filed its partnership agreement, where a covered
nonbank organized as a limited liability company was organized, or
where the covered nonbank was otherwise formed.
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\258\ As discussed in the section-by-section discussion of Sec.
1092.205(a) below, the Bureau is retaining the discretion not to
publish information under Sec. 1092.205 based on operational
considerations.
---------------------------------------------------------------------------
The Bureau is adopting a revision to provide that the Bureau may
require a
[[Page 56075]]
covered nonbank to submit to the registry any doing business as or
fictitious business names, which if collected would be categorized as
``identifying information'' under filing instructions issued under
Sec. 1092.102(a). The Bureau concludes that collecting and potentially
publishing doing business as or fictitious business names (including
trade names or previously-used names) as ``identifying information''
under Sec. 1092.202(c) may be useful to the Bureau and to other
potential users of the registry information that the Bureau intends to
publish under Sec. 1092.205(a). Since some companies may use different
names in different contexts, and it may not always be obvious whether a
particular doing business as or fictitious business name may apply to a
covered nonbank, such information may help the Bureau and other
potential users identify the covered nonbanks that are registered with
the nonbank registry as well as the covered orders to which they are
subject.
In filing instructions adopted under Sec. 1092.102(a), the Bureau
will specify the ``unique identifiers issued by a government agency or
standards organization'' that will be collected under Sec.
1092.202(c). As discussed in the proposal, examples of the latter
identifiers that entities may be required to provide under proposed
Sec. 1092.202(c) include an NMLS identifier, a HMDA Reporter's
Identification Number, and LEI information. The Bureau may also specify
other unique identifiers in filing instructions in addition to the
examples discussed in the proposal. The Bureau also may collect, for
example, an RSSD ID, a unique identifier assigned to financial
institutions by the Federal Reserve System, and an Electronic Data
Gathering, Analysis, and Retrieval system (EDGAR) Central Index Key
(CIK), a unique identifier assigned by the Securities and Exchange
Commission (SEC) to persons that submit filings to the SEC.
Under the final rule, the Bureau will not collect or publish
Federal employer identification numbers (EIN) from covered nonbanks as
``identifying information'' as that term is defined at Sec.
1092.201(g), but may determine to collect this information under Sec.
1092.202(c) as ``administrative information'' that the nonbank registry
will not publish under Sec. 1092.205(a). In filing instructions issued
under Sec. 1092.102(a), the Bureau will specify whether and how it
will collect such information. In addition, a registered entity should
not submit any Social Security numbers, individual taxpayer
identification numbers, or other similar personally identifying tax
information to the nonbank registry, even if the registered entity uses
an individual's Social Security number in tax documents filed by or
associated with the entity. As stated in part III(B), the Bureau's
registry is designed to not collect any protected proprietary,
personal, or confidential consumer information, and thus, the Bureau
will not publish, or require public reporting of, any such information.
Section 1092.201(h) Insured Depository Institution
Proposed Rule
The proposal would have defined the term ``insured depository
institution'' to have the same meaning as in 12 U.S.C. 5301(18)(A).
Section 5301(18)(A), in turn, incorporates the meaning of ``insured
depository institution'' provided in section 3 of the Federal Deposit
Insurance Act, 12 U.S.C. 1813.\259\
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\259\ See 12 U.S.C. 1813(c)(2) (defining ``insured depository
institution'' as ``any bank or savings association the deposits of
which are insured by the [Federal Deposit Insurance] Corporation
pursuant to this chapter'').
---------------------------------------------------------------------------
Comments Received and Final Rule
The Bureau did not receive any comments specifically regarding
proposed Sec. 1092.201(h)'s definition of ``insured depository
institution.'' See the section-by-section discussion of Sec.
1092.201(d) above for a discussion of the final rule's treatment of
such institutions and their affiliates. For the reasons set forth
above, the Bureau is finalizing Sec. 1092.201(h) as proposed.
Section 1092.201(i) Local Agency
Proposed Rule
The proposal would have defined the term ``local agency'' to mean a
regulatory or enforcement agency or authority of a county, city
(whether general law or chartered), city and county, municipal
corporation, district, or other political subdivision of a State, other
than a State agency. The term would not have included State agencies.
The Bureau proposed to require registration in connection with
applicable orders issued or obtained by local agencies. The Bureau
understood that local agencies do issue or obtain public orders under
covered laws.\260\ For the reasons described above with respect to
orders issued by Federal and State agencies, the Bureau believed that
such orders may indicate risk to consumers, and that obtaining
information about these orders would support Bureau functions.
---------------------------------------------------------------------------
\260\ See, e.g., Cal. Bus. & Prof. Code sec. 17204 (authorizing
enforcement of Cal. Bus. & Prof. Code sec. 17200 by certain county
counsel and city attorneys).
---------------------------------------------------------------------------
Comments Received and Final Rule
The Bureau did not receive any comments specifically regarding
proposed Sec. 1092.201(i)'s definition of ``local agency.'' For the
reasons set forth in the description of the proposed rule above, the
Bureau is finalizing Sec. 1092.201(i) as proposed.
Section 1092.201(j) NMLS
Proposed Rule
The proposal did not contain an exemption for covered orders
published on the NMLS Consumer Access website.
Comments Received
See the section-by-section discussion of Sec. 1092.203(a) below
for a discussion of comments received regarding duplication of the
proposed registry with the NMLS and discussing or requesting an
exemption for orders that are already published or available via NMLS,
and the Bureau's responses thereto.
Final Rule
The Bureau is finalizing a new paragraph (j) to Sec. 1092.201 and
is renumbering the remainder of the paragraphs accordingly. Section
1092.201(j) provides that the term ``NMLS'' means the Nationwide
Multistate Licensing System. As the NMLS's website explains, the NMLS
is the system of record for non-depository financial services licensing
or registration for participating State agencies.\261\ The NMLS is
overseen and operated by the State Regulatory Registry LLC, which was
established by the Conference of State Bank Supervisors in cooperation
with the American Association of Residential Mortgage Regulators.\262\
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\261\ NMLS Resource Center, About NMLS, https://mortgage.nationwidelicensingsystem.org/about/Pages/default.aspx.
\262\ Id.
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Section 1092.201(k) NMLS-Published Covered Order
Proposed Rule
The proposal did not contain an express alternative registration
option for covered orders published on the NMLS Consumer Access
website.
Comments Received
See the section-by-section discussion of Sec. 1092.203(a) below
for a discussion of comments received regarding duplication of the
proposed registry with the NMLS and discussing or requesting an
exemption for orders that
[[Page 56076]]
are already published on NMLS Consumer Access or otherwise available to
other regulators via NMLS, and the Bureau's responses thereto.
Final Rule
The Bureau is finalizing a new paragraph (k) to Sec. 1092.201 and
is renumbering the remainder of the paragraphs accordingly. Section
1092.201(k) provides that the term NMLS-published covered order
generally means a covered order that is published on the NMLS Consumer
Access website, www.NMLSConsumerAccess.org.
For the reasons discussed in the section-by-section discussion of
Sec. 1092.203 below, this section would further provide that no
covered order issued or obtained at least in part by the Bureau shall
be an NMLS-published covered order. Thus, where the Bureau has issued a
covered order, or has obtained a covered order from a court, that
covered order will not be an NMLS-published covered order under the
final rule. Covered nonbanks must comply with the requirements of Sec.
1092.202 and (where applicable) Sec. 1092.204 with respect to such
Bureau orders, and may not elect to comply with the one-time
registration option described in Sec. 1092.203 with respect to such
Bureau orders.
Section 1092.201(l) Order
Proposed Rule
The proposal would have defined the term ``order'' to include any
written order or judgment issued by an agency or court in an
investigation, matter, or proceeding. The Bureau explained that the
term would have included orders or judgments issued after trials or
agency hearings. It would also have included default judgments or
orders issued after an entity fails to properly respond to charges or
claims made against it. In addition, it would have included orders or
judgments issued to resolve matters without the need for further
litigation, including stipulated or consent orders, decrees, or
judgments, as well as settlements, multistate settlements, or
assurances of discontinuances embodied in orders or judgments issued by
agencies or courts. Furthermore, the term would have included cease-
and-desist orders and orders suspending, conditioning, or revoking a
license based on a violation of law. The proposed definition would also
have included legally enforceable written agreements under sections 8
and 50 of the Federal Deposit Insurance Act \263\ or any State
counterparts.
---------------------------------------------------------------------------
\263\ 12 U.S.C. 1818, 1831aa.
---------------------------------------------------------------------------
The Bureau explained that the proposed definition of the term
``order'' would have included an order or judgment issued by one agency
or a single order or judgment jointly issued by multiple agencies.
However, where more than one agency issues a distinct order under its
own authority, or a court issues distinct orders with respect to the
different parties in connection with various actions or proceedings,
even where the orders involve the same subject matter or laws, each
order would have been considered a separate order under the proposed
definition.
Comments Received
An industry commenter stated that the Bureau should limit the
number of times a single instance of a violation needs to be reported
where multiple agencies issue orders based on the same facts. The
commenter stated that entities should only need to submit to the NBR
system one order per violation to avoid reporting multiple listings for
one incident in a multi-State enforcement action, and that this
approach would not deprive the public or the Bureau of any information,
since under the proposed rule registered entities would already need to
identify the government entity that issued the order.
Response to Comments Received
In response to the industry commenter, if multiple agencies join a
single order, that order would be the only ``covered order'' requiring
registration under the final rule. However, if multiple agencies issue
distinct and different orders in connection with the same facts or
matter, each such order (if it satisfies the other criteria established
by the final rule) would be a distinct ``covered order'' that would
require separate registration (and, where applicable, designation of an
attesting executive and submission of a written statement under Sec.
1092.204).
The Bureau declines to adopt the commenter's suggestion to treat
multiple orders as a single order under certain circumstances. As
stated in the notice of proposed rulemaking, the Bureau ``anticipates
that agency and court orders will vary widely in form and content,
depending in part on such matters as the relevant individual laws being
enforced, the historical practices of the various enforcement agencies,
and the negotiations and facts and circumstances underlying specific
orders.'' \264\ The Bureau anticipates that such orders will often
contain different findings of fact and law, impose different
obligations, and otherwise contain meaningful differences such that
requiring registration of each such order would be useful to the Bureau
and other users of the nonbank registry. Also, permitting certain
orders to be treated as a single order would create unnecessary
complexity and confusion for registrants and other users of the nonbank
registry. Among other things, the final rule would have to establish
which orders would be sufficiently similar to warrant such treatment.
The Bureau declines to require such determinations as part of the
registration process.
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\264\ 88 FR 6088 at 6111.
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Final Rule
For the reasons set forth above, the Bureau is finalizing Sec.
1092.201(j) (renumbered as Sec. 1092.201(l)) as proposed.
Section 1092.201(m) Public
Proposed Rule
The proposal would have defined the term ``public'' to mean, with
respect to a covered order or any portion thereof, published by the
issuing agency or court, or required by any provision of Federal or
State law, rule, or order to be published by the issuing agency or
court. The proposal would have clarified that the term ``public'' does
not include orders or portions of orders that constitute confidential
supervisory information of any Federal or State agency.
The Bureau explained that the proposed term would have included
orders that are actually published by the issuing agency or court, as
well as orders that are required by any provision of Federal or State
law, rule, or order to be published by the issuing agency or court. For
example, section 8(u) of the Federal Deposit Insurance Act \265\
requires the publication of certain types of Federal banking agency
orders. The proposed definition was intended to include those orders,
as well as those required to be published by any other similar Federal
or State law.
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\265\ 12 U.S.C. 1818(u).
---------------------------------------------------------------------------
The Bureau explained that, under the proposal, an order would only
be ``public'' if it has been released or disseminated (or is required
to be released or disseminated) in a manner such that the order is
accessible by the general public--for example, by posting the order on
a publicly accessible website or by publishing it in a written format
generally available to members of the public. The proposed term,
however, would not have included documents that are not made generally
[[Page 56077]]
available but are disclosed to specific persons, such as in response to
Federal or State Freedom of Information Act or open records law
requests or as part of litigation discovery proceedings. Under the
proposal, an order also would have only qualified as ``public'' if it
is published (or required to be published) ``by the issuing agency or
court.'' Therefore, independent publication by a third party, such as
publication that may occur in connection with a covered person's
securities disclosures, would not make an order ``public'' within the
meaning of the proposal.\266\ The Bureau did not anticipate that
requiring registration of orders disclosed only through such methods as
freedom-of-information requests or securities disclosures would
materially improve the quantity and quality of the information provided
to the nonbank registry. To the contrary, the Bureau anticipated that
third-party disclosures in the securities context, or pursuant to
freedom-of-information requests, may sometimes fail to capture all
significant aspects of an order. The Bureau was also concerned that if
such types of disclosures were included in the final rule, subpart B's
registration requirements might affect an entity's decisions regarding
securities or litigation disclosures in a manner not intended by the
Bureau.
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\266\ By contrast, the Bureau explained, an order would qualify
as ``public'' where the issuing agency or court makes the order
available to a third-party printing service or reporter for the
purpose of publishing the order in a publicly available format.
---------------------------------------------------------------------------
The proposed term would have excluded orders or portions of orders
that constitute confidential supervisory information of any Federal or
State agency. The Bureau was concerned that requiring registration and
disclosure of confidential supervisory information might interfere with
the functions and missions of other agencies and did not believe that
requiring such registration and disclosure was necessary to accomplish
the purposes of the proposed rule. The Bureau noted that such agencies
may rely on confidential communications with covered nonbanks in order
to, for example, foster full cooperation between those institutions and
their regulators and to protect those institutions and the public from
harm that could result from the disclosure of agency concerns regarding
the integrity and security of these institutions. The proposed
definition would have therefore expressly excluded confidential
supervisory information. Where an order is not clearly marked or
otherwise designated by the regulator as confidential supervisory
information, the Bureau would have expected the entity to have
confirmed the confidential supervisory information status of any order
or portion of an order with its regulator before relying on that status
in connection with the proposed subpart B's registration requirements.
Comments Received
A Tribal commenter stated that although many State agency orders
are publicly available, this is not the case for State court orders,
and requested that the Bureau clarify this proposed definition.
An industry commenter stated that the proposal's requirement to
submit redacted orders would confuse the public, and that in cases
where a portion of a covered order is redacted or confidential, the
whole order should stay off the registry.
Response to Comments Received
In response to the Tribal commenter, the Bureau believes that this
definition clearly describes the term ``public'' with respect to orders
that are issued by State courts as well as other orders that may be
issued or obtained by a Federal agency, State agency, or local agency,
as described in Sec. 1092.201(e)(1)(i). As detailed in the above
description of the proposal, an order (or a portion of an order) issued
by a State court would only be ``public'' if it has been released or
disseminated (or is required to be released or disseminated) in a
manner such that the order (or portion thereof) is accessible by the
general public--for example, by posting the order (or portion thereof)
on a publicly accessible website or by publishing it in a written
format generally available to members of the public. If the issuing
court (including a State court) or agency does not publish an order (or
portion thereof) in this way, and the order (or portion thereof) is not
required to be so published, then the order (or portion thereof) is not
``public'' under the definition. On the other hand, if the issuing
court or agency does publish an order (or portion thereof) in this way,
or the order (or portion thereof) is required to be so published, then
the order (or portion thereof) is ``public'' under the definition. The
Bureau declines to further narrow or otherwise amend this definition,
as it concludes the definition as finalized will help ensure that the
registry will obtain adequate information regarding relevant orders to
achieve the registry's objectives.
Under the final rule, registrants should submit only the public
portions of covered orders. The Bureau believes that both submission of
and publication of public portions of such orders, and only public
portions of such orders, will best serve the purposes of the registry.
The Bureau disagrees that either the submission of or the publication
of redacted orders will confuse the public or other users of the
nonbank registry, especially considering that the unredacted portions
of orders submitted to the Bureau will, by definition, already be
published (or required to be published) elsewhere. As discussed in the
section-by-section discussion of Sec. 1092.201(e) above, the Bureau is
excluding from the rule's information collection requirements nonpublic
portions of orders in order to help protect the confidential processes
of other agencies, including their supervisory processes. But the
Bureau believes that the other portions of such orders remain relevant
and should be collected and potentially published under the final
rule.\267\
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\267\ In the proposal, the Bureau considered requiring covered
nonbanks to submit to the Bureau portions of orders that constitute
confidential supervisory information under proposed Sec. 1092.202,
but then exempting those confidential portions from publication
under proposed Sec. 1092.204. See 88 FR 6088 at 6114. The Bureau
finalizes its preliminary conclusion in the proposal that the
administrative burden associated with implementing such an approach
likely outweighs the advantage of collecting such confidential
portions of orders under the proposed rule. See id. The Bureau notes
that it can use other mechanisms to obtain confidential supervisory
information from other regulators in appropriate cases.
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Final Rule
For the reasons set forth below above and as follows, the Bureau is
finalizing Sec. 1092.201(k) (renumbered as Sec. 1092.201(m)) as
proposed, with revisions to provide that the term ``public'' (1)
encompasses covered orders required to be published by the issuing
agency or court under any provision of local law, rule, or order, and
(2) does not include orders or portions of orders that constitute
confidential supervisory information of any local agency. The Bureau is
finalizing these revisions to reflect that under Sec.
1092.201(e)(1)(i), covered orders can be issued or obtained by local
agencies, which may operate under local laws, rules, or orders
regarding publication requirements, and which might claim to have
``confidential supervisory information.''
201(n) Registered Entity
Proposed Rule
The proposal would have defined the term ``registered entity'' to
mean any person registered or required to be registered under proposed
subpart B. The Bureau explained that, under the proposal, entities that
fail to comply
[[Page 56078]]
with a requirement to register under proposed subpart B would have
nonetheless still been subject to all of the requirements applicable to
registered entities under proposed subpart B. If such an entity were a
supervised registered entity, it would have also been subject to the
requirements applicable to a supervised registered entity under
proposed subpart B.
Comments Received and Final Rule
The Bureau did not receive any comments specifically regarding
proposed Sec. 1092.201(l)'s definition of ``registered entity.'' For
the reasons set forth in the description of the proposed rule above,
the Bureau is finalizing Sec. 1092.201(l) (renumbered as Sec.
1092.201(n)) as proposed.
Section 1092.201(o) Remain(s) In Effect
Proposed Rule
The proposal would have defined the terms ``remain in effect'' and
``remains in effect'' to mean, with respect to any covered order, that
the covered nonbank remains subject to public provisions that impose
obligations on the covered nonbank to take certain actions or to
refrain from taking certain actions based on an alleged violation of a
covered law.
Proposed Sec. 1092.202(a) would have used this proposed term in
defining the scope of proposed Sec. 1092.202's registration
requirement. Proposed Sec. 1092.202(f) would have used this proposed
term in specifying when a covered nonbank would be required to submit a
final filing to the NBR system and would be permitted to cease updating
its registration information and filing written statements with respect
to a covered order.
Comments Received and Final Rule
The Bureau did not receive any comments specifically regarding
proposed Sec. 1092.201(m)'s definition of ``remain(s) in effect.'' For
the reasons set forth in the description of the proposed rule above,
the Bureau is finalizing Sec. 1092.201(m) (renumbered as Sec.
1092.201(n)) as proposed.
Section 1092.201(p) State Agency
Proposed Rule
The proposal would have defined the term ``State agency'' to mean
the attorney general (or the equivalent thereof) of any State and any
other State regulatory or enforcement agency or authority. The Bureau
intended this definition to encompass all State government officials
and regulators authorized to bring actions to enforce any covered law,
including actions to enforce the CFPA's provisions or regulations
issued under the CFPA pursuant to CFPA section 1042(a)(1).\268\ The
term would also have included regulatory or enforcement agencies of
certain Tribal governments that are included in the CFPA's definition
of the term ``State.'' \269\
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\268\ 12 U.S.C. 5552(a)(1).
\269\ See 12 U.S.C. 5481(27) (defining ``State'' to include
``any federally recognized Indian tribe, as defined by the Secretary
of the Interior under'' 25 U.S.C. 5131(a)).
---------------------------------------------------------------------------
Comments Received and Final Rule
The Bureau did not receive any comments specifically regarding
proposed Sec. 1092.201(n)'s definition of ``State agency.'' For the
reasons set forth in the description of the proposed rule above, the
Bureau is finalizing Sec. 1092.201(n) (renumbered as Sec.
1092.201(o)) as proposed.
Section 1092.201(q) Supervised Registered Entity
Proposed Rule
The proposal would have defined the term ``supervised registered
entity'' to mean a registered entity that is subject to supervision and
examination by the Bureau pursuant to CFPA section 1024(a),\270\ with
certain exceptions.\271\ The Bureau explained that the CFPA authorizes
the Bureau to require reports and conduct examinations of certain
persons, as described in CFPA section 1024(a)(1)(A)-(E); the proposed
term would have referred to a registered entity that is subject to
supervision and examination by the Bureau pursuant to any of those
provisions.\272\
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\270\ 12 U.S.C. 5514(a).
\271\ The Bureau explained that an affiliate of an insured
depository institution that is subject to examination and
supervision by the Bureau under 12 U.S.C. 5515(a) would not be
included in the proposed definition of supervised registered entity,
where the affiliate is not subject to examination and supervision by
the Bureau under 12 U.S.C. 5514(a). See 12 U.S.C. 5514(a)(3)(A)
(providing that 12 U.S.C. 5514 shall not apply to persons described
in 12 U.S.C. 5515(a) or 5516(a)).
\272\ The Bureau explained that the proposal would not increase
the number of entities subject to Bureau examinations or otherwise
modify the scope of the Bureau's supervisory jurisdiction.
---------------------------------------------------------------------------
For purposes of proposed Sec. 1092.201(o), the proposal would have
clarified that the term ``subject to supervision and examination by the
Bureau pursuant to CFPA section 1024(a)'' would include an entity that
qualifies as a larger participant of a market for consumer financial
products or services under any rule issued by the Bureau pursuant to
CFPA section 1024(a)(1)(B) and (a)(2) (providing Bureau supervisory
authority over larger participants in certain markets as defined by
Bureau rule), or that is subject to an order issued by the Bureau
pursuant to CFPA section 1024(a)(1)(C) (providing Bureau supervisory
authority over certain nonbank covered persons based on risk
determination). The Bureau proposed this language only to clarify and
make express that such persons would be included in the proposed
definition of the term supervised registered entity. The Bureau
explained that it was not proposing by means of this language to limit
the scope of the term ``supervised registered entity.''
Under the proposed definition of ``supervised registered entity,''
the Bureau explained that it need not have previously exercised its
authority to require reports from, or conduct examinations of, a
particular registered entity for that entity to qualify as a supervised
registered entity. A registered entity would have qualified as a
supervised registered entity if the Bureau could require reports from,
or conduct examinations of, that entity because it is a person
described in CFPA section 1024(a)(1). Such an entity would have been
``subject to supervision and examination'' within the meaning of the
proposal even if the Bureau has never previously exercised its
authority to require reports or conduct examinations with respect to
that entity.
The Bureau explained that persons would be subject to the
proposal's requirements applicable to ``supervised registered
entities'' so long as they satisfy the proposed definition of that
term. The Bureau recognized that certain entities may, in certain
circumstances, satisfy the definition only for a limited period of
time. For example, the Bureau noted that an entity's activity levels
may change in such a manner as to cause the entity to cease to qualify
as a larger participant of a market for consumer financial products and
services as defined by CFPA section 1024(a)(1)(B) and 12 CFR part
1090,\273\ or an entity may cease to be a person subject to Bureau
supervision under CFPA section 1024(a)(1)(C) and 12 CFR part 1091.\274\
An entity would have been required to comply with the proposal's
[[Page 56079]]
requirements applicable to ``supervised registered entities'' so long
as it qualifies as such an entity, but not once it ceases to so
qualify. Thus, for example, the Bureau explained that depending upon
the timing of events, a supervised registered entity might be required
to register with, and submit information to, the NBR system under
proposed Sec. 1092.202 but not subsequently submit a written statement
under proposed Sec. 1092.203 if it ceases to qualify as a supervised
registered entity before Sec. 1092.203(d)'s submission deadline.
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\273\ The Bureau explained that such a determination would be
made under the provisions of 12 CFR part 1090. See, e.g., 12 CFR
1090.102 (providing that ``[a] person qualifying as a larger
participant under subpart B of [12 CFR part 1090] shall not cease to
be a larger participant under [12 CFR part 1090] until two years
from the first day of the tax year in which the person last met the
applicable test under subpart B'').
\274\ The Bureau explained that such a determination would be
made under the provisions of 12 CFR part 1091. See, e.g., 12 CFR
1091.113 (regarding petitions for termination of an order issued
under 12 CFR 1091.109).
---------------------------------------------------------------------------
The Bureau believed that applying proposed Sec. 1092.203's
requirements to supervised registered entities so long as they satisfy
the proposed definition of that term, even if they do so for limited
periods of time, would serve its goals in imposing such requirements,
as described in section IV(D) of the proposal. The Bureau did not
believe that it should exempt, or otherwise distinguish for purposes of
the proposal, entities that are subject to supervision under CFPA
section 1024(a) for limited periods of time. The Bureau believed that
it is important to obtain reports from such supervised registered
entities under proposed Sec. 1092.203 for the reasons discussed in
section IV(D) of the proposal, including to ensure they are legitimate
entities and able to perform their obligations to consumers, to detect
and assess risks to consumers related to entities subject to Bureau
supervision, and to facilitate its assessments in connection with its
risk-based supervisory program under CFPA section 1024(b)(2). In
addition, the Bureau explained that requiring regular submission of
written statements from such entities would assist the Bureau in
determining whether the entity should continue to be subject to Bureau
supervision under CFPA section 1024(a)(1)(C), for example. However, the
Bureau preliminarily concluded that obtaining such written statements
from entities that are no longer subject to the Bureau's supervision
and examination authority under CFPA section 1024(a) is not necessary
to serve these purposes.\275\
---------------------------------------------------------------------------
\275\ The Bureau is adopting the proposal's approach to this
issue in the final rule and finalizes its preliminary conclusion to
this effect.
---------------------------------------------------------------------------
The Bureau explained that its proposed approach to applying the
term ``supervised registered entity'' would also have extended to the
recordkeeping requirements proposed in Sec. 1092.203(e). Proposed
Sec. 1092.203(e) would have required a supervised registered entity to
maintain certain documents and other records for five years after the
submission of a written statement is required, and to make such
documents and other records available to the Bureau upon request. The
Bureau explained that, once a supervised registered entity ceased to
qualify as a supervised registered entity under proposed Sec.
1092.201(o), it would no longer have been subject to Sec.
1092.203(e)'s requirement to maintain and provide such records. (The
Bureau noted that the entity may nevertheless be subject to other
requirements to maintain and provide such records, where such
requirements are imposed by Federal consumer financial law or other
applicable law.) The Bureau further explained that if, because of a
change in circumstances, the entity later once again qualifies as a
supervised registered entity, the entity would once again have become
subject to proposed Sec. 1092.203(e)'s recordkeeping requirement, but
only as to conduct undertaken to comply with proposed Sec. 1092.203
that occurs after the entity requalifies as a supervised registered
entity.
The proposal would have provided that the term ``supervised
registered entity'' would not include a service provider that is
subject to Bureau examination and supervision solely in its capacity as
a service provider and that is not otherwise subject to Bureau
supervision and examination. The Bureau noted that CFPA section 1024(e)
authorizes the Bureau to exercise supervisory authority with respect to
a service provider to a person described in CFPA section
1024(a)(1).\276\ Additionally, CFPA sections 1025(d) and 1026(e)
authorize the Bureau to exercise supervisory authority with respect to
certain other service providers.\277\ The Bureau explained that this
provision of the proposed definition clarifies that the term
``supervised registered entity'' would not have included a registered
entity that is subject to Bureau examination and supervision solely in
its capacity as a service provider under any of these provisions.
However, the Bureau explained, the term supervised registered entity
would have included a registered entity if the registered entity is
otherwise subject to Bureau supervision and examination under CFPA
section 1024(a)--i.e., if the registered entity is a person that is
described in CFPA section 1024(a)(1)--even if the registered entity is
also a service provider for some purposes under the CFPA.\278\ The
Bureau preliminarily concluded that, at least in the first instance,
the requirements set forth in proposed Sec. 1092.203 are best directed
at persons described in CFPA section 1024(a). The Bureau believed that
it could achieve the anticipated benefits described above without
extending its coverage to service providers subject to supervision
under CFPA section 1024.
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\276\ 12 U.S.C. 5514(e).
\277\ 12 U.S.C. 5515(d), 5516(e).
\278\ As discussed above, entities that are service providers
may nevertheless also be covered persons under the CFPA.
---------------------------------------------------------------------------
Proposed Sec. 1092.201(o)(2) would have provided that the term
``supervised registered entity'' would not include a motor vehicle
dealer that is predominantly engaged in the sale and servicing of motor
vehicles, the leasing and servicing of motor vehicles, or both, within
the meaning of 12 U.S.C. 5519(a), except to the extent such a person
engages in functions that are excepted from the application of CFPA
section 1029(a) as described in CFPA 1029(b).\279\ Proposed Sec.
1092.201(e), discussed above, would have further provided that the only
orders issued to such motor vehicle dealers that would subject the
dealer to the requirements of proposed Sec. Sec. 1092.202 and 1092.203
would be those issued in connection with the functions that are
excepted from the application of CFPA section 1029(a) as described in
CFPA 1029(b).
---------------------------------------------------------------------------
\279\ 12 U.S.C. 5519 (``Exclusion for Auto Dealers''). The
Bureau explained that, as with other supervised registered entities,
the motor vehicle dealer would only qualify as a ``supervised
registered entity'' if it were subject to the Bureau's supervisory
jurisdiction under 12 U.S.C. 5514(a). Technically, the Bureau noted,
the exclusion in proposed Sec. 1092.201(o)(2) should be unnecessary
because it is identical to the proposed exclusion from the
definition of ``covered nonbank'' in proposed Sec. 1092.201(d)(4),
and only covered nonbanks can qualify as supervised registered
entities. Nevertheless, the Bureau proposed Sec. 1092.201(o)(2) to
reiterate that the exclusion described in proposed Sec.
1092.201(d)(4) also limits which entities qualify as ``supervised
registered entities.''
---------------------------------------------------------------------------
Proposed Sec. 1092.201(o)(3) would have provided that the term
``supervised registered entity'' would not include a person that
qualifies as a covered person based solely on conduct that is the
subject of, and that is not otherwise exempted from, an exclusion from
the Bureau's supervisory authority under CFPA section 1027.\280\ The
Bureau explained that this proposed component of the term ``supervised
registered entity'' would have been similar to a component in the
proposed definition of the term ``covered nonbank,'' as discussed in
more detail in the section-by-section discussion of proposed Sec.
1092.201(d), above. However, while proposed Sec. 1092.201(d) would
have
[[Page 56080]]
described exclusions from the Bureau's rulemaking authority, proposed
Sec. 1092.201(o)(3) would have described exclusions from the Bureau's
supervisory authority. This provision would have clarified that persons
excluded from the supervisory authority of the Bureau under one or more
of the provisions of section 1027 of the CFPA would not be ``supervised
registered entities.'' However, where the CFPA provides that any of the
activities engaged in by such persons are subject to the Bureau's
supervisory authority, the Bureau noted that this limitation would not
have excluded the person from qualifying as a ``supervised registered
entity.'' For example, the Bureau noted, CFPA section 1027(l)(1)
provides an exclusion from the Bureau's supervisory authority for
certain persons engaging in certain activities relating to charitable
contributions.\281\ Under the proposal, a person would not have been
deemed a ``supervised registered entity'' if it qualifies for this
statutory exclusion and is not otherwise exempt from it. But CFPA
section 1027(l)(2) exempts certain activities from this statutory
exclusion by providing that ``the exclusion in [CFPA section
1027(l)(1)] does not apply to any activities not described in [CFPA
section 1027(l)(1)] that are the offering or provision of any consumer
financial product or service, or are otherwise subject to any
enumerated consumer law or any law for which authorities are
transferred under subtitle F or H.'' \282\ Under proposed Sec.
1092.201(o), an entity described in CFPA section 1027(l)(1) engaging in
the activities described therein would have qualified as a ``supervised
registered entity'' so long as it also engages in any of the activities
described in CFPA section 1027(l)(2). And, as a ``supervised registered
entity'' under the proposed Sec. 1092.201(o), such entity would have
been subject to all of proposed Sec. 1092.203's requirements
applicable to ``supervised registered entities'' with respect to any
``covered order,'' regardless of whether the applicable ``covered
order'' addressed conduct subject to the statutory exclusion in CFPA
section 1027(l)(1).
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\280\ 12 U.S.C. 5517.
\281\ 12 U.S.C. 5517(l)(1) (``Exclusion for Activities Relating
to Charitable Contributions'').
\282\ 12 U.S.C. 5517(l)(2).
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Finally, proposed Sec. 1092.201(o)(4) would have provided that the
term ``supervised registered entity'' would not include a person with
less than $1 million in annual receipts. The exclusion would have been
based on the receipts resulting from offering or providing all consumer
financial products and services described in CFPA section 1024(a).\283\
The Bureau proposed to define the term ``annual receipts'' to have the
same meaning as it has in Sec. 1090.104(a) of the Bureau's
regulations, including the provisions of that definition at paragraph
(i) regarding receipts, paragraph (ii) regarding period of measurement,
and paragraph (iii) regarding annual receipts of affiliated
companies.\284\ The Bureau proposed the exclusion in proposed Sec.
1092.201(o) for two reasons. First, the Bureau noted that providers of
consumer financial products and services with significantly lower
levels of receipts generally pose lower risks because they engage with
fewer consumers, obtain less money from those consumers, or both.
Second, the Bureau explained that the information collection burdens on
entities with receipts of $1 million or less, on a relative basis,
generally would be higher than for larger entities.
---------------------------------------------------------------------------
\283\ 12 U.S.C. 5514(a).
\284\ 12 CFR 1090.104(a).
---------------------------------------------------------------------------
The Bureau noted that the proposed exclusion from the definition of
``supervised registered entity'' based on volume of annual receipts
would have also been consistent with the CFPA's requirement that the
Bureau take entity size into account as part of its risk-based
supervision program.\285\ Accordingly, the Bureau proposed to exclude
persons with less than $1 million in annual receipts from the proposed
annual reporting requirements applicable to supervised registered
entities under proposed Sec. 1092.203.
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\285\ See 12 U.S.C. 5514(b)(2)(A), (B) (requiring the Bureau to
take into consideration ``the asset size of the covered person'' and
``the volume of transactions involving consumer financial products
or services in which the covered person engages'').
---------------------------------------------------------------------------
However, the Bureau did not propose to exclude such smaller
entities from the information-collection requirements provided in
proposed Sec. 1092.202. The Bureau believed that the limited burden
that would be imposed on such entities due to such information-
collection requirements would be warranted in light of the market-
monitoring benefits to the Bureau and other users of the NBR system.
The Bureau explained that it could evaluate the need for additional
supervisory attention related to a smaller supervised nonbank based on
its submissions under proposed Sec. 1092.202 and any additional
information at its disposal. As discussed in section IV of the proposal
and the section-by-section discussion of proposed Sec. 1092.202, those
submissions would have provided additional information relevant to the
Bureau's assessments of risk in connection with its prioritization
efforts under CFPA section 1024(b)(2).\286\
---------------------------------------------------------------------------
\286\ 12 U.S.C. 5514(b)(2).
---------------------------------------------------------------------------
Comments Received
A consumer advocate commenter objected to proposed Sec.
1092.201(o)(1), which would have provided that the term ``supervised
registered entity'' does not include a service provider that is subject
to Bureau examination and supervision solely in its capacity as a
service provider and that is not otherwise subject to Bureau
supervision and examination. The consumer advocate commenter stated
that third party service providers can present risk even when they are
not supervised by the Bureau.
Industry commenters stated that the Bureau should raise the $1
million amount described in proposed Sec. 1092.201(o)(4), which would
have excluded from the definition of ``supervised registered entity'' a
person with less than $1 million in annual receipts resulting from
offering or providing all consumer financial products and services
described in 12 U.S.C. 5514(a). Commenters stated that the proposed $1
million annual receipts amount was essentially meaningless because it
would not exclude most nonbanks, and in particular that the proposed $1
million annual receipts amount was unlikely to exclude a meaningful
number of mortgage lenders and mortgage servicers. An industry
commenter also stated that the proposed $1 million annual receipts
amount was contrary to CFPA section 1024(b)(2)'s requirements regarding
the Bureau's risk-based supervision program for nonbanks.\287\
---------------------------------------------------------------------------
\287\ 12 U.S.C. 5514(b)(2).
---------------------------------------------------------------------------
A consumer advocate commenter stated that the Bureau should
eliminate the exception described at proposed Sec. 1092.201(o)(4) and
instead require written statements from all entities that otherwise
would qualify as ``supervised registered entities.'' The commenter
stated that the Bureau had not explained why the written-statement
requirements should not be as expansive as the Bureau's supervisory
authority, that smaller companies were likely to present risks to
consumers, and that they were less likely to have sophisticated
internal controls.
Commenters stated that the proposal was insufficiently clear with
respect to the obligations of affiliates of insured depository
institutions and insured credit unions to comply with the proposed
rule's written-statement requirements. Industry commenters stated that
such affiliates should not be required to comply with such
requirements, and an industry commenter requested that the text of the
[[Page 56081]]
final rule include an express exception for affiliates subject to
Bureau supervision under CFPA section 1025(a).\288\ A consumer advocate
commenter stated that the rule should clearly include banks and bank
affiliates, including holding companies and the nonbank subsidiaries of
bank holding companies, and that the Bureau should take as expansive of
a view as possible of the registry's reach.
---------------------------------------------------------------------------
\288\ 12 U.S.C. 5515(a).
---------------------------------------------------------------------------
Response to Comments Received
The Bureau declines to extend the written statement requirement to
service providers that are subject to Bureau examination and
supervision solely in their capacity as service providers and that are
not otherwise subject to Bureau supervision and examination.\289\ The
Bureau also declines to extend the rule's requirements, including the
written statement requirement, to service providers that do not qualify
as ``covered persons'' under CFPA section 1002(6). The Bureau finalizes
its preliminary conclusion in the notice of proposed rulemaking \290\
that, at least in the first instance, the requirements of the rule are
best directed at covered persons, and the written-statement
requirements set forth in Sec. 1092.204 are best directed at persons
described in CFPA section 1024(a). The Bureau currently believes that
it likely can achieve the anticipated benefits detailed in the
description of the proposed rule above without extending the final
rule's coverage to service providers per se.\291\ The Bureau notes that
the scope of the final rule would also need to be modified
significantly from the proposed rule in order to require service
providers that do not qualify as ``covered persons'' to register with
the nonbank registry and file written statements. Among other things,
many of the service providers subject to the Bureau's jurisdiction are
not ``covered persons'' as defined by CFPA section 1002(6), and
therefore would be neither ``covered nonbanks'' as defined by Sec.
1092.201(d) nor ``supervised registered entities'' as defined by Sec.
1092.201(q). Further, the Bureau is likely to obtain information
regarding service providers from the information that will be collected
under the final rule as well as its supervisory reviews of supervised
registered entities. To the extent the Bureau becomes aware of service
providers that may present risk to consumers, it may obtain additional
information under its existing statutory authorities, including its
supervisory authorities with respect to service providers that are
subject to the Bureau's supervisory and examination authority under the
CFPA.\292\
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\289\ 12 U.S.C. 5481(26) defines the term ``service provider''
for the purposes of the CFPA.
\290\ 88 FR 6088 at 6115.
\291\ As discussed above, entities that are service providers
may nevertheless also be covered persons under the CFPA. For
example, a service provider that acts as a service provider to its
covered person affiliate would itself be deemed to be a covered
person as provided in 12 U.S.C. 5481(6)(B), and thus would qualify
as a ``covered nonbank'' under Sec. 1092.201(d) if the other
criteria of that definition are satisfied.
\292\ See 12 U.S.C. 5514(e), 5515(d), 5516(e).
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The Bureau is adopting a revision to proposed Sec. 1092.201(q)(4),
which will exclude from the rule's definition of ``supervised
registered entity,'' and thus from the rule's written-statement
requirements under Sec. 1092.204, persons with less than $5 million in
annual receipts resulting from offering or providing all consumer
financial products and services described in 12 U.S.C. 5514(a). This
revised $5 million amount described at Sec. 1092.201(q)(4) represents
an increase from the $1 million annual receipts amount for this
exclusion that was described in the proposed rule. The Bureau concludes
that increasing the amount of the exclusion, while still imposing the
written-statement requirements described at Sec. 1092.204 on
supervised registered entities with $5 million or more in annual
receipts as described, will allow the Bureau to achieve the objectives
of the written-statement requirements while reducing burden on smaller
entities.
The Bureau declines to adopt the consumer advocate commenter's
suggestion to eliminate the Sec. 1092.201(q)(4) exception entirely
from the definition of ``supervised registered entity.'' As described
above and in the notice of proposed rulemaking,\293\ providers of
consumer financial products and services with significantly lower
levels of receipts generally pose lower risks overall because they
engage with fewer consumers, obtain less money from those consumers, or
both. And the information-collection burdens on entities with
applicable annual receipts of less than $5 million, on a relative
basis, generally would be higher than for larger entities. In addition,
imposing the annual written-statement requirements on such smaller
entities would impose additional administrative costs on the Bureau.
The Bureau believes that applying the written-statement requirements to
``supervised registered entities'' as defined at Sec. 1092.201(q) will
strike the appropriate balance in terms of obtaining information that
is useful to the Bureau without imposing undue burdens on either
industry or the Bureau. However, for the reasons stated in the
description of the proposal above and the section-by-section discussion
of Sec. 1092.201(d) above, the final rule does not exclude such
smaller entities from the information-collection requirements provided
in Sec. 1092.202.
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\293\ 88 FR 6088 at 6116.
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As described above and in the notice of proposed rulemaking,\294\
the Bureau had proposed the Sec. 1092.201(o) exclusion from the
definition of ``supervised registered entity'' based on volume of
applicable annual receipts precisely because such an exclusion would
also be consistent with the CFPA's requirement that the Bureau take
entity size into account as part of its risk-based supervision program
under CFPA 1024(b)(2).\295\ The $5 million annual receipts amount for
the exclusion adopted in the final rule will likewise be consistent
with this CFPA requirement.
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\294\ 88 FR 6088 at 6116.
\295\ See 12 U.S.C. 5514(b)(2)(A), (B) (requiring the Bureau to
take into consideration ``the asset size of the covered person'' and
``the volume of transactions involving consumer financial products
or services in which the covered person engages''). Furthermore,
while the Bureau does not believe that it needs to rely on its
authority under 12 U.S.C. 5512(b)(3) to exempt classes of covered
persons from rules in proposing this small-entity exclusion, the
Bureau believes that the exclusion would be warranted as an exercise
of its section 1022(b)(3) exemption authority, to the extent that
provision is applicable. See 12 U.S.C. 5512(b)(3). As under 12
U.S.C. 5514(b)(2), an entity-size-based exclusion accords with 12
U.S.C. 5512(b)(3)(B)(i) and (ii), which instruct the Bureau to
consider ``the total assets of the class of covered persons'' and
``the volume of transactions . . . in which the class of covered
persons engage'' in issuing exemptions. 12 U.S.C. 5512(b)(3)(B)(i)-
(ii). In addition, given the relatively smaller scope of the harm to
consumers that entities with annual receipts not exceeding $5
million would generally be able to cause when compared with entities
with annual receipts exceeding that threshold, the Bureau does not
believe that on balance the factor articulated in 12 U.S.C.
5512(b)(3)(B)(iii) (``existing provisions of law which are
applicable to the consumer financial product or service and the
extent to which such provisions provide consumers with adequate
protection'') weighs against adopting the proposed small-entity
exclusion.
---------------------------------------------------------------------------
With respect to the industry commenters' specific concerns
regarding burden on mortgage lenders and mortgage servicers, the Bureau
further notes that, under the final rule, such supervised registered
entities will no longer be required to file written statements with
respect to NMLS-published covered orders as defined at Sec.
1092.201(k) if they elect the one-time registration option set forth in
Sec. 1092.203. In addition to the change being adopted to Sec.
1092.201(q)(4), Sec. 1092.203 will further reduce, perhaps
substantially, the number of mortgage lenders and mortgage servicers
that will
[[Page 56082]]
be required to comply with the rule's written-statement requirements.
See below for discussion of the application of Sec. 1092.201(q) to
affiliates of insured depository institutions and insured credit
unions.
Final Rule
For the reasons set forth above and below, the Bureau is finalizing
Sec. 1092.201(o) (renumbered as Sec. 1091.201(q)) as proposed, with
minor technical edits and a clarification described below regarding the
application of this section to affiliates of an insured depository
institution or insured credit union with total assets of more than
$10,000,000,000 ($10 billion), as well as a revision to clarify how
annual receipts are calculated under Sec. 1091.201(q)(4).
In response to comments, the Bureau clarifies the application of
Sec. 1092.201(q)'s definition of ``supervised registered entity'' to
affiliates of insured depository institutions and insured credit
unions. The final rule defines the term ``supervised registered
entity'' as ``a registered entity that is subject to supervision and
examination by the Bureau pursuant to 12 U.S.C. 5514(a)'' (subject to
certain exceptions). CFPA section 1024(a)--which is codified as 12
U.S.C. 5514(a)--encompasses section 1024(a)(3)(A), which provides that
``[t]his section shall not apply to persons described'' in section
1025(a) or 1026(a).\296\ Section 1025(a) grants the Bureau supervisory
authority over insured depository institutions and insured credit
unions with more than $10 billion in total assets, as well as ``any
affiliate thereof.'' \297\ Therefore, because affiliates of such very
large insured depository institutions and insured credit unions are
included within the scope of section 1025(a), and thus are excluded
from the scope of section 1024(a) via section 1024(a)(3)(A), affiliates
of insured depository institutions and insured credit unions with more
than $10 billion in total assets do not qualify as ``supervised
registered entities'' under the final rule. That is the case even if
the affiliate offers or provides consumer financial products and
services described in CFPA section 1024(a)(1). For example, a bank
holding company, savings and loan holding company, or subsidiary of a
bank or savings association that is an affiliate of an insured
depository institution or insured credit union with total assets of
more than $10 billion is not covered by the definition of ``supervised
registered entity,'' even if it offers or provides consumer financial
products or services described in CFPA section 1024(a)(1), such as
mortgage lending. Such an affiliate is not subject to the final rule's
written-statement requirements even if it is a ``covered nonbank.''
\298\
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\296\ 12 U.S.C. 5514(a)(3)(A).
\297\ 12 U.S.C. 5515(a).
\298\ Such an affiliate would still be subject to the final
rule's other requirements applicable to covered nonbanks, including
Sec. 1092.202's requirements to register covered orders. See the
section-by-section discussion of Sec. 1092.201(d) above.
---------------------------------------------------------------------------
By contrast, CFPA section 1026(a), which addresses Bureau authority
over insured depository institutions and insured credit unions with $10
billion or less in total assets, makes no mention of ``affiliates'' of
such entities. Section 1024(a)(3)(A) thus does not exclude affiliates
of insured depository institutions and insured credit unions with $10
billion or less in total assets from the scope of section 1024(a). As a
result, affiliates of such entities may qualify as ``supervised
registered entities,'' unless an exception set forth in Sec.
1092.201(q)(1) through (4) applies. With the above clarification of how
the interlocking texts of Sec. 1092.201(q) and CFPA sections 1024(a),
1025(a), and 1026(a) operate with respect to affiliates of insured
depository institutions and insured credit unions, the Bureau concludes
that no revisions to the text of Sec. 1092.201(q) are required to
address this issue.
The Bureau is finalizing this approach to affiliates of insured
depository institutions and insured credit unions for several reasons.
First, the Bureau is issuing the final rule in part based on its
authority under CFPA section 1024(b)(7)(A)-(C). As explained above,
CFPA section 1024(a)(3)(A) provides that CFPA section 1024 shall not
apply to persons described in CFPA section 1025(a), including
affiliates of insured depository institutions or insured credit unions
with more than $10 billion in assets. Therefore, excluding such
affiliates from the definition of ``supervised registered entity'' will
help ensure that the written statement provisions of the final rule are
consistent with the scope of CFPA section 1024. Second, while the
Bureau might at some point consider collecting information from covered
persons other than those described at CFPA section 1024(a), the Bureau
believes that there is currently greater need to collect this
information from such persons. The Bureau acknowledges the consumer
advocate commenter's concerns regarding risks that may be posed to
consumers by affiliates of insured depository institutions and insured
credit unions, including affiliates of insured depository institutions
and insured credit unions with total assets of more than $10 billion.
These affiliate entities remain subject to the Bureau's supervisory and
examination authority under CFPA section 1025, as well as other
applicable Bureau authorities, and the Bureau may choose to utilize its
supervisory and other authorities in monitoring and assessing such
risks. Third, the Bureau concludes that exempting the affiliates of
such very large insured depository institutions and insured credit
unions from the final rule's written-statement requirements is
consistent with its rationale for exempting insured depository
institutions and insured credit unions from the scope of subpart B at
this time.
The Bureau has also added to the final rule the new Sec.
1092.201(q)(4)(ii). That provision clarifies that a person's receipts
from offering or providing a consumer financial product or service
subject to a larger participant rule under CFPA section 1024(a)(1)(B)
count as receipts for purposes of the $5 million exclusion in Sec.
1092.201(q)(4), regardless of whether the person qualifies as a larger
participant. As described in the proposal, under Sec. 1092.201(q)(4),
the exclusion is based on the receipts resulting from offering or
providing all consumer financial products and services described in
CFPA section 1024(a). The new provision makes clear that such receipts
include the receipts resulting from offering or providing any of the
consumer financial products and services subject to a rule defining
larger participant covered persons issued under CFPA section
1024(a)(1)(C) and (2), which for purposes of this exclusion are
consumer financial products and services described in CFPA section
1024(a). For purposes of this exclusion, receipts that count toward
determining larger participant status under a larger participant rule
would count toward this exclusion, even if the person ultimately did
not qualify as a larger participant. For example, a person may engage
in offering or providing both consumer mortgages, private student
loans, or payday loans, on the one hand, and consumer financial
products or services identified in a larger participant rule, on the
other hand. In that example, even if the person did not meet the
threshold for larger participant status under the applicable larger
participant rule, the receipts from offering or providing the consumer
financial product or service covered by the larger participant rule
still would count as receipts for purposes of this exclusion.
[[Page 56083]]
Section 1092.202 Registration and Submission of Information Regarding
Covered Orders
Proposed Sec. 1092.202 would have required covered nonbanks to
register with the NBR system by timely submitting information to the
NBR system regarding covered orders. The proposed section would have
established requirements regarding the timing and content of
information to be submitted.
The Bureau believed that requiring covered nonbanks to register
with the NBR system would further the objectives of proposed subpart B
even in the event the Bureau were not to finalize proposed requirements
that supervised registered entities submit written statements as
described in proposed Sec. 1092.203. Proposed Sec. 1092.202 would
have applied to a broader set of entities than would proposed Sec.
1092.203, and the Bureau believed that requiring registration of
entities under proposed Sec. 1092.202 would have provided independent
benefit to the Bureau and to consumers.
The Bureau is finalizing Sec. 1092.202 largely as proposed, with
certain changes discussed in the analysis of particular paragraphs
below. Below, the Bureau first addresses comments regarding the
Bureau's legal authority to impose the requirements in Sec. 1092.202
and then discusses Sec. 1092.202's individual paragraphs.
Certain Comments Received Regarding the Bureau's Authority Under CFPA
Section 1022 To Impose the Requirements in the Final Rule
Some commenters expressed the view that the Bureau is pursuing a
novel and legally impermissible approach to its authorities under CFPA
section 1022. Other commenters stated that the Bureau has statutory
authority to issue the proposed rule under section 1022. The Bureau
finalizes its conclusion that section 1022 authorizes the rule's
registration and publication requirements. The Bureau discusses and
responds to some of these comments together in this part for ease of
reference. For further discussion of the market-monitoring requirements
in the final rule and the Bureau's responses to comments received, see
the section-by-section analysis below.
Commenters stated that the proposed registry was inconsistent with
the Bureau's past practices, and that the Bureau's purported invocation
of its CFPA section 1022(c) authority was actually for the purpose of
using it to expand its supervisory authority over market participants
under CFPA section 1024(a)(1)(C). An industry commenter argued that the
proposal represented an attempt to eliminate a clear statutory firewall
between the Bureau's market-monitoring authority and its enforcement
function, and that it improperly relied upon the Bureau's authority
under CFPA section 1022 to support its enforcement functions. The
industry commenter stated that the CFPA distinguished the Bureau's
enforcement powers under subtitle E of the CFPA from its market-
monitoring authority under CFPA section 1022, and that unlike
information gathered under CFPA 1022, information collected for
enforcement purposes is subject to procedural safeguards under CFPA
section 1052 and contemplates the use of civil investigative demands
(CIDs) to determine whether there has been a violation of a law.
An industry commenter stated that the proposal did not provide any
evidence that covered orders are probative of risk to consumers,
stating that the proposal's statements about such risk were conclusory
and not backed by documented research and facts, and that companies
might actually present less risk because of the scrutiny that comes
with being subject to an order. The industry commenter further stated
that the proposal would effectively put covered nonbanks in a permanent
penalty box, and that the proposal's premise that past violations are
evidence of current risk of harm contravenes a fundamental rule of
evidence under American law as established at Federal Rule of Evidence
404, which prohibits certain use of evidence of prior crimes.
A joint comment letter from State regulators stated that the
proposal did not quantify the potential benefit to the Bureau's
consumer education efforts, and suggested that the Bureau's belief that
most consumers will not change their behavior due to the publication of
the registry was inconsistent with the existence of such a benefit.
The Bureau's Response to Certain Comments Received Regarding the
Bureau's Authority Under CFPA Section 1022 To Impose the Requirements
in the Final Rule
The Bureau proposed to rely, in part, on its authorities in
sections 1022(c)(1)-(4) and (7) for the collection and publication of
applicable orders. As the Bureau stated in the notice of proposed
rulemaking, the Bureau considers violations of consumer protection laws
probative of ``risks to consumers in the offering and provision of
consumer financial products or services,'' and that entities subject to
public orders ``may pose heightened and ongoing risks to consumers in
the markets for those products and services.'' \299\ More specifically,
monitoring for such orders would allow the Bureau ``to track specific
instances of, and more general developments regarding, potential
corporate recidivism,'' which poses its own unique risks to consumers,
and would improve the Bureau's ability to track enforcement trends by
other regulators, enabling it to more efficiently deploy resources vis-
[agrave]-vis other regulators.\300\ Parts III(B) and IV(A)-(C) above
discuss in detail how this information will support the allocation of
resources and detection of risks to consumers.
---------------------------------------------------------------------------
\299\ 88 FR 6088 at 6091-6092.
\300\ Id. at 6092.
---------------------------------------------------------------------------
Some commenters argued for a narrower interpretation of section
1022(c)(4), contending that the Bureau's market-monitoring authorities
cannot be used to impose a substantive requirement or are limited to
gathering information about particular products, services and
practices, or to one-off information gathering. In the view of some
commenters, by requiring entities to provide information to the Bureau
on an ongoing basis, the registry is inconsistent with past Bureau
practice. One commenter pointed to section 1071 to argue that, had
Congress wanted the Bureau to create a new database, it would have
explicitly and clearly done so.
The narrow view of market-monitoring urged by these commenters is
inconsistent with the text and structure of section 1022. First,
contrary to commenters' suggestion that the Bureau's market-monitoring
authority is limited to gathering information about particular
products, services, and practices, nothing in CFPA section 1022(c)
confines the Bureau to exercising its market-monitoring authority only
on a piecemeal, product-by-product or service-by-service basis. In
fact, section 1022 specifically commands the Bureau to monitor
``developments in markets for . . . products or services,'' not simply
developments regarding particular products or services themselves.\301\
Further, section 1022(c)(4)(A) explicitly authorizes the Bureau to
gather information ``regarding the organization, business conduct,
markets, and activities of covered persons and service providers.''
Commenters rest their argument on the language of section 1022(c)(2),
which contains an open-ended list of factors that the Bureau ``may
consider, among other factors,''
[[Page 56084]]
when ``allocating its resources to perform . . . monitoring.'' \302\
Although these discretionary considerations are identified by reference
to ``consumer financial products or services,'' this language does not
function as a procedural requirement for the Bureau to proceed on a
product-by-product, service-by-service, or even market-by-market basis
when it uses its market-monitoring authority.
---------------------------------------------------------------------------
\301\ 12 U.S.C. 5512(c)(1) (emphasis added).
\302\ 12 U.S.C. 5512(c)(2).
---------------------------------------------------------------------------
One commenter argues that the rule exceeds the Bureau's authority
under section 1022(c)(4)(A) to gather information ``from time to
time.'' The Bureau, however, is acting in accord with its statutory
authority to ``prescribe by rule'' that covered persons must ``from
time to time'' file ``annual or special reports.'' \303\ The rule here
does exactly that: It requires reports ``from time to time''--i.e.,
ninety days after a covered order's effective date (or the applicable
nonbank registry implementation date), as well as ninety days after the
covered order's amendment, modification, termination, abrogation, or
cessation of covered-order status, or after changes to other
registration information. There are indications elsewhere in the CFPA
that ``from time to time'' may include regular intervals. For example,
section 1014, which establishes the Bureau's Consumer Advisory Board,
directs the Board to meet ``from time to time . . . but, at a minimum,
. . . at least twice in each year.'' \304\ In addition, in other
statutory contexts, courts have recognized that the phrase ``from time
to time'' contemplates ``an ongoing process'' rather than a one-off
action.\305\ In section 1022, Congress imposed on the Bureau an
obligation to monitor markets; as a practical matter, doing so often
requires repeated or periodic information collections in order to
understand how the consumer financial marketplace is developing. An
atextual reading of section 1022(c)(4) that would limit the Bureau to
one-off information gathering efforts would significantly undermine the
Bureau's ability to fulfill its congressionally assigned obligations
and runs counter to the notion of market monitoring ``by rule'' under
the statute.\306\
---------------------------------------------------------------------------
\303\ 12 U.S.C. 5512(c)(4).
\304\ 12 U.S.C 5494(c).
\305\ In re A Community Voice, 878 F.3d 779, 784 (9th Cir.
2017); see also Earth Island Institute v. Wheeler, 464 F. Supp. 3d
1138, 1145 (N.D. Cal. 2020) (concluding that ``from time to time''
statutory language reflected an ``ongoing duty'').
\306\ 12 U.S.C. 5512(c)(4)(B)(ii).
---------------------------------------------------------------------------
Contrary to commenters' suggestion, this is not the first time that
the Bureau has relied on section 1022(c)(4) to create an ongoing
requirement for covered persons to submit information for the purposes
of carrying out market monitoring. For example, as part of its final
rule to extend consumer protections over prepaid accounts under
Regulation E, which implements the Electronic Fund Transfer Act, and
Regulation Z, which implements the Truth in Lending Act, the Bureau
also utilized its authority under CFPA section 1022(c)(4) to require
prepaid card issuers to submit prepaid account agreements to the
Bureau.\307\ The Bureau initially proposed requiring prepaid card
issuers to submit new and amended agreements to the Bureau on a
quarterly basis for posting on a website maintained by the Bureau.\308\
In the final rule, the Bureau ultimately chose to require submission on
a rolling basis to reduce compliance burden.\309\ Requiring ongoing
submissions in this final rule is not a novel or unique interpretation
of the Bureau's authority under section 1022(c)(4).
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\307\ Prepaid Accounts Under the Electronic Fund Transfer Act
(Regulation E) and the Truth in Lending Act (Regulation Z), 81 FR
83934 (Nov. 22, 2016).
\308\ Id. at 83957.
\309\ Id. at 83963.
---------------------------------------------------------------------------
Commenters appear to be relying on the expressio unius est exclusio
alterius canon of statutory interpretation in claiming that the data
collection authorized by section 1071 of the CFPA, which amended the
Equal Credit Opportunity Act (ECOA),\310\ implies limitations on the
Bureau's market-monitoring authority in section 1022 of the CFPA. But
the Supreme Court has ``long held that the expressio unius canon does
not apply `unless it is fair to suppose that Congress considered the
unnamed possibility and meant to say no to it.' '' \311\ Courts have
observed that the canon is a ``feeble helper in an administrative
setting,'' where Congress often employs expansive statutory language to
leave room for exercises of reasonable agency discretion, and is a
``poor indicator'' of congressional intent ``when countervailed by a
broad grant of authority contained within the same statutory scheme.''
\312\
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\310\ 15 U.S.C. 1691 et seq.
\311\ Marx v. General Rev. Corp., 568 U.S. 371, 381 (2013)
(quoting Barnhardt v. Peabody Coal Co., 537 U.S. 149 (2003)).
\312\ Adirondack Med. Ctr. v. Sebelius, 740 F.3d 692, 697 (D.C.
Cir. 2014) (quoting Cheney R.R. Co. v. I.C.C., 902 F.2d 66, 68-69
(D.C. Cir. 1990)).
---------------------------------------------------------------------------
Commenters do not point to anything in the legislative history of
the CFPA to support their claim that Congress ``meant to say no'' to
requirements like those contemplated by this rule. Indeed, the
authority to collect information in section 1022(c)(4) is precisely the
kind of broad authority with respect to which courts have found the
expressio unius canon to be a ``poor indicator'' of congressional
intent. The Bureau has an extensive obligation, covering the entire
marketplace for consumer financial products and services, to monitor
for risks to consumers; the information-collection authority at section
1022(c)(4) is necessarily broad in order to satisfy that obligation.
In addition, interpreting section 1071 to imply some limit on the
authorities in section 1022 is inappropriate because, among other
reasons, section 1071 amends another statute, ECOA, and serves purposes
specific to that statute, which are to ``facilitate enforcement of fair
lending laws'' and to ``enable communities, governmental entities, and
creditors to identify business and community development needs and
opportunities of women-owned, minority-owned, and small businesses.''
\313\ Sections 1022 and 1071 should be interpreted in light of their
distinct and specified purposes.
---------------------------------------------------------------------------
\313\ 15 U.S.C. 1691c-2(a).
---------------------------------------------------------------------------
Regarding the industry commenters' statements that the final rule
improperly relies upon section 1022 authority to support the Bureau's
determinations under CFPA section 1024(a)(1)(C), or to support the
Bureau's enforcement functions, CFPA section 1022(a)(1) provides that
the CFPB may use its market-monitoring authority to ``support its
rulemaking and other functions.'' \314\ The Bureau understands this
provision to mean that all of the Bureau's functions, including
supervision and enforcement, can be informed by information it gathers
through market monitoring. While the Bureau's market-monitoring
authority does not replace its supervision and enforcement authorities
(which are established by and subject to other provisions of the CFPA),
there is no question that the Bureau can use its market-monitoring work
to generally ``support'' those functions as well as its other
functions, such as rulemaking and conducting financial education
programs.\315\
---------------------------------------------------------------------------
\314\ See 12 U.S.C. 5512(c)(1).
\315\ See part IV(B) above.
---------------------------------------------------------------------------
The Bureau is finalizing its preliminary conclusion in the proposal
that collecting and registering public agency and court orders imposing
obligations based upon violations of consumer law would assist with
monitoring for risks to consumers in the offering or provision of
consumer financial products and services. As explained in part IV
above, when an agency issues such an order, or seeks a court order, it
typically has determined
[[Page 56085]]
that the problems at the applicable entity are sufficiently serious to
merit the expenditure of that agency's limited resources and perhaps
the attention of the courts. As discussed in part IV, conduct that
constitutes a violation of a covered law may also indicate that the
covered nonbank has engaged in violations of laws that the Bureau
administers. And, notwithstanding the issuance of the covered order,
the violations of covered law or other problems that led the agency to
pursue enforcement action may persist after an order has been issued.
Such orders may also be indicative of the existence of broader problems
at the entity that pose related risks to consumers--including lack of
sufficient controls related to the offering and provision of consumer
financial products and services, inadequate compliance management
systems and processes, and an unwillingness or inability of senior
management to comply with laws subject to the Bureau's jurisdiction.
Information regarding the absence of covered orders will also be
informative to the Bureau. The existence of covered orders may also in
some cases be indicative of lesser, and not greater, risk to consumers.
For example, the presence of enforcement activity may indicate that
particular risks, markets, or companies are receiving adequate
enforcement attention and oversight from regulators.\316\ But while
less enforcement activity in certain areas could indicate less risk to
consumers, it potentially also could be evidence of less attention by
regulators and a need to increase monitoring and other supervisory or
regulatory activities. Enforcement patterns and trends may vary
depending on any number of factors, including the agency issuing or
obtaining the order, the type of entity subject to the order, the
consumer protection law being enforced, the applicable geographic or
product market, and other variables. The Bureau will use the
information it collects under the final rule to evaluate, assess, and
understand the consumer risk posed by or otherwise related to covered
orders, including patterns in such orders and developments in the
markets for consumer financial products and services.
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\316\ See 12 U.S.C. 5514(b)(2)(D) (requiring the Bureau to
consider in conducting risk-based supervisory prioritization ``the
extent to which [nonbanks] are subject to oversight by State
authorities for consumer protection'').
---------------------------------------------------------------------------
As discussed in part IV above, collecting and evaluating such
market-monitoring information relevant to the offering and provision of
consumer financial products and services is appropriate to inform the
Bureau's functions, including its supervision and enforcement
functions. Thus, the Bureau may consider all of this information
regarding enforcement activity, including patterns in such activity, in
assessing risks to consumers as part of, among other things, exercising
its market-monitoring authority under CFPA section 1022(c), conducting
its supervisory prioritization under CFPA section 1024(b)(2), and
determining the amount of civil money penalties it may seek or assess
under CFPA section 1055(c). However, such use by the Bureau of this
information as authorized under the CFPA does not represent an attempt
to improperly penalize covered nonbanks for prior acts. Likewise, as
discussed in the section-by-section discussion of Sec. 1092.205(a)
below, any publication by the Bureau of the information collected
through the registry as authorized under Sec. 1092.205 would not be
intended to punish companies or individuals for their past acts.
Collection and publication of such information as provided in the final
rule is authorized by the CFPA and does not violate evidentiary or
other fundamental principles of American law.
Industry commenters also stated that the proposed registry's
purpose was incompatible with the Bureau's authorities to prescribe
rules regarding registration requirements under CFPA section
1022(c)(7). A joint letter from members of Congress stated CFPA section
1022(c)(7) does not grant the Bureau authority to establish such a
robust set of registration requirements, nor a database for a
particular category of information, and stated that when Congress
intends to create a database, it explicitly and clearly does so. One
industry commenter also stated that CFPA section 1022(c)(7) does not
contemplate the creation of a registration requirement and bespoke
database for a particular category of information, but rather outlines
a path for registering a covered entity with the Bureau and sharing
basic identifying information about the entity with the public. Another
industry commenter stated that the proposed registry represented an
attempt to obscure the Bureau's failure to create a registry that would
identify legitimate companies for the use of consumers and others, as
required by law, and that the Bureau should instead develop and
publicize an accessible list of legitimate debt collectors.
Commenters do not specify how the final rule's particular
registration requirements exceed the authority contained in CFPA
section 1022(c)(7), and the Bureau believes that the final rule is
consistent with the Bureau's authority under that provision. As
discussed in part III(B) above, CFPA section 1022(c)(7)(A) expressly
authorizes the Bureau to ``prescribe rules regarding registration
requirements applicable to a covered person, other than an insured
depository institution, insured credit union, or related person.'' The
registry will provide a mechanism for the Bureau to gather information
about the nonbank entities that are subject to its jurisdiction. The
CFPB has designed its rule to be consistent with limitations contained
in CFPA section 1022(c)(7)(A), including by excluding insured
depository institutions, insured credit unions, and related persons
from the scope of the rule's registration requirements.\317\ As
explained in more detail in parts III and IV, the Bureau is adopting
the final rule to fulfill the general purposes and objectives
established for the Bureau in CFPA sections 1021, 1022(b) and (c), and
1024(b)(7)(A)-(C), as authorized under those sections. The Bureau
disagrees that more specific statutory authorization is required.
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\317\ See Sec. 1092.201(d)(1) and (2) of the final rule.
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Section 1022(c)(7)(B) also provides that ``[s]ubject to rules
prescribed by the Bureau, the Bureau may publicly disclose registration
information to facilitate the ability of consumers to identify covered
persons that are registered with the Bureau.'' \318\ The Bureau
interprets CFPA section 1022(c)(7)(B) as authorizing it to publish
registration information required by Bureau rule under CFPA section
1022(c)(7)(A) so that consumers may identify the nonbank covered
persons on which the Bureau has imposed registration requirements.
Contrary to a commenter's suggestion, this provision does not imply
that the Bureau is precluded from publishing registration information
in database or other searchable form, or from publishing identifying
information or other registration information in a manner that
highlights specific information or categories of information. As
further explained in part IV(F) and the section-by-section discussion
of Sec. 1092.205(a), publication of registry information under Sec.
1092.205 in an online public registry will implement the provisions of
Federal consumer financial law in a manner fully consistent with the
Bureau's obligations under the CFPA.
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\318\ 12 U.S.C. 5512(c)(7)(B).
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An industry commenter questioned the Bureau's authority to make the
market-monitoring data public under
[[Page 56086]]
CFPA section 1022(c)(3). Section 1022(c)(3)(B), however, authorizes the
Bureau to release information through aggregated reports or ``other
appropriate formats.'' The only limitations on ``format'' that section
1022 imposes are that the format be ``appropriate'' and that it be
``designed to protect confidential information in accordance with
paragraphs (4), (6), (8), and (9).'' The proposed registry complies
with these restrictions.
Section 1022(c)(3)(B) is not limited by section 1022(c)(3)(A), on
which the industry commenter focused. Section 1022(c)(3)(A) requires
the Bureau to, at minimum, publish one ``report of significant findings
of its monitoring required by this subsection [i.e., subsection
1022(c)] in each calendar year.'' It sets a floor, not a ceiling, and
it does not restrict the Bureau to only publishing ``report[s] of
significant findings'' related to its market-monitoring work.
In addition, section 1022(c)(3)(B) authorizes the Bureau to publish
information obtained ``under this section [i.e., section 1022]'' in
``appropriate formats.'' By its own terms, this provision applies to
any category of information collected under section 1022 (see, e.g.,
CFPA sections 1022(c)(6)(C), 1022(c)(7), 1022(d)), and so cannot
reasonably be limited by section 1022(c)(3)(A), which only concerns the
Bureau's ``monitoring'' work under ``subsection'' (c).
The commenter's assertion is also in tension with laws requiring
Federal agencies to make data and information available to the public.
The Foundations for Evidence-Based Policymaking Act requires agencies
to disclose data if it would otherwise be made available under the
Freedom of Information Act.\319\ Similarly, the Freedom of Information
Act imposes proactive disclosure requirements when records are likely
to be requested by the public.\320\
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\319\ 44 U.S.C. 3504(b)(6)(F).
\320\ 5 U.S.C. 552(a)(2)(D).
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As discussed in part IV(B) above, the information collected under
the final rule will inform the Bureau's exercise of its consumer
education functions, among other functions.\321\ For example, the
Bureau may consider the information it has collected in determining
what harmful practices may be prevalent in the markets for consumer
financial products and services, in monitoring and assessing the
enforcement actions that are being issued in connection with such
harmful practices and the content of covered orders, and in identifying
patterns of similar alleged or found violations of Federal consumer
financial law across multiple nonbank covered persons. Such information
about risk to consumers in the offering and provision of consumer
financial products and services will help the Bureau determine how to
conduct its own consumer education efforts. The Bureau may choose to
direct its consumer education efforts toward educating consumers about
risks identified via the registry, and can help consumers understand
the risks and associated costs of such conduct with respect to their
use of certain consumer financial products or services. While, as
discussed in parts VIII and IX below, the Bureau believes that most
consumers will not change their behavior due to the publication of the
registry as authorized under Sec. 1092.205(a), the Bureau will be able
to utilize the information collected under the final rule to inform its
own consumer education functions.
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\321\ See 12 U.S.C. 5493(d) (establishing the Bureau's Office of
Financial Education); 12 U.S.C. 5511(b)(1) (``The Bureau is
authorized to exercise its authorities under Federal consumer
financial law for the purposes of ensuring that, with respect to
consumer financial products and services . . . consumers are
provided with timely and understandable information to make
responsible decisions about financial transactions''); 12 U.S.C.
5511(c)(1) (``The primary functions of the Bureau are . . .
conducting financial education programs'').
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Section 1092.202(a) Scope of Registration Requirement
Proposed Rule
Proposed Sec. 1092.202(a) would have defined the scope of the
registration requirement. To maximize the value of subpart B's
registration requirements, while taking into consideration
administrative costs to the Bureau and covered nonbanks in keeping the
registry updated, the Bureau proposed to limit Sec. 1092.202 to
covered orders (as that term is defined at proposed Sec. 1092.201(e))
that have an effective date (as that term is defined at proposed Sec.
1092.201(f)) on or after the effective date of subpart B, or that
remain in effect (as that term is defined at proposed Sec.
1092.201(m)) as of the effective date of subpart B. The Bureau
preliminarily concluded that this limitation of the registration
requirement's scope would help ensure that the most relevant orders are
submitted into the NBR system.\322\ The Bureau recognized in its
proposal that there is potential value in requiring registration with
respect to older orders that no longer remain in effect. Among other
things, the Bureau believed that such registration would have helped
inform the Bureau and consumers regarding older orders and help to
identify an even larger number of repeat offenders than could be
identified through the registration requirement as proposed in Sec.
1092.202. On the other hand, the Bureau recognized that requiring
covered nonbanks to identify and register older orders to which they
were once subject, but that no longer impose any present obligations,
may be burdensome. In addition, extending the registration requirement
to older orders would have imposed additional administrative costs on
the Bureau. The Bureau believed that limiting the registration
requirement to covered orders with an effective date on or after the
effective date of subpart B, or that remain in effect as of subpart B's
effective date, would strike the appropriate balance in terms of
establishing an informative and useful registry without imposing undue
burdens on either industry or the Bureau. To maximize the value of
subpart B's registration requirements, while taking into consideration
administrative costs to the Bureau and covered nonbanks in keeping the
registry updated, the Bureau therefore proposed to limit Sec. 1092.202
to covered orders (as that term is defined at proposed Sec.
1092.201(e)) that have an effective date (as that term is defined at
proposed Sec. 1092.201(f)) on or after the effective date of subpart
B, or that remain in effect (as that term is defined at proposed Sec.
1092.201(m)) as of the effective date of subpart B.
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\322\ The Bureau is adopting the proposal's approach to this
issue in the final rule and finalizes its preliminary conclusion to
this effect; see the discussion of Sec. 1092.202(a) of the final
rule below.
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Comments Received and Final Rule
The Bureau did not receive any comments specifically regarding
proposed Sec. 1092.202(a). For the reasons set forth in the
description of the proposed rule above, the Bureau is finalizing Sec.
1092.202(a) as proposed.
Section 1092.202(b) Requirement To Register and Submit Information
Regarding Covered Orders
Proposed Rule
Proposed Sec. 1092.202(b) would have established subpart B's
requirements for covered nonbanks to register with the NBR system and
to provide and maintain certain registration information.
Proposed Sec. 1092.202(b)(1) would have provided that each covered
nonbank that is identified by name as a party subject to a covered
order described in paragraph (a) shall register as a registered entity
with the NBR system in accordance with proposed Sec. 1092.202(b)
[[Page 56087]]
if it is not already so registered, and shall provide or update, as
applicable, the information described in subpart B in the form and
manner specified by the Bureau. As discussed in connection with
proposed Sec. 1092.201(e)(1), a covered nonbank that is identified by
name as a party subject to the order would have been required to
register under this paragraph even if the covered nonbank is not listed
in the title or caption of the order, or as the primary respondent,
defendant, or subject of the order. A covered nonbank may have been
subject to the requirements of proposed Sec. 1092.202 even if the
issuing agency or court does not list the covered nonbank as a party in
related press releases or internet links.
The Bureau considered but did not propose alternative approaches,
including applying the requirements of this section to any covered
nonbank alleged or found in a covered order to have violated a covered
law, even if such party were not expressly named. This alternative
would have captured circumstances where, for instance, a covered order
applies to a category of entities, such as all affiliates of a
particular named covered nonbank, but the order does not specifically
name all of the entities that fall within that category (e.g., does not
specifically list the names of all of the affiliates of the named
covered nonbank). While this alternative would have potentially widened
the scope of information the Bureau would have obtained relevant to its
market-monitoring objectives, it preliminarily concluded that the
proposed approach would effectively achieve those objectives with
greater administrative ease.
As provided at Sec. 1092.102(a), the Bureau proposed to specify
the form and manner for electronic filings and submissions to the NBR
system that are required or made voluntarily under part 1092, including
Sec. Sec. 1092.202 and 1092.204. The Bureau would have issued specific
guidance for filings and submissions.
Proposed Sec. 1092.202(b)(2)(i) would have required each covered
nonbank that is required to register under proposed Sec. 1092.202 to
submit a filing containing the information described in proposed Sec.
1092.202(c) and (d) to the NBR system within the later of 90 days after
the applicable nonbank registration system implementation date or 90
days after the effective date of any applicable covered order. Thus, a
covered nonbank would not have been required under proposed subpart B
to register any covered orders to which it may be subject until 90 days
after the nonbank registration system implementation date for this
provision. For covered orders with effective dates after the nonbank
registration system implementation date, an applicable covered nonbank
would have been required to register the covered order within 90 days
after the covered order's effective date, as that term is defined at
proposed Sec. 1092.201(f). The Bureau believed the 90-day period would
give sufficient time for a covered nonbank to collect and submit the
applicable information to the NBR system and would also generally
permit a sufficient length of time for any relevant agency or court
stays to take effect.
As discussed above regarding proposed Sec. 1092.101(e), the Bureau
estimated that the nonbank registration system implementation date for
proposed Sec. Sec. 1092.202 and 1092.203 would have been no earlier
than January 2024 and may be substantially later. The Bureau explained
in its proposal that the exact nonbank registration system
implementation date would depend upon, among other things, the comments
received to this proposal and the Bureau's ability to launch the
registration system.
Proposed Sec. 1092.202(b)(2)(ii) would have required each covered
nonbank that is required to register under proposed Sec. 1092.202 to
submit a revised filing amending any information described in
paragraphs (c) and (d) to the NBR system within 90 days after any
amendments are made to the covered order or any of the information
described in paragraphs (c) or (d) changes. The Bureau believed that
requiring entities to maintain up-to-date information with the NBR
system would significantly enhance the usefulness of the NBR system for
the Bureau, consumers, and other users of the NBR system.
Comments Received
Commenters stated that the Bureau is pursuing a novel and legally
impermissible approach to its authorities under CFPA section 1022. For
a discussion of these issues, see the Bureau's response above to
comments received regarding the Bureau's authority under CFPA section
1022.
Commenters also stated that the proposal was not compatible with
CFPA section 1024. Industry commenters stated that the proposed
registry would conflict with the requirement at CFPA section 1024(b)(4)
\323\ for the Bureau, in exercising its nonbank supervisory authority,
to use reports that have already been provided to Federal and State
agencies and information that has been reported publicly. An industry
commenter also stated that the proposed registry would conflict with
the requirement at CFPA section 1024(b)(3) \324\ for the Bureau, in
exercising its nonbank supervisory authority, to ``coordinate its
supervisory activities with the supervisory activities conducted by
prudential regulators, the State bank regulatory authorities, and the
State agencies that license, supervise, or examine the offering of
consumer financial products or services, including . . . requirements
regarding reports to be submitted by such persons.'' \325\
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\323\ 12 U.S.C. 5514(b)(4); see also 12 U.S.C. 5515(b)(3),
5516(b)(1).
\324\ 12 U.S.C. 5514(b)(3).
\325\ See id.
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The joint comment from State regulators stated that, because in the
commenters' view the discrepancy between the number of nonbank entities
licensed by States through NMLS and the number of firms subject to
Bureau supervisory authority appears negligible, the proposed Bureau
registry would likely be largely duplicative of NMLS and provide little
new insight for risk-based supervision purposes, particularly for the
mortgage and money services business industries.
An industry commenter stated the proposal did not comply with CFPA
section 1024(b)(2) and did not properly assess the impact of the rule
on attorneys and law firms under that statutory provision. The
commenter stated that creditors' rights attorneys and law firms already
are heavily regulated at the State level, the Bureau should have
considered the unique characteristics of creditors' rights law firms,
and such firms should be exempt from the proposed rule. Another
industry commenter stated that the proposed written-statement
requirements were inconsistent with section 1024(b)(2) since the $1
million amount in proposed Sec. 1092.201(q)'s definition of
``supervisory registered entity'' should be increased.
Consumer advocate commenters generally supported the Bureau's
proposal to collect information as described in the proposal. A
consumer advocate commenter stated that in light of the large number of
nonbanks subject to Bureau oversight, the self-reporting requirements
in the proposed rule would assist the Bureau's supervisory
prioritization efforts and would help the Bureau identify wider trends
in relevant markets. A consumer advocate commenter stated that it would
not be a substantial burden for companies to identify covered orders,
since they would presumably have these orders on
[[Page 56088]]
hand for their own in-house compliance purposes.
An industry commenter stated that the Bureau should establish a
minimum threshold of five non-expired covered orders before requiring
registration, in order to better distinguish nonbanks with only a few
consent orders from ``repeat offenders'' and reduce consumer confusion.
The SBA Office of Advocacy stated that the Bureau should issue
clear guidance to assist small entities with compliance with the rule's
submission and other requirements.
See the section-by-section discussion of Sec. 1092.201(e)
regarding a comment related to the final rule's treatment of parties
not expressly named in the covered order.
Response to Comments Received
The Bureau is finalizing a new section at Sec. 1092.203 that will
provide that, with respect to any covered order that is published on
the NMLS Consumer Access website, a covered nonbank that is identified
by name as a party subject to the order may elect to comply with the
one-time registration option described in that section in lieu of
complying with the requirements of Sec. Sec. 1092.202 and 1092.204. To
the extent that CFPA section 1024(b)(4) may apply to Bureau rulemakings
under section 1024(b)(7), Sec. 1092.203 will ensure that the
requirements in the Bureau's rule reflect, to the fullest extent
possible, ``reports pertaining to persons described in [section
1024(a)(1)] that have been provided or required to have been provided
to a Federal or State agency'' and ``information that has been reported
publicly.'' \326\ In particular, covered nonbanks with NMLS-published
covered orders can opt for a streamlined registration process designed
to provide notice that information regarding such covered orders is
available through the NMLS. After the existence of NMLS-published
covered orders has been directed to the Bureau's attention through a
streamlined registration under Sec. 1092.203, the Bureau can use any
information available through the NMLS to help inform its risk-based
supervisory prioritization determinations under CFPA section 1024(b)(2)
and its supervisory activities under section 1024(b)(1).
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\326\ 12 U.S.C. 5514(b)(4).
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To the extent these industry commenters suggest that additional
changes would be required in order to satisfy the Bureau's obligations
under CFPA section 1024(b)(4)--for example, by not collecting
information that is also published by an individual State agency--the
Bureau declines to make such changes. First, a central purpose of the
rule's registration requirements is to ensure that the Bureau is made
aware and provided with copies of ``information that has been reported
publicly''--i.e., information related to public enforcement orders--in
a manner that is usefully associated with covered nonbanks. Second, the
Bureau views the registry as a means to increase its ability to obtain
and use such information and thus promote Congress's intent in adopting
these statutory provisions. CFPA section 1024(b)(4) requires that the
Bureau use such information ``to the fullest extent possible,'' and
collecting this information makes it more ``possible'' for the Bureau
to use this information.
Likewise, to the extent that CFPA section 1024(b)(3) may apply to
Bureau rulemakings under section 1024(b)(7), the Bureau has satisfied
any obligation to coordinate with prudential regulators and relevant
State authorities through the consultations described in part V of this
preamble. Further, the Bureau is finalizing Sec. 1092.203 in part to
facilitate coordination with the State authorities described in CFPA
section 1024(b)(3), as well as to facilitate adoption of the
``coordinated or combined systems for registration'' with State
agencies discussed in CFPA sections 1022(c)(7)(C) and
1024(b)(7)(D).\327\
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\327\ One of the authorities cited as a basis for components of
the final rule is 12 U.S.C. 5512(c)(7), which provides that the
``Bureau may prescribe rules regarding registration requirements
applicable to a covered person, other than an insured depository
institution, insured credit union, or related person.'' Congress
provided that ``[i]n developing and implementing registration
requirements under [12 U.S.C. 5512(c)(7)], the Bureau shall consult
with State agencies regarding requirements or systems (including
coordinated or combined systems for registration), where
appropriate.'' 12 U.S.C. 5514(b)(7)--the proposed statutory basis
for the written-statement requirement--includes a similar
consultation provision.
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As discussed further in part IV(E) above and the section-by-section
discussion of Sec. 1092.203 below, the Bureau does not believe that
the existence of the NMLS renders the new Bureau registry unnecessary,
including with respect to supervised registered entities. However, the
Bureau is finalizing Sec. 1092.203 to provide that applicable entities
may comply with the one-time limited registration option described in
that section in lieu of complying with the requirements of Sec. Sec.
1092.202 and 1092.204. The information obtained by the Bureau under the
final rule, including Sec. 1092.203, will inform the Bureau's risk-
based supervisory prioritization efforts as well as its other
functions.
The Bureau does not agree that the final rule is inconsistent with
CFPA section 1024(b)(2), whether with respect to attorneys and law
firms or any other broad category of covered nonbanks that can be
identified in advance of collecting information under the final rule.
As an initial matter, CFPA section 1024(b)(2) does not govern this
rulemaking. As the Bureau has explained, it relies on CFPA sections
1022(b), 1022(c), and 1024(b)(7) in issuing this rule.\328\ By its own
terms, CFPA section 1024(b)(2) applies only to exercises of the
Bureau's supervisory authority under a different provision, CFPA
section 1024(b)(1). Section 1024(b)(2) does not govern rulemakings;
instead, it governs the Bureau's prioritization of entities for
examinations and other supervisory activities under section 1024(b)(1).
Therefore, the Bureau is not required to account for the risk-based
prioritization factors set forth in section 1024(b)(2) in determining
this rulemaking's scope. Moreover, as the Bureau discussed in the
proposed rule, one of the purposes of this registry is to provide the
Bureau with additional information to use for its prioritization of
examinations and other supervisory activities under section
1024(b)(2).\329\ Requiring an assessment under section 1024(b)(2) for
rulemakings under section 1024(b)(7) would, in fact, limit the Bureau's
ability to make informed assessments of individual entities for
supervisory activities.
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\328\ See, e.g., 88 FR 6088 at 6103 (``The Bureau proposes to
establish the NBR system under its registration and market-
monitoring rulemaking authorities under CFPA section 1022(b)(1),
(c)(1)-(4), and (c)(7), and under its supervisory rulemaking
authorities under CFPA section 1024(b)(7)(A), (B), and (C).'').
\329\ Id. at 6095 (``The Bureau believes that the proposed
registry would be especially useful with respect to the particular
nonbank markets that are subject to the Bureau's supervision and
examination authority under CFPA section 1024(a). In those markets,
the Bureau would be able to take account of risks identified through
the proposed registry in conducting its risk-based supervisory
prioritization and enforcement work.'').
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In any event, even if the Bureau were exercising authority under
section 1024(b)(1) here, and thus section 1024(b)(2) applied, that
would not affect the rulemaking's outcome. The Bureau believes that the
risk associated with covered orders is significant and that a
consideration of the factors set forth in section 1024(b)(2) supports
imposing the rule's requirements. As discussed in part IV(B), depending
upon the circumstances, the Bureau may consider the existence of an
order requiring registration under the final rule to be a risk factor
under these provisions for covered persons subject to the final
[[Page 56089]]
rule--in particular, under CFPA section 1024(b)(2)(C)-(E). Moreover,
the information that the Bureau obtains under the rule will inform its
supervisory prioritization efforts with respect to individual entities
and will otherwise facilitate its supervision of covered nonbanks that
are described in CFPA section 1024(a)(1). In addition, consistent with
CFPA sections 1024(b)(2)(A)-(B), the Bureau has effectively accounted
for asset size and transaction volume by excluding persons with less
than $5 million in annual receipts (as described in Sec.
1092.201(q)(4)) from Sec. 1092.204's annual reporting requirements.
For additional discussion of that exclusion, see the section-by-section
discussion of Sec. 1092.201(q).
The Bureau is finalizing Sec. 1092.202(b)(2)(i)'s requirement for
covered nonbanks to register each covered order within 90 days of the
order's effective date (or, in the initial phase of the registry, the
applicable nonbank registry implementation date). The Bureau declines
to establish a minimum number of covered orders to which a covered
nonbank must be subject before requiring registration. That approach
would lead to the omission of many covered orders that are relevant to
risk to consumers, and would impair the ability of the Bureau and
others to identify trends and patterns in the information collected. It
would also lead to the omission of relevant covered nonbanks and
supervised registered entities from the registry, which would mean that
the Bureau would not be notified regarding the existence of such
entities and would not learn that they were subject to a covered order.
The approach would limit the Bureau's ability to seek additional
information about the covered order and the covered nonbank and
otherwise monitor risks to consumers as appropriate to inform the
Bureau's functions. While, as discussed elsewhere in this preamble, the
Bureau is very concerned about the risks to consumers presented by
repeat offenders, even one covered order may be probative of
significant risk to consumers. In addition, the Bureau would be less
able to understand where covered orders are not being issued or
obtained, depriving it of important information regarding the absence
of covered orders. And supervised registered entities would not be
subject to the rule's written-statement requirements until the
threshold had been reached, unduly limiting the effectiveness of those
requirements. The Bureau concludes that registration of each covered
order will serve the purposes of the final rule described in part IV
above. The Bureau disagrees that requiring registration of each covered
order will lead to consumer confusion, as consumers and other users of
the registry will have access to accurate information about the orders
and nonbank. See the section-by-section discussion of Sec. 1092.205(a)
below for additional discussion of related issues involving the
potential publication of registry information.
As provided in Sec. 1092.102(a), the Bureau will issue filing
instructions that will provide covered nonbanks with specific
information regarding their filing obligations under the final rule.
The Bureau may consider issuing additional rules and guidance as may be
necessary or appropriate.
Final Rule
For the reasons discussed above and in the proposal, the Bureau is
finalizing Sec. 1092.202(b) as proposed, with minor technical edits
and a minor revision to reflect the renumbering of Sec. 1092.206 in
the final rule.\330\
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\330\ See also the section-by-section discussions of Sec.
1092.101(d) and (e) above regarding the Bureau's adoption of the
revised terms ``nonbank registry'' and ``nonbank registry
implementation date.''
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Section 1092.202(c) Required Identifying Information and Administrative
Information
Proposed Rule
Proposed Sec. 1092.202(c) would have required a registered entity
to provide all identifying information and administrative information
required by the NBR system. In filing instructions the Bureau would
have issued under proposed Sec. 1092.102(a), the Bureau would have
specified the types of identifying information and administrative
information registered entities would be required to submit. Proposed
Sec. 1092.201(a) would have defined the term ``administrative
information,'' and proposed Sec. 1092.201(g) would have defined the
term ``identifying information.'' Proposed Sec. 1092.202(c) also would
have clarified that the Bureau's filing instructions may require joint
or combined submissions to the NBR system by covered nonbanks that are
affiliates as defined in proposed Sec. 1092.101(a).
The Bureau requested comment on the general requirements of
proposed Sec. 1092.202(c), including the requirement to register and
update identifying information and administrative information within
the timeframes described in proposed Sec. 1092.202(b). The Bureau
requested comment on whether registration of updates with respect to
this information should be required more or less often, and if so, why
and in what circumstances. The Bureau also sought comment on the
proposed distinctions between identifying information and
administrative information, and whether collection of other types of
information would help in the administration of the NBR system or
benefit its users.
Comments Received
An industry commenter asked that the Bureau clarify that entities
would only be required to report, and only be publicly affiliated with,
orders wherein they are named.
Comments addressing the proposal's approach to the written
statement, including requirements to designate and submit the names and
titles of attesting executives and associated criteria for such a
designation, are addressed in the section-by-section discussion of
Sec. 1092.204 below.
Response to Comments Received
As provided in Sec. 1092.201(e)(1)(i), in order to qualify as a
``covered order'' under the final rule, an order must among other
things ``[i]dentif[y] a covered nonbank by name as a party subject to
the order.'' Where a covered nonbank is not identified by name as a
party subject to an order, the order will not be a covered order with
respect to that covered nonbank, and the covered nonbank will not be
subject to any of the requirements of the final rule with respect to
the covered order. A covered nonbank is not subject to the requirements
of the rule with respect to a covered order on the sole grounds that
its affiliated covered nonbank is subject to those requirements.
However, as provided at Sec. 1092.202(c), the Bureau may require, via
filing instructions issued pursuant to Sec. 1092.102(a), two or more
affiliated covered nonbanks to submit a joint or combined filing
statement with respect to a covered order, where those affiliated
covered nonbanks are each subject to the requirements of Sec. 1092.202
with respect to such covered order. Also, as discussed in the section-
by-section discussion of Sec. Sec. 1092.201(a) and 1092.202(d) above,
for any covered order that a covered nonbank must register under Sec.
1092.202, the Bureau may via filing instructions require the registered
covered nonbank to identify to the Bureau, as administrative
information required under Sec. 1092.202(c), the names of any of the
registered covered nonbank's affiliates
[[Page 56090]]
registered under subpart B with respect to the same covered order.
Final Rule
For the reasons set forth above, the Bureau is finalizing Sec.
1092.202(c) as proposed.\331\
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\331\ See also the section-by-section discussions of Sec.
1092.101(d) and (e) above regarding the Bureau's adoption of the
revised terms ``nonbank registry'' and ``nonbank registry
implementation date.''
---------------------------------------------------------------------------
See also the discussion regarding the final rule's treatment of
affiliates of insured depository institutions and insured credit unions
in the section-by-section discussions of Sec. 1092.201(d) and (q)
above.
Section 109.202(d) Information Regarding Covered Orders
Proposed Rule
Proposed Sec. 1092.202(d) would have required a registered entity
to provide additional types of information more specifically related to
each covered order subject to proposed Sec. 1092.202. First, proposed
Sec. 1092.202(d)(1) would have required a registered entity to provide
a fully executed, accurate, and complete copy of the covered order, in
a format specified by the Bureau. This information would have helped
the Bureau more clearly identify the covered orders to which the
registered entity is subject, as well as the terms of those orders, and
would provide access to updated copies of those orders. The information
would have provided similar benefits to other regulators, consumers,
and other users of the NBR system upon publication.
This proposed section would have also provided that any portions of
a covered order that are not public must not be submitted. These
nonpublic portions would have been required to be clearly marked on the
copy submitted, to promote ease of use. For example, a nonpublic
section could have been redacted and marked as nonpublic. As discussed
above regarding proposed Sec. 1092.201(e)(3) and (k), the Bureau was
concerned that requiring registration and disclosure of confidential
supervisory information or other nonpublic information might interfere
with the functions and missions of other agencies and did not believe
that requiring such registration and disclosure is necessary to
accomplish the purposes of the proposed rule. The Bureau sought comment
on this aspect of the proposed rule. The Bureau also sought comment on
whether it should permit covered nonbanks to submit only select
portions of covered orders, and if so, what portions of such orders
should be submitted, and which should be excluded from the submission
requirement.
Proposed Sec. 1092.202(d)(2) would have required a registered
entity to provide five additional types of data regarding each covered
order subject to Sec. 1092.202. The Bureau believed all of the
described data fields would be useful to the Bureau in locating,
understanding, organizing, and using the information submitted. The
Bureau also explained in its proposal that upon publication, the data
fields would be similarly useful to other users of the NBR system as
well. In addition, the Bureau believed that requiring covered nonbanks
to identify and submit these fields would help ensure accuracy and
lower administrative costs for the Bureau.
First, proposed Sec. 1092.202(d)(2)(i) would have required a
registered entity to identify the government entity that issued the
covered order. Second, proposed Sec. 1092.202(d)(2)(ii) would have
required a registered entity to provide the covered order's effective
date, as that term is defined at proposed Sec. 1092.201(f). Third,
proposed Sec. 1092.202(d)(2)(iii) would have required a registered
entity to provide the date of expiration, if any, of the covered order,
or a statement that there is none. The Bureau explained in its
proposal, for example, where a covered order expires by its own terms
after perhaps five or some other term of years, the registered entity
would be required to provide that information. The Bureau requested
comment on whether the date of expiration of covered orders would be
sufficiently clear to comply with this provision or whether additional
specification on this point from the Bureau would be useful. Fourth,
proposed Sec. 1092.202(d)(2)(iv) would have required a registered
entity to identify all covered laws found to have been violated or, for
orders issued upon the parties' consent, alleged to have been violated,
in the covered order. The Bureau would have expected that registered
entities would satisfy this requirement by providing accurate Federal
or State citations for the applicable covered laws. The Bureau believed
this information would increase the usefulness of the NBR system. It
would have better enabled the Bureau to identify and assess any risks
to consumers relating to the violations, and once published would have
also enabled users of the registry to more easily search and review
filings.
Fifth, proposed Sec. 1092.202(d)(2)(v) would have required a
registered entity to provide the names of any of the registered
entity's affiliates registered under subpart B with respect to the same
covered order. The Bureau anticipated that this information would be
useful in identifying affiliate relationships between registered
entities that are registered with the NBR system, which might not
otherwise be obvious or apparent. Proposed Sec. 1092.101(a) would have
defined the term ``affiliate'' to have the meaning given to that term
in the CFPA, which would have included any person that controls, is
controlled by, or is under common control with another person.\332\
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\332\ See 12 U.S.C. 5481(1).
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Proposed Sec. 1092.202(d)(3) would have required a registered
entity, if the registered entity is a supervised registered entity,
also to file the name and title of its attesting executive for purposes
of proposed Sec. 1092.203 with respect to the covered order. The
benefits of designating an attesting executive were discussed in detail
in proposed section IV(D). In addition, the Bureau believed that its
collection (and ultimate publication) in the registry of the name and
title of a supervised registered entity's attesting executive would be
important to the Bureau and other users of the NBR system. The Bureau
believed that requiring the entity to identify the name and title of
the attesting executive designated in connection with each covered
order would assist the Bureau in administering the requirements in
proposed Sec. 1092.203 regarding annual written statements. In
addition, as discussed below regarding proposed Sec. 1092.203(b), the
Bureau explained that collecting information regarding the name and
title of the attesting executive for a given covered order would
provide the Bureau with insight into the entity's organization,
business conduct, and activities, and would inform the Bureau's
supervisory work, including its risk-based prioritization process. The
Bureau also believed that publishing this information would have also
provided benefits to the public and other users of the proposed NBR
system, as discussed further below in connection with proposed Sec.
1092.204(a).
The Bureau would have relied on two separate statutory grants of
authority in collecting the attesting executive's name and title, each
of which would provide an independent statutory basis for proposed
Sec. 1092.202(d)(3). The Bureau would have collected this information
under its market-monitoring authority under CFPA section 1022(c)(1) and
(4) to ``gather information regarding the organization, business
conduct, markets, and activities'' of supervised registered
entities.\333\ The Bureau would have also
[[Page 56091]]
collected this information under its CFPA section 1024(b)(7) authority
to prescribe rules regarding registration, recordkeeping, and other
requirements for covered persons subject to Bureau supervision under
CFPA section 1024.\334\
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\333\ 12 U.S.C. 5512(c)(1), (4).
\334\ 12 U.S.C. 5514(b)(7).
---------------------------------------------------------------------------
The Bureau requested comment on whether proposed Sec. 1092.202(d)
should identify additional or different categories of information
collected by the NBR system, including but not limited to information
regarding covered orders or the registered entity.
Comments Received
An industry commenter stated that the proposal's requirement to
submit redacted orders would confuse the public, and that in cases
where a portion of a covered order is redacted or confidential, the
whole order should stay off the registry.
A consumer advocate commenter stated that the treatment of
nonpublic information under proposed Sec. 1092.202(d) demonstrated
that the Bureau was taking steps to protect confidential and otherwise
nonpublic information relevant to orders.
Response to Comments Received
See the section-by-section discussion of Sec. 1092.201(m) above
regarding the treatment of nonpublic portions of orders under the final
rule.
See the section-by-section discussion of Sec. 1092.201(l) above
regarding an industry commenter's suggestion to treat multiple orders
as a single order under certain circumstances.
See the section-by-section discussion of Sec. Sec. 1092.204(b) and
1092.205(a) below for discussions regarding the final rule's
requirements to designate an attesting executive for each covered order
and the Bureau's reasons for collecting and potentially publishing that
information.
Final Rule
For the reasons set forth below and in the description of the
proposed rule above, the Bureau is finalizing Sec. 1092.202(d) as
proposed, with several revisions.
First, as discussed further below in the section-by-section
discussion of Sec. 1092.205(a), the Bureau has determined not to
mandate with respect to every covered order the collection of
information regarding the names of the person's affiliates registered
under subpart B with respect to the same covered order in the final
rule. Under the final rule, Sec. 1092.202(d)(2)(v) as proposed has
been deleted, but the Bureau may determine to collect this information
as ``administrative information'' under Sec. 1092.202(c). In filing
instructions issued under Sec. 1092.102(a), the Bureau will specify
whether and how it will collect such information. As described in the
section-by-section discussion of Sec. 1092.205(a) below, the Bureau
will not publish such information under Sec. 1092.205(a) if it is
collected.
Second, the Bureau is finalizing a clarification at Sec.
1092.202(d)(2)(i) to provide that a registered entity shall provide to
the nonbank registry, for each covered order subject to Sec. 1092.202,
information regarding the agency (or agencies) and court(s) that issued
or obtained the covered order, as applicable. The Bureau is finalizing
this change to the proposed rule in order to clarify that covered
orders may be issued or obtained by more than one agency or court, and
to collect more accurate and comprehensive information about covered
orders. In general, for covered orders that are issued by a court of
law, the nonbank registry will collect information regarding the court
that issued the order as well as the agency or agencies that brought
the applicable proceeding and obtained the order. For covered orders
issued directly by agencies in an administrative action or other agency
proceeding, the nonbank registry generally will collect information
regarding the issuing agency or agencies.
Third, the Bureau is finalizing a new provision at Sec.
1092.202(d)(2)(v) to provide that a registered entity shall provide to
the nonbank registry, for each covered order subject to Sec. 1092.202,
information regarding any docket, case, tracking, or other similar
identifying number(s) assigned to the covered order by the applicable
agency(ies) or court(s). Collecting and potentially publishing this
information will better enable the Bureau and other users of the
registry to identify the applicable covered order, to distinguish it
from other orders, and to understand any connections between the order
and the covered nonbank with other information about the covered order
and covered nonbank that the Bureau may possess or that may be
otherwise available. As with the other required data fields, this
information will be useful to the Bureau in locating, understanding,
organizing, and using the information submitted and will be similarly
useful to other users of the nonbank registry as well. In addition,
requiring covered nonbanks to identify and submit such information will
help ensure accuracy and lower administrative costs for the Bureau.
Fourth, the Bureau is finalizing a minor revision at Sec.
1092.202(d)(3) to reflect the renumbering of Sec. 1092.204.
Section 1092.202(e) Expiration of Covered Order Status
Proposed Rule
Proposed Sec. 1092.202(e) would have provided for an outer limit
on the time period during which the existence of a covered order would
subject a registered entity to the requirements of proposed subpart B.
The Bureau explained in its proposal that in circumstances where a
covered order terminates (or otherwise ceases to remain in effect)
within ten years after the order's effective date, the registered
entity's obligations to update its filing under proposed Sec. 1092.202
or to file written statements with respect to the covered order under
proposed Sec. 1092.203 would cease after its final filing under
proposed Sec. 1092.202(f)(1).\335\ The Bureau, however, recognized
that some covered orders may not terminate (or otherwise cease to
remain in effect) within ten years of the orders' effective dates. In
such circumstances, proposed Sec. 1092.202(e) would have provided that
a covered order shall cease to be a covered order for purposes of
subpart B as of the later of: (1) ten years after its effective date;
or (2) if the covered order expressly provides for a termination date
more than ten years after its effective date, the expressly provided
termination date.
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\335\ See the discussion of Sec. 1092.202(f) below.
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The Bureau preliminarily concluded that, in most cases, it may be
less likely to obtain meaningful information in connection with
existing orders after ten years have passed since their effective
dates. The Bureau also preliminarily concluded that maintaining the
proposal's registration and written-statement requirements for at least
ten years after the effective date of covered orders that remain in
effect would have provided useful information to the Bureau and other
uses of the registry, as described in this proposal. Among other
things, the Bureau believed that maintaining the obligation to update
registration information for ten years would better enable the Bureau
to identify covered nonbanks in the event a subsequent covered order
requires additional registration. The Bureau also believed that
limiting registration obligations to more recent orders would also help
limit the burden imposed by proposed subpart B's requirements on
covered nonbanks. However, where a covered order expressly provides for
a later termination date, the Bureau
[[Page 56092]]
believed that it should continue to collect and publish information on
the order under the provisions of proposed Sec. Sec. 1092.202 through
1092.204. The Bureau sought comment on all aspects of proposed Sec.
1092.202(e). In particular, the Bureau sought comment on whether to
adopt a different approach to setting and determining the sunset period
for orders, and on whether the proposed baseline ten-year period should
be longer or shorter. The Bureau also sought comment on whether
registered entities would benefit from additional guidance in
determining whether a covered order expressly provides for a
termination date more than ten years after its effective date, and what
constitutes the expressly provided termination date of such a covered
order.
The Bureau also sought comment on whether the applicable sunset
period should depend upon the content of the order. The Bureau
explained in its proposal that, for example, it considered whether the
sunset period for a covered order should be shorter where the only
obligations based on alleged violations of covered laws and imposed in
the public provisions of such order were to pay money (such as payment
of a civil money penalty or fine, or payment of refunds, restitution,
or disgorgement). Under this alternative approach, for such covered
orders without express termination dates, the orders would have ceased
being covered orders for purposes of subpart B after some period
shorter than the ten-year sunset proposed here. The Bureau did not
propose this approach for reasons of simplicity and administrative
efficiency, and because the Bureau believes that the sunset provision
in proposed Sec. 1092.202(e) would generally be preferable for most
such covered orders. However, the Bureau sought comment on this
proposed alternative and, more generally, on whether and why it should
adopt a shorter sunset period for these orders. The Bureau also sought
comment on other approaches that would establish different sunset
periods depending on the content of the order, and other types of
orders that might have different sunset periods.
The Bureau further considered requiring registered entities to
continue treating an order that would otherwise sunset under the
proposal as a covered order for purposes of the proposed rule if the
Bureau determined, after providing the entity notice and an opportunity
to respond, that continuing to do so was necessary for the Bureau to
fulfill its monitoring or supervisory responsibilities. For example, as
the Bureau explained in the proposal, based on information supplied by
another agency or otherwise in its possession, the Bureau may have
cause to believe that the nonbank continued to be in violation of the
order. For such cases, the Bureau considered requiring continued
compliance with the requirements of proposed subpart B beyond the
expiration period if the Bureau ultimately concluded doing so was
necessary for the Bureau to fulfill its monitoring or supervisory
responsibilities. The Bureau did not propose this approach for reasons
of simplicity and administrative efficiency, and because the Bureau
believed that the proposed sunset provision would be likely to provide
sufficient information regarding most covered orders. However, the
Bureau sought comment on whether it should include this additional
requirement in the final rule and whether any additions or subtractions
to it would better achieve its intended purpose. The Bureau also sought
comment on whether, if it included this additional requirement in a
final rule, it should specify any alternative or additional criteria
that the Bureau might consider in reaching its determination whether a
particular covered order should remain subject to the requirements of
subpart B.
Comments Received
Some comments incorrectly referred to proposed Sec. 1092.202(e)'s
sunset provisions as specifying when information regarding covered
orders or covered nonbanks would be removed from the registry.
An industry commenter agreed with the proposal's establishment of a
sunset date for registration of covered orders under Sec. 1092.202(e).
Another industry commenter stated that the Bureau should establish a
process for entities to be removed from the public registry after a
specific set of criteria is met, and that the Bureau should also
establish an appeals process that would permit entities to contest
their inclusion on the registry.
Industry commenters also stated the text of 1092.202(e)(1) was
unclear and proposed specific revisions. Commenters stated that
information regarding covered orders (and related covered nonbanks)
should be removed from the registry earlier than after ten years after
its effective date. One industry commenter stated that most regulatory
and supervisory agencies are reluctant to agree to termination dates.
Another industry commenter stated that there would be few instances in
which a consent order does not contain an expiration date, thereby
making the timing set out in Sec. 1092.202(e)(1) almost entirely
irrelevant. This commenter stated that the sunset period established
under proposed Sec. 1092.201(e) should be the later of five years or
the express termination period of the covered order. Another industry
commenter stated that covered orders that have no termination date
should be subject to the proposed registry for a period of three years,
not ten, in part because information contained in the proposed registry
associated with older covered orders would be inaccurate, outdated or
obviated and would pollute the registry. This commenter also stated
that proposed Sec. 1092.202(e) could be interpreted to mean that all
covered orders are subject to updates or written statements for ten
years, and proposed a revision that would state that if a covered order
expressly provides for a termination date ten (or five) years or less
after its effective date, Sec. 1092.201(e)'s sunset provision would
apply on the expressly provided termination date. Another industry
commenter proposed an alternative timeframes of two years after an
order's effective date. The SBA Office of Advocacy expressed concern
that requiring an order to be a covered order for ten years after its
effective date was overly punitive and stated that such an order should
no longer be considered a covered order when it is no longer in effect.
Response to Comments Received
The Bureau is adopting Sec. 1092.202(e) of the final rule, which
provides for an outer limit on the time period during which the
existence of a covered order would subject a registered entity to the
registration requirements. In circumstances where a covered order
terminates (or otherwise ceases to remain in effect) within ten years
after the order's effective date, the registered entity's obligations
to update its filing or to file written statements with respect to the
covered order would cease after its final filing under Sec.
1092.202(f). Where a covered order does not terminate (or otherwise
cease to remain in effect) within ten years of the order's effective
date, the covered order would no longer require registration as of the
later of: (1) ten years after its effective date; or (2) if the covered
order expressly provides for a termination date more than ten years
after its effective date, the expressly provided termination date. The
Bureau finalizes its preliminary conclusions in the proposal \336\
that, in most cases, it may be less likely to obtain meaningful
information in connection with existing orders after ten
[[Page 56093]]
years have passed since their effective dates, and that maintaining the
proposal's registration and written-statement requirements for at least
ten years after the effective date of covered orders that remain in
effect will provide useful information to the Bureau and other uses of
the registry, as described in part IV.
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\336\ 88 FR 6088 at 6119.
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In response to comments incorrectly suggesting that proposed Sec.
1092.202(e)'s sunset provisions would have specified when information
regarding covered orders or covered nonbanks would be removed from the
Bureau's registry, the Bureau clarifies that, under the final rule,
Sec. 1092.202(e) and (f) together establish when, with respect to a
particular covered order, a covered entity's obligations to submit
updated filings under Sec. 1092.202(b)(2)(ii) and to comply with Sec.
1092.204's written-statement requirements expire. These provisions of
the final rule do not address when the Bureau intends to remove
information from the nonbank registry or otherwise to cease publication
of such information as provided at Sec. 1092.205. Under the final
rule, the Bureau may maintain any information about covered orders and
the covered nonbanks that are subject to them that may be published
under the nonbank registry on a public website indefinitely, subject to
the Bureau's discretion and pursuant to Sec. 1092.205 and other
applicable law.
With respect to the industry commenter's suggestion to establish a
process to allow covered nonbanks to petition for removal from the
registry before the sunset date established in Sec. 1092.201(e), the
Bureau declines to adopt this suggestion. The Bureau believes that it
is important to collect information regarding covered orders, including
the annual written statement described in Sec. 1092.204 where
applicable, on an ongoing basis for the periods of time described in
the final rule. The Bureau declines to adopt criteria for determining
whether covered nonbanks would no longer need to comply with these
obligations with respect to particular covered orders. While the Bureau
agrees that many covered nonbanks are likely to take steps to address
issues relating to covered orders, such orders are nevertheless likely
to remain probative of risk to consumers (including risks related to
developments in markets for consumer financial products and services),
and the Bureau concludes they should continue to be subject to these
requirements. Also, the Bureau believes that engaging in an ongoing
case-by-case assessment of entities' compliance efforts with respect to
covered orders in order to determine whether particular covered orders
are deserving of an exemption from registration requirements would
invite frivolous petitions, increase the complexity involved in
maintaining the nonbank registry, and would not be a good use of the
Bureau's resources. Likewise, the Bureau disagrees that an appeals
process for the nonbank registry is necessary. As with any other
Federal consumer financial law, the Bureau expects covered nonbanks
themselves to identify their responsibilities under the final rule and
to comply with those obligations. Where an entity believes in good
faith the final rule does not require registration, but is not certain
the Bureau would agree with its interpretation, it may file an
applicable good faith notification under Sec. 1092.202(g) or Sec.
1092.204(f).
The Bureau believes that the final rule is sufficiently clear for
entities to comply with the final rule's requirements and that a
modification to the proposed text is unnecessary. Section 1092.202(e)
and (f) together address the variety of situations that may arise where
a covered order does or does not expressly provide for a termination
date, as well as situations where a covered order is modified or
otherwise does not actually terminate according to its original terms.
Under the final rule, a covered order that does not expressly provide
for a termination date will cease to be a covered order ten years after
its effective date pursuant to Sec. 1092.202(e), and the applicable
covered nonbank must submit a final filing under Sec. 1092.202(f)(1)
at that time--unless the order terminates earlier, in which case the
covered nonbank must submit its final filing at that earlier time.
Under Sec. 1092.201(e), a covered order that expressly provides for a
termination date of ten years or less after its effective date will
remain a covered order for a period of ten years from its effective
date. Such an order may in fact terminate before the expiration of the
ten-year period, in which case the applicable covered nonbank would
submit a final filing under Sec. 1092.202(f)(1) upon termination of
the order, whenever it occurs, and would have no further obligation to
update its registration information or to file written statements with
respect to the order. If, however, the order is extended or for some
other reason does not terminate as originally provided, those
obligations will continue until the order actually terminates or the
ten-year period expires. And a covered order that expressly provides
for a termination date more than ten years after its effective date
will remain a covered order, and thus subject to the rule's
registration and (if applicable) written-statement requirements, until
it terminates, at which time the covered nonbank must submit a final
filing notice under Sec. 1092.202(f)(1).
Where a covered order terminates under its own terms or otherwise,
under Sec. 1092.202(f)(2), such obligations (including the obligation
to submit an annual written statement) with respect to such a covered
order will terminate following the filing of the final submission
described in Sec. 1092.202(f)(1). Thus, although the Bureau is not
finalizing a modification to the sunset period established under
proposed Sec. 1092.201(e) to directly reflect the termination of a
covered order as requested by the industry commenters and the SBA
Office of Advocacy, Sec. 1092.202(f)(1) and (2) provide that upon
termination of the order a covered nonbank may submit a final filing
and be relieved of its further obligations under appropriate
circumstances, which essentially accomplishes the same result.
The Bureau is adopting the proposal's approach to the amount of
time for which such requirements are imposed for non-terminated orders
under Sec. 1092.202(e). The Bureau finalizes its preliminary
conclusions in the proposal \337\ that, in most cases, it may be less
likely to obtain meaningful information in connection with existing
orders after ten years have passed since their effective dates, and
that maintaining the proposal's registration and written-statement
requirements for at least ten years after the effective date of covered
orders that remain in effect will provide useful information to the
Bureau and other uses of the registry.
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\337\ 88 FR 6088 at 6119.
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The Bureau believes that, on average, covered orders that have not
been terminated are likely to remain probative of risk to consumers for
at least the period of time specified in Sec. 1092.202(e). While the
Bureau agrees that it is possible that entities that are subject to
such covered orders may have taken significant steps to address
violations of law or other problems identified in the order, or
otherwise taken steps to prevent or remedy related issues, the Bureau
believes that the existence of such covered orders remains probative of
risk to consumers (including risks related to developments in markets
for consumer financial products and services) notwithstanding such
subsequent developments and merits continued imposition of the related
registration and written-
[[Page 56094]]
statement requirements. The final rule's obligations for registered
entities to update their identifying and other information will help
ensure that the information contained in the registry remains accurate
and up to date. When such an order terminates, the covered nonbank may
submit a final filing under Sec. 1092.202(f)(1).
Final Rule
For the reasons set forth above and in the description of the
proposal, the Bureau is finalizing Sec. 1092.202(e) as proposed.
Section 1092.202(f) Requirement To Submit Revised and Final Filings
With Respect to Certain Covered Orders
Proposed Rule
Proposed Sec. 1092.202(f) would have addressed situations where a
covered order is terminated, modified, or abrogated (whether by its own
terms, by action of the applicable agency, or by a court). It would
have also addressed situations where an order ceases to be a covered
order for purposes of subpart B by operation of proposed Sec.
1092.202(e). In all such cases, proposed Sec. 1092.202(f)(1) would
have required the registered entity to submit a revised filing to the
NBR system within 90 days after the effective date of the order's
termination, modification, or abrogation, or after the date the order
ceases to be a covered order. The Bureau believed that this requirement
would help in administering the registry, and supporting the Bureau's
monitoring work by ensuring that the registry is up to date.
Proposed Sec. 1092.202(f)(2) would have addressed situations where
a covered order no longer remains in effect or no longer qualifies as a
covered order due to the covered order's termination, modification, or
abrogation, or the application of Sec. 1092.202(e). In such cases,
proposed Sec. 1092.202(f)(2) would have clarified that following its
final filing under paragraph (f)(1) with respect to the covered order,
the registered entity would have no further obligation to update its
filing or to file written statements with respect to such covered order
under proposed subpart B. However, the Bureau explained that it
expected to make historical information publicly available via the NBR
registration system. As provided at proposed Sec. 1092.201(m), the
proposal would have defined the term ``remains in effect'' to mean that
the covered nonbank remains subject to public provisions of the order
that impose obligations on the covered nonbank to take certain actions
or to refrain from taking certain actions based on an alleged violation
of a covered law. The Bureau explained that, once a covered nonbank no
longer remains subject to such public provisions, proposed Sec.
1092.202(f)(2) would permit the covered nonbank to cease updating its
registration information and filing written statements with respect to
the order.
Comments Received and Final Rule
An industry commenter expressed support for proposed Sec.
1092.202(f)'s treatment of covered orders containing termination dates.
The Bureau did not receive any other comments specifically regarding
Sec. 1092.202(f). Comments addressing the proposal's approach to the
sunset period established in Sec. 1092.202(e) are addressed in the
section-by-section discussion of Sec. 1092.202(e) above.
For the reasons set forth in the description of the proposed rule
above, the Bureau is finalizing Sec. 1092.202(f) as proposed, with
minor technical edits.\338\
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\338\ See also the section-by-section discussions of Sec.
1092.101(d) and (e) above regarding the Bureau's adoption of the
revised terms ``nonbank registry'' and ``nonbank registry
implementation date.''
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Section 1092.202(g) Notification by Certain Persons of Non-Registration
Under This Section
Proposed Rule
Proposed Sec. 1092.202(g) would have provided that a person may
submit a notice to the NBR system stating that it is not registering
pursuant to this section because it has a good-faith basis to believe
that it is not a covered nonbank or that an order in question does not
qualify as a covered order. The Bureau explained that such a filing
could be combined with any similar filing under proposed Sec.
1092.203(f).\339\ Proposed Sec. 1092.202(g) would have also required
the person to promptly comply with Sec. 1092.202 upon becoming aware
of facts or circumstances that would not permit it to continue
representing that it has a good-faith basis to believe that it is not a
covered nonbank or that an order in question does not qualify as a
covered order. The Bureau proposed to treat information submitted under
this paragraph as ``administrative information'' as defined by proposed
Sec. 1092.201(a).
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\339\ See also the section-by-section discussion of Sec.
1092.204(f), which provides a similar option with respect to Sec.
1092.204.
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While the Bureau believed the reporting and registration
requirements under proposed Sec. 1092.202 would impose very minimal
burden on nonbank covered persons, and that determining an entity's
status as a covered nonbank (or an order's status as a covered order)
should be a straightforward task for the vast majority of relevant
persons, the Bureau proposed Sec. 1092.202(g) as an additional means
of providing flexibility to those few entities where uncertainty in
some respect raises good-faith concerns that they do not meet the
definition of a covered nonbank (or an order does not meet the
definition of a covered order). Under the proposal, such persons could
elect to file a notice under proposed Sec. 1092.202(g). The Bureau
explained in its proposal that when a person makes a non-frivolous
filing under proposed Sec. 1092.202(g) stating that it has a good
faith basis to believe that it is not a covered nonbank (or that an
order is not a covered order), the Bureau would not bring an
enforcement action against that person based on the person's failure to
comply with proposed Sec. 1092.202 unless the Bureau has first
notified the person that the Bureau believes the person does in fact
qualify as a covered nonbank (or that an order does qualify as a
covered order) and has subsequently provided the person with a
reasonable opportunity to comply with proposed Sec. 1092.202.
Among other things, the Bureau would have permitted entities to
file notifications under proposed Sec. 1092.202(g) when they have a
good-faith basis to believe that they do not qualify as a ``covered
nonbank'' because they constitute part of a ``State,'' as that term is
defined in CFPA section 1001(27).\340\ Under proposed Sec.
1092.102(c), the filing of such a notification would not have affected
the entity's ability to dispute more generally that it qualifies as a
person subject to Bureau authority.\341\
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\340\ 12 U.S.C. 5481(27). As discussed above, Sec.
1092.201(d)(3) of the final rule excludes States from the definition
of ``covered nonbank.''
\341\ The Bureau noted that, as an alternative to filing a
notification under proposed Sec. 1092.202(g), an entity could
simply choose to register under the proposal, even though it has a
good faith basis for believing that it does not qualify as a covered
nonbank (or that its order does not qualify as a covered order).
Under proposed Sec. 1092.102(c), such registration would not
prejudice the entity's ability to dispute the Bureau's authority
over it.
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The Bureau anticipated that, in most cases, it would not respond to
Sec. 1092.202(g) notices with the Bureau's views on whether filers in
fact qualify as covered nonbanks (or whether orders in fact qualify as
covered orders). The Bureau also emphasized that a non-response from
the Bureau should not be misapprehended as Bureau acquiescence in the
filer's assertions in the notice (or in the legitimacy of the filer's
assertion of good faith). The Bureau, however, preliminarily
[[Page 56095]]
concluded that obtaining these notifications may assist the Bureau in
better understanding how potentially regulated entities interpret the
scope of proposed Sec. 1092.202.
The Bureau considered alternatives to proposed Sec. 1092.202(g),
including an alternative whereby entities would not file a notice of
non-registration with the Bureau, but could avoid penalties for non-
registration if in fact they could establish a good-faith belief that
they did not qualify as covered nonbanks subject to Sec. 1092.202 (or
their orders did not qualify as covered orders). The Bureau explained
in its proposal that under this alternative, entities would maintain
such good-faith belief so long as the Bureau had not made clear that
Sec. 1092.202 would apply to them (or their orders). Although the
Bureau preliminarily concluded that this alternative was not preferable
to requiring entities to actually file a notice of non-registration,
the Bureau sought comment on whether it should finalize this
alternative instead. It also sought comment on whether, if it finalized
this alternative, entities would require additional guidance on the
circumstances pursuant to which an entity could no longer legitimately
assert a good-faith belief that Sec. 1092.202 would not apply to its
conduct. While the Bureau anticipated that such circumstances would
certainly include entity-specific notice from the Bureau that Sec.
1092.202 applies, the Bureau did not believe such notice should be
required to terminate a good-faith defense to registration. Among other
circumstances, the Bureau anticipated that at least formal Bureau
interpretations of (for example) the definition of a ``covered person''
under the CFPA, or published Bureau interpretations specific to the
scope of the proposed registration requirements, would generally
suffice to terminate such belief.
Comments Received
Tribes commenting on the proposal generally opposed proposed
Sec. Sec. 1092.202(g) and 1092.203(f) as unworkable or inappropriate
in the context of determining the rule's coverage of entities
affiliated or potentially affiliated with tribes. These commenters
asserted that tribes, as self-determining bodies, are the only ones
competent to determine the status of an entity as enjoying Tribal
sovereignty. Thus, in their view, U.S. government institutions--whether
the Bureau, other U.S. regulators, or U.S. courts--lack competence to
make such determinations. For these reasons, these commenters generally
opposed the notion that the Bureau would be evaluating the legal
foundation for good-faith notifications under proposed Sec. Sec.
1092.202(g) and 1092.203(f) by entities affiliated with tribes. In
their view, rather than collecting and reviewing such notifications,
the Bureau should consult with relevant tribes if it has questions
about the relationship of a particular entity with a tribe. Tribal
commenters also stated that requiring tribe-affiliated entities to
submit good-faith notifications was itself a violation of Tribal
sovereignty.
Tribal commenters stated that these good-faith notification
provisions confuse the issue as to whether tribes are exempt, and that
they were unnecessary and should be removed.
As described above, the Bureau specifically sought comment on an
alternative to proposed Sec. 1092.202(g) whereby entities would not
file a notice of non-registration with the Bureau, but could avoid
penalties for non-registration if in fact they could establish a good-
faith belief that they did not qualify as covered nonbanks subject to
Sec. 1092.202 (or their orders did not qualify as covered orders).
Tribal commenters stated that the Bureau should adopt this alternative.
Several Tribal commenters also stated that publication of
Sec. Sec. 1092.202(g) and 1092.203(f) notifications could expose the
tribe to costly, frivolous private litigation, as well as force the
Bureau to take a position in connection with third-party claims
regarding the sovereign status of a tribe-affiliated entity.
Proposed Sec. Sec. 1092.202(g) and 1092.203(f) would have required
a person to promptly comply with applicable requirements upon becoming
aware of facts or circumstances that would not permit it to continue
representing that it has a good-faith basis to believe that it is not a
covered nonbank or supervised registered entity, as applicable, or that
an order in question does not qualify as a covered order. A Tribal
commenter stated that this requirement's reference to unspecified facts
and circumstances was vague and overbroad, and stated that the last
sentence of proposed Sec. Sec. 1092.202(g) and 1092.203(f) should be
deleted.
Response to Comments Received
The Bureau disagrees with the tribes' comments to the extent they
suggest the Bureau cannot evaluate the legal significance of
relationships that nonbank covered persons providing consumer financial
products or services claim to have with tribes.\342\ The Bureau also
notes that if an entity is a federally recognized Indian tribe, it is
excluded from the definition of the term ``covered nonbank'' under
Sec. 1092.201(d)(3) \343\ and thus from the requirements of the final
rule. Thus, the Bureau disagrees with commenters' conclusion that
proposed Sec. 1092.202(g) or Sec. 1092.203(f) would be unworkable or
inappropriate in the context of determining coverage of entities
affiliated or potentially affiliated with tribes. In any event, if
entities are excluded from the definition of ``covered nonbank''
because they are part of a State and thus not subject to the rule,\344\
they are not required to file notifications of that status under either
good-faith notification provision in the final rule (Sec. 1092.202(g)
or renumbered Sec. 1092.204(f)). Nor would a decision not to file a
voluntary good-faith notification change or enlarge the coverage of the
rule. The entity has the choice to file such a notice, knowing that if
its filing is not frivolous, then, as described above, it will not be
subject to enforcement action on a retroactive basis if the Bureau
later disagrees with the entity's good-faith position.\345\
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\342\ See, e.g., CFPB v. Cash Call, 35 F.4th 734, 743-45 (9th
Cir. 2022) (upholding district court decision in agreement with
Bureau determination that lender did not have requisite relationship
with a tribe for Tribal law to apply).
\343\ This section of the final rule excludes from the
definition of the term ``covered nonbank'' a ``State,'' as defined
in 12 U.S.C. 5481(27)--a term that includes ``any federally
recognized Indian tribe, as defined by the Secretary of the
Interior'' under section 104(a) of the Federal Recognized Indian
Tribe List Act of 1994, 25 U.S.C. 5131(a).
\344\ As described in the proposal (88 FR 6088 at 6120) with
respect to Sec. 1092.202(g), the Bureau would permit entities to
file notifications of non-registration under that section when they
have a good faith basis to believe that they do not qualify as a
``covered nonbank'' because they constitute part of a ``State,'' as
that term is defined in CFPA section 1001(27). Entities could
similarly file good faith notifications under final Sec.
1092.204(f) for the same reason.
\345\ Under the final rule, when an entity makes a non-frivolous
filing under Sec. 1092.202(g) or Sec. 1092.204(f), the Bureau will
not bring an enforcement action based on the entity's failure to
comply with Sec. 1092.202 or Sec. 1092.204 unless the Bureau has
first notified the person that the Bureau believes the person does
in fact qualify as a covered nonbank or supervised registered entity
(as applicable), or the order is a covered order, and has
subsequently provided the person with a reasonable opportunity to
comply with Sec. 1092.202 or Sec. 1092.204, as applicable.
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Moreover, the Bureau disagrees that this rulemaking is the
appropriate context in which to issue a determination as to the scope
of sovereign immunity or as to what type of ownership or association
with a Tribal government will cause an entity to fall within the scope
of the categories established by Congress in the CFPA. The Bureau will
reach determinations in any particular case upon review of the
information before it at that time. As stated in the notice of proposed
[[Page 56096]]
rulemaking, the Bureau's failure to respond to a good-faith notice
``should not be misapprehended as Bureau acquiescence in the filer's
assertions in the notice.'' \346\
---------------------------------------------------------------------------
\346\ 88 FR 6088 at 6120.
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The Tribal commenters expressed concern regarding publication of
information with respect to good-faith notifications submitted under
proposed Sec. Sec. 1092.202(g) and 1092.203(f). The Bureau is
finalizing the definition of ``administrative information'' at Sec.
1092.201(a) to expressly provide for the treatment of good-faith
notifications as administrative information. As discussed in the
section-by-section analysis of that definition above, good-faith
notifications qualify as administrative information, which is excluded
from the publication provisions in Sec. 1092.205. Thus, contrary to
commenters' concerns, the Bureau disagrees that filing a Sec.
1092.202(g) or Sec. 1092.204(f) notification in good faith will lead
to publication of the notification under the final rule, exposing a
tribe to frivolous private litigation or improperly involving the
Bureau in third-party claims regarding Tribal sovereignty.
The Bureau finalizes its preliminary conclusion in the proposal
\347\ that obtaining good-faith notifications may assist the Bureau in
better understanding how potentially regulated entities interpret the
scope of Sec. 1092.202, and concludes the same with respect to Sec.
1092.204. The Bureau wishes to be informed about entities'
interpretations of Sec. Sec. 1092.202 and 1092.204. The Bureau
declines to adopt the proposed alternative recommended by Tribal
commenters, which would allow entities to claim a good-faith defense to
any action enforcing the rule's requirements without needing to file a
good-faith notification. The proposed alternative would not provide the
Bureau with information regarding the number of entities that might be
asserting such a good-faith exemption or provide the means for the
Bureau to follow up with any questions. It would fail to notify the
Bureau of the existence of the entity, its views of whether it is a
covered nonbank or supervised registered entity, or how to contact it.
The Bureau finalizes its preliminary conclusion in the proposal that
this alternative is not preferable to the good-faith notification
option set forth in Sec. Sec. 1092.202(g) and 1092.204(f).
---------------------------------------------------------------------------
\347\ 88 FR 6088 at 6120-21.
---------------------------------------------------------------------------
The Bureau concludes that it is appropriate to include provisions
in the final rule requiring a person to promptly comply with the rule's
requirements upon becoming aware of facts or circumstances that would
not permit it to continue representing that it has a good-faith basis
to believe that it is not a covered nonbank or supervised registered
entity, as applicable, or that an order in question is not a covered
order. The Bureau concludes that it is necessary to include these
provisions in order to account for changing or previously unknown facts
or circumstances that might render previously filed good-faith
notifications incorrect or obsolete, and to maintain the ongoing
accuracy of the information maintained in the nonbank registry. The
Bureau does not believe that these requirements are vague, unclear, or
impose on Tribal sovereign immunity. Notifications may be filed only
where the entity has the applicable good-faith belief. The Bureau
believes it is appropriate to require the entity to consider whether
any subsequent cases, regulatory orders, complaints, or other matters
may affect the accuracy of its notifications to the Bureau.
Final Rule
For the reasons set forth above and in the description of the
proposal, the Bureau is finalizing Sec. 1092.202(g) as proposed, with
two minor revisions for clarification.\348\ Proposed Sec. 1092.202(g)
had referred to a person's good-faith basis to believe that ``an order
in question does not qualify as a covered order,'' whereas proposed
Sec. 1092.203(f) had referred to a person's good-faith basis to
believe that ``an order in question is not a covered order.'' The
Bureau does not intend these two slightly different phrases to mean
different things. The Bureau is adopting revisions to Sec. 1092.202(g)
in the two places where this phrase had occurred to refer to a person's
good-faith basis to believe that ``an order in question is not a
covered order.''
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\348\ See also the section-by-section discussions of Sec.
1092.101(d) and (e) above regarding the Bureau's adoption of the
revised terms ``nonbank registry'' and ``nonbank registry
implementation date.''
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Section 1092.203 Optional One-Time Registration of NMLS-Published
Covered Orders
Section 1092.203(a) One-Time Registration Option
Proposed Rule
The proposal would have required each covered nonbank that is
identified by name as a party subject to a covered order described in
proposed Sec. 1092.202(a) to register as a registered entity with the
NBR system in accordance with proposed Sec. 1092.202 if it is not
already so registered, and to provide or update, as applicable, the
information described in subpart B in the form and manner specified by
the Bureau. The proposal would also have required submission of written
statements by supervised registered entities in connection with such
covered orders as provided in proposed Sec. 1092.203. Proposed Sec.
1092.204 would have required the Bureau to make certain information
submitted to the NBR system available to the public by means that would
have included publishing it on the Bureau's publicly available internet
site within a timeframe determined by the Bureau in its discretion.
Comments Received
In connection with proposed Sec. 1092.102(b), the Bureau sought
comment on the types of coordinated or combined systems that would be
appropriate under CFPA sections 1022(c)(7)(C) and 1024(b)(7)(D) and the
types of information that could be obtained from or provided to State
agencies.
Multiple commenters stated that the proposed registry was redundant
with existing registries and other published information, while several
consumer advocate commenters stated that the proposed registry would
not be redundant because no existing registry would be equivalent. For
ease of reference, the Bureau is describing these comments and the
Bureau's responses thereto in this part. Most of these commenters,
including the SBA Office of Advocacy, stated or suggested that the
collection and publication of the information described in the proposal
was particularly duplicative of the requirements imposed upon covered
nonbanks that are registered under the NMLS. Commenters stated that, in
light of the redundancy with existing registries and other sources of
information, the Bureau should not finalize the proposal or at least
should reconsider the creation of the proposed registry.
Industry and consumer advocate commenters agreed with the Bureau's
statements in the proposal about the need for a new Bureau registry for
nonbank entities that are subject to the Bureau's jurisdiction and that
are subject to certain agency and court orders. Commenters urged the
Bureau to register various specific types of nonbanks, including
nonbank mortgage lenders, fintech companies, and student financing
companies. Commenters also stated that the registry was particularly
important since nonbanks are increasing their market share and
otherwise becoming increasingly relevant in the
[[Page 56097]]
markets for consumer financial products and services. Industry and
consumer advocate commenters stated that there was a dearth of
information about nonbank financial companies, including their number
and type and the practices they engage in. An industry commenter
stressed the importance of ensuring consumers are protected when they
engage with both banks and nonbanks in seeking consumer financial
products and services.
A consumer advocate commenter agreed that the Bureau, in
administering the nonbank registry, should rely on information an
entity previously submitted to the registry under part 1092 and
coordinate or combine systems with State agencies, as provided in
proposed Sec. 1092.102(b). The commenter stated that not only would
this provision allow for more efficient implementation of the registry
by avoiding duplicative or redundant efforts but would also reflect the
importance of this registry to both Federal and State regulators, and
that the Bureau should consider coordination with existing State
consumer financial protection agencies.
A joint comment from State regulators stated that a significant
share of covered orders on the proposed registry are currently reported
in NMLS, which the comment described as currently the most
comprehensive registry of nonbank financial services providers. The
joint comment stated that in particular there was reason to believe a
significant share of the covered order information captured by the
proposed registry for supervised registered entities was likely already
available in NMLS Consumer Access. The comment expressed particular
concern with respect to the confusion that might be generated when
consumers compared the information on the proposed registry with the
information available on the NMLS Consumer Access website. The joint
comment stated that consumers visiting either the proposed Bureau
registry or NMLS Consumer Access might be confused as to why they were
unable to locate information on certain companies on one site and not
the other. The joint comment also voiced concern that identical or
similar information on the same company published in different formats
by different online tools may frustrate consumers looking for critical
financial services information.
The joint comment also stated that NMLS Consumer Access includes
information on actions related to violations of covered consumer
protection laws as well as actions related to licensing or
administrative violations that would not be covered under the proposal.
Therefore, the comment stated, NMLS provides consumers with a more
complete picture of nonbank enforcement actions than would be provided
by the proposed Bureau registry. The joint comment stated that if the
Bureau chose to proceed, the Bureau should exempt companies from the
requirement of filing a public order if the order is already published
on the NMLS Consumer Access website. Other commenters similarly stated
that the Bureau should consider exempting companies from the rule's
requirements for orders that are already published or available via
NMLS or should otherwise create a safe harbor for entities that comply
with NMLS reporting requirements.
Commenters also made various other arguments and observations
related to the NMLS, including that the proposed registry would be
largely duplicative of the NMLS or not necessary in light of the
existence of the NMLS, that NMLS operates in much the same way as the
proposed registry, that the NMLS includes most of the data the Bureau
would be looking to collect in the nonbank registry about covered
orders, that the Bureau should more closely tailor the rule to the
NMLS's requirements to avoid duplication, or that, by failing to use or
rely on the information on the public-facing NMLS website, the Bureau
was not coordinating with State bank regulatory authorities to minimize
regulatory burden. In particular, industry commenters discussed the
NMLS Company Form (Form MU1) submitted by nonbanks under the NMLS,
which commenters stated includes a requirement to provide information
regarding enforcement actions within the past 10 years. One industry
commenter pointed out that the Form MU1 requires the submission of an
attestation by an employee or officer and stated that, although the
language of this attestation is different from the Bureau's proposal,
the intent and purpose are similar, and the Bureau could rely on the
attestation in the Form MU1 rather than the proposed written statement;
another industry commenter similarly stated that the Bureau should be
able to rely on the attestations provided through NMLS filings.
In addition, during the Bureau's interagency consultations on the
proposed and final rule as described in part V above, certain
consulting parties expressed similar concerns regarding overlap and
duplication between the proposed NBR system and NMLS Consumer Access.
Commenters also identified other registries or sources of
information regarding agency or court orders that they stated made the
Bureau's proposal redundant or unnecessary, or stated that the Bureau
should not finalize the proposal in light of the existence of such
other sources of information. Commenters pointed to the websites and
registries maintained by individual Federal and State agencies, the
Federal Trade Commission's Sentinel database and Banned Debt Collectors
list, information maintained by the Better Business Bureau, the
Bureau's own Consumer Response portal and database, information posted
by the U.S. Department of Housing and Urban Development, information
published in connection with lawsuits, and databases listing public
reprimands of credit unions associated with credit union service
organizations (CUSOs). Commenters also stated that the Bureau would be
able to obtain adequate information from other regulators under its
information-sharing memorandums of understanding (MOUs) with those
regulators.
Response to Comments Received
Description of Option Adopted Under Sec. 1092.203
After considering the arguments by commenters, the Bureau is
adopting a one-time registration option excepting entities from other
requirements of the rule, including the proposed written-statement
requirements, for orders that are published on the NMLS Consumer Access
website. The NMLS Consumer Access website currently makes available for
public viewing, subject to certain terms and conditions of access,
certain information regarding companies that are regulated by State
agencies in connection with a variety of financial services industries,
including information regarding administrative and enforcement actions
against such companies.\349\
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\349\ See NMLS, ``Information About NMLS Consumer Access''
(September 9, 2016), at https://mortgage.nationwidelicensingsystem.org/about/Documents/InformationAboutNMLSConsumerAccess.pdf.
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The Bureau agrees with commenters that it is consistent with the
purposes of the final rule to adopt such a limited exception. This
exception will reduce burden on entities that are subject to the rule,
help avoid confusion, and promote coordination with the States in
exercising the Bureau's nonbank registration authorities by leveraging
information already gathered and published by the States. Section
1092.203 of the final rule provides an
[[Page 56098]]
option for covered nonbanks to submit limited information regarding
such covered orders in substitution of submitting filings about such
covered orders to the Bureau-maintained nonbank registry under the
rule's other provisions. To provide for this option, the Bureau is
adopting new Sec. 1092.203 as well as related new definitions for the
terms ``NMLS'' and ``NMLS-published covered order.''
Covered nonbanks will have the option to either register under
Sec. 1092.203 with respect to any applicable NMLS-published covered
order(s) or to comply with the general registration requirements of
subpart B with respect to such order(s). Covered nonbanks may opt to
register under the one-time registration provision for all, some, or
none of the applicable NMLS-published covered orders to which they are
subject.\350\ Covered nonbanks that exercise this option with respect
to an NMLS-published covered order will be required to submit certain
limited information to the nonbank registry regarding the covered order
to enable the Bureau to coordinate the nonbank registry with the NMLS.
Upon exercising this option and submitting the required information
about the NMLS-published covered order, the covered nonbank will have
no further obligation under subpart B to provide information to, or
update information provided to, the nonbank registry regarding the
NMLS-published covered order.
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\350\ An entity that wishes to confirm that any particular
covered order is published on the NMLS Consumer Access website may
either review the information on the NMLS Consumer Access website in
a manner consistent with any terms of use or other conditions on
access that may be imposed by the NMLS's operator, or verify that
information by contacting the State regulator that issued the order
or the NMLS's operator directly.
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The Bureau intends to notify users of the nonbank registry
regarding the existence of NMLS-published covered orders and the
covered nonbanks that are subject to them by publishing under Sec.
1092.205 relevant information about the applicable covered nonbank and
covered order that the Bureau collects under Sec. 1092.203. Such users
may then, subject to any terms of use or other conditions of access
that the NMLS's operator may impose, view a copy of the order on the
NMLS Consumer Access website, as well as any information about the
applicable covered nonbank that may be maintained and published there.
Continued Need for Bureau's Nonbank Registry That Applies to All
Covered Orders and Covered Nonbanks
The one-time registration option in Sec. 1092.203 will complement
the nonbank registry. The Bureau agrees with the commenters asserting
that there is a need for a new Bureau registry with respect to covered
orders issued against nonbank covered persons. As described in part IV
above, the final rule will assist the Bureau in monitoring for risks to
consumers in the offering or provision of a wide range of consumer
financial products or services and will impose registration
requirements on a wide range of nonbank covered persons subject to the
Bureau's jurisdiction. The nonbank registry will accomplish this goal
by assisting the Bureau in having access to relevant information
regarding applicable covered nonbanks and covered orders even where
information regarding those entities and orders is not available
through the NMLS. The Bureau's registry will also help ensure that the
Bureau is provided with information about such covered orders as they
are issued across multiple product markets and geographies and in
connection with the wide range of consumer financial products and
services regulated by the Bureau. Thus, there remains a need for the
Bureau to adopt its own new nonbank registry in order to provide the
Bureau with information necessary to support its functions under the
CFPA. In addition, for the reasons discussed in part IV(F) and the
section-by-section discussion of Sec. 1092.205 below, the Bureau
intends to publish certain information submitted to its new nonbank
registry.
The Adopted Exception for NMLS-Published Covered Orders Will Reduce
Burden on Registered Entities and Implement the CFPA and Sec.
1092.102(b) by Coordinating With State Agencies
The Bureau is adopting the option set forth in Sec. 1092.203 in
part to reduce burden on entities that are subject to the final rule.
The Bureau's adoption of Sec. 1092.203 lowers the cost to firms of the
final rule relative to the proposed rule. For entities with NMLS-
published covered orders, exercising this option should take even less
employee time than registering under the other provisions of the rule.
As described further below, the Bureau believes that this option will
advance the purposes described herein while imposing less cost on
entities subject to the final rule.
The Bureau is also finalizing this option in part to implement the
approach described in the proposal in discussing proposed Sec.
1092.102(b). There, the Bureau proposed that in administering the NBR
system, the Bureau may coordinate or combine systems in consultation
with State agencies as described in CFPA sections 1022(c)(7)(C) and
1024(b)(7)(D).\351\ Section 1092.203 is consistent with the Bureau's
statutory mandates under these provisions to consult with State
agencies regarding requirements or systems (including coordinated or
combined systems for registration) in developing and implementing
registration requirements under CFPA sections 1022(c)(7)(C) and with
respect to supervisory requirements adopted under CFPA section
1024(b)(7)(D). CFPA section 1022(c)(7)(C) states: ``In developing and
implementing registration requirements under [CFPA section 1022(c)(7)],
the Bureau shall consult with State agencies regarding requirements or
systems (including coordinated or combined systems for registration),
where appropriate.'' \352\ Similarly, CFPA section 1024(b)(7)(D)
states: ``In developing and implementing requirements under [CFPA
section 1022(b)(7)], the Bureau shall consult with State agencies
regarding requirements or systems (including coordinated or combined
systems for registration), where appropriate.'' Section 1092.203 will
enable the Bureau to develop and implement the registration
requirements of the rule adopted in part under CFPA section 1022(c)(7),
as well as the written-statement requirements adopted under CFPA
section 1024(b)(7), in a manner that allows for ``coordinated'' and
``combined'' systems for registration as indicated under these
statutory provisions. As indicated by the consumer advocate commenter
with respect to proposed Sec. 1092.102(b), coordinating or combining
systems with State agencies as provided in Sec. 1092.102(b) of the
final rule not only allows for more efficient implementation of the
registry by avoiding duplicative or redundant efforts but also reflects
the importance of this registry to both Federal and State regulators.
In addition, Sec. 1092.203's option for one-time registration in lieu
of filing annual written statements is consistent with Sec.
1092.102(b) and with the Bureau's statutory mandate to consult with
State agencies in developing and implementing requirements adopted
under CFPA section 1024(b)(7), including Sec. 1092.204's written-
statement requirements.
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\351\ 88 FR 6088 at 6103.
\352\ 12 U.S.C. 5512(c)(7)(C).
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[[Page 56099]]
Notifications submitted by covered nonbanks under Sec. 1092.203(b)
will alert the Bureau to the existence of the order and the relevant
covered nonbank, and to the publication of the order on the NMLS
Consumer Access website. Should the Bureau desire to learn more about
any particular NMLS-published covered order, including information
about violations identified by State agencies, it may do so through the
NMLS or by contacting relevant State agencies for additional
information, including under the relevant provisions of the CFPA and
applicable information-sharing agreements. Thus, the option adopted at
Sec. 1092.203 will promote coordination with State agencies in
connection with the nonbank registry.
The Adopted Exception for NMLS-Published Orders Appropriately Addresses
the Bureau's Current Need for Information Regarding Applicable Orders
and Companies
The Bureau is also providing this option for covered nonbanks in
recognition of the Bureau's extensive experience with the NMLS, the
information that currently is collected under the NMLS, the Bureau's
access to the NMLS, and the public's access to the NMLS Consumer Access
website (subject to any applicable terms of use or other conditions).
The Bureau concludes that at this time it currently needs to collect
only limited information from covered nonbanks about covered orders
that are published by State agencies on the NMLS Consumer Access
website. Under the final rule, a covered nonbank subject to a covered
order that is published on the NMLS Consumer Access website will have
the option to instead notify the Bureau's nonbank registry that the
order is so published and to provide certain limited information about
itself and the covered order to the Bureau's nonbank registry. In
general, applicable State regulators submit certain information to the
NMLS and keep that information updated, which will help to ensure the
information's accuracy and timeliness. Furthermore, as argued by
commenters, covered nonbanks are generally subject to legal obligations
to provide truthful and accurate submissions to their State regulators,
and the States regularly post information to NMLS and help ensure the
accuracy of the information published there. In light of these
considerations, the Bureau concludes that the information about covered
orders that is available via the NMLS is relatively more likely to be
reliable and up to date than information maintained on systems that are
not similarly used, maintained, and monitored by State agencies.
Adopting the one-time registration option will provide the Bureau
with much of the information about covered orders and the nonbank
entities that are subject to them that the Bureau proposed to collect
under the proposed rule. The Bureau acknowledges that, by providing
this option, the nonbank registry will not contain all of the
information about covered orders that it would have contained under the
Bureau's registry as described in the proposed rule. However, the
Bureau believes that the adoption of Sec. 1092.203 will provide a
number of significant benefits to the Bureau and to covered nonbanks.
While this approach under the final rule means that the Bureau will
likely need to review two different systems in order to obtain complete
information regarding all covered orders, the additional option adopted
under the final rule will facilitate those efforts. Importantly, the
information collected under Sec. 1092.203 will notify the Bureau
regarding the existence of covered orders and the covered nonbanks that
are subject to them. This limited filing will notify the Bureau
regarding the covered nonbank's existence and the existence of the
covered order, and will enable the Bureau to obtain more information
about the covered nonbank and the covered order, should it so choose,
through other means, including through the Bureau's own access to the
information stored on NMLS as well as through other direct
communications with applicable State agencies.
The Bureau also concludes that it does not need to impose Sec.
1092.204's annual written statement requirements in connection with
NMLS-published covered orders in cases where the applicable covered
nonbank has filed a one-time registration under Sec. 1092.203. By
submitting information under Sec. 1092.203, the supervised registered
entity will notify the Bureau regarding the covered nonbank's existence
and the existence of the covered order. The Bureau, based on its
extensive experience with the NMLS, has determined for purposes of this
final rule that once it has been so notified of the existence of a
covered nonbank and an applicable NMLS-published covered order, it
generally will be able to obtain sufficient information through the
NMLS and the State authorities participating in that system so as to
render annual written statements under this final rule in connection
with such an order unnecessary. Under the CFPA provisions that provide
for sharing of supervisory information among the Bureau and State
agencies,\353\ as well as under its standing information-sharing
agreements with the Conference of State Bank Supervisors (CSBS) and
individual State agencies, the Bureau anticipates that it will be able
to obtain information to inform its supervisory prioritizations and
activities.
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\353\ See 12 U.S.C. 1022(c)(6), 1024(b)(3).
---------------------------------------------------------------------------
In particular, as discussed by several commenters, many covered
nonbanks that are licensed by State regulators through the NMLS submit
the NMLS Company Form MU1 in connection with various matters relating
to their State licenses. The NMLS currently uses the Form MU1 as its
universal licensing form for companies to apply for and maintain
nondepository, financial services licenses from State agencies
participating on NMLS. As discussed by commenters, the current version
of Form MU1 requires licensed entities to provide information to State
regulators about a variety of matters, including information about
orders entered against the entity in connection with a financial
services-related activity and about violations of financial services-
related regulations or statutes.\354\ Also as discussed by commenters,
Form MU1 requires the submission of an attestation by an authorized
representative regarding the accuracy of the information submitted. If
the Bureau wants information relevant to the covered nonbank's
compliance with covered orders identified on the Form MU1, the Bureau
generally can obtain such information for its internal use through its
statutory authorities and its information-sharing agreements with CSBS
and the relevant State authorities. Although Form MU1 itself may not
provide the Bureau with information about compliance with a covered
order, the Bureau is willing to accept some reduced convenience in
order to reduce regulatory burden and promote coordination with the
States with respect to NMLS-published covered orders. Thus, it is not
necessary at this time for the nonbank registry to collect annual
statements under Sec. 1092.204 with respect to an NMLS-published
covered order from a supervised registered entity that opts to submit a
filing under Sec. 1092.203 in connection with that NMLS-published
covered order.
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\354\ See NMLS Resource Center, https://mortgage.nationwidelicensingsystem.org/slr/common/policy/Pages/default.aspx. A commenter noted that entities must promptly file
updates to their MU1 disclosures as needed.
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[[Page 56100]]
The Adopted Exception for NMLS-Published Covered Orders Appropriately
Addresses the Current Need To Provide Relevant Information to Other
Users of the Bureau's Registry
In addition, as described in part IV(F) above and in the section-
by-section discussion of Sec. 1092.205 below, the Bureau intends to
publish certain limited information about the entity and the order as
obtained under Sec. 1092.203, for the purpose of notifying other
regulators and other users of the nonbank registry about the entity's
existence and the existence of the covered order. Users of the
information published under Sec. 1092.203 will then have the option,
where doing so is consistent with any NMLS Consumer Access terms of use
or other applicable conditions, to review the information that is
published on the NMLS Consumer Access website about the covered order
and the covered nonbank.
While the NMLS does not contain registration information regarding
all of the covered nonbanks that are likely to be subject to the final
rule, and does not publish all of the information that the Bureau will
collect and intends to publish under the rule, the Bureau believes
that, on the whole, the information about NMLS-published covered orders
made available to the public on the NMLS Consumer Access website
(subject to any applicable terms of use or other conditions) currently
satisfies many of the goals of publication that the Bureau described in
its proposal. These goals include making information about covered
nonbanks and the covered orders to which they are subject readily
accessible in a comprehensive and collected manner. As stated by
commenters, the NMLS Consumer Access website currently publishes a wide
range of information regarding those covered nonbanks that are subject
to applicable State licensing and registration requirements, including
much of the identifying information that would be collected under the
proposal, such as the entity's legal name, business address, and NMLS
identifier. The NMLS Consumer Access website is currently searchable by
name, company, city, State, ZIP code, NMLS identification, and/or
license number (subject to any applicable terms of use or other
conditions). The NMLS Consumer Access website also currently publishes
much of the same information that would have been collected and
published under the proposal with respect to covered orders--in
particular, a copy of the order and relevant information about the
agency that issued or obtained the order. Therefore, where the Bureau
publishes information on its nonbank registry informing users of that
system about the existence of a covered nonbank and the issuance of an
applicable order against that nonbank, users can (subject to NMLS
Consumer Access's terms of use or other applicable conditions) obtain
related information from the NMLS Consumer Access website, including
much of the same information about the covered nonbank and covered
order that would have otherwise been available via the proposed nonbank
registry. In addition, many users of the nonbank registry--in
particular, many State regulators--have their own access to the NMLS
system and may use that access to obtain additional information about
the company, beyond what is available through the NMLS Consumer Access
website.
As stated in the joint comment by State regulators, the one-time
registration option provided in the final rule will also help minimize
company, consumer, and other public user confusion when utilizing both
NMLS Consumer Access and the nonbank registry. First, consumers and
other users of the nonbank registry will have the ability to review any
information about the order that is published in the nonbank registry
(whether from the limited filing under Sec. 1092.203 or a more
detailed filing under Sec. 1092.202) as well as any information
published on the NMLS Consumer Access website (subject to any
applicable terms of use or other conditions of access), and will be
able to associate the NMLS Consumer Access website and the Bureau's
nonbank registry. Thus, users will have a mechanism to identify and
associate the information provided in both the NMLS Consumer Access
website and the Bureau's nonbank registry about that company and any
relevant covered orders. Second, publication of the limited information
obtained under Sec. 1092.203 as provided under Sec. 1092.205 will
help clarify the identity of the applicable covered nonbanks and the
covered orders they are subject to, and otherwise reduce confusion
about the information published on the NMLS Consumer Access website and
the Bureau's nonbank registry. Thus, the option provided under Sec.
1092.203 will help reduce the redundancies identified by commenters
while maintaining the integrity and usefulness of the nonbank registry.
Response to Comments Received Regarding Redundancies With Other
Registries and Sources of Information
The Bureau believes that the NMLS represents a uniquely useful
complement to the nonbank registry. The Bureau disagrees with
commenters that the other sources of information identified by
commenters diminish the need for the nonbank registry, or that the rule
should accept registration of covered orders under those sources in
lieu of registration with the nonbank registry. As stated above in part
IV(B), although referrals from and other information provided by other
agencies have been valuable to the Bureau's work, the Bureau currently
often relies on other agencies to take proactive steps to contact it.
Having access to a centralized list of orders entered against nonbanks
will significantly increase the Bureau's ability to monitor the market
so that the Bureau can identify, better understand, and ultimately,
prevent further consumer harm. The Bureau disagrees that the indirect
method proposed by commenters would be as efficient or effective as
requiring covered nonbanks to directly submit information to the
Bureau. Similarly, requiring the Bureau to proactively reach out and
obtain information under its information-sharing memorandums of
understanding with other regulators without creating its own registry
would be an inadequate substitute for the final rule.
The Bureau disagrees that simply steering users to the various
other public-facing websites and registries maintained by other Federal
agencies, State regulators, State attorneys general, and local agencies
would serve the purposes of the final rule.\355\ First, such an
approach would be confusing and inefficient for the Bureau and for
other users of the public registry the Bureau intends to establish, who
would need to become proficient at searching and otherwise using the
various websites maintained by multiple Federal agencies, State
regulators, State attorneys general, and local agencies in order to
locate applicable information about covered orders and covered
nonbanks. The sheer number of such websites would present an obstacle
to obtaining full information about all of the covered orders that have
been issued against the covered nonbank. Collecting, keeping track of,
and verifying
[[Page 56101]]
information maintained on a wide range of uncoordinated Federal, State,
and local agency websites would be highly inefficient for the Bureau
and other users of the nonbank registry. Such an approach would also
impair the accuracy of the information maintained by the nonbank
registry. The various websites publishing such orders would be subject
to various approaches to maintaining and updating information about the
applicable entities and orders listed on them, including the frequency
at which such information is published and updated. In addition, the
external web page(s) to which the Bureau directs users for more
information regarding an order might be changed or otherwise become
outdated. By contrast, currently the NMLS Consumer Access website
generally maintains updated and consolidated information about entities
and orders that are listed on it.
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\355\ The Bureau also disagrees that the Bureau's own Consumer
Response portal renders the nonbank registry unnecessary. To the
contrary, the Bureau's consumer response function will be informed
by the increased monitoring of risks and trends provided by the
nonbank registry.
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Second, because the information maintained by such a variety of
agencies would necessarily vary in format and presentation, it would be
very challenging for the Bureau to regularly monitor, search, and link
to the appropriate selection of orders on the registry that the Bureau
would deem relevant to its jurisdiction. Such websites may not provide
information about nonbanks and orders in a uniform manner that will
enable the Bureau to easily locate and access that information.
Third, the final rule, unlike the alternative information sources
suggested by commenters, is calibrated to collect information relevant
to the Bureau's exercise of its authorities. Even where another agency
publishes a particular order against a covered nonbank, it may not be
self-evident to the Bureau that the covered nonbank is a covered
nonbank--information that would be provided in the nonbank registry.
The Bureau currently lacks access to any comprehensive list of covered
nonbanks, and thus may not even be aware of such entities or that it
should monitor orders issued against them. Also, neither the orders
themselves nor the relevant website publishing those orders would
necessarily provide sufficient information to permit the Bureau to
recognize that the order was a covered order. For example, it may not
be clear from the face of the order the extent to which the violations
of law found or alleged in the order arose out of conduct in connection
with the offering or provision of a consumer financial product or
service. Thus, the information that would be collected by the Bureau
either by solely linking to a host of multiple other websites or by
reaching out under its information-sharing memorandums of
understanding, or both, would always necessarily be incomplete. Under
such an approach, the Bureau would be required to attempt to discern on
an ongoing basis which entities listed on another agency's website were
subject to its jurisdiction and when they had become subject to a
covered order. Therefore, at a minimum, the Bureau will need to be
notified when a covered order is issued against a covered nonbank, and
will need to be notified about the existence of the covered nonbank and
the relevant covered order. The Bureau concludes that imposing a
registration requirement on the covered nonbank itself to register with
and notify the Bureau regarding such matters, as authorized under the
CFPA, is the most effective and efficient mechanism for collecting this
information.
Fourth, the Bureau has concluded that it will often be difficult to
obtain an adequate substitute for the information contained in the
written statement with respect to covered orders that are not available
through the NMLS. The Bureau is not currently aware of other
regularized and consolidated official sources of information about
covered orders that would provide the information about order
violations that would be contained in the written statement.
As an alternative to the approach taken in the final rule, the
Bureau considered requiring covered nonbanks to notify the Bureau when
they become subject to a covered order--even one not published on the
NMLS Consumer Access website--in a manner similar to that adopted under
Sec. 1092.203 of the final rule. Under such an alternative system, the
Bureau might have used such notifications to attempt to obtain
additional information about the covered nonbank and the covered order
directly under its information-sharing memorandums of understanding
with relevant regulators. However, such a requirement would not have
adequately accomplished the purposes of the registry for the reasons
explained above. Because the Bureau could not be assured that the other
Federal, State, and local systems would routinely collect and make
available the types of relevant identifying information about covered
nonbanks subject to covered orders that are currently collected under
the NMLS with respect to companies registered with the NMLS, the
nonbank registry would therefore still need to collect such identifying
information directly from registering nonbanks. Moreover, such an
approach would require the Bureau to comb through a large number of
different websites maintained by various Federal agencies, State
regulators, State attorneys general, and local agencies, all using
their own organization, formats, naming conventions, frequency of
posting and updating, and other matters. Such an approach would be
cumbersome at best not only for the Bureau but also for registering
entities themselves. Such an approach would therefore represent a less
efficient and effective means of accomplishing the purposes of the
final rule, including registering applicable covered nonbanks and
supporting the objectives and functions of the Bureau through
monitoring markets for consumer financial products and services, than
the approach being adopted by the Bureau under Sec. 1092.203.
That approach is comparatively much more useful both for the Bureau
and for other potential users of the registry. As discussed above,
filings submitted under Sec. 1092.203 will notify both the Bureau and
such other potential users when a covered order is issued against a
covered person. Then the Bureau and other users will be able to use the
NMLS to access additional information about the covered nonbank and
covered order (subject to any applicable terms of use or other
conditions). The NMLS and applicable State regulators generally collect
identifying information about most of the companies that have
applicable orders published on the NMLS Consumer Access website. For
example, the NMLS Form MU1 requires companies to provide information
regarding their legal name, address, NMLS number, and State licensing
information. The Bureau will generally be able to obtain this
information from NMLS and directly from State regulators. (While the
Bureau understands that some covered nonbanks that are subject to an
NMLS-published covered order may not have created an NMLS account--for
example, where a covered order is issued against a company that is not
appropriately licensed by an applicable State--the Bureau also
understands that the number of such covered nonbanks is comparatively
small. The Bureau intends to use the information collected through the
nonbank registry to better understand the number of such companies, and
intends to continue to consult with State agencies and the NMLS's
operator regarding coordination of the nonbank registry and the NMLS.)
Thus, the Bureau believes it will more readily be able to identify most
covered nonbanks that register an NMLS-
[[Page 56102]]
published covered order than it would be able to identify covered
nonbanks subject to other types of covered orders.
In addition, the NMLS, which is maintained through the coordinated
action of the States, will be relatively simple for the Bureau to
monitor and to coordinate with. The NMLS provides a valuable
coordination function by organizing information about registered
nonbank companies, generally by assigning an NMLS identification number
for the company and assembling relevant identifying and licensing
information together in an accessible manner. Limiting the number of
places where the Bureau will need to search in order to obtain
information about covered nonbanks and covered orders to two--the
nonbank registry and the NMLS--will help limit the Bureau's search
costs, and conserve resources that it could apply elsewhere, including
to monitor for risk to consumers in other ways. By minimizing the
number of places such information will be located, the final rule will
also help minimize variation in the steps that would be required to
obtain access to the information or any controls that may be placed on
access to the information, and the ways or formats in which that
information may be posted. Thus, the final rule will help ensure access
by the Bureau to more uniform and consistent reporting about covered
nonbanks and covered orders.
In addition to providing a consolidated source of information to
the Bureau, the NMLS is also comparatively a more useful resource for
other users of the public registry the Bureau intends to establish than
a collection of other websites would be. As discussed above, where the
Bureau publishes information on its nonbank registry informing users of
that registry about the existence of a covered nonbank and the issuance
of an applicable order against that nonbank, State regulators will
generally be able to obtain related information from the NMLS pursuant
to their arrangements with NMLS. In addition, as discussed above, the
NMLS Consumer Access website currently publishes a wide range of
information regarding those covered nonbanks that are subject to
applicable State licensing and registration requirements, including
much of the identifying information that would be collected under the
proposal, such as the entity's legal name, business address, and NMLS
identifier. Other users of the nonbank registry may use the NMLS
Consumer Access website to access copies of, and other information
about, NMLS-published covered orders and covered nonbanks that are
registered with the NMLS, so long as that access is consistent with any
terms of use or other conditions of access that NMLS may impose. Thus,
the NMLS Consumer Access website provides a centralized point of access
(subject to NMLS Consumer Access's applicable terms of use or other
conditions of access) for persons seeking to learn more about NMLS-
published covered orders and covered nonbanks. Moreover, publication on
the NMLS Consumer Access website will help ensure that such orders are
presented in a format that is uniform and consistent, which will reduce
the opportunity for confusion for persons who are attempting to locate
and learn about NMLS-published covered orders.
Therefore, the Bureau has determined that maintaining its own
registry, with the alternative option for one-time registration of
NMLS-published covered orders provided in Sec. 1092.203, will best
serve the purposes of the final rule as described herein.
Final Rule
For the reasons described above and as follows in this section-by-
section analysis, the Bureau is finalizing a new Sec. 1092.203, and is
renumbering the remainder of the sections of subpart B to part 1092
accordingly. Consistent with the approach suggested by commenters, this
section will provide an express exception from some of the requirements
of the rule as proposed (including the proposed written-statement
requirements) for orders that are published on the NMLS Consumer Access
website, which may be exercised at the option of the covered nonbank in
lieu of registering under subpart B generally with respect to such
orders.
The Bureau is adopting corresponding definitions of the terms
``NMLS'' and ``NMLS-published covered order'' at Sec. 1092.201(j) and
(k). See the discussion of these definitions in the section-by-section
discussion of these sections above.
With respect to any NMLS-published covered order, a covered nonbank
that is identified by name as a party subject to the order may elect to
comply with the one-time registration option described in this section
in lieu of complying with the requirements of Sec. Sec. 1092.202 and
1092.204. Section 1092.203(c) provides that, once a covered nonbank
avails itself of this option, and chooses to file the information
required under Sec. 1092.203(b) with respect to an NMLS-published
covered order, the covered nonbank shall have no further obligation
under subpart B to provide information to, or update information
provided to, the nonbank registry regarding the NMLS-published covered
order.
As discussed above, by collecting and potentially publishing
limited information for the purpose of coordinating the nonbank
registry with NMLS, the final rule will also promote coordination with
States in accordance with CFPA sections 1022(c)(7)(C) and
1024(b)(7)(D).
As provided in Sec. 1092.201(k), no covered order issued or
obtained at least in part by the Bureau shall be an NMLS-published
covered order. Thus, a covered nonbank must comply with the
requirements of Sec. 1092.202 and (where applicable) Sec. 1092.204
with respect to a covered order that has been issued or obtained at
least in part by the Bureau and may not elect to comply with the one-
time registration option described in Sec. 1092.203 with respect to
such a covered order whether or not the order has been published on the
NMLS Consumer Access website. This restriction applies whether the
applicable covered order was issued either by a court or by the Bureau
itself, so long as the order was issued in any action or proceeding
brought at least in part by the Bureau. The Bureau has a special
interest in monitoring its own orders, and in obtaining updated
information under Sec. 1092.202 regarding them. The identifying
information submitted under Sec. 1092.202, and the final rule's
obligation to update that information in the event of changes, could
provide new and useful information to the Bureau in monitoring and
enforcing its own orders. For example, a covered nonbank subject to a
Bureau covered order that moves its principal place of business or
changes its name will be required to notify the Bureau. Also, the
Bureau has a special interest in obtaining annual written statements
under Sec. 1092.204 from supervised registered entities regarding such
Bureau orders. The written statements will provide information
regarding ongoing compliance with the Bureau order and the name and
title of the attesting executive, will otherwise facilitate the
Bureau's supervision of entities subject to its orders, and will help
the Bureau detect and assess risks to consumers in connection with the
orders it has issued or obtained. The Bureau also concludes that the
rule's written-statement requirements should be imposed on supervised
registered entities subject to covered orders that have been issued or
obtained by the Bureau to ensure that such entities are legitimate
entities and are able to perform their obligations to consumers. Thus,
the final rule requires covered
[[Page 56103]]
nonbanks to comply with Sec. 1092.202 and (where applicable) Sec.
1092.204 with respect to such covered orders whether or not they are
published on the NMLS Consumer Access website.
Section 1092.203(b) Information To Be Provided
Proposed Rule
See the section-by-section discussion of Sec. 1092.203(a) above
for a discussion of the proposal's requirements regarding submission of
information and written statements and publication of information
relating to covered orders.
Comments Received
See the section-by-section discussion of Sec. 1092.203(a) above
for a summary of comments received requesting an exception for NMLS-
published covered orders as well as comments received regarding alleged
redundancies with other registries and sources of information.
Final Rule
For the reasons described above and as follows in this section-by-
section analysis, the Bureau is adopting a new Sec. 1092.203(b)
requiring a covered nonbank that chooses to exercise the option
described in Sec. 1092.203(a), in the form and manner specified by the
Bureau, to provide such information that the Bureau determines is
appropriate for the purpose of identifying the covered nonbank and the
NMLS-published covered order, and otherwise for the purpose of
coordinating the nonbank registry with the NMLS. The Bureau will
provide instructions regarding the submission of such information in
filing instructions issued under Sec. 1092.102(a).
The Bureau is finalizing this requirement in order to help ensure
that it obtains adequate information regarding NMLS-published covered
orders to maintain the usefulness of the nonbank registry with respect
to such orders. Without such a requirement, the Bureau may not learn
about the existence of such orders or the applicable covered nonbank,
or may not be informed that the covered nonbank is a covered nonbank
subject to its jurisdiction or that the covered order is a covered
order. Such matters are critical for the Bureau to be informed about so
that it may understand when information regarding such matters that is
of interest to the Bureau and relevant to its jurisdiction may be
available from State agencies. The Bureau will also need this
information in order to help coordinate the nonbank registry with the
NMLS, including to verify that an applicable NMLS-published covered
order is in fact published on the NMLS Consumer Access website and to
obtain information regarding the applicable covered nonbank and the
NMLS-published covered order.
Under Sec. 1092.205 of the final rule, the Bureau intends to
publish certain information that the nonbank registry collects under
Sec. 1092.203. As described above and in the section-by-section
discussion of Sec. 1092.205 below, and except as provided therein, the
Bureau believes the publication of certain information collected under
Sec. 1092.203 will be in the public interest, in order to allow users
of the Bureau's public registry to identify that a covered nonbank has
become subject to a covered order and (consistent with any applicable
terms of use or other conditions of access) to be able to locate
information about that covered nonbank and covered order on the NMLS
Consumer Access website. The Bureau may also collect additional
information under Sec. 1092.203 for the purpose of coordinating the
nonbank registry with the NMLS that it may choose not to publish. In
administering the nonbank registry, the Bureau will implement Sec.
1092.203 along with Sec. 1092.102(b) as part of coordinating or
combining systems in consultation with State agencies.
203(c) No Further Obligation To Provide or Update Information
Proposed Rule
See the section-by-section discussion of Sec. 1092.203(a) above
for a discussion of the proposal's requirements regarding submission of
information and written statements and publication of information
relating to covered orders.
Comments Received
See the section-by-section discussion of Sec. 1092.203(a) above
for a summary of comments received requesting an exception for NMLS-
published covered orders as well as comments received regarding alleged
redundancies with other registries and sources of information.
Final Rule
For the reasons described above and as follows in this section-by-
section analysis, the Bureau is adopting a new Sec. 1092.203(c)
stating that, upon providing the information described in Sec.
1092.203(b), the covered nonbank shall have no further obligation under
subpart B to provide information to, or update information provided to,
the nonbank registry regarding the NMLS-published covered order. Thus,
once a covered nonbank has submitted the information specified in the
filing instructions adopted under Sec. 1092.102(a) for an applicable
NMLS-published covered order, the covered nonbank will have no further
obligation to provide information to, or update information provided
to, the nonbank registry regarding the NMLS-published covered order.
Thus, among other things, following such a submission, the covered
nonbank need not submit either an initial or a revised filing under
Sec. 1092.202(b)(2) with respect to the NMLS-published covered order.
(However, if the covered nonbank is also subject to at least one other
covered order that is registered or required to be registered under
Sec. 1092.202, and such other order(s) is not eligible for
registration under Sec. 1092.203 or the covered nonbank has not opted
to register the order(s) under that provision, the covered nonbank will
remain subject to Sec. 1092.202(b)(2)'s requirements with respect to
such other covered order(s), including the ongoing obligation to update
its identifying information.) If the covered nonbank is a supervised
registered entity, then, following such a submission under Sec.
1092.203, it will not be required to submit an annual written statement
under Sec. 1092.204 or otherwise comply with the requirements of that
section in connection with the applicable NMLS-published covered order.
As described in the section-by-section analysis of Sec.
1092.203(a) above, the Bureau believes that this exception to the
requirements of the final rule with respect to NMLS-published covered
orders is consistent with the purposes of the final rule described in
part IV above. This exception will reduce burden on entities that are
subject to the rule, help avoid confusion, and promote coordination
with the States in exercising the Bureau's nonbank registration
authorities by leveraging information already gathered and published by
the States.
Section 1092.204 Annual Reporting Requirements for Supervised
Registered Entities
Proposed Sec. 1092.203, which is renumbered in the final rule as
Sec. 1092.204, would have required supervised registered entities
annually to identify an executive (or executives) who is responsible
for and knowledgeable of the firm's efforts to comply with orders
identified in the registry. The proposal would also have required
supervised registered entities to submit on an annual basis a written
statement signed by that executive (or executives) regarding the
entity's compliance with orders in the registry.
[[Page 56104]]
The Bureau is finalizing this component of the proposal, with
certain changes to the proposed regulatory text that are discussed
below. Below, the Bureau first addresses comments regarding the
Bureau's legal authority to impose the requirements in Sec. 1092.204
and then discusses Sec. 1092.204's individual paragraphs.
Proposed Rule's Discussion of the Bureau's Legal Authority To Impose
Written-Statement Requirements
The Bureau relied on its rulemaking authority under CFPA section
1024(b)(7)(A)-(C) in requiring supervised registered entities to submit
written statements.\356\ The Bureau explained that each of those
paragraphs provides independent authority for the requirement to submit
written statements. First, the Bureau explained, CFPA section
1024(b)(7)(A) and (B) authorize these written-statement requirements
because the statements would facilitate the Bureau's supervision
efforts and its assessment and detection of risks to consumers. The
Bureau believed the proposed written statement would facilitate the
Bureau's supervision efforts, including by providing the Bureau with
important additional information regarding risks to consumers that may
be associated with the covered order; informing the Bureau's risk-based
prioritization of its supervisory activities under CFPA section
1024(b); and improving the Bureau's ability to conduct its supervisory
and examination activities with respect to the supervised nonbank, when
it does choose to exercise its supervisory authority. The Bureau noted
that submission of a written statement that identifies noncompliance
with reported orders would provide the Bureau with important
information regarding risks to consumers that may be associated with
the order. The Bureau further noted that such orders themselves
frequently contain provisions aimed at ensuring an entity's future
legal compliance with the covered laws violated. The Bureau believed
that an entity's compliance with such provisions may mitigate the
continuing risks to consumers presented by the entity and thus the
potential need for current supervisory activities. By contrast, the
Bureau also believed that evidence of noncompliance with an order
requiring registration under the proposal would be probative of a
potential need for supervisory examination of the supervised nonbank
and would be a relevant factor for the Bureau to consider in conducting
its risk-based prioritization of its supervisory program under CFPA
section 1024(b)(2), including (b)(2)(C), (D), and (E). Likewise, in
cases where the Bureau determined to exercise its supervisory
authorities with respect to a supervised nonbank required to submit
written statements under the proposal, the Bureau expected that those
written statements would provide important information relevant to
conducting examination work. For example, the Bureau explained that it
might use the written statements in determining what information to
require from a supervised nonbank, in determining the content of
supervisory communications and recommendations, or in making other
decisions regarding the use of its supervisory authority.
---------------------------------------------------------------------------
\356\ 12 U.S.C. 5514(b)(7)(A)-(C).
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Second, the Bureau explained in the proposal that it has authority
to require preparation of the written statements under CFPA section
1024(b)(7)(C) because the written statements will help ensure that
supervised registered entities ``are legitimate entities and are able
to perform their obligations to consumers.'' \357\ The Bureau
interpreted CFPA section 1024(b)(7)(C) as authorizing it to prescribe
substantive rules to ensure that supervised entities are willing and
able to comply with their legal obligations to consumers, including
those imposed by Federal consumer financial law. The Bureau believed
that the proposed requirement to submit an annual written statement
would help ensure that the supervised registered entity takes its legal
duties seriously, and that it is not treating the risk of enforcement
actions for violations of legal obligations as a mere cost of doing
business. If an entity reported under proposed Sec. 1092.203(d)(2)
that it violated its obligations under covered orders, the Bureau noted
that may indicate that the entity lacks the willingness or ability more
generally to comply with its legal obligations, including its
obligations under the Federal consumer financial laws that the Bureau
enforces. The Bureau believed that that would especially be the case if
an entity reported violations under proposed Sec. 1092.203(d)(2) in
multiple years or with respect to multiple covered orders, or if the
violation amounted to a repeat of the conduct that initially gave rise
to the covered order. The Bureau noted that, under CFPA section
1024(b)(2),\358\ the Bureau may prioritize such an entity for
supervisory examination to determine whether the entity has worked in
good faith to maintain protocols aimed at ensuring compliance with its
legal obligations and detecting and appropriately addressing any legal
violations that the entity may commit. In this way, the Bureau
explained that the written statement required by proposed Sec.
1092.203(d)(2) would assist the Bureau in ensuring that supervised
registered entities are legitimate entities and are able to perform
their obligations to consumers.
---------------------------------------------------------------------------
\357\ 12 U.S.C. 5514(b)(7)(C).
\358\ 12 U.S.C. 5514(b)(2).
---------------------------------------------------------------------------
Certain Comments Received Regarding the Bureau's Legal Authority To
Impose Written-Statement Requirements
Some industry commenters questioned the Bureau's authority to
impose the written-statement requirements, while some consumer advocate
commenters stated that the Bureau was authorized to impose the written-
statement requirements. The Bureau finalizes its conclusion set forth
in the proposal that CFPA section 1024(b)(7) authorizes the rule's
written-statement requirements.\359\ The Bureau discusses and responds
to some of these comments together in this part for ease of reference.
For further discussion of the written-statement requirements in the
final rule and the Bureau's responses to comments received, see the
section-by-section analysis of Sec. 1092.204 below.
---------------------------------------------------------------------------
\359\ See, e.g., 88 FR 6088 at 6091-93, 6125.
---------------------------------------------------------------------------
Commenters focused primarily on the meaning of CFPA section
1024(b)(7)(B) and 1024(b)(7)(C). Industry commenters commented that the
proposed written statement would not qualify as a ``record'' within the
meaning of CFPA section 1024(b)(7)(B). They also argued that section
1024(b)(7)(B) only allows the Bureau to require a supervised entity to
produce records, not to compel an individual executive to provide the
required written statement. Further, an industry commenter stated that
the written-statement requirement is not the type of rule contemplated
by CFPA section 1024(b)(7)(C) because, in the group's view, the
requirement does not address the competency of management or financial
requirements to ensure an entity's solvency. Finally, commenters
contended that Congress's express provision for certification or
attestation requirements in other statutory provisions \360\ implies
that the Bureau lacks the authority to impose the proposed written-
statement requirement under CFPA section 1024(b)(7) because that
provision does not expressly address such a requirement.
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\360\ Commenters cited 7 U.S.C. 6s(k)(3)(B)(ii), 12 U.S.C.
1851(f)(3)(A)(ii), 15 U.S.C. 7241(a), and 15 U.S.C. 7262(b).
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[[Page 56105]]
The Bureau's Response to Certain Comments Received Regarding the
Bureau's Legal Authority To Impose Written-Statement Requirements
The Bureau finalizes its conclusion that CFPA section 1024(b)(7)
authorizes the Bureau to impose the written-statement requirements
contained in Sec. 1092.204. As an initial matter, commenters are wrong
in suggesting that Congress's express provision for certification or
attestation requirements in provisions like 7 U.S.C. 6s(k)(3)(B)(ii),
12 U.S.C. 1851(f)(3)(A)(ii), 15 U.S.C. 7241(a), and 15 U.S.C. 7262(b)
implies that the Bureau lacks authority to impose the written-statement
requirement under section 1024(b)(7). The commenters appear to be
relying on the principle articulated in Russello v. United States that
Congress generally ``acts intentionally and purposely in the disparate
inclusion or exclusion'' of statutory language.\361\ That principle,
however, only applies when ``Congress includes particular language in
one section of a statute but omits it in another section of the same
Act.'' \362\ By contrast, ``[l]anguage in one statute usually sheds
little light upon the meaning of different language in another
statute.'' \363\ Therefore, 15 U.S.C. 7241(a) and 7262(b), which
Congress enacted in the Sarbanes-Oxley Act of 2002,\364\ have little
bearing on the proper interpretation of CFPA section 1024(b)(7).
---------------------------------------------------------------------------
\361\ Russello v. United States, 464 U.S. 16, 23 (1983)
(citation omitted).
\362\ Id.
\363\ Id. at 25.
\364\ Public Law 107-204, 116 Stat. 745.
---------------------------------------------------------------------------
While 7 U.S.C. 6s(k)(3)(B)(ii) and 12 U.S.C. 1851(f)(3)(A)(ii),
like section 1024(b)(7), were enacted in the Dodd-Frank Act (albeit in
different titles than section 1024(b)(7)), those provisions are also
insufficient to invoke the Russello principle. That principle infers
meaning from differences in language between statutory provisions that
are otherwise similarly worded. Accordingly, the inference ``grows
weaker with each difference in the formulation of the provisions under
inspection.'' \365\ Also, the Russello principle ``applies with limited
force'' to broadly worded statutes.\366\ The Russello principle is
founded on the premise that ``the absence of the words used in [a
separate statutory provision] could indicate an intention to exclude
their application'' in the principal provision at issue.\367\ It,
however, ``makes less sense to draw that inference when . . . the
provision at issue uses broader language that encompasses the meaning
of the absent words and thus did not need to expressly include them.''
\368\
---------------------------------------------------------------------------
\365\ City of Columbus v. Ours Garage & Wrecker Serv., Inc., 536
U.S. 424, 435-36 (2002); accord Clay v. United States, 537 U.S. 522,
532 (2003); see also Nat'l Postal Policy Council v. Postal
Regulatory Comm'n, 17 F.4th 1184, 1191 (D.C. Cir. 2021) (Russello
presumption ``has limited force'' when ``two provisions use
different words and are not otherwise parallel''); United States v.
Councilman, 418 F.3d 67, 74 (1st Cir. 2005) (``[I]f the language of
the two provisions at issue is not parallel, then Congress may not
have envisioned that the two provisions would be closely compared in
search of terms present in one and absent from the other.'').
\366\ See United States v. O'Donnell, 608 F.3d 546, 552 (9th
Cir. 2010).
\367\ Id.
\368\ Id.; see also Adirondack Med. Ctr. v. Sebelius, 740 F.3d
692, 697 (D.C. Cir. 2014) (explaining that the ``expressio unius
canon'' is a ``poor indicator of Congress' intent'' to limit the
scope of an otherwise ``broad grant of authority''); Councilman, 418
F.3d at 74 (``The Russello maxim . . . is simply a particular
application of the classic principle expressio unius est exclusio
alterius . . . .'').
---------------------------------------------------------------------------
Applying those considerations here, 7 U.S.C. 6s(k)(3)(B)(ii) and 12
U.S.C. 1851(f)(3)(A)(ii) provide no basis for reading into CFPA section
1024(b)(7) an atextual limitation that would prevent the Bureau from
imposing the written-statement requirement. The provisions do not use
parallel wording. While 7 U.S.C. 6s(k)(3)(B)(ii) and 12 U.S.C.
1851(f)(3)(A)(ii) focus on particular reporting requirements, CFPA
section 1024(b)(7) provides a general grant of rulemaking authority to
facilitate supervision, assessment, and detection of risks to
consumers, and to ensure that supervised entities are legitimate and
are able to perform their obligations to consumers. Further, as
explained in greater detail below, Congress used expansive language in
section 1024(b)(7) that encompasses the authority to impose the
written-statement requirements. The contrast that the commenters
attempt to draw between section 1024(b)(7) and other, more limited
provisions imposing certification or attestation requirements does not
support restricting section 1024(b)(7)'s breadth.
Turning to the specific subparagraphs of CFPA section 1024(b)(7),
no commenter specifically addressed the Bureau's statements in the
notice of proposed rulemaking that CFPA section 1024(b)(7)(A) provides
a ``distinct, independently sufficient basis for the proposed written-
statement requirements.'' \369\ In the absence of any comments
specifically challenging the proposition that CFPA section
1024(b)(7)(A) authorizes the written-statement requirements, the Bureau
finalizes its conclusion that section 1024(b)(7)(A) supports those
requirements. The written-statement requirements will ``facilitate [the
Bureau's] supervision'' efforts and its ``assessment and detection of
risks to consumers'' within the meaning of section 1024(b)(7)(A). In
particular, the written-statement requirements will provide the Bureau
with important additional information regarding risks to consumers that
may be associated with the covered order; inform the Bureau's risk-
based prioritization of its supervisory activities under CFPA section
1024(b); and improve the Bureau's ability to conduct its supervisory
and examination activities with respect to the supervised nonbank, when
it chooses to exercise its supervisory authority. Because CFPA section
1024(b)(7)(A) provides a distinct grant of authority separate from CFPA
section 1024(b)(7)(B) or 1024(b)(7)(C)--a proposition not disputed by
any commenter--section 1024(b)(7)(A) suffices to support the written-
statement requirements, even if (as the commenters argue) the written
statement did not qualify as a ``record'' that the Bureau could require
under section 1024(b)(7)(B) and also was not authorized by section
1024(b)(7)(C).
---------------------------------------------------------------------------
\369\ 88 FR 6088 at 6090; see also id. at 6093 (``Section
1024(b)(7) of the CFPA . . . identifies three independent sources of
Bureau rulemaking authority.''); id. at 6125 (``Each of th[e]
paragraphs [in CFPA section 1024(b)(7)(A)-(C)] provides independent
authority for the requirement to submit written statements.'').
---------------------------------------------------------------------------
Although not necessary to support the written-statement
requirements, the Bureau also concludes that section 1024(b)(7)(B)
authorizes those requirements as well. Section 1024(b)(7)(B) authorizes
the Bureau to require entities subject to its supervisory authority
``to generate, provide, or retain records for the purposes of
facilitating supervision . . . and assessing and detecting risks to
consumers.'' \370\ As the Bureau has explained,\371\ the term
``records'' in section 1024(b)(7)(B) is broad. It includes any
``[i]nformation that is inscribed on a tangible medium or that, having
been stored in an electronic or other medium, is retrievable in
perceivable form,'' or any ``documentary account of past events.''
\372\ The written statement
[[Page 56106]]
required by Sec. 1092.204 easily qualifies as a ``record'' under that
definition. The written statement provides ``[i]nformation'' or a
``documentary account'' of past events--namely, the fact of ``whether,
to the attesting executive's knowledge, the supervised registered
entity during the preceding calendar year identified any violations or
other instances of noncompliance'' with an applicable covered order, as
well as the steps the attesting executive undertook to review and
oversee the supervised registered entity's activities with respect to
the covered order. Even under commenters' preferred definitions of
``record,'' the written statement fits the bill. It ``set[s] down in
writing,'' ``furnish[es] written evidence'' of, and ``gives evidence
of'' the matters required to be addressed in the written statement. It
also ``recalls or relates past events.'' Put another way, the written
statement provides ``a description of actions taken by the business,''
which commenters recognize ``might constitute a `record.' '' Because
the written statement qualifies as a ``record,'' section 1024(b)(7)(B)
authorizes the Bureau to require supervised nonbanks to ``generate''--
i.e., create \373\--such written statements and ``provide'' them to the
Bureau.\374\
---------------------------------------------------------------------------
\370\ 12 U.S.C. 5514(b)(7)(B).
\371\ See 88 FR 6088 at 6093.
\372\ Record, Black's Law Dictionary (11th ed. 2019); accord
Record, Webster's Third New International Dictionary (1981) (``an
account in writing or print (as in a document) . . . intended to
perpetuate a knowledge of acts or events''; ``a piece of writing
that recounts or attests to something''); Record, American Heritage
Dictionary of the English Language, https://www.ahdictionary.com/word/search.html?q=record (``[a]n account, as of information or
facts, set down especially in writing as a means of preserving
knowledge'').
\373\ See Generate, Webster's Third New International Dictionary
(1981) (defining ``generate'' as ``to bring into existence'').
\374\ 12 U.S.C. 5514(b)(7)(B).
---------------------------------------------------------------------------
Contrary to commenters' assertions, Sec. 1092.204(d) does not
require the entity to comply with covered orders, or to engage in, or
to refrain from, other specific non-recordkeeping conduct. Rather, the
two elements of the written statement required under Sec.
1092.204(d)(1) and (2) are statements about facts that will already
exist at the time the written statement is submitted--namely, the steps
the executive took, and whether or not the entity identified any
applicable violations. Section 1092.204(d) merely requires that the
supervised registered entity generate and submit a record (signed by
the attesting executive) about those existing facts.
The commenters suggest that, because the Bureau uses the term
``attest'' in describing the statements required to be included in the
written statement, the document cannot qualify as a ``record.'' But
nothing about the use of the term ``attest'' changes the substance of
the written-statement requirements or takes the written statement
outside the realm of the term ``records.'' ``Attest'' means to ``affirm
to be true or genuine.'' \375\ It is common to refer to the maker of a
record as having ``attest[ed]'' to the information contained in that
record. Indeed, Webster's Third New International Dictionary uses the
word ``attest'' in defining the word ``record'': The definition of
``record'' includes ``a piece of writing that recounts or attests to
something.'' \376\
---------------------------------------------------------------------------
\375\ Attest, Webster's Third New International Dictionary
(1981); accord Attest, Black's Law Dictionary (11th ed. 2019)
(``[t]o affirm to be true or genuine''); Attest, American Heritage
Dictionary of the English Language, https://www.ahdictionary.com/word/search.html?q=attest (``[t]o affirm to be correct, true, or
genuine'').
\376\ Record, Webster's Third New International Dictionary
(1981) (emphasis added).
---------------------------------------------------------------------------
Further, contrary to commenters' suggestion, the fact that Sec.
1092.204(e) requires the supervised entity to ``maintain documents and
other records sufficient to provide reasonable support'' for its
written statement does not transform the written statement into
something other than a ``record.'' Information contained in documents
that constitute ``records'' is often supported by other ``records.''
For example, accounting journals or ledgers are ``records,'' even
though they are often based on other ``records,'' such as receipts or
invoices.\377\ Similarly, Sec. 1092.204(e)'s recordkeeping requirement
does not render the written statement a non-``record.''
---------------------------------------------------------------------------
\377\ See, e.g., 2 Robert P. Mosteller et al., McCormick on
Evidence Sec. 287 (8th ed. 2022) (explaining that accounting
journals or ledgers may be admissible under the hearsay exception
for records of regularly conducted activities, even though the
journals or ledgers are based on other records).
---------------------------------------------------------------------------
Commenters also contend that the Bureau is exceeding its authority
under section 1024(b)(7)(B) by imposing the requirement to submit
written statements on individual executives. According to commenters,
section 1024(b)(7)(B) only allows the Bureau to require a supervised
entity to produce records; it does not allow the Bureau to require an
executive of a supervised entity to provide any such certification. The
commenters, however, do not accurately describe the nature of the
requirements imposed by Sec. 1092.204 of the Bureau's rule. Section
1092.204 imposes requirements on supervised registered entities, not on
any particular individuals. Supervised registered entities with
applicable covered orders must designate attesting executives who
satisfy certain criteria, and they must submit a written statement that
is signed by the attesting executive ``on behalf of the supervised
registered entity.'' \378\ Those obligations belong to the supervised
registered entity, not to any individual. If a supervised registered
entity failed to designate an attesting executive or to submit a
written statement when required to do so, the supervised registered
entity--not a particular individual--would potentially be subject to an
enforcement action. It is thus simply incorrect to suggest that Sec.
1092.204 imposes requirements on corporate executives in their personal
capacities. To be sure, as with any other regulatory obligation,
supervised registered entities, like any legal entity, must take steps
to comply with Sec. 1092.204 through their agents. But the obligations
under Sec. 1092.204 belong to supervised registered entities, not to
particular individuals acting in their personal capacities.
---------------------------------------------------------------------------
\378\ Section 1092.204(b), (d).
---------------------------------------------------------------------------
For the reasons discussed above, the Bureau does not find the
comments challenging its reliance on section 1024(b)(7)(B) persuasive.
The Bureau thus finalizes its conclusion that section 1024(b)(7)(B)
authorizes Sec. 1092.204's written-statement requirements.
In addition, the Bureau finalizes its conclusion that CFPA section
1024(b)(7)(C) provides a distinct, independent statutory basis for
Sec. 1092.204's written-statement requirements. Section 1024(b)(7)(C)
authorizes the Bureau to prescribe rules to ensure that nonbanks
subject to its supervisory authority ``are legitimate entities and are
able to perform their obligations to consumers.'' \379\ As the Bureau
has explained, Sec. 1092.204's written-statement requirements further
the statutory purposes specified in section 1024(b)(7)(C) because those
requirements will facilitate the Bureau's assessment of whether a
company is willing and able to satisfy its legal obligations, including
those set forth in covered orders.\380\
---------------------------------------------------------------------------
\379\ 12 U.S.C. 5514(b)(7)(C).
\380\ See 88 FR 6088 at 6091, 6093, 6125.
---------------------------------------------------------------------------
In response, commenters assert that the types of requirements
contemplated by section 1024(b)(7)(C) address the competency of
management and financial requirements to ensure the entity's solvency,
and according to commenters, the written-statement requirements do
``not further either of those statutory purposes.'' As an initial
matter, the commenters' argument fails on its own terms because Sec.
1092.204's written-statement requirements ``address the competency of
management.'' If an entity is violating its obligations under a covered
order, or its executives are not taking sufficient steps to effectively
oversee the entity's compliance with its obligations under such an
order, that would raise concerns regarding ``the competency of [the
entity's] management.''
The commenters also fail to account for the full breadth of the
language Congress used in section 1024(b)(7)(C).
[[Page 56107]]
As the Bureau has explained,\381\ the term ``obligations'' in section
1024(b)(7)(C) encompasses ``anything that a person is bound to do or
forbear from doing,'' including duties ``imposed by law, contract, [or]
promise.'' \382\ Contrary to commenters' suggestion, the term
``obligations'' is not limited to financial requirements related to
solvency. Similarly, ``legitimate entities'' is a broad phrase
encompassing an inquiry into whether an entity takes seriously its duty
to ``[c]omply[ ] with the law.'' \383\
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\381\ See 88 FR 6088 at 6093.
\382\ Obligation, Black's Law Dictionary (11th ed. 2019).
\383\ Legitimate, Black's Law Dictionary (11th ed. 2019)
(``[c]omplying with the law; lawful''); accord Legitimate, Webster's
Second New International Dictionary (1934) (defining ``legitimate''
as ``[a]ccordant with law or with established legal forms and
requirements; lawful''); Legitimate, Webster's Third New
International Dictionary (1981) (similar).
---------------------------------------------------------------------------
Commenters also lose sight of the purposes of the Bureau's
supervisory program, which are ``assessing compliance with the
requirements of Federal consumer financial law''; ``obtaining
information about the activities and compliance systems or procedures''
of entities subject to Bureau supervision; and ``detecting and
assessing risks to consumers and to markets for consumer financial
products and services.'' \384\ The authority that Congress granted to
the Bureau in CFPA section 1024(b)(7) must at least be sufficiently
expansive to allow the Bureau to issue rules aimed at achieving the
supervisory objectives listed in CFPA section 1024(b)(1). According the
terms ``obligations'' and ``legitimate entities'' in section
1024(b)(7)(C) their full breadth--rather than artificially restricting
them, as commenters propose, to addressing limited issues like
solvency--is most consistent with achieving the congressionally stated
purposes of supervision, including ``assessing compliance with the
requirements of Federal consumer financial law.'' \385\
---------------------------------------------------------------------------
\384\ 12 U.S.C. 5514(b)(1).
\385\ 12 U.S.C. 5514(b)(1)(A).
---------------------------------------------------------------------------
In accordance with the expansive language that Congress used in
section 1024(b)(7)(C), the Bureau finalizes its conclusion that section
1024(b)(7)(C) provides authority for Sec. 1092.204.
Section 1092.204(a) Scope of Annual Reporting Requirements
Proposed Rule
Proposed Sec. 1092.203(a) would have provided that the proposed
section would apply only with respect to covered orders with an
effective date (as that term was defined at proposed Sec. 1092.201(f))
on or after the nonbank registration system implementation date for
proposed Sec. 1092.203.
This section would have applied only to certain larger supervised
entities.\386\ The Bureau preliminarily concluded that the reporting
requirements set forth in the section--which focused specifically on
larger supervised entities' compliance with the orders registered
pursuant to Sec. 1092.202--should apply only prospectively to those
covered orders with an effective date on or after the NBR
implementation date for proposed Sec. 1092.203. The Bureau explained
that the prospective application of Sec. 1092.203 would have ensured
that entities faced with enforcement actions that might result in
covered orders could take Sec. 1092.203's requirements into account in
their decision-making. While the Bureau did not believe that compliance
with proposed Sec. 1092.203's requirements would materially affect an
entity's decision-making about how to respond to a prospective
enforcement action--as discussed in further detail in section VII of
the proposal, for the vast majority of entities, the Bureau generally
did not anticipate any of the proposed rule's reporting and publication
requirements imposing meaningful burden either operationally or on
their bottom line--the Bureau proposed this provision out of an
abundance of caution. In addition, the Bureau explained that this
limitation would have helped ensure that supervised registered entities
would be required to submit reports only after the nonbank registration
system implementation date.
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\386\ The proposal would have excluded from the term
``supervised registered entity'' persons with less than $1 million
in annual receipts resulting from offering or providing all consumer
financial products and services described in 12 U.S.C. 5514(a). As
discussed in the section-by-section discussion of Sec. 1092.201(q)
above, in a revision to the proposed rule, the Bureau is adopting an
exclusion for persons with less than $5 million in annual receipts
(as defined) resulting from offering or providing all consumer
financial products and services described in 12 U.S.C. 5514(a), as
well as a clarification to this provision.
---------------------------------------------------------------------------
Comments Received
Commenters did not specifically address proposed Sec. 1092.203(a).
For comments regarding the proposed written-statement requirements
generally, including comments stating that the Bureau lacks authority
to impose such requirements and otherwise commenting on the nature and
scope of the requirements, see the discussion elsewhere in this
section-by-section discussion of Sec. 1092.204.
Final Rule
For the reasons discussed in the description of the proposal above,
the Bureau adopts Sec. 1092.203(a) as proposed (renumbered as Sec.
1092.204(a)), with certain changes for the reasons described
below.\387\ See the section-by-section discussion of Sec. 1092.201(q)
above for a discussion of revisions to the definition of ``supervised
registered entity.''
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\387\ See also the section-by-section discussion of Sec.
1092.101(e) above regarding the Bureau's adoption of the revised
term ``nonbank registry implementation date.''
---------------------------------------------------------------------------
Section 1092.204(a) describes the covered orders that are subject
to Sec. 1092.204's written-statement requirements. The Bureau is
finalizing three revisions to this paragraph (a). First, the Bureau is
finalizing an amendment to the proposal at Sec. 1092.204(a)(1) that
clarifies that Sec. 1092.204 applies only with respect to covered
orders with an effective date on or after the ``applicable'' nonbank
registry implementation date. This amendment reflects the addition of
Sec. 1092.206 to the final rule, which establishes nonbank
implementation dates for different categories of covered nonbanks
subject to the final rule. As discussed in the section-by-section
discussion of Sec. 1092.206 below, the Bureau is specifying the annual
registration date in Sec. 1092.206 of the final rule for each category
of covered nonbank in order to provide greater certainty and clarity to
covered nonbanks as of the issuance of the final rule. Section
1092.204's written-statement requirements apply only with respect to
covered orders with an effective date on or after the nonbank registry
implementation date that applies to the supervised registered nonbank
subject to the covered order, as provided in Sec. 1092.206.
Second, the Bureau is finalizing an amendment to the proposal at
Sec. 1092.204(a)(1) that provides that final Sec. 1092.204 shall
apply only with respect to covered orders ``as to which information is
provided or required to be provided under Sec. 1092.202'' (and that
also have an effective date on or after the applicable nonbank registry
implementation date for Sec. 1092.204). This amendment clarifies that
only covered orders that have been registered (or are required to be
registered) under Sec. 1092.202 are subject to Sec. 1092.204's
written-statement requirements. For example, a supervised registered
nonbank would not be required to comply with Sec. 1092.204's written-
statement requirements in cases where the applicable covered order has
not
[[Page 56108]]
been registered (and was not required to be registered) under Sec.
1092.202: (1) due to a stay or other agency or court action; (2)
because the later of the 90-day period following its applicable nonbank
registry implementation date or the effective date of the covered order
as provided under Sec. 1092.202 had not yet expired; or (3) where the
supervised registered nonbank has exercised the option to register an
NMLS-published covered order under Sec. 1092.203 instead of Sec.
1092.202. However, once the covered order is registered (or required to
be registered) under Sec. 1092.202, the supervised nonbank must comply
with Sec. 1092.204 as applicable, subject to the other provisions of
the rule, including Sec. 1092.202(f)'s provisions regarding submitting
a final filing upon termination of the covered order. See the section-
by-section discussion of Sec. 1092.204(d) below regarding the scope of
the written statements required by that section.
Third, the Bureau is finalizing a new paragraph at Sec.
1092.204(a)(2) that provides that a supervised registered entity is not
required to comply with Sec. 1092.204's written-statement requirements
with respect to any NMLS-published covered order for which it chooses
to comply with the one-time registration option described in Sec.
1092.203. This provision complements the related provisions at Sec.
1092.203(a) and (c), which also provide that a covered nonbank that is
identified by name as a party subject to a covered order may elect to
comply with the one-time registration option described in that section
in lieu of complying with the requirements of Sec. 1092.204.
Section 1092.204(b) Requirement To Designate Attesting Executive
Proposed Rule
Proposed Sec. 1092.203(b) would have required a supervised
registered entity subject to an applicable covered order to annually
designate as its attesting executive for purposes of proposed subpart B
its highest-ranking duly appointed senior executive officer (or, if the
supervised registered entity does not have any duly appointed officers,
the highest-ranking individual charged with managerial or oversight
responsibility for the supervised registered entity) whose assigned
duties include ensuring the supervised registered entity's compliance
with Federal consumer financial law, who has knowledge of the entity's
systems and procedures for achieving compliance with the covered order,
and who has control over the entity's efforts to comply with the
covered order. The supervised registered entity would have been
required annually to designate one attesting executive for each covered
order to which it is subject and for all submissions and other purposes
related to that covered order under proposed subpart B. The supervised
registered entity would have also been required to authorize the
attesting executive to perform the duties of an attesting executive on
behalf of the supervised registered entity with respect to the covered
order as required in proposed Sec. 1092.203, including submitting the
written statement described in proposed Sec. 1092.203(d).
Criteria That an Attesting Executive Must Satisfy
For the reasons described in section IV(D) of the proposal,
proposed Sec. 1092.203(b) would have provided that a supervised
registered entity subject to a covered order described in proposed
Sec. 1092.203(a) would generally be required to designate as its
attesting executive for purposes of proposed subpart B its highest-
ranking duly appointed senior executive officer (i) whose assigned
duties include ensuring the supervised registered entity's compliance
with Federal consumer financial law, (ii) who has knowledge of the
entity's systems and procedures for achieving compliance with the
covered order, and (iii) who has control over the entity's efforts to
comply with the covered order. If the supervised registered entity has
no duly appointed officers, proposed Sec. 1092.203(b) would have
required the entity to designate as its attesting executive the
highest-ranking individual charged with managerial or oversight
responsibility for the supervised registered entity who meets those
three criteria.
As explained below in the discussion of proposed Sec. 1092.203(d),
the Bureau proposed that the attesting executive would sign a written
statement submitted by the supervised registered entity regarding the
entity's compliance with covered orders. The Bureau believed that
proposal would have the benefit of ensuring that the supervised
registered entity's reporting obligations under proposed Sec. 1092.203
have received attention from the highest applicable level of a
supervised registered entity's management. The Bureau proposed the
criteria in proposed Sec. 1092.203(b) in order to ensure that the
person who attests and signs the written statement has sufficient
authority and access to all the relevant company stakeholders to ensure
that the report is as complete and accurate as possible. The Bureau
believed that the language of proposed Sec. 1092.203(b) would have
ensured that the supervised registered entity designates an
appropriately high-ranking employee as its attesting executive. The
Bureau believed that such a person will be in the best position to know
all relevant information with respect to the order, and to provide a
reliable attestation in the written statement regarding the entity's
compliance with the covered order.
The Bureau anticipated that this individual will in most cases
likely be a top senior executive of the entity. For entities that are
not organized as corporations, and thus may not have duly appointed
officers, proposed Sec. 1092.203(b) would have clarified that the
attesting executive may be another individual who is charged with
managerial or oversight responsibility for the supervised registered
entity. The Bureau anticipated that this individual would in most cases
serve in a capacity equivalent to a high-ranking senior executive at a
corporation. For example, the Bureau noted, a supervised registered
entity organized as a limited liability company that is run by an
individual managing member and lacks executive officers may designate
the managing member as its ``attesting executive,'' where the managing
member's assigned duties include ensuring the supervised registered
entity's compliance with Federal consumer financial law and the
managing member has the requisite knowledge and control as described in
proposed Sec. 1092.203(b). Likewise, the Bureau further noted, a
supervised registered entity organized as a general or limited
partnership may designate an individual partner who otherwise satisfies
the requirements set forth in proposed Sec. 1092.203(b). The use of
the term ``executive'' was not intended to preclude the designation of
such persons as ``attesting executives'' where the supervised
registered entity otherwise lacks a senior executive officer who
satisfies proposed Sec. 1092.203(b)'s requirements.
The Bureau anticipated that entities would take appropriate steps
to ensure compliance with the proposed rule in the event that an
executive leaves employment or changes duties, or a higher-ranking
executive is put in place. For example, the Bureau explained, a
supervised registered entity might consider designating an alternate
attesting executive for each covered order to address such
possibilities, including by ensuring that they have sufficient
knowledge of the entity's systems and procedures for achieving
compliance with the applicable covered
[[Page 56109]]
order(s) and control over the entity's efforts to comply with the
covered order(s).
The proposal would have also required that the supervised
registered entity designate as its attesting executive for a covered
order a person who has knowledge of the entity's systems and procedures
for achieving compliance with the covered order. The Bureau anticipated
that this requirement would help ensure that the annual written
statement is completed by an individual with sufficient knowledge of
the entity's systems and procedures for achieving compliance to make
the written statement required by proposed Sec. 1092.203(d). The
Bureau expected that an executive who lacked knowledge of those
compliance systems and procedures would not be in the best position to
identify violations of the order. Therefore, the Bureau believed that
without the proposed knowledge requirement, the attestation proposed at
Sec. 1092.203(d)(2) would lose much of its usefulness.
Proposed Sec. 1092.203(b) would have also required that the
attesting executive be required to have control over the entity's
efforts to comply with the covered order. By this requirement, the
Bureau meant to require that the executive have the ability, under the
entity's existing compliance systems and procedures, to direct and
supervise the entity's efforts to comply with the applicable covered
order. The Bureau explained that this proposed requirement would
complement the knowledge requirement discussed above, since the Bureau
believed an executive with control over the entity's efforts to comply
with the covered order would be more likely also to have (and to
demand) the requisite knowledge regarding the entity's related
compliance systems and procedures. The Bureau noted that it is possible
that an executive with knowledge of an entity's related compliance
systems and procedures, but who does not have control over the entity's
efforts to comply with an applicable covered order, would not have been
fully informed regarding violations of the order. The Bureau further
explained that it would also be able to use information regarding which
executives have control of the entity's efforts to comply with specific
covered orders in connection with its supervisory reviews of the
entity's compliance systems and procedures, compliance with Federal
consumer financial law, and risks to consumers and markets.
In addition, the Bureau expected that the proposal's requirements
to designate an attesting executive who has knowledge of the entity's
systems and procedures for achieving compliance with its covered
orders, and who has control over the entity's efforts to comply with
its covered orders, would create an additional incentive for certain
entities to comply with their obligations to consumers. The Bureau
believed that most supervised registered entities would comply with
covered orders even without the proposal. However, the Bureau believed
that these requirements would motivate additional compliance efforts at
certain entities that have failed to take adequate steps to comply with
the order. The Bureau also believed that if a particular executive is
identified to the Bureau as the person ultimately accountable for
ensuring compliance with a covered order, the clear delineation of that
executive's responsibility would prompt the executive to focus greater
attention on ensuring compliance, which in turn would increase the
likelihood of compliance.
In addition, the Bureau anticipated that obtaining information
about which senior executive officer(s) at a supervised registered
entity have knowledge of the entity's systems and procedures for
achieving compliance with specific covered orders, and who have control
over the entity's efforts to comply with those covered orders, would
facilitate the Bureau's ability to identify situations in which
individual executives have recklessly disregarded, or have actual
knowledge of, the entity's violations of covered orders. The Bureau
believed that this information would better enable the Bureau to
identify risks to consumers related to such orders and the entity's
compliance systems and procedures, and to take steps to address such
risks through its supervisory or other authorities. Where the
applicable covered order is a Bureau order, the Bureau believed such
information will also facilitate the Bureau's efforts to assess
compliance with the order and to make determinations regarding any
potential related Bureau supervisory or enforcement actions. For
example, the Bureau noted, where information obtained under proposed
Sec. 1092.203 indicates that a high-ranking executive has knowledge of
(or has recklessly disregarded) violations of legal obligations falling
within the scope of the Bureau's jurisdiction, and has authority to
control the violative conduct, the Bureau could use that information in
assessing whether an enforcement action should be brought not only
against the nonbank covered person, but also against the individual
executive.
The Bureau noted that in developing this proposal, it considered
various options other than requiring entities to designate a senior
executive officer as an attesting executive. The Bureau considered
permitting entities to designate lower ranking individuals whose
assigned duties include ensuring the supervised registered entity's
compliance with Federal consumer financial law and who possessed
sufficient knowledge and control to provide a written statement under
proposed Sec. 1092.203. However, the Bureau believed that requiring
entities to designate their highest-ranking executive officer would
better help ensure that all relevant information was considered when
submitting the written statement. In addition, because the attestation
that would have been provided under proposed Sec. 1092.203(d)(2) would
be subject to the knowledge of the attesting executive, the Bureau
believed this requirement would help enhance the reliability of that
attestation, and thus the accuracy of the written statement. The Bureau
noted that lower-ranking managers at the entity might not be aware of
all relevant facts. Also, the Bureau believed that the designation
requirement would provide an important piece of information regarding
the organizational structure of an entity's compliance management
system--namely, the identity of the entity's highest-ranking executive
whose assigned duties include ensuring the supervised registered
entity's compliance with Federal consumer financial law, and who has
the requisite level of knowledge and control. The Bureau believed that
this information would be valuable to the Bureau's understanding of the
supervised registered entity's compliance systems and procedures and
its organization, business conduct, and activities subject to the
covered order. The Bureau concluded that such information would have
informed the Bureau's functions, including its use of its supervisory
and enforcement authorities.
As another alternative to imposing this requirement, the Bureau
noted that it might instead require the entity to appoint an individual
with a given title--for example, the entity's Chief Compliance Officer
(CCO), or equivalent. However, the Bureau observed that it did not have
comprehensive information regarding the organizational structures of
the entities it supervises, and the Bureau expected that many
supervised registered entities may have organizational structures that
do not provide for a CCO or other officer title.
[[Page 56110]]
The Bureau believed that the proposed requirement to designate the
entity's highest-ranking executive who satisfies the specified criteria
would help ensure that an appropriately high-level individual was
designated but would retain flexibility to accommodate a range of
entity organizational structures. And as discussed above, the Bureau
believed that requiring the entity to designate its attesting executive
for each covered order would provide the Bureau with information
regarding the entity, including its compliance systems and procedures
and its organization, business conduct, and activities subject to the
covered order.
As another alternative to the approach proposed in Sec.
1092.203(b), the Bureau explained that it might require supervised
registered entities to obtain a review or audit by an independent
third-party consultant of the entities' written statements and the
facts underlying the written statements. However, the Bureau believed
that this alternative would impose costs on the entity that would
largely be avoided by the proposal's requirement to designate an
attesting executive already providing services to the entity and would
require the Bureau to impose controls on such reviews in order to
ensure their usefulness. In addition, this alternative would not have
provided the Bureau with the information regarding the entity described
above.
Requirement To Designate an Attesting Executive for Each Covered Order
on an Annual Basis
Proposed Sec. 1092.203(b) would have required a supervised
registered entity to annually designate one attesting executive for
each applicable covered order to which it is subject and for all
submissions and other purposes related to that covered order under
proposed subpart B. The Bureau believed that requiring a supervised
registered entity to designate an attesting executive for each covered
order would facilitate the Bureau's supervision of the supervised
registered entity by, among other things, facilitating the Bureau's
supervisory communications with the supervised registered entity
regarding the covered order, including any related supervisory
concerns. The Bureau would have also been able to contact the attesting
executive with questions and to understand how the executive's
responsibilities relate to the entity's obligations under its covered
orders. The Bureau also believed that by requiring the entity to
designate its attesting executive(s) on an annual basis, the proposal
would have better enabled the Bureau to understand the reporting
relationships within the entity and the entity's compliance systems and
procedures. The Bureau thus believed that this proposed designation
requirement would help ensure compliance with the proposed rule,
facilitate the Bureau's supervision of the supervised registered
entity, help the Bureau assess and detect risks to consumers, and help
ensure that the entity is legitimate and able to perform its
obligations to consumers.
The Bureau expected that under most circumstances, a supervised
registered entity would designate one single individual as its
attesting executive for all of the covered orders to which it is
subject. However, the Bureau noted, there may be situations in which
there is no one senior executive officer with the requisite knowledge
of the entity's systems and procedures for achieving compliance with
all of the covered orders to which the entity is subject, and who has
control over the entity's efforts to comply with those orders. In such
a case, the Bureau proposed that the entity could designate different
attesting executives for the covered orders. By requiring a supervised
registered entity to designate one attesting executive for each covered
order described in proposed Sec. 1092.203(a) to which it is subject,
proposed Sec. 1092.203(b) would have enabled the Bureau to better
identify such situations.
Comments Received
See the beginning of the section-by-section discussion of Sec.
1092.204 for a discussion of certain comments received regarding the
Bureau's legal authority to impose the final rule's written-statement
requirements.
Industry commenters and the joint comment from State regulators
generally opposed the imposition of the rule's written-statement
requirements. Commenters stated that the proposed requirements were
unnecessary, onerous, and vague, would add little to no value to the
Bureau fulfilling its objectives, and would be unlawful and drive up
compliance costs. An industry commenter stated that the proposed
requirements were extreme and an attempt to trap and embarrass
companies and their executives. Industry commenters stated that the
proposed written-statement requirements would not further the purpose
of the proposal.
Industry commenters stated that the proposed written statements
were more burdensome than described, and that the proposal did not
adequately explain the benefits of the written-statement requirements.
Industry commenters expressed concern that the written-statement
requirements would harm consumers by discouraging qualified individuals
from seeking employment with nonbanks, and stated that the Bureau
should reconsider the cost and impact that would be associated with the
written-statement requirements in harming hiring by supervised
registered entities and in discouraging applicants. The SBA Office of
Advocacy stated that the Bureau had failed to support its claims that
few entities would lack a qualified executive, and to provide
information about the costs that would be incurred to obtain a
qualified executive to perform the duties required.
Industry commenters stated that proposed Sec. 1092.203(b)'s
requirements to designate an attesting executive for each covered order
were unfair, because the proposed designation requirement served only
as a shaming tool and appeared to place sole responsibility for
compliance on the attesting executive. However, a consumer advocate
commenter stated that the Bureau would be able to make clear that the
attesting executive is not necessarily an at-fault individual. An
industry commenter stated that no other industry seeks to impose
liability upon corporate executives acting in a corporate capacity, and
that under the proposal such liability would be unlimited. Industry
commenters stated that the proposed requirement to designate an
attesting executive for each covered order did not reflect real-world
situations and how companies actually manage risk, and would
inappropriately signal that other persons are less responsible for the
supervised registered entity's compliance with the covered order.
Industry commenters also stated that proposed Sec. 1092.203(b)'s
requirements to designate an attesting executive for each covered order
were in conflict with the Bureau's existing guidance stating that an
institution's board of directors or other principals are ultimately
responsible for the institution's compliance management, and that
designation of an attesting executive would encourage the mistaken
notion that compliance is the sole responsibility of that individual.
The proposal indicated that the Bureau was considering adopting a
requirement that the attesting executive attest that, in the
executive's professional judgment, the entity's compliance systems and
procedures are reasonably designed to detect violations of the
applicable covered order and ensure that such violations are reported
[[Page 56111]]
to the attesting executive.\388\ An industry commenter stated that this
alternative requirement would contribute to the impression that the
compliance burden rests solely with the attesting executive.
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\388\ 88 FR 6088 at 6126.
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An industry commenter stated that designation of an attesting
executive would serve no purpose for closely held entities.
Industry commenters stated that the rule, including the proposed
written-statement requirements, should apply prospectively only.
Response to Comments Received
See the beginning of the section-by-section discussion of Sec.
1092.204 for a discussion of the Bureau's response to certain comments
received regarding the Bureau's legal authority to impose the final
rule's written-statement requirements. As explained in that discussion,
Sec. 1092.204's written-statement requirements are appropriate and
lawful and will serve the purposes identified in CFPA section
1024(b)(7)(A)-(C) and the goals of the final rule.
See part VIII for discussion of comments related to the economic
costs and benefits associated with Sec. 1092.204's written-statement
requirements, including costs related to hiring and discouraging
qualified applicants from seeking employment with supervised registered
entities. As described in that analysis, the Bureau concludes that the
requirements imposed by the final rule's written-statement requirements
will impose only modest costs on entities beyond the costs entities are
already incurring to ensure compliance with covered orders. The Bureau
is finalizing an exception to the written-statement requirements for
NMLS-published covered orders, as discussed in part IV(E) and the
section-by-section discussion of Sec. 1092.203, which will reduce
overall costs to industry as discussed in part VIII.
As part of its mandate to ensure that markets for consumer
financial products are fair, transparent, and competitive,\389\ the
Bureau is committed to applying the law and regulations fairly and
equitably across all persons subject to its authority. The Bureau
believes the written statement is a fair approach to obtaining
important information about covered orders from supervised registered
entities. The Bureau disagrees with the industry commenters that Sec.
1092.204(a)'s requirement to designate an attesting executive for each
covered order represents an unfair attempt to place responsibility on
individual attesting executives for violations of covered orders, or to
impose unlimited accountability on individual executives in an
unprecedented manner. The final rule does not establish any new
standards, or alter any existing standards, regarding individuals'
liability for supervised registered entities' violations of covered
orders or other legal obligations. Nor does the final rule alter which
agencies have jurisdiction to enforce the obligations imposed in
covered orders or the scope of agencies' discretion to determine
whether to bring such enforcement actions. Any individual
accountability in connection with violations of covered orders shall
continue to be determined in accordance with existing law. The final
rule also does not affect the Bureau's existing approach to its
supervisory responsibilities, including the manner in which the Bureau
assesses board and management oversight at supervised registered
entities.\390\
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\389\ See 12 U.S.C. 5511(a).
\390\ See, e.g., Federal Financial Institutions Examination
Council, Uniform Interagency Consumer Compliance Rating System, 81
FR 79473, 79478 (Nov. 14, 2016) (discussing assessment by agency
examiners of Board and management oversight).
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As described in the proposal, Sec. 1092.204(b) establishes
requirements for the supervised registered entity's designation of its
attesting executive(s) to ensure that the person who signs the written
statement has sufficient authority and access to all the relevant
company stakeholders to ensure that the report is as complete and
accurate as possible.\391\ Those requirements are intended to serve the
information-collection purposes of the rule by helping to ensure the
accuracy and usefulness of the written statement. As stated in the
proposal,\392\ the Bureau also believes these requirements will create
an additional incentive for certain entities to comply with their
obligations to consumers. These requirements are specific to the rule.
As the Bureau explained in the proposal,\393\ the final rule does not
establish any minimum level of compliance management or expectation for
compliance systems and procedures. Further, aside from the targeted
designation, written-statement, and recordkeeping requirements in Sec.
1092.204(b) through (e), the final rule does not impose any
requirements on any of the entity's internal affairs, or require any
particular approach of allocating responsibility for complying with
covered orders or with the law generally. The Bureau understands that
compliance management at supervised registered entities will likely be
managed differently from entity to entity and that compliance
management systems will and should be adapted to a supervised
registered entity's business strategy and operations. The final rule
does not purport to impose any restrictions on the manner in which
supervised registered entities address such matters.
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\391\ 88 FR 6088 at 6121-22.
\392\ Id. at 6122.
\393\ Id. at 6100.
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In the proposal, the Bureau explained that, because--in the
Bureau's experience--most supervised entities take active steps to
comply with covered orders, they would likely already have in place an
officer or employee who could satisfy the Sec. 1092.204(b)
criteria.\394\ For similar reasons, the Bureau believed that most
supervised entities would have in place systems and procedures to help
them achieve compliance with covered orders to which they are
subject.\395\ Therefore, the Bureau believed that few supervised
entities would need to make significant changes to their compliance
systems to comply with Sec. 1092.204.\396\ Despite the Bureau's
request for comment on the issue, no commenter provided persuasive
evidence that Sec. 1092.204(b)'s designation requirement likely would
impose material additional costs on a substantial number of supervised
registered entities, beyond the costs those entities are already likely
to incur as part of fulfilling their obligations under the covered
orders to which they are subject. For additional discussion about these
and other potential costs associated with this provision, see parts
VIII and IX.
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\394\ See 88 FR 6088 at 6132.
\395\ See id. at 6133.
\396\ See id. at 6132-33.
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In the proposal,\397\ the Bureau described the attesting executive
as ``identified to the Bureau as the person ultimately accountable for
ensuring compliance with a covered order.'' This description was merely
intended to reflect Sec. 1092.203(b)'s requirements regarding the
designation of the highest-ranking individual charged with managerial
or oversight responsibility for the supervised registered entity who
meets the three criteria established in that section. To be clear, the
final rule does not affect the Bureau's long-standing guidance for
supervised registered entities organized as corporations that the board
of directors is ultimately responsible for developing and administering
a compliance management system that ensures
[[Page 56112]]
compliance with Federal consumer financial laws and addresses and
minimizes associated risks of harm to consumers.\398\ In a supervised
registered entity organized under a non-corporate form, that ultimate
responsibility may rest with a controlling person or some other
arrangement. The Bureau understands that compliance management at
supervised registered entities will likely be managed differently from
entity to entity and that compliance management systems will and should
be adapted to a supervised registered entity's business strategy and
operations. Consistent with FFIEC guidance, Bureau examiners evaluate
Board and management oversight factors commensurate with the
institution's size, complexity, and risk profile.\399\ The Bureau
agrees that compliance is often the responsibility of many, and not
just a single executive. The final rule does not attempt to place such
responsibility entirely on the shoulders of the entity's attesting
executive.
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\397\ Id. at 6122.
\398\ See CFPB Supervision and Examination Manual at CMR 3.
\399\ See, e.g., Uniform Interagency Consumer Compliance Rating
System, 81 FR 79473 at 79480.
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Nevertheless, as stated in the proposal,\400\ the Bureau does
believe that Sec. 1092.204(b)'s designation requirement will create an
additional incentive for certain entities to comply with their
obligations to consumers. The Bureau expects the requirement to
designate a single attesting executive for the covered order will
prompt the executive to focus greater attention on ensuring compliance,
which in turn will increase the likelihood of compliance. Also, as
stated in the proposal,\401\ the Bureau intends to use the information
submitted under Sec. 1092.204 to facilitate its efforts to assess
compliance with any covered orders that may be enforced by the Bureau,
and to make determinations regarding any potential Bureau supervisory
or enforcement actions related to the covered order or any other
identified risks to consumers. For example, where information obtained
under proposed Sec. 1092.204 indicates that a high-ranking executive
has knowledge of (or has recklessly disregarded) violations of legal
obligations falling within the scope of the Bureau's jurisdiction, and
has authority to control the violative conduct, the Bureau may use that
information in assessing whether an enforcement action should be
brought not only against the nonbank covered person, but also against
the individual executive. However, the final rule itself does not
impose any legal obligation on the attesting executive to ensure
compliance with any covered order.
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\400\ 88 FR 6088 at 6122.
\401\ Id.
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The Bureau declines to finalize the proposed additional requirement
described in the proposal \402\ that would have required the attesting
executive to attest that the entity's compliance systems and procedures
are reasonably designed to detect violations of the applicable covered
order and ensure that such violations are reported to the attesting
executive. The Bureau disagrees with the industry commenter that a
requirement that the executive attest to such matters would contribute
to the impression that the compliance burden rests solely with the
attesting executive. But the Bureau does not believe it is necessary at
this time to require supervised registered entities to submit such
information on an annual basis, or to dedicate staff and other Bureau
resources to reviewing such submissions.
---------------------------------------------------------------------------
\402\ 88 FR 6088 at 6126.
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The Bureau believes it is appropriate even for closely held
entities annually to designate an attesting executive for each covered
order. The designation requirement will serve the information-
collection purposes of the rule by ensuring that the person who signs
the written statement has sufficient authority and access to all the
relevant company stakeholders to ensure that the report is as complete
and accurate as possible.\403\ These requirements are necessary even
for closely held entities. The Bureau may not regularly examine such
entities, may not be aware of the entity's existence, and may not have
adequate information about the entity's structure or operations; the
designation requirement will help inform the Bureau regarding such
matters. In addition, the designation requirement will facilitate the
Bureau's efforts to assess compliance with any covered orders that may
be enforced by the Bureau, and to make determinations regarding any
potential Bureau supervisory or enforcement actions related to the
covered order or any other identified risks to consumers.
---------------------------------------------------------------------------
\403\ See 88 FR 6088 at 6121-22.
---------------------------------------------------------------------------
As for commenters' requests that the rule's written-statement
requirements apply only prospectively, they are in fact so limited.
Section 1092.204's written statement requirements apply only
prospectively to covered orders with an effective date after the
nonbank registry implementation date that is applicable to the
supervised registered entity under Sec. 1092.206. Thus, a supervised
registered entity will not be required to file written statements for
any covered order issued before late 2024, at the earliest. Moreover,
as explained above, while some covered orders with an effective date
after the applicable nonbank registry implementation date might relate
to violations of covered laws committed before the final rule's
effective date, the Bureau does not believe that the prospect of
becoming subject to the written-statement requirements would have had a
significant marginal impact on a supervised registered entity's
decision whether to engage in conduct that risked violating covered
laws, given the negative consequences already associated with
committing such legal violations.\404\
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\404\ See additional discussion of retroactivity concerns in the
section-by-section discussion of Sec. 1092.202(d) above.
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Final Rule
The Bureau adopts Sec. 1092.203(b) as proposed (renumbered as
Sec. 1092.204(b)) for the reasons described above, with minor
technical edits and certain changes and clarifications for the reasons
discussed below.
The first sentence of Sec. 1092.204(b) in the final rule has been
revised from the proposed version to provide that the requirement to
designate an attesting executive applies only as to covered orders that
are described in Sec. 1092.204(a). The first sentence of Sec.
1092.204(b) in the final rule has also been revised from the proposed
version to clarify, consistent with the approach described in the
proposal and the final rule, that under Sec. 1092.204(b) a supervised
registered entity subject to a covered order described in Sec.
1092.204(a) is required to designate an attesting executive for each
covered order to which it is subject.
Section 1092.204(c) Requirement To Provide Attesting Executive(s) With
Access to Documents and Information
Proposed Rule
Proposed Sec. 1092.203(c) would have required a supervised
registered entity subject to proposed Sec. 1092.203 to provide its
attesting executive(s) with prompt access to all documents and
information related to the supervised registered entity's compliance
with all applicable covered order(s) as necessary to make the written
statement(s) required in proposed Sec. 1092.203(d).
The Bureau believed that this proposed requirement would help
ensure that the attesting executive for an applicable covered order has
timely access to the documents and information needed to submit an
informed and accurate written statement
[[Page 56113]]
under proposed Sec. 1092.203(d). A supervised registered entity would
not have been permitted to refuse or deny to its attesting executive
access to documents or information related to the supervised registered
entity's compliance with the covered order. Under the proposed
requirement, the Bureau would have expected the attesting executive to
have prompt access to all such documents and information,
notwithstanding, for example, any privileges that may apply to the
documents and information, or where or how the documents and
information are stored.
The Bureau believed that this requirement would enhance the
accuracy and usefulness of the written statement, which in turn would
enhance the Bureau's ability to supervise the entity effectively,
assess and detect risks to consumers, and ensure the entity is
legitimate and able to perform its obligations to consumers. The Bureau
requested comment on the need for this requirement and whether other
requirements, modifications, or amendments to proposed Sec.
1092.203(c) should be considered in order to ensure the accuracy and
usefulness of the written statement.
Comments Received
Commenters did not specifically address proposed Sec. 1092.204(c).
Final Rule
For the reasons set forth in the description of the proposal above,
the Bureau adopts Sec. 1092.203(c) as proposed (renumbered as Sec.
1092.204(c)).
Section 1092.204(d) Annual Requirement To Submit Written Statement to
the Bureau for Each Covered Order
Proposed Rule
Proposed Sec. 1092.203(d) would have required, on or before March
31 of each calendar year, that the supervised registered entity submit
to the NBR system, in the form and manner specified by the Bureau, a
written statement with respect to each covered order described in
proposed Sec. 1092.203(a). In the written statement, the attesting
executive would have been required to provide a summary description of
the executive's efforts to review and oversee compliance with the
applicable order, and to attest regarding the entity's compliance with
the order. Proposed Sec. 1092.203(d) would have required the written
statement to be signed by the supervised registered entity's attesting
executive.
Proposed Sec. 1092.203(d)(1) would have required the written
statement to contain a general summary description of the steps, if
any, the attesting executive has undertaken to review and oversee the
supervised registered entity's activities subject to the applicable
covered order for the preceding calendar year. This proposal was
intended to provide information to the Bureau regarding the compliance
monitoring efforts that have been undertaken by the executive during
the applicable time period in connection with the order. The proposed
rule would not have established any minimum procedures or otherwise
specified the steps the executive must take to review and oversee the
entity's activities. Instead, the proposed rule would have required
only that the executive provide the Bureau with a general description
of the steps the executive has already taken in this regard. The Bureau
believed that this information would enhance the usefulness of the
written statement by providing valuable context regarding the basis of
the attesting executive's knowledge and by assisting the Bureau with
determining the degree to which the Bureau may rely on the written
statement. The Bureau believed that this information would be useful
because the proposal would not by itself establish minimum requirements
regarding the attesting executive's review and oversight of the
entity's activities.
Proposed Sec. 1092.203(d)(2) would have required the attesting
executive to attest whether, to the attesting executive's knowledge,
the supervised registered entity during the preceding calendar year
identified any violations or other instances of noncompliance with any
obligations that were imposed in a public provision of the covered
order by the applicable agency or court based on a violation of a
covered law. The attestation would have been provided subject to the
attesting executive's knowledge. As discussed above with respect to
proposed Sec. 1092.203(b) and proposed Sec. 1092.203(c), the Bureau
anticipated that the attesting executive would have adequate knowledge
of the entity's systems and procedures for achieving compliance with
the covered order to provide a useful attestation.
The written statement described in the proposal would have
addressed violations and other instances of noncompliance with
obligations that are ``based on'' a violation of a covered law. For
purposes of this proposed requirement, the Bureau explained that an
obligation would have been ``based on'' an alleged violation where the
order identifies the covered law in question, asserts or otherwise
indicates that the covered nonbank has violated it, and imposes the
obligation on the covered nonbank as a result of the alleged
violation.\405\ This would have included, for example, obligations
imposed as ``fencing-in'' or injunctive relief, so long as those
obligations were imposed at least in part as a result of the entity's
violation of a covered law. The proposed written statement would have
also needed to address, for example, any obligation imposed as part of
other legal or equitable relief granted with respect to the violation
of a covered law, as well as any obligation imposed in order to
prevent, remedy, or otherwise address a violation of a covered law, or
the conditions resulting from such violation. The Bureau explained
that, as discussed elsewhere in the proposal, an order may identify a
covered law as the legal basis for the obligations imposed by
referencing another document, such as a written opinion, stipulation,
or complaint, that shows that a covered law served as the legal basis
for the obligations imposed in the order. The Bureau proposed this
approach because an order may satisfy the proposed definition of
``covered order'' but nonetheless contain provisions that are entirely
unrelated to covered laws. This element of the requirement in proposed
Sec. 1092.203(d)(2) was intended to exclude such provisions that are
entirely unrelated to violations of covered laws.
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\405\ As in the context of proposed Sec. 1092.201(e)(4), the
Bureau explained that an obligation imposed based on multiple
violations, some of covered laws and some of other laws, would
qualify as an ``obligation[ ] . . . based on an alleged violation of
a covered law'' within the meaning of proposed Sec. 1092.203(d)(1),
even if the violations of the non-covered laws would themselves have
sufficed to warrant the imposition of the obligation.
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The supervised registered entity would have been required to state
whether it has or has not identified instances of noncompliance with
respect to each covered order. If no such instances of noncompliance
have been identified, the supervised registered entity would have been
required to so state. The proposed rule would not have established any
minimum procedures or otherwise imposed or specified steps a supervised
registered entity must take in order to review or monitor compliance
with each covered order.\406\ Instead, the proposed rule would merely
have required supervised registered entities to report violations and
noncompliance that they had already identified in the course of their
own compliance reviews and assessments. The Bureau believed
[[Page 56114]]
that supervised registered entities likely already conduct reviews to
determine their compliance with covered orders, and those reviews would
assist in completing the required written statements. The Bureau did
not expect the proposal to amend or affect any review, reporting, or
recordkeeping requirement contained in any covered order or other
provision of law.
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\406\ As discussed elsewhere in the proposal, the Bureau
expected that some supervised registered entities might bolster
their compliance efforts in response to the proposal.
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While proposed Sec. 1092.203(d) would have required the written
statement to be signed by the supervised registered entity's attesting
executive, it would not have required the attesting executive to submit
a statement subject to the penalty of perjury. Nevertheless, the Bureau
noted that knowingly and willfully filing a false attestation or report
with the Bureau may be subject to criminal penalties.\407\ The Bureau
believed that the signature requirement, and the consequent potential
for criminal liability where a knowingly false attestation is made,
would be likely to deter attesting executives from submitting written
statements that are incorrect or based on incomplete or otherwise
inadequate information. The Bureau explained that this requirement
should significantly enhance the accuracy and usefulness of the written
statement.
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\407\ See 18 U.S.C. 1001.
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Comments Received
Commenters objected to the proposed annual requirement to submit a
written statement to the Bureau for each covered order, and to the type
of information that the proposal would require a supervised registered
entity to submit. Industry commenters stated that the written statement
to be submitted under proposed Sec. 1092.204(d) would require proving
to the Bureau that the entity had complied with applicable law.
Industry commenters expressed concern with the Bureau's statement in
the notice of proposed rulemaking \408\ that the proposed requirement
for the attesting executive to sign the written statement, and the
consequent potential for criminal liability where a knowingly false
attestation is made, would be likely to deter attesting executives from
submitting written statements that are incorrect or based on incomplete
or otherwise inadequate information. Commenters referred or alluded to
this statement in the proposal in expressing concern that an incorrect
or false written statement would be punishable, and stated that a
single individual could not hold first-hand knowledge sufficient to
ensure compliance with a covered order. An industry commenter stated
that the proposal seemed to conflate ``knowingly and willfully'' with
the making of an incorrect statement or a statement based on incomplete
or otherwise inadequate information, and stated that the Bureau's
discussion of 18 U.S.C. 1001 was misleading and caused confusion as to
what standard would apply to the attestation.
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\408\ See 88 FR 6088 at 6125.
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Commenters stated that the proposed written-statement requirements
were vague and unclear, so executives and supervised registered
entities would be required to guess what the Bureau expects in terms of
compliance. Commenters stated that the Bureau must unambiguously
articulate the obligations of supervised registered entities and
attesting executives under the rule, including the potential liability
and intent standards. Industry commenters further suggested that such
assertedly vague requirements represented an attempt at ``regulation by
enforcement'' by the Bureau.
An industry commenter stated that the proposed requirement to
attest regarding past violations was incompatible with constitutional
due process, since a court might subsequently determine, after the
executive had submitted a written statement, that an applicable
violation had in fact occurred. The commenter expressed concern that
such a development would lead to retroactive liability for the
attesting executive.
An industry commenter stated that the proposal would have required
the submission of an absolute statement, which in the commenter's view
would be unreasonable, and stated that the required written statement
should include materiality and reasonableness standards--for example,
to provide that the entity had not identified any material violations,
and that the statement was based on a reasonable and good-faith review
of the material information.
Industry commenters and a joint comment by State regulators stated
that the proposed written statement requirement was jurisdictional
overreach by the Bureau and an unauthorized attempt to enforce laws
that the Bureau does not enforce. Commenters also stated that the
issuing agency (or court), and not the Bureau, should monitor and
establish compliance guidelines related to the covered order.
A joint comment by State regulators asserted that the proposed
written-statement requirements would complicate and frustrate attempts
by the States to enforce Federal consumer financial law, and stated
that such requirements would be onerous, duplicative, and unnecessary,
and may ultimately weaken the original regulatory action and order.
This comment and industry commenters also stated that the proposed
written-statement requirements would create contradictory reporting
obligations, since covered orders themselves contain reporting
provisions and the agencies that issue or obtain such orders will also
be monitoring compliance.
Commenters stated that in lieu of the proposed written-statement
requirements, the Bureau should rely on similar attestations submitted
to the NMLS, including the NMLS Form MU1, where applicable. The joint
comment letter from State regulators stated that established
information-sharing memorandums of understanding and supervisory
coordination protocols provide the most effective and straightforward
means for the Bureau and State regulators to raise concerns and
identify potential instances of recidivism at supervised registered
nonbanks.
An industry commenter stated that the registry should provide
supervised registered entities with an opportunity to supplement their
written statements with relevant ameliorating information, such as
remediation paid or steps taken.
A joint comment by industry commenters stated that the proposal
failed to consider downsides to the written-statement requirements, and
that the Bureau had failed to provide an adequate explanation of the
basis of its belief that those requirements would achieve their claimed
benefits or the scale of any benefit to consumers.
An industry commenter stated that the requirement that would have
been imposed under proposed Sec. 1092.203(d)(1) to ``[g]enerally
describe the steps that the attesting executive has undertaken to
review and oversee the supervised registered entity's activities
subject to the applicable covered order for the preceding calendar
year'' may exceed the reporting requirements of the underlying covered
order, multiplying the burden imposed by that order. Another industry
commenter stated that this requirement would not provide an adequate,
accurate description of the compliance framework and that the Bureau
could instead simply obtain this information through its normal
supervisory process. This commenter also stated that obtaining this
information via the proposed registry would put confidential
supervisory information at risk. Other industry commenters stated the
Bureau should detail how it will safeguard written statement
information against data breach.
[[Page 56115]]
An industry commenter stated that the proposed registry should not
require disclosure of information protected by the attorney-client
privilege.
Commenters stated that the proposed written-statement requirements
would have a significant chilling effect on the hiring and retention of
senior executives and could discourage competent individuals from
serving in such roles, raising costs and potentially harming consumers.
An industry commenter suggested that the proposed written-statement
requirements would raise First Amendment concerns related to compelled
speech, and an individual commenter expressed concerns regarding the
proposal's implications for free speech.
An industry commenter stated that the proposed written statements
would be redundant because the applicable covered order, if issued
under consent, would already have been signed by a company officer.
An industry commenter stated that the attestation described at
proposed Sec. 1092.203(d)(2) should not be made by an executive but by
the supervised registered entity itself. An industry commenter stated
that the proposed written statement would inappropriately substitute
individual liability for the company's liability, contrary to
longstanding corporate legal tenets regarding piercing the corporate
veil.
Industry commenters stated that the proposed written statements
would cause supervised registered entities to place undue emphasis on
compliance with covered orders to the detriment of their other
compliance responsibilities, distorting compliance programs at such
entities, imposing unwarranted burden, and harming consumers.
Industry commenters stated that the proposed written-statement
requirements should not include any representations about compliance
with covered orders issued under State laws. In particular, these
commenters suggested that because many covered orders require ongoing
compliance with State UDAP laws, and because those laws are very broad
and cover a wide range of activities, it would be impossible for
attesting executives to be certain that the supervised registered
entity had not violated such a covered order. Commenters stated that
the Bureau has no legitimate interest in requiring written statements
regarding compliance with such laws.
More generally, commenters stated that the proposed written-
statement requirements were unfair because it would be impossible for
an executive to attest that the supervised registered entity had not
committed any violations of the applicable covered order, especially
since such orders often cover a wide range of broad laws, including
UDAAP laws.
In the proposal, the Bureau stated that it was ``also considering
adopting a requirement that the written statement contain a short
description of the entity's compliance systems and procedures relating
to the covered order, including a description of the processes for
notifying the attesting executive regarding violations or other
instances of noncompliance with the order.'' \409\ The Bureau stated
that it ``expects that many executives may choose to provide such
information in the summary narrative portion of the written statement
required in proposed Sec. 1092.203(d)(1), as part of describing the
steps that the attesting executive has undertaken to review and oversee
the supervised registered entity's activities subject to the applicable
covered order,'' but it sought ``comment on whether to expressly
require submission of such information in the final rule.'' \410\ One
industry commenter, while stating that the Bureau should remove the
written-statement requirements altogether, argued in the alternative
that if the Bureau did choose to require a written statement it should
take an approach similar to this proposed alternative. Under the
approach suggested by the industry commenter, the entity would be
required to submit a written statement to the effect that the entity's
overall compliance program is reasonably designed to detect and prevent
violations of all orders, and not just a particular covered order.
Another industry commenter stated that this proposed alternative would
not alleviate the industry commenter's concerns about the proposal,
would not provide an adequate, accurate description of the compliance
framework, and could risk revealing confidential information about the
entity or its compliance system or procedures.
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\409\ 88 FR 6088 at 6126.
\410\ Id.
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Industry commenters stated that the proposal failed to identify
benefits of the proposed written-statement requirements that could not
readily be achieved through the Bureau's exercise of its existing
supervisory authorities with fewer negative consequences. These
commenters stated that the Bureau could gather sufficient information
through its normal supervisory process. A commenter stated that the
Bureau could obtain more detailed and comprehensive information about
the entity's compliance systems and procedures for complying with the
order through the supervisory process.
Tribe and industry commenters stated that for purposes of the
written statement, orders should not be considered ``final'' as
provided under proposed Sec. 1092.201(e) until all avenues of appeal
have been exhausted.
Response to Comments Received
Section 1092.204(d) does not require that the supervised registered
entity demonstrate its compliance with the covered order to the Bureau.
The provision requires only that the supervised registered entity
indicate whether or not, to the knowledge of the attesting executive,
the supervised registered entity has identified any violations of
applicable provisions of the covered order. As stated in the proposal,
knowingly and willfully filing a false attestation or report with the
Bureau may be subject to criminal penalties under other provisions of
law outside the final rule.\411\ But neither the final rule nor the
existing legal obligations of individuals and entities to be truthful
in their attestations to the Bureau require attesting executives to
demonstrate compliance with covered orders. Section 1092.204(d)(2)
requires only that the executive attest (truthfully), to the
executive's knowledge, regarding whether the entity has identified any
applicable violations (or other instances of noncompliance). For
example, an attesting executive might attest truthfully that the entity
has not identified a violation even if the entity has in fact violated
the order, so long as the entity has not identified that violation.
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\411\ See, e.g., 18 U.S.C. 1001. One industry commenter
asserted, incorrectly, that the proposal would have required the
attesting executive to submit the annual written statement subject
to the penalty of perjury. As stated in the proposal, and as
acknowledged by other commenters, proposed Sec. 1092.203(d) would
not have required the attesting executive to submit a statement
subject to the penalty of perjury. See 88 FR 6088 at 6125. The
Bureau sought comment on its proposal to require the attesting
executive's signature on the statement but not to require a
statement subject to the penalty of perjury. Commenters did not
provide arguments in support of changing this approach, and the
Bureau finalizes Sec. 1092.204(d) without requiring the attesting
executive to submit a statement subject to the penalty of perjury.
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The proposal's statement regarding the possibility of criminal
penalties did not purport to expand or otherwise affect the scope of an
executive's potential liability under existing criminal law for
submitting false statements to the Bureau. Nor does the final rule
impose any requirements regarding steps that an executive must
[[Page 56116]]
take to review and oversee the supervised registered entity's
activities subject to the applicable covered order. While the Bureau
expects attesting executives to submit truthful statements under the
final rule and believes that the existence of other laws like 18 U.S.C.
1001 provides incentives in that regard, the final rule does not
purport to interpret provisions of criminal law (which are administered
by agencies other than the Bureau) or to identify particular
circumstances under which an attesting executive would become
criminally liable for false statements.\412\
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\412\ Note, however, that a supervised registered entity's
failure or refusal to make reports or provide information as
required under the final rule may violate civil laws administered by
the Bureau, including not just the rule itself but also 12 U.S.C.
5536(a)(2).
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Nor, as discussed in the description of the proposal above, does
the final rule itself establish any minimum procedures or otherwise
specify the steps the executive must take in order to review and
oversee the entity's activities. Instead, Sec. 1092.204(d)(1) requires
only that the executive provide the Bureau with a general description
of the steps the executive has already taken in this regard; this
information will provide valuable context regarding the basis of the
attesting executive's knowledge and will assist the Bureau with
determining the degree to which the Bureau may rely on the written
statement. The attestation submitted under Sec. 1092.204(d)(2) is made
subject to the attesting executive's knowledge, as that knowledge
exists. As discussed above, based in part on the other written-
statement requirements contained in Sec. 1092.204, the Bureau
anticipates that the attesting executive will have adequate knowledge
of the entity's systems and procedures for achieving compliance with
the covered order to provide a useful attestation.
The Bureau declines to modify the required contents of the written
statement as provided at Sec. 1092.204(d)(1) and (2). The Bureau
believes these provisions are sufficiently clear to inform registered
supervised entities and their attesting executives regarding their
responsibilities under the final rule. Section 1092.204(d)(1) requires
that the attesting executive generally describe the steps that the
attesting executive has undertaken to review and oversee the supervised
registered entity's activities subject to the applicable covered order
for the preceding calendar year. Section 1092.204(d)(2) requires that
the attesting executive attest whether, to the attesting executive's
knowledge, the supervised registered entity during the preceding
calendar year identified any violations or other instances of
noncompliance with any obligations that were imposed in a public
provision of the covered order by the applicable agency or court based
on a violation of a covered law. If the executive knows of such
identified violations, the executive should so state; conversely, if
the executive does not know of such identified violations, the
executive should so state. That is all these provisions of the final
rule require.
The final rule does not require that the supervised registered
entity prove its compliance with the applicable covered order to the
Bureau. Instead, the rule requires the attesting executive to state
whether the entity has identified applicable violations of the covered
order. If an agency or court were to subsequently determine that,
contrary to the entity's determination at the time of the written
statement, the supervised registered entity had in fact violated the
covered order during the relevant year, that determination would not
establish that the entity's attestation was false. Thus, the rule does
not impose a retroactive liability on supervised registered entities or
their attesting executives.
The Bureau believes that the written statement requirement is
reasonable and declines to impose materiality requirements as to the
type of violations that must be declared. There is value to the Bureau
in knowing about any violation of existing orders, even violations that
might be characterized as ``minor.'' The covered order is in place
because an agency or court has already determined that issuing the
order, and each of the provisions thereof, was appropriate to address a
violation by the supervised registered entity of a covered law. A
subsequent violation of the covered order is therefore a ``second
strike'' that is probative of risk to consumers. The Bureau believes
that obtaining information about such matters through the written
statement will facilitate its supervisory activities and its assessment
and detection of risks to consumers. In addition, violation of any
legally binding obligation may indicate that the entity lacks the
willingness or ability more generally to comply with its legal
obligations, including its obligations under the Federal consumer
financial laws that the Bureau enforces. Thus, the submission of
information about such violations, even allegedly minor ones, will
assist the Bureau in ensuring that supervised registered entities are
legitimate entities and are able to perform their obligations to
consumers.
The Bureau also declines to impose a reasonableness, good faith, or
other standard regarding the steps that the attesting executive has
undertaken to review and oversee the supervised registered entity's
activities subject to the applicable covered order. The final rule does
not impose any substantive requirements on supervised registered
entities or attesting executives regarding such steps. Thus, there is
no need for the final rule to establish a standard against which the
Bureau will assess compliance with any such requirements. The Bureau
intends to review the summary narrative portion of the written
statement required in Sec. 1092.204(d)(1) for information regarding
the executive's review. In addition, Sec. 1092.204(e) imposes related
recordkeeping requirements with respect to the preparation of the
written statement. The Bureau anticipates that these requirements will
assist the Bureau in assessing the reliability of the written
statement.
For similar reasons, the Bureau declines to impose reasonableness
or other standards with respect to the entity's efforts to identify
applicable violations of covered orders. The final rule does not impose
any substantive requirements on supervised registered entities with
respect to such matters. For example, the final rule does not establish
any minimum procedures or otherwise impose or specify steps a
supervised registered entity must take in order to review or monitor
compliance with any covered order. The Bureau will continue to assess
such matters as part of its normal supervisory process where
applicable.
The Bureau disagrees that the written-statement requirements
represent an attempt to enforce the orders or laws that are
administered by other agencies (or by courts). The written-statement
requirements are intended to promote the Bureau's own work by
facilitating the Bureau's supervisory activities and its assessment and
detection of risks to consumers, and by ensuring that supervised
registered entities are legitimate entities and are able to perform
their obligations to consumers. The Bureau is adopting these
requirements for the purposes established by Congress. The Bureau does
not agree with commenters' assertions that written-statement
requirements to provide information about violations of a covered order
constitute an effort to enforce that order. The written statement
required under Sec. 1092.204(d) is not intended to monitor compliance
by supervised registered entities with covered orders for the purpose
of enforcing those orders. This
[[Page 56117]]
part of the written statement is intended to provide the Bureau with
information regarding whether or not the entity violated the covered
order during the preceding year. As described at part IV, that
information will facilitate the Bureau's supervision of the supervised
registered entity, help the Bureau detect and assess risks to
consumers, and help ensure that supervised registered entities are
legitimate entities and are able to perform their obligations to
consumers. However, the Bureau does not intend to, and does not assert
any authority to, enforce covered orders merely because of their
covered order status. While certain covered orders--such as the
Bureau's own orders--will be enforceable by the Bureau, others will not
be. The final rule will not affect whether the Bureau may enforce the
terms of any covered order.
Some commenters expressed concern that the Bureau is overextending
its authority by using the written-statement requirements in an effort
to enforce State law. The written-statement requirement, however, does
not seek to compel compliance with orders issued under State law.
Instead, the written-statement requirement is an aid to assessing risks
to consumers arising under Federal consumer financial law, including by
considering the extent to which an entity is subject to oversight by
State authorities.\413\ Although it is possible that, in some
instances, the Bureau may review information submitted through the
registry, including the written statements from attesting executives,
and determine that supervisory action under Federal consumer financial
law is necessary, the Bureau's review may also indicate that action
under Federal law is unnecessary or should be a lower supervisory
priority.
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\413\ See 12 U.S.C. 5514(b)(2)(D) (providing that, in
prioritizing entities for supervision, the Bureau should consider
``the extent to which such institutions are subject to oversight by
State authorities for consumer protection''). As discussed in the
section-by-section discussion of Sec. 1092.201(c) above, the Bureau
declines to remove State laws from the final rule's definition of
``covered law'' or to exempt covered orders issued under such laws
from the scope of the written-statement requirements. As discussed
in that section and in the proposal, the Bureau has determined that
agency and court orders stemming from violations of these State laws
will likely be probative of risk to consumers. The Bureau believes
that it is important to impose the annual written-statement
requirements on supervised registered entities that are subject to
such covered orders.
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The Bureau believes it is important to obtain the information
described in the final rule about supervised registered entities'
ongoing compliance with relevant provisions of covered orders,
including covered orders issued or obtained by State and local
agencies. The Bureau believes that the written statement obligations in
the final rule will not complicate or frustrate State enforcement
efforts. The Bureau will not undermine the efforts of other regulators
by collecting such information from entities subject to its
jurisdiction related to the offering or provision of consumer financial
products and services. As discussed above, the Bureau does not intend
to, and does not assert any authority to, enforce covered orders not
issued or obtained by the Bureau merely because of their covered order
status. As stated in the proposal,\414\ evidence regarding a supervised
registered entity's compliance with a covered order will provide the
Bureau with important information regarding risks to consumers that may
be associated with the order and will be highly relevant to the
Bureau's own supervisory and enforcement efforts. State regulators
conduct enhanced supervision and ongoing monitoring of companies that
are subject to covered orders precisely because of the increased risk
such orders represent. The Bureau agrees with the joint comment from
State regulators that increased coordination and information sharing
with the States regarding such orders will also facilitate the work of
all regulators concerned, and the Bureau intends to use the information
provided under the registry, including the written statement, so that
it may be better informed about such orders and thus be in a better
position to communicate with other regulators about them.
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\414\ See 88 FR 6088 at 6125.
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The additional reporting obligation in the final rule will not
prevent or interfere with the efforts of supervised registered entities
to comply with their other reporting obligations. Supervised registered
entities can comply with their reporting requirements under Sec.
1092.204(d) and other sources of law, much as supervised registered
entities currently comply with Bureau supervisory requests for
information under CFPA section 1024(b)(1) while also complying with
other reporting requirements.\415\
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\415\ See 12 U.S.C. 5514(b)(1).
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The Bureau agrees with the industry commenter that registration
under the NMLS system will provide information that may help lessen the
need to submit an annual written statement to the Bureau under this
section. As discussed in the section-by-section discussion of final
Sec. 1092.203, the Bureau is adopting a provision that will provide an
option for a supervised registered entity to file a one-time statement
to the Bureau in lieu of complying with Sec. 1092.204's requirements
with respect to a NMLS-published covered order.
The Bureau declines to supplement the written-statement
requirements beyond the requirements in the final rule. However, any
supervised registered entity that wishes to discuss any matter relevant
to Bureau supervision should contact the appropriate Bureau supervisory
representative. To the extent that the supervised registered entity
believes that the submission of such information would be useful or
informative to the Bureau, it may use other channels to do so.
The Bureau has considered alternative approaches to adopting the
written-statement requirements for supervised registered entities.
However, as discussed herein and in part IV(D), the Bureau finalizes
its preliminary findings contained in the proposal \416\ that requiring
supervised nonbanks to designate attesting executives and to submit
certain written statements relating to compliance with reported orders
will facilitate the Bureau's supervisory efforts and better ensure that
supervised registered entities are legitimate entities and are able to
perform their obligations to consumers. Among other things, as
discussed herein and in part IV(D), the Bureau concludes that the
adoption of the written-statement requirements will provide valuable
information regarding the entities subject to Bureau supervision. The
Bureau may use that information, including whether supervised
registered entities have identified violations of covered orders
registered under Sec. 1092.202, in conducting its supervisory
prioritization efforts, assessing compliance systems and procedures,
and detecting and assessing risk to consumers and to markets for
consumer financial products and services. As described in parts VIII
and IX, the Bureau has considered the potential benefits, costs, and
impacts of the written-statement requirements in the final rule,
including the potential benefit to consumers.
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\416\ 88 FR 6088 at 6100.
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Under the final rule, as proposed, Sec. 1092.204(d)(1) requires
the written statement to contain only a general summary description of
the attesting executive's actions, and thus does not impose a
substantial new reporting requirement. This provision does not
affirmatively require the executive to take any actions related to
compliance with the covered order; it only requires the executive to
provide the Bureau with a general description of what
[[Page 56118]]
applicable steps, if any, the executive has taken. The Bureau
anticipates that this general description will generally be short and
summary in nature. The Bureau concludes that such a statement will
generally be sufficient to serve the purposes of this requirement and
provide the information sought by the Bureau. This requirement will
provide valuable context regarding the basis of the attesting
executive's knowledge and assist the Bureau with determining the degree
to which the Bureau may rely on the written statement.
Final Sec. 1092.204(d)(1) is not intended to provide the Bureau
with a comprehensive understanding of a supervised registered entity's
compliance systems or procedures. Instead, it is intended to enhance
the usefulness of the written statement by providing valuable context
regarding the basis of the attesting executive's knowledge and by
assisting the Bureau with determining the degree to which the Bureau
may relay on the written statement. To the extent the Bureau desires
additional information regarding the supervised registered entity's
activities or practices, the Bureau may utilize its other supervisory
authorities.
As expressly provided at final Sec. 1092.205(b), the written
statement submitted under final Sec. 1092.204(d) will be treated as
CFPB confidential supervisory information subject to the provisions of
12 CFR part 1070. The Bureau disagrees that requiring submission of
this confidential supervisory information via the nonbank registry will
put the information at risk. The Bureau has adequate data safeguards to
protect the written statement information that supervised registered
entities provide to the Bureau under Sec. 1092.204(d). Such
information will be protected by the Bureau's confidentiality
regulations at 12 CFR part 1070, the Federal Trade Secrets Act, 18
U.S.C. 1905, and other laws. In addition, the Bureau is subject to data
breach requirements provided in the Federal Information Security
Management Act (FISMA), applicable Office of Management and Budget
(OMB) Memoranda, U.S. Department of Homeland Security (DHS) Binding
Operational Directives, National Institute of Standards and Technology
(NIST) Federal Information Processing Standards and documents, and
other applicable guidance.
To the extent that certain comments might be read as expressing
concern that Sec. 1092.204(d) might require the submission of
information protected by the attorney-client privilege or another legal
privilege, the commenters do not identify any particular scenarios
under which submission of privileged information might be required to
comply with Sec. 1092.204(d), and as discussed in the section-by-
section discussion of Sec. 1092.201(d), the Bureau does not intend for
the final rule to require the submission of privileged information to
the nonbank registry.
As discussed in part VIII below, the Bureau acknowledges that
certain firms that are subject to covered orders and that lack adequate
compliance systems may be forced to pay attesting executives a salary
premium because of the written-statement requirements, but believes
that there will be few such firms. The Bureau also disagrees with
commenters' assertions that, for most covered nonbanks, the requirement
for covered nonbanks to designate attesting executives for covered
orders will discourage competent compliance and risk management
personnel from serving in such roles. Neither Sec. 1092.204(b)'s
designation requirements nor the publication of the name and title of
the attesting executive as provided at Sec. 1092.205 will materially
increase the legal obligations of such executives. As discussed
elsewhere in this section, Sec. 1092.204(d) requires the submission
only of certain limited statements on behalf of the supervised
registered entity to the executive's knowledge. For most companies,
this statement should be straightforward and noncontroversial. Thus,
for most supervised registered entities, the Bureau does not agree with
commenters' assertions that the proposed requirements would have a
significant chilling effect on the hiring and retention of senior
executives.
The written-statement requirement does not violate the First
Amendment. The final rule merely requires a factual disclosure
regarding (1) the steps the attesting executive has taken to review and
oversee the supervised registered entity's activities subject to the
applicable covered order, and (2) whether, to the attesting executive's
knowledge, the supervised registered entity during the preceding
calendar year identified violations or other instances of noncompliance
with the entity's obligations under such a covered order. It only
requires that the written statement be made to the Bureau, not to the
general public. The rule excludes the written statement from its
publication requirements and expressly provides that the written
statement ``will be treated as Bureau confidential supervisory
information.'' The written-statement requirement will facilitate Bureau
supervisory efforts. It bears no resemblance to the type of
``Government-mandated pledge or motto'' that has been held to violate
the First Amendment.\417\ Such a limited reporting requirement,
especially one connected to extant conduct regulations, complies with
the First Amendment.\418\
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\417\ Rumsfeld v. Forum for Academic & Institutional Rights,
Inc., 547 U.S. 47, 61-62 (2006) (discussing W. Va. State Bd. of
Educ. v. Barnette, 319 U.S. 624 (1943), and Wooley v. Maynard, 430
U.S. 705 (1977)).
\418\ See, e.g., Arkansas Times LP v. Waldrip, 37 F.4th 1386,
1394 (8th Cir. 2022) (en banc) (holding that requirement that
government contractors certify compliance with conduct-based
regulations did not unconstitutionally compel speech); United States
v. Arnold, 740 F.3d 1032, 1033-35 (5th Cir. 2014) (rejecting
``compelled speech'' challenge to Federal sex-offender registration
requirements); United States v. Conces, 507 F.3d 1028, 1040 (6th
Cir. 2007) (holding that requiring responses to discovery requests
did not violate First Amendment); United States v. Sindel, 53 F.3d
874, 878 (8th Cir. 1995) (rejecting ``compelled speech'' challenge
to providing information required by an IRS form).
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The Bureau disagrees with the industry commenter that the written-
statement requirements would be redundant because the applicable
covered order, if issued under consent, would already have been signed
by a company officer. A signature of a supervised registered entity's
officer with respect to a covered consent order (such as on a
stipulation or consent agreement) would not serve the purposes of Sec.
1092.204's written-statement requirements. Among other things, there
generally would be no requirement that such an executive would satisfy
the criteria established under Sec. 1092.204(b); such an executive
generally would not be designated on an annual basis, depriving the
Bureau of relevant up-to-date information; an executive signature
consenting to a covered order generally would not provide any of the
information that would be submitted in the annual written statement
required under Sec. 1092.204(d); and the other requirements
established in Sec. 1092.204, including Sec. 1092.204(c) and (e),
generally would not be imposed with respect to the covered order.
Regarding the comment that the attestation described at Sec.
1092.203(d)(2) should not be made by an executive but by the supervised
registered entity itself, the written statement--as discussed above
\419\--is a statement by the supervised registered entity. To be sure,
Sec. 1092.204(d) requires the written statement to be made and signed
``on behalf of the supervised registered entity'' by a particular
individual agent, the attesting executive. Section 1092.204(b)
establishes requirements for the entity's designation of its attesting
[[Page 56119]]
executive(s) to ensure that the person who signs the written statement
has sufficient authority and access to all the relevant company
stakeholders to ensure that the report--which is filed on behalf of the
entity, not the individual executive--is as complete and accurate as
possible.\420\ But the obligations under Sec. 1092.204 belong to
supervised registered entities, not to particular individuals acting in
their personal capacities.
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\419\ See the Bureau's response to certain comments regarding
the Bureau's legal authority to impose written-statement
requirements above.
\420\ See 88 FR 6088 at 6121-22.
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The Bureau disagrees that Sec. 1092.204(d)(2) represents an
inappropriate attempt to substitute the individual liability of the
attesting executives for the liability of the supervised registered
entities they represent. As discussed above, even for those covered
orders that the Bureau is authorized to enforce, Sec. 1092.204(b)'s
requirement to designate an attesting executive does not mean that the
Bureau intends to hold that executive solely responsible for the
entity's compliance with those covered orders. The final rule does not
impose any additional requirements to take steps to address any covered
order, nor does it establish any standards for imposing liability on
any individual in connection with any covered order. Any individual
accountability in connection with violations of such orders shall
continue to be determined in accordance with existing law, which the
final rule does not purport to change. Nor does the final rule affect
the Bureau's existing approach to assessing board and management
oversight at supervised registered entities.
The Bureau disagrees that Sec. 1092.203(d)(2) would cause a
supervised registered entity to place undue emphasis on compliance with
covered orders, to the detriment of its other compliance
responsibilities. As stated in part IV(A) above, agency and court
orders are not suggestions. It is incumbent on supervised registered
entities to comply with such orders and also manage their other
responsibilities. As explained in the proposal,\421\ the Bureau
believes, based on its experience and expertise, that most entities
subject to covered orders endeavor in good faith to comply with them
and will already have in place systems and procedures to help achieve
such compliance. The Bureau thus believes that few entities would
significantly alter their compliance systems, procedures, or priorities
in response to Sec. 1092.204.\422\ Further, the risk of legal
sanctions will likely deter entities from neglecting other legal
obligations not associated with covered orders. The Bureau thus does
not believe that Sec. 1092.204 will cause supervised registered
entities to ignore other legal requirements not set forth in covered
orders.
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\421\ See 88 FR 6088 at 6133.
\422\ The final rule does not obligate supervised registered
entities to spend an inordinate amount of time, or indeed any time
at all, on compliance with covered orders. The final rule does not
establish any minimum level of compliance management or expectations
for compliance systems and procedures at supervised registered
entities. It only requires such entities to report information about
their compliance to the Bureau.
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For the reasons discussed in part IV and the section-by-section
discussions of Sec. 1092.201(c) and (e) above, the Bureau concludes
that the term ``covered order'' should include orders issued or
obtained by agencies other than the Bureau. As discussed in part IV(D)
and this section-by-section discussion of Sec. 1092.204, submission of
a written statement regarding either compliance or noncompliance with
covered orders will provide the Bureau with important additional
information regarding risks to consumers that may be associated with
the orders and the applicable supervised registered entities'
compliance systems and procedures, and will otherwise facilitate the
Bureau's supervision of such entities. The Bureau disagrees with
commenters' assertions that the Bureau lacks a legitimate interest in
obtaining such information from entities that are subject to its
supervisory and examination jurisdiction under CFPA section 1024.
With respect to the comments stating that it would be impossible
for an executive to attest that a supervised entity had complied with a
broadly drafted covered order, including orders based on violations or
alleged violations of Federal or State UDAP/UDAAP laws, final Sec.
1092.204(d) does not require that the supervised registered entity
prove its compliance with the covered order to the Bureau, as discussed
above. Section 1092.204(d)(1) requires the executive to generally
describe the steps that the attesting executive has undertaken to
review and oversee the supervised registered entity's activities
subject to the applicable covered order for the preceding calendar
year, but imposes no minimum standards or other requirements regarding
those steps. And all the entity need disclose under Sec.
1092.204(d)(2) is whether, to the attesting executive's knowledge, the
supervised registered entity during the preceding calendar year
identified any violations or other instances of noncompliance with any
obligations that were imposed in a public provision of the covered
order by the applicable agency or court based on a violation of a
covered law. Such matters are within the power of the supervised
registered entity and its attesting executive to know and describe to
the Bureau, and will provide important information that is useful to
the Bureau. Should the Bureau desire additional information relating to
the covered order or the supervised registered entity's compliance with
the covered order, the Bureau may choose to follow up on the
information provided by the supervised registered entity in its written
statement, including via its supervisory and examination authority or
by communicating with the appropriate agency.
The Bureau declines to adopt the alternative approach proposed in
the notice of proposed rulemaking that the written statement contain a
short description of the entity's compliance systems and procedures
relating to the covered order.\423\ The Bureau concludes the written-
statement requirements included in the final rule will provide
sufficient information to the Bureau to serve the purposes of the
written-statement requirement. The written statement will provide
valuable information to the Bureau regarding the entity's attesting
executive for each applicable covered order, the steps undertaken by
that executive to review and oversee compliance with the covered order,
and any applicable recent violations of the order identified by the
supervised registered entity. To the extent the Bureau desires to
obtain more information about the entity's compliance systems or
procedures than is provided in the written statement, the Bureau may
choose to follow up directly with the supervised registered entity
through its supervisory authority or through other means. The Bureau
does not believe it is necessary at this time to require all supervised
registered entities to submit a description of the entity's relevant
compliance systems and procedures on an annual basis, or to dedicate
staff and other Bureau resources to reviewing such submissions.
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\423\ See 88 FR 6088 at 6126.
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Likewise, the Bureau declines to adopt the alternative approach
proposed by the commenter to obtain a single representation about all
covered orders to which the entity is subject. The Bureau believes that
requiring a separate written statement for each covered order will be
more likely to provide the Bureau with meaningful and useful
information regarding the covered order, the entity's compliance with
that covered order, other risks to consumers
[[Page 56120]]
that are related to that covered order, and other matters. The Bureau
also believes this proposed alternative is inconsistent with the
approach to designation of attesting executives taken under Sec.
1092.204(b). As described in the proposal,\424\ the Bureau believes it
is desirable to require a supervised registered entity to annually
designate one attesting executive for each applicable covered order to
which it is subject and for all submissions and other purposes related
to that covered order under subpart B. If an entity has designated
multiple attesting executives under the rule, the Bureau would not
necessarily expect each such executive to be able to provide a
meaningful attestation with respect to all covered orders. See part IV
above for additional discussion of these issues.
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\424\ See 88 FR 6088 at 6123.
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With respect to the comment opposing the adoption of this proposed
alternative, while the Bureau does not necessarily agree with the
industry commenter's assertion that the proposed alternative would fail
to provide adequate or accurate information to the Bureau, the Bureau
believes the written-statement requirements included in the final rule
will provide sufficient information to the Bureau to serve the purposes
of the written-statement requirement. Regarding the inclusion of
confidential information in the written statement, the Bureau expects
that the written statement may contain certain confidential information
about the entity and its compliance system or procedures. Anticipating
this issue, the final rule treats the written statement as Bureau
confidential supervisory information (Sec. 1092.205(b)) and would not
publish it. As discussed in the section-by-section discussion of Sec.
1092.205(b), this approach will enhance the usefulness of submissions
under final Sec. 1092.204(d)(1) and (2), increase the Bureau's ability
to detect and assess potential noncompliance and emerging risks to
consumers, and promote compliance with the law.
With respect to the comments stating that the Bureau should use its
existing supervisory authorities instead of imposing the written-
statement requirements, the Bureau disagrees to the extent the comments
suggest that the Bureau should collect written statements only in
connection with particular examinations via direct communication with
supervised registered entities. Such an approach would not be more
reliable and predictable for all parties than a rule-based approach,
and would be less administrable for the Bureau. The approach adopted in
the final rule will structure the information collected and establish a
regular cadence for collecting it. This approach also will enable the
Bureau to more readily utilize this information, as it will be linked
via the nonbank registry to the other information submitted by the
relevant supervised registered entity regarding the applicable covered
order.\425\
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\425\ See also part IV(D) above.
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In addition, there is no existing comprehensive list of nonbank
entities subject to Bureau supervision, so the Bureau would be unable
to issue a standing order to such entities to produce such information.
The final rule requires supervised registered entities, within the
timeframes established by the rule, to identify themselves to the
Bureau and to provide information that is relevant to the Bureau's
assessment and detection of risks to consumers related to such
entities. As discussed in part IV(D) above, the collection of this
information will facilitate Bureau supervision by, among other things,
helping the Bureau identify when a nonbank entity subject to its
supervisory authority is subject to a covered order, and by annually
collecting information about the entity's compliance with the covered
orders to which it is subject. This information will in turn help the
Bureau prioritize its nonbank examinations under CFPA section
1024(b)(2) and otherwise inform how the Bureau supervises and examines
the entity. As appropriate, the Bureau may also, as one commenter
suggests, obtain more detailed and comprehensive information about the
entity's compliance systems and procedures for complying with the order
via direct communication with the entity through the supervisory
process.
See the section-by-section discussion of Sec. 1092.201(e) above
regarding the final rule's treatment of covered orders that may be
subject to appeal.
Final Rule
The Bureau adopts Sec. 1092.203(d) as proposed (renumbered as
Sec. 1092.204(d)) for the reasons discussed above and in the
description of the proposal, with changes to the wording of the
paragraph's first sentence.\426\ That sentence now reads (with
additions marked with italics): ``On or before March 31 of each
calendar year, the supervised registered entity shall, in the form and
manner specified by the Bureau, submit to the nonbank registry a
written statement with respect to each covered order described in
paragraph (a)(1) of this section to which it is subject.'' \427\ The
changes reflect revisions to Sec. 1092.204(a) that are discussed in
the section-by-section analysis of that subsection (as well as the
Bureau's adoption of the term ``nonbank registry'' described in the
section-by-section discussion of Sec. 1092.101(d) above).
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\426\ See also the section-by-section discussion of Sec.
1092.101(d) above regarding the Bureau's adoption of the revised
term ``nonbank registry.''
\427\ Under Sec. 1092.204(a)(2), a supervised registered entity
is not required to comply with Sec. 1092.204--including the
requirements of Sec. 1092.204(d)(2)--with respect to any NMLS-
published covered order for which it has chosen to comply with the
one-time registration option described in Sec. 1092.203.
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Under Sec. 1092.204(d) of the final rule, written statements only
need to address periods during which covered nonbanks qualify as
supervised registered entities. Therefore, if a covered nonbank did not
qualify as a supervised registered entity at any point during the
preceding calendar year, it does not need to file a written statement
in the current calendar year, even if the covered nonbank becomes a
supervised registered entity by March 31 of the current calendar year.
Section 1092.204(e) Requirement To Maintain and Make Available Related
Records
Proposed Rule
Proposed Sec. 1092.203(e) would have imposed recordkeeping
requirements with respect to the preparation of the written statement.
These requirements were designed to promote effective and efficient
enforcement and supervision of proposed Sec. 1092.203. The Bureau
would have relied on its rulemaking authorities under CFPA section
1024(b)(7)(A)-(C) in imposing proposed Sec. 1092.203(e)'s
recordkeeping requirements.
Proposed Sec. 1092.203(e) would have required a supervised
registered entity to maintain documents and other records sufficient to
document the entity's preparation of the written statement, to provide
reasonable support for the written statement, and to otherwise
demonstrate compliance with the requirements of proposed Sec. 1092.203
with respect to any submission under that section. The proposed section
would have required the supervised registered entity to maintain those
documents and records for five years after such submission was
required. The proposal would have also required the supervised
registered entity to make such documents and other records available to
the Bureau upon the Bureau's request. The Bureau explained that the
purpose of this requirement would be to enable the Bureau to assess, as
part of its normal supervisory
[[Page 56121]]
process, the supervised registered entity's compliance with proposed
Sec. 1092.203. The Bureau explained that it expected such documents
and other records to be in a form sufficient to enable the Bureau to
conduct this assessment. The Bureau believed that the five-year time
period would appropriately facilitate the Bureau's examination and
enforcement capabilities with respect to compliance with proposed Sec.
1092.203's requirements.
Comments Received
One industry commenter stated that the requirement to ``provide
reasonable support'' for the written statement was vague and overly
broad, and that it could extend to every record that a company has.
Relatedly, the commenter stated that the costs associated with this
requirement could not be quantified as a result of this uncertainty.
The commenter also stated that the proposed recordkeeping
requirement would be unduly burdensome because it would require a
supervised registered entity to maintain evidence of compliance with
covered orders. And the commenter objected to the duration of the
recordkeeping requirement, as the five-year obligation imposed under
proposed Sec. 1092.203(e) might exceed the duration of the
requirements imposed by the other provisions of the proposal (such as
where the order terminates earlier). The commenter also stated the
Bureau should have considered obtaining documents from other regulators
as an alternative to proposed Sec. 1092.203.
Response to Comments Received
The Bureau disagrees with the industry commenter's statement that
the requirements of Sec. 1092.204(e) (which was initially proposed as
Sec. 1092.203(e)) are vague and overly broad, and that an estimate of
the costs associated with those requirements cannot be quantified.
Section 1092.204(e) does not require a supervised registered entity to
comply with any covered order, nor does it require the entity to prove
that it is in compliance with any covered order. Instead, Sec.
1092.204(e) requires the entity to maintain documents sufficient to
allow the Bureau, through its normal supervisory process, to review the
entity's compliance with the requirements of Sec. 1092.204 with
respect to a submission under that section. Thus, Sec. 1092.204(e)
requires a supervised registered entity to maintain documents that
demonstrate compliance with the various paragraphs of Sec. 1092.204.
Specifically, a supervised registered entity would satisfy Sec.
1092.204(e) with respect to the requirements of Sec. 1092.204(b)
regarding the designation of an attesting executive for a particular
covered order by maintaining records that reasonably support the
entity's designation, including records that demonstrate that the
attesting executive satisfies the criteria established by Sec.
1092.204(b).
Section 1092.204(d)(1) requires the attesting executive to
``[g]enerally describe the steps that the attesting executive has
undertaken to review and oversee the supervised registered entity's
activities subject to the applicable covered order for the preceding
calendar year.'' A supervised registered entity would satisfy Sec.
1092.204(e) with respect to a statement submitted under Sec.
1092.204(d)(1) by maintaining documents that reasonably support the
description submitted. If the entity chooses to submit a statement
under Sec. 1092.204(d)(1) that describes specific steps undertaken by
the attesting executive to review and oversee the entity's applicable
activities, Sec. 1092.204(e) would require that the entity maintain
documents that demonstrate that the executive undertook the steps
described. For example, the entity could preserve relevant reports
provided to the executive regarding compliance with the relevant order,
or emails that demonstrate the questions asked by the executive as part
of the executive's review.
Section 1092.204(d)(2) requires the attesting executive to
``[a]ttest whether, to the attesting executive's knowledge, the
supervised registered entity during the preceding calendar year
identified any violations or other instances of noncompliance with any
obligations that were imposed in a public provision of the covered
order by the applicable agency or court based on a violation of a
covered law.'' If, to the executive's knowledge, the entity did
identify such a violation, the executive should so attest under Sec.
1092.204(d)(2), and the entity should maintain records sufficient to
provide reasonable support for the executive's statement. For example,
the entity could preserve relevant documents that caused the executive
to know that a violation had occurred, such as a report or email sent
to the executive. On the other hand, if the executive attests that he
or she does not know of any such violation, the Bureau anticipates that
attestation will generally be based upon the executive's review and
oversight as described in the portion of the written statement
submitted under Sec. 1092.204(d)(1). By demonstrating what steps (if
any) the executive had undertaken to review and oversee the activities
subject to the covered order, the entity generally would also provide
support for the statement that the executive was not aware of
applicable violations. Thus, in such cases the Bureau would generally
expect the documentation that supports the portion of the written
statement submitted under Sec. 1092.204(d)(1) also to adequately
support the portion submitted under Sec. 1092.204(d)(2), and Sec.
1092.204(e) would generally not require the entity to maintain any
other additional records specifically in connection with the portion of
the written statement submitted under Sec. 1092.204(d)(2).
With respect to the comment regarding potential burden associated
with Sec. 1092.204(e)'s recordkeeping requirements, this provision
would not require a supervised registered entity to maintain documents
to enable the Bureau to assess whether the entity is in compliance with
any covered order. Instead, this provision would require a supervised
registered entity to maintain documents that demonstrate compliance
with Sec. 1092.204 itself. Section 1092.204 imposes a set of
requirements regarding the designation of one or more attesting
executives and submission of one or more annual reports. It requires
neither that the entity comply with any covered order nor that it
demonstrate to the Bureau that it is in compliance with any covered
order. Documents that demonstrate the entity's compliance with Sec.
1092.204 will not generally be available from other regulators or from
sources other than the entity itself.
The Bureau acknowledges that in some cases, a supervised registered
entity's obligation to maintain documents under Sec. 1092.204(e) may
extend, perhaps by several years, past the time required for the
entity's final filing under Sec. 1092.202(f)(1). While, as provided in
Sec. 1092.202(f)(2), a supervised registered entity's final filing
under Sec. 1092.202(f)(1) relieves the entity of its obligations to
update its filing or to file written statements with respect to the
applicable covered order under subpart B, the entity would remain
subject to Sec. 1092.204(e)'s requirements to maintain and make
available applicable records. Nevertheless, the Bureau believes Sec.
1092.204(e)'s five-year recordkeeping requirement is consistent with
the final rule's approach to final filings in Sec. 1092.202(f). The
purpose of Sec. 1092.204(e)'s recordkeeping requirement is to promote
effective and efficient enforcement and supervision of Sec. 1092.204.
The Bureau may wish to review a supervised registered entity's
[[Page 56122]]
past compliance with Sec. 1092.204 even after the entity has been
released, as provided under Sec. 1092.202(f)(2), from its ongoing
obligations to update information under Sec. 1092.202 and to file
annual written statements under Sec. 1092.204. The Bureau believes the
five-year period is an appropriate length of time to require
preservation of records in order to facilitate any review that may
occur. For a discussion of the economic costs and benefits associated
with this provision, see part VIII.
Final Rule
The Bureau adopts Sec. 1092.203(e) as proposed (renumbered as
Sec. 1092.204(e)) for the reasons discussed above and in the
description of the proposal.
Section 1092.204(f) Notification of Entity's Good-Faith Belief That
Requirements Do Not Apply
Proposed Rule
Proposed Sec. 1092.203(f) would have provided that a person may
submit a notice to the NBR system stating that it is neither
designating an attesting executive nor submitting a written statement
pursuant to proposed Sec. 1092.203 because it has a good-faith basis
to believe that it is not a supervised registered entity or that an
order in question is not a covered order. Such a filing may be combined
with any similar filing under proposed Sec. 1092.202(g).\428\ Proposed
Sec. 1092.203(f) would have also required the person to promptly
comply with Sec. 1092.203 upon becoming aware of facts or
circumstances that would not permit it to continue representing that it
has a good-faith basis to believe that it is not a supervised
registered entity or that an order in question is not a covered order.
The Bureau proposed to treat information submitted under Sec.
1092.203(f) as ``administrative information'' as defined by proposed
Sec. 1092.201(a).
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\428\ See also the section-by-section discussion of Sec.
1092.202(g), which provides a similar option with respect to Sec.
1092.202.
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The Bureau proposed Sec. 1092.203(f) for several reasons. First,
while the Bureau believed that determining whether a company qualifies
as a ``supervised registered entity'' (or whether an order is a covered
order) should be straightforward in most cases, some persons may be
uncertain about whether they are a supervised registered entity (or
whether an order is a covered order). The Bureau acknowledged in its
proposal that even when they have a good-faith basis to believe they
are not a supervised registered entity (or an order is not a covered
order), they could annually designate an attesting executive and file
annual written statements if they did not want to incur the risk of
violating the requirements of proposed Sec. 1092.203. But the Bureau
believed that that approach could impose burden on persons who
ultimately are not supervised registered entities (or whose orders are
not covered orders). The Bureau therefore proposed an alternative
option for these persons. Rather than facing the burden of designating
an attesting executive and filing written statements, such an entity
could have elected to file a notice under proposed Sec. 1092.203(f).
The Bureau explained that, when a person makes a non-frivolous filing
under proposed Sec. 1092.203(f) stating that it has a good-faith basis
to believe that it is not a supervised registered entity (or an order
is not a covered order), the Bureau would not bring an enforcement
action against that person based on the person's failure to comply with
proposed Sec. 1092.203 unless the Bureau has first notified the person
that the Bureau believes the person does in fact qualify as a
supervised registered entity (or the order in question qualifies as a
covered order) and has subsequently provided the person with a
reasonable opportunity to comply with proposed Sec. 1092.203.\429\
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\429\ The Bureau explained that, under proposed Sec.
1092.102(c), the filing of a notification under proposed Sec.
1092.203(f) would not affect the entity's ability to dispute more
generally that it qualifies as a person subject to Bureau authority.
---------------------------------------------------------------------------
The Bureau also believed that filings under proposed Sec.
1092.203(f) may reduce uncertainty by the Bureau about why certain
entities are not designating an attesting executive or providing a
written statement under proposed Sec. 1092.203. In addition, the
Bureau believed that these notifications might provide the Bureau with
information about how market participants are interpreting the scope of
proposed Sec. 1092.203, about the potential need for the Bureau to
instruct certain persons to designate an attesting executive and
provide written statements, and about the potential need for guidance
or rulemaking clarifying the scope of proposed Sec. 1092.203.
As in the case of proposed Sec. 1092.202(g), the Bureau considered
an alternative to proposed Sec. 1092.203(f) under which entities would
not file a notice with the Bureau, but they could avoid penalties for
non-compliance with Sec. 1092.203 if in fact they could establish a
good-faith belief that they did not qualify as supervised registered
entities subject to Sec. 1092.203 (or their order was not a covered
order). Under this alternative, entities would have maintained such
good-faith belief so long as the Bureau had not made clear that Sec.
1092.203 would apply to them. Although the Bureau preliminarily
concluded that this alternative was not preferable to requiring
entities to actually file notices under proposed Sec. 1092.203(f), the
Bureau sought comment on whether it should finalize this alternative
instead. It also sought comment on whether, if it finalized this
alternative, entities would require additional guidance on the
circumstances pursuant to which an entity could no longer legitimately
assert a good-faith belief that Sec. 1092.203 would not apply to its
conduct. While the Bureau anticipated that such circumstances would
certainly include entity-specific notice from the Bureau that Sec.
1092.203 applies, the Bureau did not believe such notice should be
required to terminate a good faith defense to registration. Among other
circumstances, the Bureau anticipated that at least formal Bureau
interpretations of (for example) the provisions of CFPA section
1024(a)(1) would generally suffice to terminate such belief.\430\
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\430\ 12 U.S.C. 5514(a)(1).
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Comments Received
As discussed in the section-by-section discussion of Sec.
1092.202(g) above, the Bureau received a number of comments from tribes
regarding proposed Sec. Sec. 1092.202(g) and 1092.203(f). The tribes
commenting on the proposal generally opposed proposed Sec. Sec.
1092.202(g) and 1092.203(f) and submitted specific objections to
aspects of the proposal.
Response to Comments Received
See the section-by-section discussion of Sec. 1092.202(g) above
for a description of the Bureau's responses to comments received
regarding proposed Sec. 1092.203(f).
Final Rule
The Bureau adopts Sec. 1092.203(f) as proposed (renumbered as
Sec. 1092.204(f)) for the reasons discussed above and in the
description of the proposal.\431\
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\431\ See the section-by-section discussion of Sec. 1092.101(d)
above regarding the Bureau's adoption of the revised term ``nonbank
registry.''
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[[Page 56123]]
Section 1092.205 Publication and Correction of Registration Information
Section 1092.205(a) Internet Posting of Registration Information
Proposed Rule
Proposed Sec. 1092.204(a)
Proposed Sec. 1092.204(a) would have required the Bureau to make
available to the public the information submitted to it by persons
pursuant to proposed Sec. 1092.202, except that the Bureau could
choose not to publish certain administrative information or other
information that the Bureau determined may be inaccurate, not required
to be submitted under subpart B, or otherwise not in compliance with
part 1092 and any accompanying guidance. Proposed Sec. 1092.204(a)
would have further provided that the Bureau may make registration
information available to the public by means that include publishing it
on the Bureau's publicly available internet site within a timeframe
determined by the Bureau in its discretion. However, as discussed below
regarding proposed Sec. 1092.204(b), the proposal would have
specifically provided that the Bureau would not disclose the written
statement submitted under proposed Sec. 1092.203.
The Bureau explained that publication of registered entities'
identifying information would facilitate the ability of consumers to
identify covered persons that are registered with the Bureau.\432\ And
the Bureau believed that publication of additional information about
registered entities and covered orders would be in the public
interest.\433\ Namely, as discussed in more detail in section IV(E) of
the proposal's preamble, proposed Sec. 1092.204(a) would have provided
information of use to consumers, other regulators, industry,
nongovernment organizations, and the general public. Proposed Sec.
1092.204(a) also would have formally aligned the proposed NBR system
with Federal Government emphasis on making government data available to
and usable by the public, by default, to the greatest extent
possible.\434\
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\432\ 12 U.S.C. 5512(c)(7)(B).
\433\ 12 U.S.C. 5512(c)(3)(B).
\434\ See, e.g., Open, Public, Electronic, and Necessary
Government Data Act, in title II of Public Law 115-435 (Jan. 14,
2019); Office of Management and Budget, M-19-18, Federal Data
Strategy--A Framework for Consistency (June 4, 2019), https://www.whitehouse.gov/wp-content/uploads/2019/06/M-19-18.pdf.
---------------------------------------------------------------------------
The Bureau explained that making the data collected publicly
available would further the rationale of the proposal--that is,
enhancing oversight and awareness of covered orders and the covered
nonbanks that are subject to them. The Bureau believed that regulators
and other agencies at all levels of government (not just the Bureau)
could use the information the Bureau would make publicly available to
set priorities. The Bureau believed publication was also in the public
interest because researchers could analyze the information the Bureau
would make publicly available to gain valuable insight into the issues
addressed in the NBR system. For example, as the Bureau explained in
its proposal, they could produce reports that may inform consumers and
the public more broadly of potential risks related to covered orders,
or otherwise use the public data to promote private innovation. The
Bureau also believed that organizations representing consumer interests
could use the information to assist with their consumer protection
efforts. The Bureau further explained in its proposal that publication
can also help inform the public, including industry actors, about how
regulators are enforcing Federal consumer financial laws and other
similar laws. The Bureau cited, for example, that industry actors could
use the registry as a convenient source of information regarding
regulator actions and trends across jurisdictions, helping them to
better understand legal risks and compliance obligations. The Bureau
believed that at least in certain cases, consumers may be able to use
the information in the registry to make informed choices regarding
consumer financial products and services, including potentially using
the information to assist with the assertion of private rights of
action that might be available under the Federal consumer financial
laws. Finally, the Bureau believed that publication would help promote
Bureau accountability by helping the public better see and understand
the results of the nonbank registry initiative, and helping the public
gain greater insight into Bureau decision-making. As discussed in
section IV(E) of the proposal, the Bureau believed that identifying the
executive who has knowledge and control of the supervised entity's
efforts to comply with the covered order would provide particular
benefits to the Bureau, the public, and other users of the registry.
Proposed Sec. 1092.204(a) would have provided that the Bureau may
choose not to publish certain administrative information or other
information that the Bureau determines may be inaccurate, not required
to be submitted under proposed subpart B, or otherwise not in
compliance with part 1092 and any accompanying guidance. The Bureau
proposed to exclude administrative information, as defined at proposed
Sec. 1092.201(a), from the proposed publication requirement because it
believed the publication of such information may not in all instances
be especially useful to external users of the registry. The Bureau
explained that administrative information is likely to include
information such as time and date stamps, contact information, and
administrative questions. The Bureau anticipated that it may need such
information to work with personnel at nonbanks and in order to
administer the NBR system. The Bureau believed that publishing such
information would not be in the public interest because publication
would be unnecessary and likely would be counterproductive to the goals
of ensuring compliance with the proposal and publishing usable
information.
The Bureau would have also reserved the right not to publish any
information that it determines may be inaccurate, not required to be
submitted under proposed subpart B, or otherwise not in compliance with
part 1092 and any accompanying guidance. For example, the Bureau
explained, persons may submit unauthorized or inadvertent filings, or
filings regarding orders that would not require registration under the
proposal, or other inaccurate or inappropriate filings. The Bureau
believed it would require flexibility not to publish such information
in order to maintain the accuracy and integrity of the NBR system and
the data that would be published by the Bureau. And publication of
information that the Bureau determines is, or may be, inaccurate, not
required to be submitted under proposed subpart B, or that is otherwise
not appropriately submitted under the proposal and accompanying
guidance, would not further the goals of the proposal.
Furthermore, consistent with CFPA section 1022(c)(8),\435\ the
Bureau explained that it would not publish information protected from
public disclosure under 5 U.S.C. 552(b) or 552a or any other provision
of law. The Bureau, however, did not believe that any of the
information proposed to be
[[Page 56124]]
collected under proposed Sec. 1092.202 would be protected from public
disclosure by law. The Bureau requested comments on this question, and
whether any other steps should be taken to protect this information
from public disclosure.
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\435\ 12 U.S.C. 5512(c)(8) (``In . . . publicly releasing
information held by the Bureau, or requiring covered persons to
publicly report information, the Bureau shall take steps to ensure
that proprietary, personal, or confidential consumer information
that is protected from public disclosure under [the FOIA] or [the
Privacy Act of 1974, 5 U.S.C. 552a,] or any other provision of law,
is not made public under [the CFPA].'').
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The Bureau recognized that by relying in part on its supervisory
authority in section 1024 of the CFPA to require submission of
information to the nonbank registry, registry information could be
construed to be ``confidential supervisory information'' as defined in
the Bureau's confidentiality rules at 12 CFR 1070.2(i). The Bureau
stated that, under the proposal, public release of information pursuant
to Sec. 1092.204(a) would have been authorized by the Bureau's
confidentiality rules at 12 CFR 1070.45(a)(7), which permits the Bureau
to disclose confidential information ``[a]s required under any other
applicable law.'' The Bureau did not believe that the information
proposed to be published under Sec. 1092.204(a) would have raised the
concerns generally addressed by the Bureau's restrictions on disclosure
of confidential supervisory information. For example, the Bureau
anticipated that the information collected pursuant to Sec. 1092.202
would otherwise be subject to disclosure under the Freedom of
Information Act and would not be particularly sensitive to financial
institutions or compromise any substantial privacy interest; that
disclosure of the information would not impede the confidential
supervisory process; and that disclosure would not present risks to the
financial system writ large.
Proposed Sec. 1092.204(b)
Proposed Sec. 1092.204(b) would have provided that the publication
described in proposed Sec. 1092.204(a) would not have included the
written statement submitted under proposed Sec. 1092.203, and that
such information would be treated as confidential supervisory
information subject to the provisions of part 1070. The Bureau proposed
to require the submission of the written statement pursuant to CFPA
section 1024(b)(7), which authorizes the Bureau to prescribe rules
regarding registration, recordkeeping, and other requirements for
covered persons subject to its supervisory authority under CFPA section
1024. The Bureau believed that treating the written statements that it
would receive under proposed Sec. 1092.203 as confidential, and not
publishing them under proposed Sec. 1092.204, would facilitate the
Bureau's supervision of supervised registered entities by enabling the
Bureau to obtain frank and candid assessments and other information
from supervised registered entities regarding violations and
noncompliance in connection with covered orders. The Bureau believed
this information in turn would better enable the Bureau to spot
emerging risks, focus its supervisory efforts, and address underlying
issues regarding noncompliance, compliance systems and processes, and
risks to consumers.
The Bureau recognized that there may have been some benefit to
other users of the NBR system from publishing the written statements
that it would receive under proposed Sec. 1092.203, including
enhancing the ability of other agencies and affected consumers to
monitor compliance. However, the Bureau believed that these potential
benefits were likely to be outweighed by increased candor and
compliance with proposed Sec. 1092.203. The Bureau noted that its
supervision program depends upon the full and frank exchange of
information with the institutions it supervises. The Bureau explained
that, consistent with the policies of the prudential regulators, the
Bureau's policy is to treat information obtained in the supervisory
process as confidential and privileged.\436\ For example, the Bureau
explained in its proposal that it would treat all such information as
exempt from disclosure under exemption 8 of the Freedom of Information
Act.\437\ The Bureau believed that these considerations would also
underlie supervisory communications with supervised registered entities
under proposed Sec. 1092.203, and that the proposed approach would
enhance the usefulness of submissions under proposed Sec. 1092.203,
increase the Bureau's ability to detect and assess potential
noncompliance and emerging risks to consumers, and promote compliance
with the law.\438\
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\436\ See CFPB Compliance Bulletin 2015-01 (Jan. 27, 2015),
https://files.consumerfinance.gov/f/201501_cfpb_compliance-bulletin_treatment-of-confidential-supervisory-information.pdf; CFPB
Bulletin 2012-01 (Jan. 4, 2012), https://files.consumerfinance.gov/f/2012/01/GC_bulletin_12-01.pdf. Also consistent with the policies
of the prudential regulators, the Bureau recognized that the sharing
of confidential supervisory information with other government
agencies may in some circumstances be appropriate, and in some
cases, required. See id. For example, in accordance with the scheme
of coordinated supervision established by Congress, the Bureau's
policy is to share confidential supervisory information with the
prudential regulators and State regulators that share supervisory
jurisdiction over an institution supervised by the Bureau. See id.
\437\ See 5 U.S.C. 552(b)(8).
\438\ Proposed Sec. 1092.102(c) would have provided that
proposed part 1092 would not alter applicable processes whereby a
person may dispute that it qualifies as a person subject to Bureau
authority. The Bureau believed written statements submitted to the
NBR system under Sec. 1092.203 of the proposed rule (renumbered to
Sec. 1092.204 of the final rule) would constitute Bureau
confidential supervisory information under the regulatory definition
of that term even if the submitter later disputed that it qualified
as a person subject to the Bureau's supervisory authority. See 12
CFR 1070.2(i) (defining Bureau confidential supervisory
information), (q) (``Supervised financial institution means a
financial institution that is or that may become subject to the
Bureau's supervisory authority.'').
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Comments Received
Comments Received Regarding Proposed Sec. 1092.204(a)
General comments received regarding publication.
Many commenters opposed the proposal's approach to publication of
registry information, and either questioned whether the proposed public
registry was necessary or opposed publication of the registry.
Commenters stated that the proposed publication of the registry
information would create a much more elevated level of scrutiny and
risk for covered nonbanks subject to covered orders.
Consumer advocate commenters and some industry and individual
commenters generally supported the publication of the registry, stating
that it would provide a valuable resource to help regulators and
consumers. A consumer advocate commenter stated that the public
registry would be immensely useful for the Bureau and other Federal and
State regulators alike, and another consumer advocate commenter stated
that it would unify the efforts of the various enforcers of consumer
protection laws. A consumer advocate commenter stated that the public
registry would be particularly beneficial for low-income consumers. A
consumer advocate commenter agreed that making the proposed registry
public would enhance the ability of consumer advocacy organizations
conducting due diligence, and would better equip organizations to warn
consumers against companies with patterns or practices of illegal or
otherwise harmful behaviors. The consumer advocate commenter also
stated that searchable public databases like the proposed registry
empower consumers, regulators, and consumer advocates, and that the
registry would help protect older Americans and all consumers as well
as benefit Bureau supervision. Consumer advocate commenters stated the
information obtained from the public registry would also assist the
Bureau and other regulators in developing new regulations and other
reforms for consumer protection. Consumer advocate and industry
commenters stated that the public registry would
[[Page 56125]]
create heightened accountability and have a deterrent effect on
violations. Consumer advocate commenters stated that the public
registry would promote compliance with orders. An industry commenter
stated that the public registry would help entities conduct due
diligence and choose their service providers, would motivate nonbanks
to comply with the law, and would provide financial institutions with
examples of the types of acts and practices that constitute violations
of consumer financial protection laws.
See part V above for a discussion of comments regarding publication
received from other agencies during the Bureau's interagency
consultation process.
Comments received regarding alternatives to the proposal's approach
to publication.
Many commenters proposed alternatives to the proposal's approach to
publication of registry information. An industry commenter stated that
the Bureau could just provide links on a web page instead. An industry
commenter stated that the additional benefit of publication to
consumers was unclear in light of the existence of other, more user-
friendly registries. Another industry commenter stated that the Bureau
should instead work with State and other Federal agencies to create a
unified database. An industry commenter stated that the Bureau should
use its other tools instead to provide transparency and public
guidance, including the Bureau's Supervisory Highlights publication,
advisory opinions, and other rulemakings such as larger participant
rules. A consumer advocate commenter stated the Bureau should work with
the Federal Deposit Insurance Corporation (FDIC) and other regulators
to establish other similar registries in addition to establishing the
proposed Bureau registry. An industry commenter stated that the
publication of registry information might deter other regulators from
maintaining their own sites containing information about covered
orders.
An industry commenter stated that publication of information about
covered orders would lack context and be unfair and misleading because
entities are precluded from similarly publicly disclosing outcomes of
successful audits and examinations.
An industry commenter stated that the Bureau should permit a
covered nonbank to publish its own accompanying statement or
explanation in connection with information published in the registry so
that other financial institutions in the market and consumers can
better understand the reason for the covered order.
Comments received stating publication of registry information would
further improper purposes.
Commenters stated that the true purpose of publishing the registry
was to name and shame the entities that were registered as well as
their executives, to impose a ``scarlet letter'' on such persons, or to
punish such entities, and not the purposes stated in the Bureau's
proposal.
Industry commenters also stated that the Bureau's true purpose in
publishing registry information was to benefit plaintiffs' lawyers and
class action lawsuits against industry participants. Industry
commenters stated that the information published in the proposed
registry would be used against the covered nonbank in other litigation,
and that increased litigation and risk of litigation against covered
nonbanks will hurt consumers by raising costs.
Commenters stated that the references in the proposal and in
related Bureau statements identifying the proposed registry as relating
to ``repeat offenders'' indicated that the registry was being adopted
for an improper purpose. Commenters stated that the Bureau should not
call the proposed registry a ``repeat offender registry.'' Commenters
also questioned what it might mean to be a ``repeat offender'' as the
Bureau used that term, and what the consequences of such a designation
might be. An industry commenter stated that such a designation would
imply wrongdoing, even though the entity might not have admitted
liability. An industry commenter stated that such a designation would
mislead consumers by indicating that less significant violations listed
on the registry were comparable to more serious ones. An industry
commenter stated that the term ``repeat offenders'' was inflammatory,
and expressed concern that the Bureau would impose ``repeat offender
penalties'' based on non-CFPB orders. An industry commenter stated that
the use of such language demonstrated a belief on the part of the
Bureau that past violations are an indication of potential future
violations. And an industry commenter stated that the proposal did not
truly address ``repeat offenders'' but rather perhaps those businesses
who are not able to afford defending themselves from government
attacks.
Comments received regarding the publication of the name and title
of attesting executives.
The Bureau specifically requested comment on whether the
requirement to submit the name and title of the attesting executive
``would assist users of the NBR system and whether it would unduly
interfere with the privacy interests of the attesting executive or
other interests of the supervised entity.'' \439\ A consumer advocate
commenter stated that it would be appropriate to publish the name and
title of the attesting executive, and that the Bureau would be able to
make clear that the executive is not necessarily an at-fault
individual. Other commenters objected to the proposal's provisions
regarding the publication of the name and title of the attesting
executive. Commenters stated that publishing the name and title of the
attesting executive would impose reputational harm or would violate due
process and the presumption of innocence by shaming the executive and
the company. An industry commenter stated that the proposed requirement
to designate a current executive as an attesting executive would
unfairly implicate executives in previous wrongdoing, and that the rule
should only require designation of an attesting executive where the
executive had been serving at the time of the violations underlying the
order. Some industry commenters expressed privacy concerns about this
aspect of the Bureau's proposal. Most of the commenters generally
expressed this concern without added explanation, but one industry
commenter asserted that it was highly likely publishing this
information would result in these individuals being subject to unfair
and unjust harassment.
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\439\ 88 FR 6088 at 6102.
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Other comments received regarding publication.
An individual commenter stated that the proposed publication of
registry information would focus on larger companies, leading consumers
to smaller but possibly more harmful entities. Other commenters
asserted that smaller entities will be disproportionately affected. A
joint comment from industry groups stated that the proposed registry
would risk public trust in new and emerging companies. An industry
commenter stated that the proposed registry would deter consumers from
working with legitimate companies, including debt collection
businesses.
A consumer advocate commenter urged the Bureau to make the proposed
public database searchable, sortable, and downloadable.
Industry commenters and another commenter stated that the proposal
was contrary to the public policy behind the Fair Debt Collection
Practices Act
[[Page 56126]]
(FDCPA).\440\ A commenter stated that the proposal would publish the
names of covered nonbanks in order to punish and harm them in a manner
precluded by the FDCPA. An industry commenter stated that while the
proposal might not directly conflict with the FDCPA, it could prompt
additional interest in public information in court records and other
materials that might embarrass consumers.
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\440\ 15 U.S.C. 1692 et seq. The FDCPA is an enumerated consumer
law and a Federal consumer financial law, as provided at 12 U.S.C.
5481(12)(H) and (14).
---------------------------------------------------------------------------
Commenters disagreed with the Bureau's statements in the proposal
that publication of registry information would benefit other regulators
and agencies. An industry commenter stated that publication would be of
small or no benefit to other agencies because the orders published
under the proposal would already be public and because the relevant
State regulators already have adequate information about covered
orders.
Commenters stated that publication of the proposed registry would
confuse consumers and other public users, thus itself leading to risk
and harm to consumers.
Commenters stated that the proposal would present all orders as the
same, which would be misleading. An industry commenter stated that one
State's orders may not appropriately compare to other States, and
expressed concern that companies with covered orders addressing other
matters not related to consumer products, data, or market harm could
still inadvertently be included with companies that have an actual
track record of consumer harm. The commenter also asserted that orders
with effective dates before 2019 were less relevant to the registry
because covered nonbanks were more likely to have taken remedial steps
in connection with the order, and expressed concern that the
publication of such earlier orders together with orders issued later
would unfairly characterize the earlier orders as having the same
relevance as later ones. And the commenter stated that the registry
should only require registration once a nonbank became subject to at
least five non-expired covered orders.
Comments Received Regarding Proposed Sec. 1092.204(b)
The Bureau specifically sought comment on the proposed approach
with respect to treatment of the written statement,\441\ whether
treatment of written statement submissions as Bureau confidential
supervisory information was warranted, and whether the Bureau should
consider taking other steps to facilitate the submission of written
statements. An industry commenter expressed concern about proposed
Sec. 1092.203(b) and the Bureau's treatment of the written statements
submitted under proposed Sec. 1092.203, stating that the Bureau might
change its mind about protecting written statements as confidential
supervisory information.
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\441\ 88 FR 6088 at 6129.
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Response to Comments Received
Response to Comments Received Regarding Proposed Sec. 1092.204(a)
Response to general comments received regarding publication.
For the reasons given in the description of the proposal above and
further addressed below, the Bureau intends to publish a registry that
contains the identifying information for covered nonbanks that the
nonbank registry collects under Sec. 1092.202(c) and the information
regarding covered orders collected under Sec. 1092.202(d), as well as
certain information collected under Sec. 1092.203 for the purposes of
enabling users of the registry to identify NMLS-published covered
orders and the applicable covered nonbanks subject to them. Except as
described further below, the Bureau concludes that publication of such
information will be in the public interest. However, as described
further below, the Bureau is modifying the proposal to provide that the
Bureau may choose, in its sole discretion, not to publish such
information based on operational considerations.
The Bureau agrees with commenters that the nonbank registry's
centralization and republication of covered orders that are already
public may make them easier to locate and access, and thus somewhat
increase their visibility. That is part of the point of publishing
them. The Bureau believes that publication of registry information as
described in Sec. 1092.205 will serve the purposes described in part
IV.
Response to comments received regarding alternatives to the
proposal's approach to publication.
The Bureau does not agree that the proposed alternative approaches
to publication suggested by commenters would serve the purposes for
which the Bureau is adopting the final rule. Among other things, these
alternative approaches would be more resource intensive for Federal and
State agencies, including the Bureau, and would make it more difficult
to identify covered orders and the covered nonbanks that are subject to
them.
As discussed in part IV and the section-by-section discussion of
Sec. 1092.203 above, the Bureau is finalizing a new Sec. 1092.203
that provides, with respect to any NMLS-published covered order, a
covered nonbank that is identified by name as a party subject to the
order may elect to comply with the one-time registration option
described in that section in lieu of complying with the requirements of
Sec. Sec. 1092.202 and 1092.204. Also as discussed in part IV and the
section-by-section discussion of Sec. 1092.203 above, the Bureau
disagrees with commenters that the other sources of information
identified by commenters diminish the need for the nonbank registry, or
that the rule should accept registration of covered orders under those
sources in lieu of registration with the nonbank registry. While the
Bureau intends to continue using all of its available tools to promote
transparency and provide guidance as appropriate, the Bureau concludes
that it is also appropriate to adopt the final rule to accomplish the
purposes described herein.
With respect to the industry commenter's assertion that the
publication of registry information might deter other regulators from
maintaining their own sites containing information about covered
orders, first, the Bureau believes establishing the registry
accomplishes the goals established for it under the CFPA, and would do
so even if the effect described by this commenter were to occur. The
Bureau does not believe this consideration should outweigh the benefits
resulting from the final rule. Second, it is not clear this described
effect would occur, and whether it does or not depends upon many
factors outside the Bureau's control. Other agencies must make their
own decisions regarding how best to utilize their own resources to meet
their own goals and priorities. As described at part V, the Bureau
engaged in consultations with many Federal, State, and Tribal agencies
with respect to both the proposal and the final rule, as required by
the CFPA. No other agency, in those discussions or otherwise, has
indicated to the Bureau that it was considering ceasing the publication
of any of its own published orders in light of the final rule. Third,
even if the Bureau were to consider this potential effect, the Bureau
would expect it to be a very small one, since the Bureau expects
agencies would generally continue to maintain their current approach to
publishing their own orders. Many agencies are under an existing legal
obligation to publish their
[[Page 56127]]
orders.\442\ For agencies that have discretion over whether to publish
their orders enforcing the law, the Bureau does not anticipate that the
Bureau's rule would cause many, if any, agencies to change their
practices regarding publication. The orders defined as ``covered
orders'' under the final rule represent only a portion of the orders
issued or obtained by most, if not all, agencies other than the Bureau.
For example, covered orders do not include orders against individuals,
or that do not relate to covered laws. Likewise, other agencies may
have jurisdiction over entities that do not qualify as covered nonbanks
and thus are not subject to the final rule. The Bureau thus expects
that few, if any, agencies would modify their general practices
regarding publication to avoid a subset of their orders from appearing
in the Bureau's public registry. Therefore, the Bureau does not expect
the final rule to have much, if any, effect on the publication
decisions made by other agencies.
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\442\ See, e.g., 12 U.S.C. 1818(u) (requiring appropriate
Federal banking agencies to publish certain final orders and
agreements); 5 U.S.C. 552(a)(2)(A) (``[E]ach agency, in accordance
with published rules, shall make available for public inspection in
an electronic format . . . final opinions, including concurring and
dissenting opinions, as well as orders, made in the adjudication of
cases'').
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As explained above, an industry commenter expressed concern that
the Bureau's public registry would be unfair and misleading because it
would not contain information regarding successful audits and
examinations of registered entities. The Bureau disagrees. The
existence of prior successful audits or examinations does not render
the information that would be published in the registry inaccurate,
inconsistent, or misleading.
The consumer advocate commenter's suggestion to establish other
similar registries in addition to establishing the proposed Bureau
registry is outside the scope of the proposal, but the Bureau may
consider related action at a later date.
The Bureau declines to create a mechanism for a covered nonbank to
publish its own accompanying statement or explanation on the nonbank
registry in connection with information published in the registry. The
Bureau believes requiring the nonbank registry to publish such
statements would increase the complexity and costs associated with the
nonbank registry and may confuse users. The Bureau declines to
republish on its own registry statements provided by covered nonbanks
regarding either the Bureau's own orders or orders issued or obtained
by other agencies, especially as those statements may contain factual
or legal errors. The Bureau also declines to utilize its resources to
review and screen such statements for materials that may not be
appropriate to publish, such as personally identifiable information
about consumers. Such statements are not generally included with orders
published by the Bureau or by other agencies. Subject to other
applicable law, covered nonbanks would be free to issue their own
statements about a covered order or the matters underlying it.
Response to comments received stating publication of registry
information would further improper purposes.
The Bureau disagrees with the commenters stating publication of
registry information would further improper purposes. The Bureau
reiterates that its purposes in publishing registry information are
described in part IV and in the description of the Bureau's proposal
above, and include informing the public, other regulators, academic
researchers, consumer advocacy organizations, and public education
efforts regarding covered orders and the covered nonbanks that are
subject to them. Any publication by the Bureau of the information
collected through the registry is not intended to punish companies or
individuals for their past acts. As discussed in part IV(F) above,
consumers may benefit from the publication of the information collected
by the registry, including information about orders that are already
public. For example, the Bureau believes that, at least in certain
cases, publishing information about the entity and its applicable
orders in a public registry will help certain consumers make informed
decisions regarding their choice of consumer financial products or
services, especially if the information in the registry is
recirculated, compiled, or analyzed by other users such as consumer
advocacy organizations, researchers, or the media. And publication of
covered orders in the registry may also facilitate private enforcement
of the Federal consumer financial laws by consumers, to the extent
those laws provide private rights of action, where consumers have been
harmed by a registered nonbank. These purposes are consistent with the
public interest, with the Bureau's other purposes in publishing
registry information, and with the Bureau's statutory authorities. The
Bureau disagrees that its purpose in publishing such information is to
shame companies or executives that are listed in the registry.
With respect to the industry comments regarding use of published
orders in litigation, and potential additional costs that may be
associated, the covered orders subject to publication under Sec.
1092.205 are already public, which will limit the costs imposed on
firms by the final rule's publication provisions. As discussed in part
IV(F) above, the Bureau believes that users who have access to
information published in the registry may potentially use that
information to assist with the assertion of private rights of action
that might be available under the Federal consumer financial laws. That
is part of the reason the Bureau is issuing the final rule. The Bureau
disagrees that litigation brought by other agencies or consumers to
enforce rights under Federal consumer financial law, as applicable, is
necessarily inappropriate. While the registry information published
under the final rule may include plaintiffs' lawyers among its users,
or help inform class action lawsuits against industry participants, it
is not the purpose of the registry to encourage or promote lawsuits
purely for the sake of litigation. Rather, the Bureau is finalizing
Sec. 1092.205 for the purposes described in part IV and in the
description of final Sec. 1092.205 below. For additional discussion
about these and other potential costs associated with this provision,
see part VIII.
With respect to the comments regarding the statements in the
proposal and other related Bureau statements about ``repeat
offenders,'' one of the purposes of the rule is to help the Bureau
identify persons that repeatedly violate the law. The information that
the Bureau intends to publish under Sec. 1092.205 will help the Bureau
and other users identify entities that have violated the law, including
those that have become subject to more than one covered order. Such
entities would be more difficult to identify without the existence of
the registry because the information about these entities and orders is
scattered across multiple sources, and may no longer be accurate or
updated in a timely fashion. However, the proposal did not purport to
comprehensively define the term ``repeat offender'' \443\ or to
establish any specific legal consequences of any such designation, and
the Bureau declines to
[[Page 56128]]
do so in the final rule. The Bureau will use the information supplied
by the registry in accordance with relevant law, including to inform
its supervisory and enforcement functions. For example, as stated in
part IV(B) above, the information contained in the proposed registry
may be relevant in assessing civil penalties for violations of Federal
consumer financial laws, given that Congress has provided that such
penalties should take into account an entity's ``history of previous
violations'' and ``such other matters as justice may require.'' \444\
As stated in part IV(B) above, the Bureau may consider certain matters
identified in previous enforcement actions published in the nonbank
registry to be relevant under these provisions. But the final rule does
not establish new requirements or guidelines for such determinations,
which will be made in accordance with existing law.
---------------------------------------------------------------------------
\443\ But see 88 FR 6088 at 6095 (``Recidivism--whether in the
form of a company that repeatedly violates the law and as a result
becomes subject to multiple orders, or in the form of a company that
violates the orders to which it is subject--poses particular risks
to consumers.'').
\444\ See, e.g., 12 U.S.C. 5565(c)(3)(D), (E).
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Response to comments received regarding the publication of the name
and title of attesting executives.
The Bureau intends to publish the names and titles of attesting
executives designated under Sec. 1092.204(b).\445\ Publishing this
name and title information will provide information of use to
consumers, other regulators, industry, nongovernment organizations, and
the general public.
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\445\ As discussed further below, the Bureau is retaining the
discretion not to publish this information based on operational
considerations.
---------------------------------------------------------------------------
As explained elsewhere in this preamble, collecting information
regarding the name and title of the attesting executive for a given
covered order will provide the Bureau with insight into the entity's
organization, business conduct, and activities, and will inform the
Bureau's supervisory work, including its risk-based prioritization
process. As discussed in part IV(F) above, the Bureau believes this
information will be similarly valuable to other users of the nonbank
registry, and thus intends to publish it in connection with covered
orders registered by supervised registered entities. Disclosure of this
information would increase transparency regarding how the Bureau
processes and verifies information submitted as part of the nonbank
registry. Thus, publication would further the rationale of the
proposal--that is, enhancing oversight and awareness of covered orders
and the covered nonbanks that are subject to them. Publishing the name
and title of attesting executives for the covered orders listed on the
registry will bring specificity and concreteness to the information
that is available to users of the nonbank registry allowing users to
better understand the nature of particular covered orders, which
activities of the applicable supervised registered entity they relate
to, and who at the entity has control over the entity's efforts to
comply with a particular covered order. Publishing name and title
information for attesting executives could help consumers and consumer
advocacy organizations better understand and monitor the conduct of the
entities with whom consumers do business.
While the Bureau will treat the contents of the written statements
as CFPB confidential supervisory information (Sec. 1092.204(b)),
publishing the name and title of each supervised registered entity's
attesting executive(s) for each covered order will provide transparency
to users of the registry and the general public regarding important
matters connected with the applicable covered order. The entity will be
identified as potentially subject to Bureau supervision under CFPA
section 1024,\446\ the officers will be designated as satisfying the
criteria established in Sec. 1092.204(b) with respect to each covered
order, and registry users will be able to quickly and efficiently
identify which officer is responsible for filing the annual written
statement with respect to the covered order. Thus, the registry will
provide users with an up-to-date and accessible source of information
about supervised registered entities, the covered orders to which they
are subject, and the senior officers who are responsible for filing
annual written statements about those orders.
---------------------------------------------------------------------------
\446\ 12 U.S.C. 5514. While, under Sec. 1092.102(c) of the
final rule, an entity's compliance with Sec. 1092.204 would not
prevent the entity from disputing that it is subject to Bureau
supervision under 12 U.S.C. 5514, publication of the fact that an
entity has designated an attesting executive under Sec. 1092.204
would indicate to users of the nonbank registry that the entity may
be subject to Bureau supervision.
---------------------------------------------------------------------------
The Bureau does not intend, in publishing the name and title of the
attesting executive, to convey the impression that the executive is
solely responsible for compliance at the entity, or that problems with
the entity's compliance with the covered order should be directed
solely to the attention of the attesting executive, or that the
executive was necessarily in any way responsible for the entity's
violations of law or other actions or omissions that resulted in the
imposition of the covered order. The Bureau also disagrees with
commenters' assertions that the designation requirement will unfairly
implicate the attesting executive in previous wrongdoing, and declines
to adopt the industry commenter's suggestion that the rule should only
require designation of an executive where the executive had been
serving at the time of the violations underlying the order. As
discussed in the section-by-section discussion of Sec. 1092.204(b),
even for those covered orders that the Bureau is authorized to enforce,
Sec. 1092.204(b)'s requirement to designate an attesting executive
does not mean that the Bureau intends to hold that executive solely
responsible for the entity's compliance with those covered orders. For
example, Sec. 1092.204(b)'s requirements for the entity's designation
of its attesting executive(s) do not imply that the attesting executive
is, merely by dint of that individual's designation under the final
rule, more responsible or accountable than is a supervised registered
entity's board of directors for any of the entity's acts or omissions.
The Bureau acknowledges that some nonbank registry users may be
susceptible of misimpressions on these matters, and may misunderstand
the Bureau's publication of the executive's name and title as a
statement about the executive's culpability or responsibility.
Nevertheless, the Bureau does not believe this misconception will be
widespread, and believes the publication of the name and title of
attesting executives will generally be in the public interest for the
reasons discussed. As discussed in the section-by-section discussion of
Sec. 1092.204(b) above, the final rule does not establish any new
standards, or alter any existing standards, regarding individuals'
liability for supervised registered entities' violations of covered
orders or other legal obligations.
Likewise, publishing the name and title of the attesting executive
will not violate due process or the presumption of innocence. As
discussed above, such publication as provided in Sec. 1092.205 is
consistent with the public interest, with the Bureau's other purposes
in publishing registry information, and with the Bureau's statutory
authorities. The Bureau disagrees that publishing such information will
shame executives that are listed in the registry. Publishing such
information also does not impose criminal penalties on or otherwise
punish such executives. Publication will inform potential users of the
registry that the supervised registered entity has designated the
individual named on the grounds that the individual satisfies the
criteria established under Sec. 1092.204(b) with respect to the
particular covered order.
[[Page 56129]]
Those criteria do not carry any connotation of shame or wrongdoing, and
publication of such information is not a punishment or penalty.
The Bureau believes that the publication of the name and title of
the attesting executive associated with each covered order who
satisfies the criteria of Sec. 1092.204(b) with respect to that order
will be useful to users of the nonbank registry, and disagrees that it
will only cause reputational harm. For example, such information will
facilitate coordination and communication regarding the order between
the Bureau, other government agencies, and the supervised registered
entity. Other regulators, especially those that have issued covered
orders regarding the supervised entity, would likely benefit from
understanding which executive(s) have been tasked with ensuring
compliance with their orders. Clients or other companies that do
business with the entity would have a better understanding of which
areas of the company are affected by a covered order and who is
responsible for compliance with it. And researchers, media, and other
users of the information may be able to detect trends or patterns
associated with such information.
Such additional regulatory and public scrutiny of the individuals
who are so designated, and the awareness on the part of the executive
and supervised registered entity that other parties may associate the
executive's name with the entity's efforts to comply with the order,
will promote identification and assessment of risks to consumers and
compliance with the laws that the Bureau administers. In particular,
with respect to covered orders enforced by the Bureau, publication as
authorized under the final rule will help ensure accountability at the
entity for noncompliance and provide an incentive to pay more attention
to such covered orders.
One industry commenter challenged the Bureau's assertion that the
publication of name and title information would promote compliance,
asserting that because this information is already public in some other
form, it is difficult in the commenter's view to see how this
requirement creates an enhanced incentive other than creating negative
reputational costs. Since the requirement to designate an attesting
executive specific to each covered order stems from the rule itself and
is not a preexisting requirement, information about the name and title
of any particular attesting executive associated under the rule with a
particular covered order would not already be public information. The
Bureau believes that many attesting executives will already be publicly
identified as employees of these entities in some other way (e.g., on
the company's website or in filings, licenses, or registrations
required under applicable Federal or State securities or corporate
law). However, such sources would not generally provide information
regarding the entity's designation of attesting executives in the
manner prescribed by the final rule. Also, not all public sources of
information about the names and titles of executives may be as accurate
or reliable, or as frequently updated, as the Bureau's registry.
Publishing the name and title information in the nonbank registry
itself will enhance users' ability to identify accurate and up-to-date
information about such matters quickly, and to associate it with the
correct covered order and supervised registered entity. By enabling
enhanced monitoring of such matters, publication of the name and title
information will promote compliance and the identification and
assessment of risks to consumers.
One industry commenter asserted that publishing an attesting
executive's name and title would disrupt supervised registered
entities' normal complaint-handling procedures by creating a false
perception that reaching out to a particular executive would be more
effective. The Bureau agrees with the commenter that consumers
generally should not rely on the name and title of the attesting
executive as a tool for identifying where to direct their complaints or
inquiries. Section 1092.203(b) does not identify an executive's role in
the entity's complaint-handling process as one of the criteria for
designating an attesting executive, and consumers should not rely on
this designation for such a purpose. The Bureau acknowledges that the
notice of proposed rulemaking stated that publishing the attesting
executive's name and title would ``inform consumers of a person to whom
they could direct escalated complaints.'' \447\ However, in this final
rule, the Bureau is not adopting this rationale for publishing the name
and title of the attesting executive. The Bureau agrees with the
commenter that a supervised registered entity's normal complaint-
handling procedures may not always involve the designated executive in
the entity's complaint-handling process, and that consumers' escalating
of complaints or inquires to officers whom the entity has not
designated as responsible for fielding complaints or inquiries directly
from the public may not always be effective or appropriate. Nor should
consumers or other users of the nonbank registry utilize this
information for the purposes of harassment, badgering, or intimidation
of the entity's officers.
---------------------------------------------------------------------------
\447\ 88 FR 6088 at 6102.
---------------------------------------------------------------------------
However, as described in the proposal,\448\ it is possible that at
least under certain scenarios, consumers who are affected by a
supervised registered entity's compliance (or failure to comply) with a
covered order may benefit from knowing the name and title of the
executive who has knowledge and control of the supervised entity's
efforts to comply with the covered order. Publishing this information
will enable consumers to better understand the operations and structure
of the supervised registered entity--for example, which of the entity's
lines of business or business names has responsibility for the matters
addressed by the order, how their complaints or inquiries regarding
matters relating to the order may be addressed, and how the entity's
compliance efforts with respect to any one covered order may relate to
its efforts with respect to other such orders.
---------------------------------------------------------------------------
\448\ Id.
---------------------------------------------------------------------------
Likewise, as stated in the proposal,\449\ publication of executive
name and title information will enable employee whistleblowers, or
other consumers who have knowledge and information about violations of
the applicable order, to ensure that such information gets to the
appropriate department or office within the supervised registered
entity. Again, the Bureau agrees with commenters that whistleblowers
and consumers generally should not rely on the name and title of the
attesting executive as a tool for identifying the individual to whom to
direct this information. The final rule is not intended to require
supervised registered entities to establish different processes for
such matters or to require attesting executives to become responsible
for all whistleblower complaints. Nevertheless, publishing this
information will help whistleblowers and consumers better understand
the operations and structure of the supervised registered entity,
including where--using any applicable processes established by the
entity for obtaining information about such matters--to direct
whistleblowing complaints or information about violations of the
covered order in order to ensure that their complaint or information is
being sent to the appropriate part of the organization.
---------------------------------------------------------------------------
\449\ Id.
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[[Page 56130]]
One commenter asserted that publication of the name and title of
attesting executives would not ensure that supervised registered
entities are legitimate entities and are able to perform their
obligations to consumers under CFPA section 1024(b)(7)(C). First, to
the extent this comment is intended to assert that Sec. 1092.204(b)'s
designation requirement is unlawful, the Bureau disagrees; see parts
III and IV and the section-by-section discussion of Sec. 1092.204(b).
Second, this concern is not relevant to the Bureau's legal authority to
publish this information. While the Bureau is promulgating the written-
statement requirements, including the requirement to designate
attesting executive(s) and submit written statements, under its
authority under CFPA section 1024(b)(7)(A)-(C), the Bureau is also
collecting attesting executives' names and titles under its market-
monitoring authorities in CFPA section 1022(c),\450\ and it intends to
publish such information under its authority at CFPA section
1022(c)(3), not under CFPA section 1024(b)(7)(A)-(C).\451\
Nevertheless, the Bureau believes that publication of the name and
title information will in fact independently help ensure that
supervised registered entities are legitimate entities and are able to
perform their obligations to consumers. Publishing this information
will promote accountability and compliance at the supervised registered
entity, helping to ensure that the supervised registered entity takes
its legal duties seriously, and that it is not treating the risk of
enforcement actions for violations of legal obligations as a mere cost
of doing business. While the commenter questioned why an illegitimate
entity would register at all, the Bureau believes that not all entities
that register in compliance with the final rule will necessarily be
perfectly willing and able to comply with their other legal obligations
to consumers, including those imposed by Federal consumer financial
law. Collecting and publishing name and title information for attesting
executives will help ensure these entities are legitimate.
---------------------------------------------------------------------------
\450\ See id. at 6119.
\451\ As discussed in the proposed rule, see 88 FR 6088 at 6128,
the Bureau recognizes that the attesting executives' names and
titles could be construed as ``confidential supervisory
information'' as defined in the Bureau's confidentiality rules at 12
CFR 1070.2(i) because the Bureau is relying in part on its
supervisory authority in 12 U.S.C. 5514 to collect the information.
In the proposal, the Bureau explained that public release of
information pursuant to proposed Sec. 1092.204(a) would have been
authorized by the Bureau's confidentiality rules at 12 CFR
1070.45(a)(7), which permits the Bureau to disclose confidential
information ``[a]s required under any other applicable law.'' The
Bureau recognizes that 12 CFR 1070.45(a)(7) is no longer applicable
because publication under the final rule is discretionary. As such,
if the Bureau publishes the above-described information, it would do
so pursuant to an authorization from the Director in accordance with
12 CFR 1070.46.
---------------------------------------------------------------------------
With respect to commenters' privacy concerns, the only information
collected under Sec. 1092.204 related to the written statement that
would be published under Sec. 1092.205 is the attesting executive's
name and title. The Bureau would not publish any contact information
required to be submitted through the registry, which the Bureau intends
to obtain as ``administrative information'' pursuant to filing
instructions issued under Sec. 1092.102(a). It is not clear how
publication of this limited name and title information would result in
any harassment of the attesting executives. Moreover, under the Freedom
of Information Act,\452\ an individual's expectation of privacy is
diminished concerning matters where the individual is acting in a
business capacity.\453\ Finally, the rule requires that the attesting
executive be a high-ranking senior executive officer at the entity. As
such, the Bureau believes that many attesting executives will already
be publicly identified as employees of these entities in some other way
(e.g., on the company's website or in filings, licenses, or
registrations required under applicable Federal or State securities or
corporate law). The Bureau does not believe publishing the name and
title of the attesting executives implicates any more than a de minimis
privacy interest.
---------------------------------------------------------------------------
\452\ 5 U.S.C. 552.
\453\ See, e.g., Brown v. Perez, 835 F.3d 1223, 1234-37 (10th
Cir. 2016); King & Spalding, LLP v. U.S. Dep't of Health & Human
Servs., 395 F. Supp. 3d 116, 119-23 (D.D.C. 2019).
---------------------------------------------------------------------------
Response to other comments received regarding publication.
Commenters did not provide any data supporting their claims about
the likely size of covered nonbanks that would be subject to covered
orders. Likewise, the industry commenter provided no evidence that new
and emerging covered nonbanks are more likely to be subject to covered
orders, or that the proposed registry would impose an unfair burden on
them. While the Bureau does not expect the final rule to impose unfair
or disproportionate effects on either small or large covered nonbanks,
or based upon their new or emerging status, in any case the rule's
requirements do not depend upon such matters. The Bureau intends to use
the information it obtains through the rule to better understand the
size and other characteristics of entities that are subject to covered
orders. This information will be highly relevant and useful not just to
the Bureau but to all government regulators of covered nonbanks as well
as the other potential users of the registry discussed above. With
respect to potential costs associated with this provision on smaller
entities, see parts VIII and IX.
As part of the purpose of the Bureau's publication of registry
information under Sec. 1092.205 is to make the information available
and easily usable for a range of potential users, including the general
public, the Bureau intends to develop a nonbank registry with the goal
of making registry information searchable, sortable, and downloadable,
among other things.
The Bureau believes the registry is authorized by the CFPA and does
not conflict with other laws, including the FDCPA or its implementing
Regulation F.\454\ The Bureau disagrees with commenters' suggestion
that the Bureau's publication of information about covered orders and
covered nonbanks as described in Sec. 1092.205 is likely to lead to
the disclosure of embarrassing information about consumers. As stated
in part III(B), the Bureau's registry is designed to not collect any
protected proprietary, personal, or confidential consumer information,
and thus, the Bureau will not publish, or require public reporting of,
any such information under Sec. 1092.205.
---------------------------------------------------------------------------
\454\ See 12 CFR part 1006.
---------------------------------------------------------------------------
Notwithstanding commenters' assertions, the Bureau believes that
collection and publication of information will benefit other agencies,
for the reasons provided in the description of the proposed rule above.
The Bureau's publication of identifying information, which may not have
been previously made public, will enable other agencies, as well as
consumers and other users, to more readily identify companies that are
subject to covered orders and otherwise obtain relevant information
about them, such as their legal name and principal place of business.
While certain identifying information about covered nonbanks,
especially those that are subject to other disclosure obligations under
Federal and State securities laws or other laws, may already be
available, information about many covered nonbanks may not be publicly
available. Nor will all covered nonbanks necessarily be subject to
licensing regimes or, even if they are so subject, be duly licensed and
registered in every jurisdiction where it is required. Publication by
the Bureau of identifying information under Sec. 1092.205 also will
present such information in a consistent and readable
[[Page 56131]]
format and will otherwise assist other agencies as well as other
registry users in locating and using this information. In addition,
Bureau publication of information regarding covered orders as described
under Sec. 1092.205 will collect and organize that information and
make it easier to find and use. By requiring covered nonbanks to
provide and maintain information about the orders under Sec.
1092.202(d), the final rule will help ensure that other agencies and
other users have ready access to collected and updated information
about covered orders that may be relevant to their jurisdiction. As
described in part V above, during interagency consultation some
agencies stated they would use the information published in the
registry, while others stated they would not.
See the section-by-section discussion of Sec. 1092.203 above with
respect to comments received regarding potential consumer confusion
that commenters stated could be caused by the publication of
information in the proposed registry in connection with the NMLS
Consumer Access website, and the Bureau's adoption of optional one-time
registration of NMLS-published covered orders under that section. As to
other types of consumer confusion addressed by commenters, in the
proposal,\455\ the Bureau acknowledged there may be some uncertainty
over the degree to which consumers would use the publicized information
and, when they do, over how consumers could interpret such information.
The Bureau stated that it would continue to evaluate the possibility
that publishing information collected under subpart B has the potential
to create confusion, which, to the extent it occurs, is unlikely to
serve the public interest. And the Bureau stated that, if it finalized
the proposed provision on publishing registry information, it would
consider options for publishing the information in a manner that
mitigates this risk. No commenter submitted specific suggestions.
---------------------------------------------------------------------------
\455\ 88 FR 6088 at 6128.
---------------------------------------------------------------------------
To be clear, registration of any covered person under the final
rule does not constitute endorsement by the Bureau or any other agency
of the Federal Government. Registered entities may also be subject to
orders that are not published in the registry.
The Bureau does not believe, and does not intend by finalizing the
rule or publishing information under Sec. 1092.205 to suggest, that
all covered orders are somehow equivalent. To the contrary, the Bureau
understands that covered orders are likely to vary widely in many ways,
including in the types of covered nonbanks they are issued against, the
types of covered laws they enforce, the type and magnitude of the harm
to consumers they address, the types of remedies they impose, their
duration, and any number of other matters. One of the reasons the
Bureau is adopting the final rule is so that it may collect and review
covered orders, including from covered nonbanks that it may not know
about, in order to better understand such issues. As discussed in the
section-by-section discussion of Sec. 1092.201(e), the Bureau does not
believe these differences among covered orders require modification of
the proposal. An order that satisfies the definition of the term
``covered order'' is subject to the rule's requirements with respect to
such orders, to the extent they apply.
Nor does the Bureau believe that any differences among covered
orders would render publication of such orders or the other
registration information required by the rule to be misleading or
inappropriate. To the contrary, publication of the information
collected through the registry will better enable users to review and
understand such covered orders directly for themselves, and thus to
better appreciate any differences among them that may exist. Thus,
publication of registry information as intended by the Bureau will
accord with the Bureau's objectives and functions under the CFPA of,
among other things, ensuring that ``markets for consumer financial
products and services are fair, transparent, and competitive,'' \456\
and ``publishing information relevant to the functioning of markets for
consumer financial products and services'' to facilitate
``identify[ing] risks to consumers and the proper functioning of such
markets.'' \457\ Publication of the copies of covered orders obtained
under Sec. 1092.202(d)(1) will provide users with the opportunity to
review the differences among covered orders.
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\456\ See 12 U.S.C. 5511(a).
\457\ See 12 U.S.C. 5511(c)(3).
---------------------------------------------------------------------------
The Bureau's potential publication of information relating to
consent orders as described at Sec. 1092.205 will not provide
inaccurate, inconsistent, or misleading information to consumers, as
the Bureau will simply be collecting and presenting factual information
regarding orders that are already published (or required to be
published) elsewhere. As discussed in parts VIII and IX below, the
Bureau concludes that the publication provisions of the rule will
impose only minor costs on affected entities resulting from changes in
consumer behavior. Publication of information as intended by the Bureau
will enable users of the registry to access relevant factual
information about covered nonbanks and covered orders and will not
cause, but rather help prevent, confusion and the distribution of
misleading information.
With respect to the commenter's objection to the publication of
older orders, as discussed in the section-by-section discussion of
Sec. 1092.201(e) above, the Bureau acknowledges that in the
intervening time following the issuance of a covered order and before
registration, it is possible that many entities will have taken steps
to address the violations and other issues identified in the covered
order. But information regarding the issuance of such a covered order,
and the information that will be collected under the final rule about
the covered nonbank and the order, will still be useful to users of the
registry. With respect to the comment that the Bureau should only
require registration once a covered order has become subject to a
minimum of five covered orders, the Bureau concludes that such an
approach would omit useful information about both covered nonbanks and
covered orders and would otherwise not further the purposes of the
final rule. The Bureau also concludes that such an approach is not
necessary in order to limit confusion for users of the registry. As
discussed above, while the Bureau may publish information about covered
nonbanks and covered orders as authorized under Sec. 1092.205 in part
to facilitate identification of entities that repeatedly break the law,
the Bureau in this final rule does not purport to comprehensively
define the term ``repeat offender'' or to establish any specific legal
consequences of any such designation.
For further discussion of these and other comments regarding
potential confusion related to the publication of information about
covered orders, see the section-by-section discussion of Sec.
1092.201(e) above.
The Bureau concludes that publication of the information collected
under the registry with respect to such covered orders as described in
Sec. 1092.205 will serve the purposes described herein.
Response to Comments Received Regarding Proposed Sec. 1092.204(b)
For the reasons given in the description of proposed Sec.
1092.204(b) above, the Bureau concludes that treating the written
statements that it receives under Sec. 1092.204 of the final
[[Page 56132]]
rule as CFPB confidential supervisory information, and not publishing
them under Sec. 1092.205 of the final rule, would facilitate the
Bureau's supervision of supervised registered entities by enabling the
Bureau to obtain frank and candid assessments and other information
from supervised registered entities regarding violations and
noncompliance in connection with covered orders. This information in
turn would better enable the Bureau to spot emerging risks, focus its
supervisory efforts, and address underlying issues regarding
noncompliance, compliance systems and processes, and risks to
consumers. The final rule adopts the proposal's approach and identifies
the written statement as CFPB confidential supervisory information
under Sec. 1092.204(a)(1). The Bureau believes its existing
regulations under part 1070 are adequate to establish safeguards for
protecting the confidentiality of such information.
Final Rule
For the reasons described in parts III(B), IV(F), the section-by-
section discussion of Sec. 1092.205(a) above, and as follows, the
Bureau is not finalizing Sec. 1092.204(a) as proposed, but is instead
adopting a revised Sec. 1092.205(a) that provides that the Bureau
``may'' publish the information submitted to the nonbank registry
pursuant to Sec. Sec. 1092.202 and 1092.203.\458\ As described below,
this provision will preserve the Bureau's discretion not to publish
information based on operational considerations, such as resource
constraints. The Bureau is also adopting proposed Sec. 1092.204(b),
which would have provided that the Bureau would not publish the annual
written statement and would treat it as Bureau confidential supervisory
information, largely as proposed but with revisions to reflect the
renumbering of this provision as Sec. 1092.205(a)(1) of the final
rule. The Bureau is also adopting a provision at Sec. 1092.205(a)(2)
that expressly provides that the Bureau will not publish administrative
information collected pursuant to subpart B.
---------------------------------------------------------------------------
\458\ See the section-by-section discussion of Sec. 1092.101(d)
above regarding the Bureau's adoption of the revised term ``nonbank
registry.''
---------------------------------------------------------------------------
Except as described below, the Bureau intends to publish a registry
that contains the identifying information for covered nonbanks that the
nonbank registry collects under Sec. 1092.202(c) and the information
regarding covered orders collected under Sec. 1092.202(d) and (f), as
well as certain information collected under Sec. 1092.203 for the
purposes of enabling users of the registry to identify NMLS-published
covered orders and the applicable covered nonbanks subject to them.
Under CFPA section 1022(c)(3), the Bureau ``shall publish not fewer
than 1 report of significant findings of its monitoring required by
this subsection in each calendar year,'' and ``may make public such
information obtained by the Bureau under this section as is in the
public interest.'' \459\ Except as described below, the Bureau finds
that it would be in the public interest to publish information (other
than ``administrative information,'' which the final rule provides the
Bureau will not publish) that has been appropriately submitted to the
nonbank registry as required under Sec. 1092.202. In addition, except
as described below, the Bureau finds that the publication of certain
information submitted under Sec. 1092.203 will be in the public
interest where publication would serve the purposes of allowing users
of the Bureau's public registry to identify that a covered nonbank has
become subject to a covered order and to be able to locate information
about that covered nonbank and covered order on the NMLS Consumer
Access website. The Bureau may also collect additional information
under Sec. 1092.203 for the purpose of coordinating the nonbank
registry with the NMLS that it may choose not to publish. The Bureau
concludes that such publication of the above-described information will
be in the public interest for the reasons provided in parts III(B) and
IV(F) and this section-by-section discussion of Sec. 1092.205(a).
---------------------------------------------------------------------------
\459\ 12 U.S.C. 5512(c)(3).
---------------------------------------------------------------------------
However, and notwithstanding the conclusions in the paragraph
above, the Bureau reserves discretion not to publish information based
on operational considerations, including resource constraints.
In light of the adopted provision providing the Bureau with
discretion not to publish any or all of the information collected, the
Bureau is not finalizing the provision in the proposed rule that would
have expressly reserved the right not to publish any information that
it determines may be inaccurate, not required to be submitted under
subpart B, or otherwise not consistent with part 1092 and any
accompanying guidance. However, under the final rule, the Bureau
retains the discretion not to publish any information that it
determines may be inaccurate, not required to be submitted under
subpart B, or otherwise not consistent with part 1092 and any
accompanying guidance.
The final rule provides that the publication described in Sec.
1092.205(a) will not include the annual written statement submitted by
supervised registered entities under Sec. 1092.204. The Bureau adopts
Sec. 1092.204(b) as proposed (renumbered as Sec. 1092.205(a)(1)) for
the reasons described above, with minor revisions to reflect the
renumbering of Sec. 1092.204 and this provision.
The Bureau is also adopting a provision at Sec. 1092.205(a)(2)
that expressly provides that the publication described in Sec.
1092.205(a) will not include ``administrative information,'' as that
term is defined at Sec. 1092.201(a). The proposed rule had reserved
the Bureau's right not to publish administrative information, but did
not expressly prohibit its publication under proposed Sec.
1092.204(a). However, the Bureau concludes that administrative
information should not be made publicly available under Sec.
1092.205(a). The identifying information collected under Sec.
1092.202(c) already will facilitate the ability of consumers to
identify covered persons for purposes of the Bureau's authority in CFPA
section 1022(c)(7)(B) to publicly disclose registration information.
Further, including administrative information with other information
the Bureau publishes pursuant to Sec. 1092.205(a) is unlikely to serve
the public interest for purposes of the Bureau's authority to publish
information under CFPA section 1022(c)(3). The publication of
information collected for a purely administrative purpose generally
will not be useful to external users of the registry. Administrative
information is likely to include information such as time and date
stamps, contact information, and administrative questions. The Bureau
may need such information to work with personnel at nonbanks and in
order to administer the nonbank registry. As discussed in the section-
by-section discussion of Sec. 1092.201(a) above, the Bureau will also
treat as administrative information the notifications of
nonregistration submitted under Sec. Sec. 1092.202(g) and 1092.204(f).
Publishing such information would not be in the public interest because
it is unclear what use the public would have for such information. In
addition, publishing such information likely would be counterproductive
to the goals of ensuring compliance with the proposal.
Also, as discussed in the section-by-section discussion of Sec.
1092.202(d) above, under the final rule, the Bureau will treat as
``administrative information'' and not publish information collected
under the nonbank registry regarding the names of the person's
affiliates registered under
[[Page 56133]]
subpart B with respect to the same covered order. The proposal would
have collected this information under proposed Sec. 1092.202(d)(1)(v)
and published it under Sec. 1092.204(a). Under the final rule, Sec.
1092.201(d)(1)(v) has been deleted, but the Bureau may determine to
collect this information as ``administrative information'' under Sec.
1092.202(c). In filing instructions issued under Sec. 1092.102(a), the
Bureau will specify whether and how it will collect such information.
The Bureau anticipates that collecting such affiliate information may
be useful in administering the nonbank registry including in connection
with administering any joint or combined submissions by affiliates
under Sec. 1092.202. However, while such affiliate information will
generally be obvious from the face of the relevant covered order or
otherwise from information that has been reported publicly, it may not
always be, and the Bureau at this time does not believe that there
would be a significant public benefit associated with publishing this
information through its registry. Therefore, the Bureau has determined
not to mandate the collection of such information in the final rule,
and not to publish such information under Sec. 1092.205 if it is
collected.
Section 1092.205(b) Other Publications of Information
Proposed Rule
Proposed Sec. 1092.204(c) would have provided that the Bureau may,
at its discretion, compile and aggregate data submitted by persons
under proposed subpart B and may publish such compilations or
aggregations (in addition to any other publication under proposed Sec.
1092.204(a)). The Bureau explained that any such publication that
relates to annual written statements submitted under proposed Sec.
1092.203 would be in a form that is consistent with the Bureau's
treatment of those annual written statements as Bureau confidential
supervisory information.\460\
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\460\ See, e.g., 12 CFR 1070.41(c).
---------------------------------------------------------------------------
Comments Received
Commenters did not specifically address proposed Sec. 1092.204(c).
Final Rule
For the reasons set forth in the above description of the proposal,
the Bureau adopts Sec. 1092.204(c) as proposed (renumbered as Sec.
1092.205(b)), with minor technical edits. Any publication under Sec.
1092.205(b) that relates to administrative information submitted to the
nonbank registry under Sec. 1092.202 will be in an aggregated or other
appropriate format that is designed not to disclose that particular
administrative information relates to a particular covered nonbank.
Section 1092.205(c) Correction of Submissions to the Nonbank Registry
Proposed Rule
Proposed Sec. 1092.204(d) would have clarified that a covered
nonbank must correct an information submission within 30 days of when
it becomes aware or has reason to know the submitted information was
and remains inaccurate. Proposed Sec. 1092.204(d) would have clarified
that the process for making corrections will be described in the filing
instructions the Bureau issues pursuant to proposed Sec. 1092.102(a).
Proposed Sec. 1092.204(d) also would have clarified that the Bureau
may direct a covered nonbank to correct errors or other non-compliant
submissions to the NBR system. Under proposed Sec. 1092.204(d), the
Bureau could have directed corrections at any time and in its sole
discretion.
Comments Received
Commenters did not specifically address proposed Sec. 1092.204(d).
Final Rule
For the reasons set forth in the above description of the proposal,
the Bureau adopts Sec. 1092.204(d) as proposed (renumbered as Sec.
1092.205(c)), with minor technical changes.\461\
---------------------------------------------------------------------------
\461\ See the section-by-section discussion of Sec. 1092.101(d)
above regarding the Bureau's adoption of the revised term ``nonbank
registry.''
---------------------------------------------------------------------------
Section 1092.206 Nonbank Registry Implementation Dates
Proposed Rule
Proposed Sec. 1092.101(e) would have defined the term ``nonbank
registration system implementation date'' to mean, for a given
requirement or subpart of part 1092, the date(s) determined by the
Bureau to commence the operations of the NBR system in connection with
that requirement or subpart. As stated in the proposal, the Bureau
proposed to provide advance public notice regarding the nonbank
registration system implementation date with respect to proposed
subpart B to enable entities subject to subpart B to prepare and submit
timely filings to the NBR system.
Comments Received
Commenters did not specifically address the definition of ``nonbank
registration system implementation date'' in proposed Sec.
1092.101(e). For a discussion of comments addressing the timing of the
effective date of the Bureau's proposed rule, see part VII below.
Final Rule
For the reasons discussed below and in the section-by-section
discussion of Sec. 1092.101(e) above and part VII below, the Bureau is
adopting the revised term ``nonbank registry implementation date''
instead of the term ``nonbank registration system implementation date''
used in the proposed rule and is adopting a revised definition of this
term to provide that the Bureau may specify a nonbank registry
implementation date with respect to a given person or category of
persons. The Bureau is also adopting Sec. 1092.206 to specify the
nonbank registry implementation date for given categories of covered
nonbanks. The Bureau is not adopting the proposal to provide in the
rule that the Bureau would specify the ``nonbank registration system
implementation date'' for subpart B following the issuance of the final
rule. Instead, to provide greater certainty and clarity to covered
nonbanks as of the issuance of the final rule, the Bureau is specifying
nonbank registry implementation dates for subpart B in Sec. 1092.206
of the final rule.
The nonbank registry implementation date established under Sec.
1092.206 is relevant to two provisions of the final rule. As provided
in Sec. 1092.202(b)(2)(i), each covered nonbank required to register
under Sec. 1092.202 must submit a filing containing the information
described in Sec. 1092.202(c) and (d) to the nonbank registry within
the later of 90 days after the applicable nonbank registry
implementation date under Sec. 1092.206 or 90 days after the effective
date of any applicable covered order. And as provided in Sec.
1092.204(a)(1), Sec. 1092.204 applies only with respect to covered
orders with an effective date on or after the applicable nonbank
registry implementation date. Thus, this provision will affect the
timeframe for submission of covered orders during the initial rollout
of the nonbank registry and the covered orders that will be subject to
Sec. 1092.204's written-statement requirements.
Section 1092.206 establishes the nonbank registry implementation
date for purposes of subpart B as follows. Under Sec. 1092.206(a)(1),
for a covered nonbank that (as of the effective date of subpart B) is a
larger participant of a market for consumer financial products or
services described under CFPA section 1024(a)(1)(B) as defined by one
or more rules issued by the Bureau, the nonbank registry implementation
date for subpart B is 30 days after subpart B
[[Page 56134]]
takes effect with respect to that covered nonbank. Under Sec.
1092.206(a)(2), for a covered nonbank that (as of the effective date of
subpart B) is described under any other provision of CFPA section
1024(a)(1), the nonbank registry implementation date for subpart B is
120 days after subpart B takes effect with respect to that covered
nonbank. Under Sec. 1092.206(a)(3), for any other covered nonbank, the
nonbank registry implementation date for subpart B is 210 days after
subpart B takes effect with respect to that covered nonbank. (Section
1092.206(a)(3) shall apply to a covered nonbank that for the first time
becomes subject to the Bureau's supervision and examination authority
under CFPA section 1024(a)(1) after the effective date of subpart B.)
For the administrability of the nonbank registry, which has
numerous potential registrants, the Bureau has determined that
registering different categories of nonbank covered persons in
different phases will be appropriate. The phased implementation
approach will also alleviate potential confusion in complying with the
requirements of the final rule and promote greater stability and
certainty for registered entities. This phased implementation approach
will better enable the Bureau to learn from the information collected
and its experience in maintaining the registry, and to enhance its
processes before information from a wider universe of covered nonbanks
is collected. As described above, the first phase under subpart B will
register larger participants, the second phase will register other
supervised nonbanks, and the third phase will register other covered
nonbanks. Larger participants generally have greater resources to
comply with the rule's requirements than do smaller business concerns.
Other supervised markets may include smaller business concerns that are
affected by the rule to the extent they are not excluded, such as by
the exclusion for entities with less than $5 million in relevant
receipts described in Sec. 1092.201(q) discussed in the section-by-
section discussion of that paragraph above. As a result, the phased
registration groupings described above (registering larger participants
first, then other covered nonbanks supervised under any other provision
of CFPA section 1024(a)(1), then other covered nonbanks) would leave
more time for most supervised registrants that are not larger
enterprises to comply with the registration requirements. In addition,
the Bureau believes it is appropriate to begin collecting information
from covered nonbanks that are subject to the Bureau's supervision and
examination authority first before extending the rule's registration
requirements to other covered nonbanks, as such information will
generally be more relevant to the Bureau's supervisory prioritization
efforts and its supervision program.
The Bureau is also adopting Sec. 1092.206(b), which clarifies that
if paragraph (a) would establish a nonbank registry implementation date
on a date that is a Saturday, Sunday, or Federal holiday, the
applicable nonbank registry implementation date will be the next day
that is not a Saturday, Sunday, or Federal holiday. Therefore, given an
effective date for the final rule of September 16, 2024, for purposes
of subpart B the nonbank registry implementation date established under
Sec. 1092.206(a)(1) will be Wednesday, October 16, 2024; under Sec.
1092.206(a)(2), the date will be Tuesday, January 14, 2025; and under
Sec. 1092.206(a)(3), the date will be Monday, April 14, 2025.
VII. Effective Date of Final Rule
Proposed Rule
The Administrative Procedure Act generally requires that rules be
published not less than 30 days before their effective dates.\462\ The
Bureau proposed that, once issued, the final rule would be effective 30
days after it is published in the Federal Register. However, it
proposed that registrants would only need to submit information once
the Bureau launched and announced a registration system, which the
proposal noted was likely to be no earlier than January 2024.
---------------------------------------------------------------------------
\462\ 5 U.S.C. 553(d).
---------------------------------------------------------------------------
Comments Received
An industry commenter stated that the effective date of the rule
should be at least a year from the date it is promulgated, in order to
provide adequate time to establish the suggested processes, procedures,
and reports in addition to adding additional staff to support the
process that would be required under the proposal.
Response to Comments Received
The final rule will take effect on September 16, 2024. The Bureau
disagrees with the commenter that additional time will be needed for
entities to comply with the final rule. The final rule's effective date
is more than three months from the issuance of the rule, and more than
60 days after anticipated publication in the Federal Register. This is
a longer time period than the 30 days in the proposed rule. This longer
period will provide additional time for covered nonbanks to prepare to
comply with their obligations under the final rule. In addition, as
discussed in the section-by-section analysis of Sec. 1092.206 above,
for the administrability of the nonbank registry the Bureau has
determined that registering different nonbank covered persons in
different phases will be appropriate. This phased implementation
approach will better enable the Bureau to learn from the information
collected and its experience in maintaining the registry, and to
enhance its processes before information from a wider universe of
covered nonbanks is collected. The Bureau is also specifying nonbank
registry implementation dates for subpart B in Sec. 1092.206 of the
final rule to provide greater certainty and clarity to covered nonbanks
as of the issuance of the final rule. Given an effective date of
September 16, 2024, the earliest nonbank registry implementation date
is Wednesday, October 16, 2024, or 30 days after the final rule's
effective date, and no entity will be required to submit any
information to the nonbank registry before Tuesday, January 14, 2025.
In addition, the reporting obligations imposed by the rule are
modest. As discussed further in part VIII, the impact of the
registration provisions of the rule on affected firms would be limited,
and, relative to the baseline, the written-statement requirements
should impose only modest costs on most covered entities. The Bureau
disagrees with the industry commenter that covered nonbanks will be
required to adopt costly new processes or hire a significant number of
additional staff in order to achieve compliance with the final rule.
Final Rule
The effective date of the final rule is September 16, 2024. This
date is more than three months after the issuance of the rule, and more
than 60 days after anticipated publication in the Federal Register.
This is a longer time period than the 30 days in the proposed rule.
This longer time period will provide additional time for covered
nonbanks to prepare to comply with their obligations under the final
rule.
VIII. Dodd-Frank Act Section 1022(b)(2) Analysis
A. Overview
In developing this final rule, the Bureau has considered the rule's
potential benefits, costs, and impacts.\463\
[[Page 56135]]
In developing this final rule, the Bureau has consulted with, or
offered to consult with, the appropriate prudential regulators and
other Federal agencies, including regarding consistency with any
prudential, market, or systemic objectives administered by such
agencies. Under CFPA sections 1022(c)(7)(C) and 1024(b)(7)(D), the
Bureau has also consulted with State agencies regarding this final
rule's requirements and registry.\464\
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\463\ Specifically, section 1022(b)(2)(A) of the CFPA requires
the Bureau to consider the potential benefits and costs of the
regulation to consumers and covered persons, including the potential
reduction of access by consumers to consumer financial products and
services; the impact of the proposed rule on insured depository
institutions and insured credit unions with $10 billion or less in
total assets as described in section 1026 of the CFPA; and the
impact on consumers in rural areas. 12 U.S.C. 5512(b)(2)(A).
\464\ 12 U.S.C. 5512(c)(7)(C), 5514(b)(7)(D).
---------------------------------------------------------------------------
The Bureau is issuing this final rule to require nonbanks to report
certain public agency and court orders imposing obligations based on
violations of consumer protection laws because the creation and
maintenance of a central repository for information regarding such
public orders that have been imposed upon nonbank covered persons will
support Bureau functions in a variety of ways and thus ultimately
benefit consumers. The Bureau also believes that consumers, the public,
and other potential users of the proposed registry would benefit if the
Bureau publishes certain information from the registry, as it intends
to do.\465\ In addition, the Bureau's receipt of annual supervisory
reports from its supervised nonbanks regarding their compliance with
such orders would facilitate the Bureau's supervisory efforts and
assessment and detection of risks to consumers and help ensure that
supervised nonbanks are legitimate entities and are able to perform
their obligations to consumers.
---------------------------------------------------------------------------
\465\ For more information on the issue of publication, see the
section-by-section discussion of Sec. 1092.205.
---------------------------------------------------------------------------
This final rule has three principal sets of substantive provisions,
which are separately analyzed below. The first set of provisions
(hereinafter referred to as the ``Registration Provisions'') will
require nonbank covered persons that are subject to certain public
orders to register with the Bureau and to submit certain information
related to those public orders to the Bureau. The second set of
provisions (hereinafter referred to as the ``Supervisory Reports
Provisions'') will require nonbank covered persons that are subject to
supervision and examination by the Bureau to prepare and submit an
annual written statement, signed by a designated individual, regarding
compliance with each covered public order. The third set of provisions
(hereinafter referred to as the ``Publication Provisions'') describes
the registration information the Bureau may make publicly available.
The Bureau received multiple comments on the proposal stating that
the proposed registry was redundant with existing registries and other
published information, and in particular with the NMLS. See the
section-by-section analysis of Sec. 1092.203 above for a discussion of
these comments and the Bureau's response. Consistent with an approach
suggested by commenters, the Bureau is adopting an express exception
from the requirements of the rule for orders that are published on the
NMLS Consumer Access website, except for orders issued or obtained at
least in part by the Bureau; that exception may be exercised at the
option of the covered nonbank. Nonbanks that exercise this option may
submit a one-time registration regarding certain agency and court
orders that are published on the NMLS Consumer Access website
maintained at www.NMLSConsumerAccess.org, in lieu of complying with the
other requirements of the rule with respect to the order. Such nonbanks
will be required to submit certain limited information to the nonbank
registry to enable the Bureau to identify the relevant nonbank and
order and otherwise coordinate the nonbank registry with the NMLS. Upon
exercising this option and submitting the required information about
the relevant order, a nonbank will have no further obligation under
subpart B to provide information to, or update information provided to,
the nonbank registry regarding the order. By allowing this option, this
final rule addresses many comments received and lowers the cost to
firms of the final rule relative to the proposed rule.
B. Data Limitations and Quantification of Benefits, Costs, and Impacts
The discussion below relies in part on information that the Bureau
has obtained from commenters, other regulatory agencies, and publicly
available sources. The Bureau has performed outreach with other
regulatory agencies on many of the issues addressed by this final rule.
However, as discussed further below, the data are generally limited
with which to quantify the costs, benefits, and impacts of the final
provisions. In light of these data limitations, the analysis below
generally provides a qualitative discussion of the benefits, costs, and
impacts of the final provisions. General economic principles and the
Bureau's experience and expertise in consumer financial markets,
together with the limited data that are available, provide insight into
these benefits, costs, and impacts.
C. Baseline for Analysis
In evaluating the benefits, costs, and impacts of the final rule,
the Bureau takes as a baseline the current legal framework regarding
orders that will be covered under the final rule. Therefore, the
baseline for the analysis of the final rule is that nonbank covered
persons are not required to register with the Bureau, nonbank covered
persons subject to Bureau supervision and examination generally are not
required to prepare and submit annual reports regarding compliance with
public orders enforcing the law, and information on the nonbank covered
persons and most corresponding covered orders is generally not
published by the Bureau in the manner contemplated by the final rule.
The final rule should affect the market as described below for as
long as it is in effect. However, the costs, benefits, and impacts of
any rule are difficult to predict far into the future. Therefore, the
analysis below of the benefits, costs, and impacts of the final rule is
most likely to be accurate for the first several years following
implementation of the final rule.
D. Potential Benefits and Costs of the Final Rule to Consumers and
Covered Persons
With certain exceptions, the final rule will apply to covered
persons as defined in the CFPA, including persons that engage in
offering or providing a consumer financial product or service.\466\
Among others,\467\ these products and services generally include those
listed below, at least to the extent they are offered or provided for
use by consumers primarily for personal, family, or household purposes:
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\466\ For the full scope of the term ``covered person,'' see 12
U.S.C. 5481(6).
\467\ For the full scope of the term ``consumer financial
product or service,'' see 12 U.S.C. 5481(5).
---------------------------------------------------------------------------
Extending credit and servicing loans;
Extending or brokering certain leases of personal or real
property;
Providing real estate settlement services;
Engaging in deposit-taking activities, transmitting or
exchanging funds, or otherwise acting as a custodian of funds;
Selling, providing, or issuing stored value or payment
instruments;
Providing check cashing, check collection, or check
guaranty services;
[[Page 56136]]
Providing payments or other financial data processing
products or services to a consumer by any technological means;
Providing financial advisory services;
Collecting, analyzing, maintaining, or providing consumer
report information or certain other account information; and
Collecting debt related to any consumer financial product
or service.\468\
---------------------------------------------------------------------------
\468\ See 12 U.S.C. 5481(15) (defining term ``financial product
or service'').
---------------------------------------------------------------------------
The Registration and Publication Provisions will affect such
covered persons (as that term is defined in 12 U.S.C. 5481(6)) that (1)
do not fall within any of the listed exclusions in Sec. 1092.201(d),
such as those for insured depository institutions, insured credit
unions, and related persons (as that term is defined in 12 U.S.C.
5481(25)), and (2) have had covered orders issued against them. The
Supervisory Reports Provisions will affect such covered persons that
(1) are subject to supervision and examination by the Bureau pursuant
to CFPA section 1024(a),\469\ (2) have had covered orders issued
against them, (3) are at or above the $5 million annual receipt
threshold, unless such covered persons are subject to certain
exclusions, and (4) are not registering covered orders under the one-
time registration option for NMLS-published covered orders under Sec.
1092.203.
---------------------------------------------------------------------------
\469\ 12 U.S.C. 5514(a).
---------------------------------------------------------------------------
A major benefit of the final rule is that it will give the Bureau
comparatively high-quality data on the number and type of covered
orders. Currently, the Bureau does not have high-quality data on the
number of covered orders, nor does it have high-quality data on the
number of nonbank covered persons that are subject to covered orders.
To derive an estimate of the number of affected entities under the
final rule using publicly available data, the Bureau used data from the
most recent available Economic Census. Table 1 below presents entity
counts for the North American Industry Classification System (NAICS)
codes that generally align with the financial services and products
listed above. The markets defined by NAICS codes in some cases include
entities that will not qualify as covered nonbanks under the final
rule. It is also possible that some covered nonbanks may not be counted
in the table below, because, for example, the financial services they
provide are not their primary line of business. The Bureau sought
comment on NAICS codes not included in table 1 that include a
significant number of entities that will be affected by the final rule,
and no commenters recommended that other NAICS codes be included.
Table 1--Potential Scope of Final Rule
------------------------------------------------------------------------
Number of NAICS
NAICS name(s) NAICS code(s) entities
------------------------------------------------------------------------
Nondepository Credit 5222 14,330
Intermediation..................
Activities Related to Credit 5223 13,618
Intermediation..................
Portfolio Management............. 523920 24,430
Investment Advice................ 523930 17,510
Passenger Car Leasing............ 532112 449
Truck, Utility Trailer, and 532120 1,612
Recreational Vehicle Rental and
Leasing.........................
Activities Related to Real Estate 5313 79,563
Consumer Reporting............... 561450 307
Debt Collection.................. 561440 3,224
--------------------------------------
Total........................ ................. 155,043
------------------------------------------------------------------------
Therefore, for purposes of its analysis of the final rule, the
Bureau estimates that there are roughly 155,043 covered nonbanks. As
noted above, covered nonbanks will only be affected by the rule if they
are subject to covered orders. Based on its experience and expertise,
the Bureau estimates that perhaps one percent, and at most five
percent, of covered nonbanks are subject to covered orders. Therefore,
the Bureau estimates that the rule would likely affect between 1,550
and 7,752 covered nonbanks. The Bureau sought comment and submissions
of data concerning the number and characteristics of covered nonbanks
subject to covered orders but did not receive data contradicting its
estimate. The Bureau also sought input on this subject during its
consultation process with other Federal, State, and Tribal regulators.
Notably, a coalition of State-regulator commenters with access to data
from NMLS did not question the Bureau's estimate. Moreover, this
coalition used the Bureau's estimate in combination with NMLS data to
make arguments, which are discussed below, regarding the rule's
potential impact on small entities and covered nonbanks subject to
supervision and examination by the Bureau.
However, a different commenter appeared to disapprove of the
Bureau's estimates, asserting that the CFPB was merely guessing on the
potential scope of its rule. This commenter did not provide other
analytical approaches or data for the CFPB to consider when estimating
the number of affected nonbanks, nor did the commenter provide a
different estimate. In response to this comment, the Bureau sought to
check the reasonableness of its estimate by obtaining data from a
database titled ``Violation Tracker,'' maintained by Washington, DC-
based nonprofit Good Jobs First (https://violationtracker.goodjobsfirst.org/). The database collects reports of
orders entered against companies for violating a wide range of laws.
From the database, the Bureau obtained data on agency actions
identified in the database as involving ``consumer-protection related
offenses'' or ``financial offenses'' with penalty announcement dates
between 2017 and April 2024. This data set includes roughly 13,200
orders. The Bureau further limited the data to orders identified by the
database as involving a ``primary offense type'' related to ``consumer
protection,'' ``discriminatory practices (non-employment),''
``privacy,'' ``banking,'' ``mortgage abuses,'' or ``payday lending,''
which resulted in a collection of roughly 4,500 orders. Of these, some
orders apply to the same entity. Taking those orders into account, the
Bureau estimates that this set of orders applies to roughly 3,700-4,000
unique entities. The Bureau
[[Page 56137]]
notes that these numbers are consistent with its estimate of the number
of entities likely to be affected by the final rule (1,550 to 7,752
covered nonbanks), which the Bureau provided in the proposal and
reaffirms here.\470\
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\470\ The Bureau's analysis of the Violation Tracker data may
exclude some covered nonbanks subject to covered orders. The
Violation Tracker database excludes orders with penalties of less
than $5,000, so the estimates above do not account for them. In
addition, the filters that the Bureau has applied may have excluded
some orders that would qualify as ``covered orders'' subject to the
rule's requirements. Moreover, the Bureau has not verified the
accuracy or completeness of the Violation Tracker data, so it is
possible the data do not include some covered orders that would need
to be registered under the rule.
The estimates derived above also likely include some entities
that are not covered nonbanks subject to covered orders. The
Violation Tracker database does not purport to identify ``covered
orders'' that would be subject to the final rule's registration
requirements, and the ``primary offense types'' identified in the
data may be highly overinclusive. Further, among the orders in the
data set, the rule's registration requirements would apply only to
those orders that remain in effect as of the rule's effective date,
but the Bureau lacks data to exclude from its analysis of the
Violation Tracker data orders that are no longer in effect. Indeed,
the written statement provisions apply only to orders with an
effective date on or after the applicable nonbank registry
implementation date, so none of the orders described above will
implicate the written statement provisions. The data include orders
that may not be ``public'' as defined in the final rule; see Sec.
1092.201(m) of the final rule. And many entities subject to the
identified orders are insured depository institutions or insured
credit unions and so will not be ``covered nonbanks'' under the
final rule; see Sec. 1092.201(d)(1) of the final rule. Thus, many,
and perhaps most, of the orders included in the estimates above are
likely not ``covered orders'' under the final rule.
Because of these caveats, the Bureau does not view the 3,700-
4,000 numbers derived above from the Violation Tracker database as a
highly accurate estimate of the number of entities likely to be
affected by the final rule. However, the Bureau finds that these
data further confirm the reasonableness of the Bureau's estimate in
the proposed rule of the number of entities that the rule will
likely affect.
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The Bureau sought comment and submissions of data concerning the
number and characteristics (such as annual revenues, number of
employees, and main area of business) of covered nonbanks subject to
covered orders. However, commenters generally did not provide, and the
Bureau does not have, this kind of quantitative data to analyze the
costs, benefits, and impacts of the final rule. In light of the limited
data available to the Bureau on the number of covered nonbanks subject
to covered orders, the analysis below focuses on the potential benefits
and costs of the proposed rule for affected consumers and covered
nonbanks.
1. Registration Provisions
Under these final provisions, affected entities will have to
provide: (1) identifying information and administrative information and
(2) information regarding covered orders. The Bureau believes this
information should be readily available to affected firms. Therefore,
the cost of complying with the Registration Provisions for most
affected firms should be on the order of a few hours of an employee's
time. The cost would likely be even lower for firms that have and
exercise the option to register NMLS-published covered orders under
Sec. 1092.203. The cost may be higher for firms with several covered
orders, or with covered orders that are frequently modified and are not
registered under Sec. 1092.203's one-time-registration provisions.
The Bureau generally expects that firms will know whether they are
covered persons or are subject to covered orders. If a firm is unsure
of its obligations under the Registration Provisions, one option would
be to hire outside legal counsel to advise them on these issues.
However, another option for such firms would be to register using the
nonbank registry, even if doing so is not legally required. As
explained above, the cost associated with registering an order is
likely low--a few hours of an employee's time. In addition, if firms
have a good-faith basis to believe they are not covered nonbanks (or
that their orders are not covered orders), they may submit a notice to
the nonbank registry stating such under Sec. 1092.202(g). Preparing
and submitting such notices would take at most a few hours of an
employee's time. The Bureau further notes that the mere act of
registering an order or submitting a Sec. 1092.202(g) notice is
unlikely to have significant indirect costs because Sec. 1092.102(c)
would provide that the rule ``does not alter any applicable process
whereby a person may dispute that it qualifies as a person subject to
Bureau authority.'' Firms should generally choose the lowest-cost
option available to them, and low-cost options--either registering
under the nonbank registry or filing a notice under proposed Sec.
1092.202(g)--are options available to firms.
To obtain a quantitative estimate of the cost of this final
provision, the Bureau assesses the average hourly base wage rate for
the reporting requirement at $49.29 per hour. This is the mean hourly
wage for employees in four major occupational groups assessed to be
most likely responsible for the registration process: Management
($66.23/hr); Legal Occupations ($64.34/hr); Business and Financial
Operations ($43.55/hr); and Office and Administrative Support ($23.05/
hr).\471\ We multiply the average hourly wage of $49.29 by the private
industry benefits factor of 1.42 to get a fully loaded wage rate of
$70.00/hr.\472\ The Bureau includes these four occupational groups in
order to account for the mix of specialized employees that may assist
in the registration process. The Bureau assesses that the registration
process will generally be completed by office and administrative
support employees that are generally responsible for the registrant's
paperwork and other administrative tasks. Employees specialized in
business and financial operations or in legal occupations are likely to
provide information and assistance with the registration process.
Senior officers and other managers are likely to review the
registration information before it is submitted and may provide
additional information. Assuming as outlined above a fully loaded wage
rate of roughly $70, and that complying with this provision would take
around five hours of employees' time, yields a cost impact of around
$350 per firm. Again, the cost would likely be even lower for firms
that have and exercise the option to register NMLS-published covered
orders under Sec. 1092.203. Because Sec. 1092.203 requires less
information from covered nonbanks than Sec. 1092.202, exercising the
option made available in Sec. 1092.203 should take even less employee
time.\473\ Therefore, the impact of this final provision on affected
firms will be limited.
---------------------------------------------------------------------------
\471\ 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. The hourly wage estimates used
in the proposed rule were slightly different because they were drawn
from 2021 data.
\472\ As of December 2023, the ratio between total compensation
and wages for private industry workers is 1.42. See U.S. Bureau of
Labor Statistics, Employer Costs for Employee Compensation: Private
industry dataset (December 2023), https://www.bls.gov/web/ecec/ecec-private-dataset.xlsx.
\473\ In the unlikely event that a covered nonbank concluded
that registering an NMLS-published covered order under Sec.
1092.203 would be more costly than registering it under Sec.
1092.202, the covered nonbank could forgo the option presented in
Sec. 1092.203 and register the order under Sec. 1092.202 instead.
---------------------------------------------------------------------------
One commenter appeared to disagree with the Bureau's cost estimate,
objecting to the proposed rule because of the expense of submitting,
monitoring, and updating the ``vast'' amount of information under the
rule. As discussed in more detail above, the Bureau does not agree that
the Registration Provisions require entities to submit ``vast'' amounts
of information. The commenter did not elaborate on this point or
provide alternative data or analysis to produce
[[Page 56138]]
an alternative cost estimate of the Registration Provisions. However,
the Bureau agrees that entities registering orders under Sec. 1092.202
may incur ongoing costs to comply with Sec. 1092.202(b)(2)(ii), which
requires that covered nonbanks submit revised registration filings
within 90 days after any amendment to a registered covered order or
information required under Sec. 1092.202(c) or (d). Similarly, Sec.
1092.202(f) requires a registered entity to submit a revised filing
within 90 days if a covered order is terminated, modified, or
abrogated, or if it ceases to be a covered order by operation of Sec.
1092.202(e).\474\ The Bureau believes that the cost of those subsequent
filings would generally be less than the cost of preparing and
submitting the initial registration.
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\474\ Covered nonbanks registering NMLS-published covered orders
under Sec. 1092.203 are not required to submit revised filings
under Sec. 1092.202(b)(2)(ii) or (f).
---------------------------------------------------------------------------
These final provisions will likely not provide any benefits for
affected firms.
These final provisions will give the CFPB comparatively high-
quality information on outstanding covered orders and the entities
subject to those orders. That information will assist the Bureau in
monitoring for risks to consumers in the offering or provision of
consumer financial products or services. The registry will allow the
Bureau to more effectively monitor for potential risks to consumers
arising from both individual violations of consumer protection laws and
broader patterns in such violations and enforcement actions intended to
address them. Such monitoring, in turn, will help inform the Bureau's
exercise of its other authorities. It will assist the Bureau in
determining whether to prioritize certain entities for risk-based
supervision, or to investigate whether certain entities have committed
violations that warrant Bureau enforcement actions. The Bureau also
anticipates that the Registration Provisions will give it more
information on important gaps in existing consumer financial protection
laws and will therefore improve future Bureau regulations. In addition,
by providing the Bureau with more information on consumer harms in
various markets, the Registration Provisions will improve the Bureau's
consumer education efforts. All of these effects would benefit
consumers.\475\ The Bureau does not have any data to quantify these
benefits.
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\475\ The Bureau will achieve these benefits even for NMLS-
published covered orders registered under Sec. 1092.203 of the
final rule. Although registrations under Sec. 1092.203 will include
less information than under Sec. 1092.202, registrations under
Sec. 1092.203 will notify the Bureau about the existence of the
covered nonbank and the issuance of an applicable order against it.
The Bureau will then generally be able to obtain further information
about the order and the covered nonbank through the NMLS and the
agency that issued or obtained the order.
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A joint letter by State regulators argued that the notice of
proposed rulemaking overstated the benefits to the Bureau of the
proposed rule. The letter asserted that the Bureau has not proven that
there is a recidivism problem among nonbanks that would necessitate the
creation of the Bureau's registry and that State regulators are
effectively protecting consumers from repeat offenders through existing
mechanisms and authorities. To substantiate this claim, the letter
provided examples of instances in which agencies have brought actions
against entities that have repeatedly violated the law. The Bureau
agrees with the point that it and other regulators have at times
successfully brought enforcement actions against entities that have
repeatedly violated the law. But the Bureau disagrees with the
commenter's view that this implies the Bureau and other regulators
could not or should not improve their regulatory, supervisory, and
enforcement activity. As described in the paragraph above, the registry
will assist the Bureau in monitoring for risks to consumers in the
offering or provision of consumer financial products or services. Among
other things, the registry will assist the Bureau in analyzing trends
in enforcement actions against covered nonbanks, including trends
regarding nonbank recidivism. Notably the State regulators' joint
letter provides no concrete data on such trends and instead only
provides anecdotal examples of individual enforcement actions;
providing data on such trends will be one benefit of the rule.
The Registration Provisions will likely not impose any significant
costs on consumers. As noted above, the final provisions would impose
limited costs on a minority of firms in consumer finance markets. Firms
are unlikely to raise prices as a consequence, given the minimal size
of the cost increase and the fact that it is borne by a small portion
of the overall market.
2. Supervisory Reports Provisions
These final provisions will only affect covered nonbanks subject to
Bureau supervision and examination. Furthermore, such covered nonbanks
that have opted to register NMLS-published covered orders under Sec.
1092.203 will not be subject to these final provisions with respect to
such orders. Therefore, they will affect fewer covered nonbanks and
fewer consumers than the Registration Provisions analyzed above.
Some firms may be unsure whether they are supervised covered
persons not otherwise excluded from the requirements of the final
Supervisory Reports Provisions, or whether they are subject to covered
orders, so they may be unsure whether they will have to comply with
these final provisions. The Bureau notes that complying with these
final provisions if it is legally unnecessary is unlikely to have
greater costs than if it is legally necessary, because Sec.
1092.102(c) provides that the rule does not alter applicable processes
whereby a person may dispute that it qualifies as a person subject to
Bureau authority. Also, under Sec. 1092.204(f), if a firm has a good-
faith basis to believe that it is not a supervised registered entity
subject to the Supervisory Reports Provisions (or that its order is not
a covered order), it may submit a notice to the nonbank registry
stating as such. Preparing and submitting such a notice would take at
most a few hours of an employee's time. Firms should generally choose
the lowest-cost option available to them. Therefore, firms are unlikely
to spend more to determine whether they need to comply with the
Supervisory Reports Provisions than the cost to the firms of complying
with the provisions or, for firms with a good-faith basis to believe
they are not supervised registered entities (or their orders are not
covered orders), of filing a Sec. 1092.203(f) notice.
These provisions will require that affected supervised entities
designate an attesting executive for each applicable covered order. The
attesting executive will be a duly appointed senior executive officer
(or, if no such officer exists, the highest-ranking individual at the
entity charged with managerial or oversight responsibilities) (i) whose
assigned duties include ensuring the supervised registered entity's
compliance with Federal consumer financial law, (ii) who possesses
knowledge of the supervised entity's systems and procedures for
achieving compliance with the covered order, and (iii) who has control
over the supervised entity's efforts to comply with the covered order.
The Bureau believes that, even under the baseline scenario, most
supervised entities would take active steps to comply with covered
orders, and therefore would already have such an officer or individual
in place to oversee the entity's compliance with its obligations under
the covered order. Therefore, the Bureau anticipates that
[[Page 56139]]
this designation requirement would impose little or no additional cost
on most supervised registered entities. The Bureau notes that the cost
may be higher for supervised entities that lack a high-ranking officer
or other employee with the requisite qualifications to serve as an
attesting executive. But the Bureau believes that there would be few
such entities because the Bureau expects most supervised registered
entities maintain adequate board and management oversight consistent
with an appropriate compliance management system.
The Supervisory Reports Provisions will also require that the
supervised registered entity submit a written statement signed by the
applicable attesting executive for each covered order to which it is
subject. In the written statement, the attesting executive will: (i)
generally describe the steps that the attesting executive has
undertaken to review and oversee the supervised registered entity's
activities subject to the applicable covered order for the preceding
calendar year; and (ii) attest whether, to the attesting executive's
knowledge, the supervised registered entity during the preceding
calendar year identified any violations or other instances of
noncompliance with any obligations that were imposed in a public
provision of the covered order by the applicable agency or court based
on a violation of a covered law.
The Bureau cannot precisely quantify the impact of the written-
statement requirement on impacted firms. But based on its experience
and expertise, the Bureau believes that most entities subject to
covered orders endeavor in good faith to comply with them and will
already have in place some manner of systems and procedures to help
achieve such compliance. For these entities, the written-statement
requirement will require little more than submitting a written
statement from the attesting executive that generally describes the
steps the executive took consistent with the established systems and
procedures to reach conclusions regarding entity compliance with the
orders. Thus, relative to the baseline, the written-statement
requirement will impose only modest costs on most covered entities,
related primarily to the time and effort needed to (i) memorialize the
attesting executive's existing oversight of compliance and (ii)
determine whether the supervised registered entity during the preceding
calendar year identified any violations or other instances of
noncompliance with any obligations that were imposed in a public
provision of the covered order by the applicable agency or court based
on a violation of a covered law.
While the attesting executive would sign the written statement, the
Bureau expects that other employees in other major occupational groups
(Legal Occupations, Business and Financial Operations, and Office and
Administrative Support) would support the attesting executive in
preparing the statement. Assuming that satisfying the written-statement
requirement would take twenty hours of employees' time, and that the
average cost to entities of an employee's time is roughly $70 an hour
as discussed above, yields an estimate that the cost of this
requirement on covered entities would be roughly $1,400 per firm.
The Bureau acknowledges that, under the baseline, some supervised
registered entities may not have in place systems and procedures to
allow them to confidently identify violations or other instances of
noncompliance with any obligations that were imposed in a public
provision of the covered order. As discussed elsewhere in this
preamble, the Supervisory Reports Provisions will likely prompt some
such entities to adopt new or additional compliance systems and
procedures, imposing a greater cost on them. However, as noted above,
based on its experience and expertise, the Bureau believes that most
entities subject to covered orders endeavor in good faith to comply
with them and will already have in place some manner of systems and
procedures to help achieve such compliance. Therefore, the Bureau
believes that the number of supervised registered entities that will
put in place significant new compliance systems and procedures as a
result of the rule will be relatively small.
In addition, the Supervisory Reports Provisions will require
entities to maintain records related to the written statement for five
years. Conservatively assuming that ensuring the necessary documents
are properly stored also requires ten hours of employee time adds $700
to the costs to affected entities of these final provisions. One
commenter stated that entities would have to pay for document retention
and storage to comply with the proposed rule, but did not suggest that
the Supervisory Reports Provisions' recordkeeping requirements would
impose more than $700 in costs on affected entities.
The Bureau notes that, for the purposes of the final rule, the term
``supervised registered entity'' excludes persons with less than $5
million in annual receipts resulting from offering or providing
consumer financial products and services described in CFPA section
1024(a).\476\ Relative to this final rule, the proposed rule further
included in the term ``supervised registered entity'' persons with more
than $1 million in annual receipts. Therefore, this final rule should
impact fewer firms, with higher average annual receipts, than
anticipated by the proposed rule. The combined costs of around $2,100
imposed by the Supervisory Reports Provisions on the majority of
affected entities should be roughly 0.04 percent or less of annual
receipts.
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\476\ 12 U.S.C. 5514(a). See the section-by-section discussion
of Sec. 1092.201(q)(4) for more information regarding how annual
receipts are calculated.
---------------------------------------------------------------------------
The costs of the Supervisory Reports Provisions may be higher in
absolute terms at larger entities because identifying instances of
noncompliance with obligations imposed in a public provision of a
covered order may be more complex at larger entities. But because
larger entities will generally have greater annual receipts, the
applicable compliance costs as a percentage of annual receipts will
likely remain nominal even for larger entities. The costs of the
Supervisory Reports Provisions will also likely be higher at entities
with multiple instances of noncompliance with public provisions of
covered orders, or with multiple covered orders.
Some commenters argued either that the Supervisory Reports
Provisions would impose an undue burden or that the analysis in the
proposed rule underestimated the costs imposed by the Supervisory
Reports Provisions. Those commenters, however, did not provide data,
information, or analysis to support their claims. Another commenter
suggested a higher employee cost estimate of $118 per hour for work to
prepare the written statement, based on the commenter's members'
experience. The Bureau notes that, as discussed above, in data from the
Bureau of Labor Statistics the highest wage rate among all occupations
considered (for Management) is $66.23 per hour; multiplied by a
benefits factor of 1.42 as discussed above, this yields an employee
cost estimate of $94.05 per hour. Still, using the commenter's
preferred hourly cost estimate yields a total cost estimate of roughly
$2,400 per firm for the twenty hours of employees' time estimated to be
required to prepare a written statement. This represents roughly .05
percent of the annual revenue of an entity with annual revenue of $5
million per year. Another commenter argued that the proposed rule's
requirements were vague and so
[[Page 56140]]
would take more staff time, at a higher average hourly rate, than
analyzed in the proposed rule; this commenter instead favored
compliance cost estimates of $4,200-$7,200 for internal employees plus
roughly $4,000 for outside counsel, for a total cost of $8,200-$12,200.
The Bureau disagrees with this commenter's view that the rule's
requirements are vague and will generally impose costs this high.
Still, to put the commenter's estimates in perspective, the Bureau
notes that $12,200 would still constitute less than .25 percent of
annual receipts for firms with average annual receipts of at least $5
million.
Similarly, another commenter argued the Bureau significantly
underestimated the amount of time involved with complying with the
written-statement requirement; this commenter estimated that the time
involved would be akin to the time spent by public companies preparing
CEO and CFO certifications of Securities and Exchange Commission (SEC)
filings under section 302 of the Sarbanes-Oxley Act and 18 U.S.C. 1350,
which was enacted in section 906 of that Act.\477\ The Bureau disagrees
that the time and internal verification processes associated with the
CEO and CFO certifications under those provisions of the Sarbanes-Oxley
Act are comparable to what is required to fulfill a supervised
registered entity's obligations under the Supervisory Reports
Provisions. Section 302 of the Sarbanes-Oxley Act required the SEC to
issue a rule requiring CEOs and CFOs to certify in annual and quarterly
reports that the reports do not contain material misstatements or
misleading omissions and that they fairly present in all material
respects the entity's financial condition and results of operations.
Section 302 also required the SEC's rule to mandate that CEOs and CFOs
make certain certifications regarding the entity's internal controls
and disclosures to auditors. Similarly, under 18 U.S.C. 1350, when an
issuer files a periodic report containing financial statements with the
SEC, that report must be accompanied by a written statement from the
CEO and CFO certifying that the periodic report fully complies with the
requirements of section 13(a) or 15(d) of the Securities Exchange Act
of 1934 and that the information contained in the report ``fairly
presents, in all material respects, the financial condition and results
of operations of the issuer.'' \478\ The commenter stated that these
certifications typically require hundreds of hours and the involvement
of a disclosure committee comprised of other professionals who, in
addition to providing the CEO and CFO necessary assurances to support
their certifications, may also provide their own sub-certifications.
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\477\ See Sarbanes-Oxley Act of 2002, Public Law 107-204, secs.
302, 906, 116 Stat. 745, 777-78, 806.
\478\ 18 U.S.C. 1350(b).
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The contents of the written statement required under the final rule
here, by contrast, are of a more general, non-technical character and
can be derived from the executive's own knowledge, with reference as
needed to documents and information related to the entity's compliance
with the covered order.\479\ The written statement merely requires a
general description of the steps the executive has personally
undertaken to review and oversee the supervised registered entity's
activities subject to the applicable covered order, and a statement,
``to the attesting executive's knowledge,'' of whether the supervised
registered entity identified any violations or instances of
noncompliance with applicable obligations under the order during the
preceding calendar year.\480\ Because the written statement is far more
limited than the certifications required under the cited provisions of
the Sarbanes-Oxley Act, the Bureau does not believe that the costs of
complying with those Sarbanes-Oxley Act provisions provide an
appropriate benchmark for estimating the costs of the written-statement
requirements. Indeed, as noted elsewhere in this preamble, this final
rule does not establish any minimum procedures or otherwise specify the
steps the attesting executive must take in order to review and oversee
the supervised registered entity's activities. Nor does the final rule
establish any minimum level of compliance management or expectation for
compliance systems and procedures at supervised registered entities, or
purport to impose any restrictions on the manner in which supervised
registered entities address such matters. Therefore, the Bureau
reaffirms its conclusion that, for most supervised registered entities,
the written-statement provisions will impose only modest costs beyond
the costs entities are already incurring to ensure compliance with
covered orders.
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\479\ See Sec. 1092.204(c) of the final rule (requiring
supervised registered entities to provide attesting executives
access to documents and information necessary to make the written
statement).
\480\ Sec. 1092.204(d) of the final rule.
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As explained in greater detail in part IV(D) and the section-by-
section discussion of Sec. 1092.204 above, the Supervisory Reports
Provisions will facilitate the Bureau's risk-based supervision efforts,
including its efforts to assess compliance with the requirements of
Federal consumer financial law, obtain information about the supervised
entities' activities and compliance systems or procedures, and detect
and assess risks to consumers and to markets for consumer financial
products and services. All of these effects would benefit consumers.
Moreover, while as noted above the Bureau believes that most entities
subject to covered orders endeavor in good faith to comply with them
and will already have in place some manner of systems and procedures to
help achieve such compliance, it is also likely that these final
provisions will cause a few entities without such systems and
procedures to develop them. This will also benefit consumers. The
Bureau does not have any data to quantify this benefit.
One commenter agreed with the analysis above that most entities
subject to covered orders already endeavor in good faith to comply with
them, and so the number of supervised registered entities that will put
in place significant new compliance systems and procedures as a result
of the rule will be relatively small. However, this commenter argued
that this in turn implies that the rule will have little compliance
benefits. The Bureau agrees with this commenter that the final rule is
unlikely to have a significant effect on the compliance efforts of the
entities already endeavoring in good faith to comply with covered
orders. But the Bureau also notes that the final rule will likely
improve the compliance efforts of a smaller number of entities that
under the baseline would not endeavor in good faith to comply with
covered orders. As discussed in both the proposed rule and this
preamble, this should have a number of beneficial effects for
consumers.
One commenter argued that the attestation requirement would divert
entities' limited resources away from serving consumers. Similarly,
another commenter argued the requirement would lead entities to
prioritize compliance with covered orders over other compliance
obligations, creating compliance risks for consumers. As stated above,
the Bureau believes that no more than 5 percent of all covered nonbanks
are subject to covered orders; of these many may have less than $5
million in relevant annual receipts, otherwise not be supervised
registered entities, or exercise their option to register NMLS-
published covered orders under Sec. 1092.203, so the number of firms
impacted by the Supervisory
[[Page 56141]]
Reports Provisions should be limited. Finally, as argued above the
Bureau expects that even entities subject to the Supervisory Reports
Provisions will generally incur minor costs because of it. For these
reasons the Bureau disagrees with these commenters that the Supervisory
Reports Provisions would have any meaningful costs for consumers.
Indeed, as described in the paragraph above, the Bureau believes this
provision will benefit consumers, including through providing a further
incentive for entities to comply with their legal obligations.
3. Publication Provisions
For affected covered nonbanks, the main effect of these provisions
will be that (1) their identifying information, (2) information
regarding covered orders that they provide to the Bureau, and (3) for
supervised registered entities, the name and title of the attesting
executive, may be posted on the internet by the Bureau.\481\ Much of
this information would be public even under the baseline, so the
additional direct effect of this information being posted on the
Bureau's website should be small. While as detailed below there will be
indirect benefits and costs associated with improving accountability,
general public awareness, and enforcement of consumer protection law,
the Bureau does not anticipate publishing its registry would have a
significant direct impact on consumer shopping decisions.
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\481\ As explained elsewhere in this preamble, the Bureau
intends to publish this information but is retaining the discretion
not to publish the information based on operational considerations,
such as resource constraints. The analysis here assumes that the
Bureau will effectuate its intended approach of publishing the
stated information. If the Bureau were not to publish any of the
information it collects under the final rule, the potential benefits
and costs discussed in this section largely would not be realized,
except that, to a more limited extent, some of the benefits and
costs associated with the Publication Provisions could result from
the Bureau's sharing of registry information with other government
agencies under memorandums of understanding or other interagency
arrangements. Similarly, if the Bureau were to publish only a
portion of the information that it currently intends to publish, the
benefits and costs of the Publication Provisions likely would be
more limited than the benefits and costs associated with the
Bureau's current publication plans.
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Because covered nonbanks will provide the required registry
information only if they are subject to covered orders, consumers might
interpret the presence of a covered nonbank on the Bureau's website as
negative information about that covered nonbank. Therefore, these
provisions may have negative reputational costs for covered nonbanks
whose information is published on the Bureau website. Yet covered
orders would be public information even under the baseline with no
rule. Therefore, these provisions will not make public any non-public
orders. This will limit the likely costs to covered nonbanks of these
provisions.
These final provisions will allow certain information related to
covered orders that is already public to be centralized on the Bureau's
website. This will make the information more readily accessible than it
would otherwise be. One commenter argued that the proposed rule did not
give any weight to this effect, but it was explicitly acknowledged in
the proposed rule. A large body of research has studied the
circumstances under which providing consumers better access to
information does, and does not, improve consumer outcomes.\482\ One
consensus from this research is that well-designed information
disclosures can be effective at directing consumer attention. For
example, one study found that providing certain borrowers with
information about the costs of their loans reduced borrowing.\483\
However, another consensus from this research is that information
disclosures do not always materially affect consumer decision-making,
and that the impact of information disclosures on consumer decision-
making depends on their design and implementation. Impactful
information disclosures are typically more direct (e.g., disclosing the
costs of a particular type of loan to prospective borrowers) and more
timely (e.g., disclosed to prospective borrowers at the time they are
obtaining a loan) than the information that will be centralized and
published under this final provision. Therefore, the Bureau believes
that most consumers will not change their behavior directly because of
this final provision, so the impact of this final provision on most
affected entities will likely not be significant.
---------------------------------------------------------------------------
\482\ For one review of this research, see Thomas A. Durkin and
Gregory E. Elliehausen, Truth in Lending: Theory, History, and a Way
Forward (2011).
\483\ See Marianne Bertrand and Adair Morse, Information
Disclosure, Cognitive Biases, and Payday Borrowing, 66 The Journal
of Finance 1865, 1865-93 (2011).
---------------------------------------------------------------------------
Many commenters agreed with this analysis, although one
mischaracterized the proposed rule as arguing that consumers would be
likely to use the public registry. In response to these comments, the
Bureau notes that as discussed in the proposed rule the registry may
benefit consumers in a number of ways beyond directly influencing their
behavior. As discussed in the proposed rule, the Publication Provisions
are likely to help government agencies, including the Bureau, enforce
consumer protection laws. As noted by some commenters, the Publication
Provisions may also help provide valuable information to other
individuals or organizations, such as researchers, investors and
business partners of covered persons, and media and advocacy
organizations.\484\ Providing additional information to these entities
through publication will also benefit consumers. Moreover, although the
Bureau expects that a fraction of consumers may use the registry to
make informed decisions in the market for consumer financial products
and services, directly informing consumers of covered orders was not
the exclusive purpose of the Publication Provisions in either the
proposed or final rules.
---------------------------------------------------------------------------
\484\ See part IV(F) and the section-by-section discussion of
Sec. 1092.205 above.
---------------------------------------------------------------------------
Commenters also argued that publishing the registry information
will have a small effect on consumer behavior because the registered
orders will already be public and available for consumers to review.
While these comments appear to disagree with the comments discussed in
the previous paragraph regarding the reasons why the Bureau's registry
likely will have a small direct effect on consumer behavior, these
commenters appear to agree with those in the previous paragraph, and
with the Bureau, that the direct effect on consumer behavior will in
fact be small. Again, this would imply that the Publication Provisions
would impose only minor costs on affected entities resulting from
changes in consumer behavior. And again, in response to these comments,
the Bureau notes that directly informing consumers of covered orders
was not the exclusive purpose of the Publication Provisions in either
the proposed or final rules.
Conversely, other commenters argued that the Bureau's analysis
understates the reputational costs of publication, including to new and
emerging financial institutions. These commenters, however, did not
provide any support for this claim or provide an alternative estimate
of the Publication Provisions' costs.
Commenters also argued that the public registry would misinform
consumers because consumers would not have the legal context to
understand the orders. Similarly, another commenter argued that
impacted entities would need to invest resources into combatting the
reputational harm imposed by the Publication Provisions. These
arguments, however, appear to
[[Page 56142]]
suppose that many consumers will themselves see, and change their
behavior based on, the public orders, which as argued above (by both
the Bureau and other commenters) is likely incorrect. While the Bureau
agrees that some consumers, if they saw the covered orders, would find
them to be complex and challenging to interpret, that is one reason the
Bureau has concluded that the public registry would have less direct
impact on consumers than other kinds of information disclosures that
are generally found to be effective. The Bureau also reiterates its
belief that few consumers would likely see these covered orders
themselves, even under the final Publication Provisions.
The Bureau acknowledges that the issues disclosed by a few covered
orders may be so controversial among consumers that their publication
on the Bureau's website could impose a substantial impact on the firms
affected by those orders. However, as noted above, covered orders would
be public information even under the baseline with no rule. Therefore,
covered orders that disclose particularly controversial practices would
likely be well known among consumers even under the baseline.
Commenters also expressed concern that the Publication Provisions
would result in increased litigation for covered nonbanks, both through
enforcement actions by government agencies and through class action and
other lawsuits by private litigants. The Bureau agrees that the public
registry could provide some informational benefits to government
enforcement agencies and private attorneys and would therefore impose
corresponding enforcement, litigation, and insurance costs on some
entities. As discussed above, the Publication Provisions may also help
provide valuable information to other individuals or organizations,
such as researchers, investors and business partners of covered
persons, and media and advocacy organizations; providing information to
these individuals or organizations may impose corresponding costs on
entities affected by the Publication Provisions, such as costs to
respond to publications based on information obtained from the Bureau's
registry. The Bureau does not have any data with which to quantify
these costs. However, as discussed above the Bureau believes that
perhaps 1 percent and at most 5 percent of covered entities are subject
to covered orders, and that among entities subject to covered orders,
most endeavor in good faith to comply with them. Therefore, the Bureau
expects that the Publication Provisions will only expose a small number
of entities to increased costs. Moreover, the Bureau does not share the
commenters' belief that providing information to government enforcement
agencies and attorneys provides no benefit to consumers. To the
contrary, as explained above, the Bureau views facilitating public and
private enforcement of the Federal consumer financial laws as a benefit
of this registry.\485\ The Bureau thus agrees with different commenters
that the registry will help the CFPB, law enforcement community, and
the public limit the harms from repeat violators of their legal
obligations.
---------------------------------------------------------------------------
\485\ See the section-by-section discussion of Sec. 1092.205
above.
---------------------------------------------------------------------------
One commenter noted that these final provisions could put affected
entities at a competitive disadvantage relative to other entities in
the market, by making information about them and the covered orders to
which they are subject more accessible. The Bureau acknowledges that
public awareness that an entity has been subjected to liability for
violating a covered law may disadvantage that entity relative to other
entities that have not been subjected to similar liability. However,
the Publication Provisions would not make public any covered orders
that were not already published (or required to be published). This in
turn mitigates the direct effects of this final provision on
marketplace competition.
These final provisions could benefit firms in affected markets,
even those without covered orders, by centralizing certain information
on covered orders. This could give firms a clearer picture of how
consumer financial protection laws are enforced across agencies and
jurisdictions, and could reduce costs for firms that would conduct
research into this question under the baseline. As noted by one
commenter, these provisions may have benefits to other market
participants, such as potential investors, contractual partners,
financial firms, and others that are conducting due diligence on a
registered nonbank.\486\ Providing the public, including firms, with
information on the extent and nature of covered orders is consistent
with the Bureau's congressionally assigned purpose of ensuring that
consumer financial markets are fair, transparent, and competitive.\487\
The Bureau does not have any data with which to quantify these
benefits.
---------------------------------------------------------------------------
\486\ See discussion at part IV(F) above.
\487\ 12 U.S.C. 5511(a).
---------------------------------------------------------------------------
For consumers, one effect of the final provision will be improved
access to information about covered nonbanks with covered orders.
However, as noted above, this information would be public even under
the baseline. Moreover, as discussed in more detail above, impactful
information disclosures are typically more direct and more timely than
the information that would be centralized and published under this
provision. Therefore, the Bureau believes that most consumers will not
change their behavior due to this final provision. As discussed in more
detail above, many commenters agreed with this conclusion.
By centralizing certain information on covered orders, another
effect of the Publication Provisions will be to improve the ability of
regulatory agencies besides the Bureau to conduct their activities,
including supervision, enforcement, regulation, market monitoring,
research, and consumer education. One commenter argued that the
benefits of the rule for enforcement agencies were overstated in the
proposed rule because covered orders are already public and because
certain regulators are already aware of certain covered orders.
However, the Bureau noted these points in the proposed rule. The Bureau
argued in the proposed rule, and finds here, that the Publication
Provisions would indirectly benefit consumers by centralizing certain
information that is already public, which will assist agencies charged
with enforcing Federal consumer financial laws with carrying out their
responsibilities. Several commenters and consulting parties agreed that
the proposed rule would help regulators and law enforcement. The Bureau
does not have any data to quantify this benefit.
The Publication Provisions will likely not impose any significant
costs on consumers. As noted above, the provisions may impose some
costs on some firms, and it is possible that those firms may respond to
these increased costs by increasing prices for consumers. But as
discussed above, the costs of these provisions on affected firms will
be limited, so any cost increases caused by the rule will be limited at
affected firms. Moreover, many firms will not be affected at all by
these provisions and so will not raise prices because of these
provisions.
Finally, a number of commenters argued that the proposed rule, by
increasing the costs to entities of consent orders, would discourage
settlements in regulatory proceedings and so impose further costs on
affected entities. The Bureau acknowledges that the final rule will
increase the costs to entities of covered orders, and so may
[[Page 56143]]
have a marginal effect on the decision of some entities to settle.
However, as argued above, the Bureau believes that the costs imposed by
the final rule on entities subject to covered orders will be quite
limited, so relative to the baseline, the final rule should increase
the expected costs of settlement by little. Therefore, the Bureau
believes that, among entities deciding whether to settle an enforcement
action, it would be rare for costs imposed by this final rule to make a
difference in the decision. Moreover, as noted above, the Bureau
believes that perhaps one percent, and at most five percent, of covered
nonbank entities are subject to covered orders. The small number of
covered entities subject to covered orders strongly suggests that only
a small percentage of such entities become subject to covered orders
each year, and so could arguably be deciding whether to settle an
enforcement matter that might result in a covered order. Therefore, the
final rule should have only a small effect on the decisions of a small
number of firms contemplating whether or not to settle.
E. Potential Specific Impacts of the Final Rule
1. Insured Depository Institutions and Insured Credit Unions With $10
Billion or Less in Total Assets, as Described in Section 1026
This final rule will only apply to nonbanks. Therefore, it will
have no direct impacts on any insured depository institution or insured
credit union. The rule may have some indirect effects on some insured
depository institutions and insured credit unions with $10 billion or
less in total assets. For example, insured depository institutions and
insured credit unions that are affiliated with affected entities might
experience indirect costs because the final rule may impose some costs
on their nonbank affiliates. Insured depository institutions and
insured credit unions that compete with affected entities might
experience indirect benefits because of the proposed rule because the
proposed rule may impose some costs on their competitors. But as noted
above, even for nonbanks that are directly affected by the final rule,
the Bureau does not anticipate that the rule's impact will be
significant in most cases. Therefore, the Bureau anticipates that any
indirect effects on insured depository institutions or insured credit
unions with $10 billion or less in total assets will be even less
significant.
2. Impact of the Proposed Rule on Access to Consumer Financial Products
and Services and on Consumers in Rural Areas
By imposing some costs on affected covered nonbanks, the final rule
may cause affected covered nonbanks to provide fewer financial products
and services (or financial products and services at higher cost) to
consumers. However, as noted above, the final rule will likely impose
only limited costs on a limited number of covered nonbanks. Therefore,
the impact of the final rule on consumer access to financial products
and services will be limited even at affected covered nonbanks.
Moreover, bank and nonbank entities that will not be directly affected
by the final rule could provide financial products and services to
consumers that would otherwise obtain these financial products and
services from affected covered nonbanks. Therefore, the negative impact
of the final rule on consumer access to financial products and services
would be limited. By improving the ability of the CFPB to conduct its
activities, including supervision, enforcement, regulation, market
monitoring, and consumer education, the final rule will likely improve
the functioning of the broader market and so may also have positive
effects on consumer access to consumer financial products or services
provided in conformity with applicable legal obligations designed to
protect consumers.
Broadly, the Bureau believes that the analysis above of the impact
of the final rule on consumers in general provides an accurate analysis
of the impact of the final rule on consumers in rural areas. The impact
of the final rule on consumers in rural areas will likely be relatively
smaller if the proposed rule affects fewer entities in rural areas.
High-quality data on the rural market share of entities that will be
affected by the final rule does not exist, so the Bureau cannot judge
with certainty the relative impact of the rule on rural areas. However,
for certain large and well-studied markets, there is evidence that
nonbanks have larger market shares in urban areas and smaller market
shares in rural areas.\488\ Based on this limited evidence, the Bureau
expects that the impact of the final rule will be smaller in rural
areas.
---------------------------------------------------------------------------
\488\ For evidence on the mortgage market, see Julapa Jagtiani,
Lauren Lambie-Hanson, and Timothy Lambie-Hanson, Fintech Lending and
Mortgage Credit Access, 1 The Journal of FinTech (2021). For
evidence on the auto loan market, see Donghoon Lee, Michael Lee, and
Reed Orchinik, Market Structure and the Availability of Credit:
Evidence from Auto Credit, MIT Sloan Research Paper (2022), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3966710.
---------------------------------------------------------------------------
IX. Regulatory Flexibility Act Analysis
A. Overview
The Regulatory Flexibility Act (RFA) generally requires an agency
to conduct an initial regulatory flexibility analysis (IRFA) and a
final regulatory flexibility analysis (FRFA) of any rule subject to
notice-and-comment rulemaking requirements, unless the agency certifies
that the rule will not have a significant economic impact on a
substantial number of small entities.\489\ The Bureau also is subject
to certain additional procedures under the RFA involving the convening
of a panel to consult with small business representatives before
proposing a rule for which an IRFA is required.\490\
---------------------------------------------------------------------------
\489\ 5 U.S.C. 601 et seq.
\490\ 5 U.S.C. 609.
---------------------------------------------------------------------------
A FRFA is not required for this final rule because it will not have
a significant economic impact on a substantial number of small
entities.
B. Impact of Final Provisions on Small Entities
The final rule has three principal sets of substantive provisions,
which are separately analyzed below. The first set of provisions
(hereinafter referred to as the ``Registration Provisions'') will
require nonbank covered persons that are subject to certain public
agency and court orders enforcing the law to register with the Bureau
and to submit certain information related to those public orders to the
Bureau. The second set of provisions (hereinafter referred to as the
``Supervisory Reports Provisions'') will require nonbank covered
persons that are supervised by the Bureau to prepare and submit an
annual written statement, signed by a designated individual, regarding
compliance with each covered public order. The third set of provisions
(hereinafter referred to as the ``Publication Provisions'') describes
the registration information the Bureau may make publicly available.
The analysis below evaluates the economic impact of the final
provisions on small entities as defined by the
[[Page 56144]]
RFA.\491\ The RFA's definition of ``small'' varies by type of
entity.\492\
---------------------------------------------------------------------------
\491\ For purposes of assessing the impacts of the proposed rule
on small entities, ``small entities'' is defined in the RFA to
include small businesses, small not-for-profit organizations, and
small government jurisdictions. 5 U.S.C. 601(6). A ``small
business'' is determined by application of Small Business
Administration regulations and reference to the North American
Industry Classification System (NAICS) classifications and size
standards. 5 U.S.C. 601(3). A ``small organization'' is any ``not-
for-profit enterprise which is independently owned and operated and
is not dominant in its field.'' 5 U.S.C. 601(4). A ``small
governmental jurisdiction'' is the government of a city, county,
town, township, village, school district, or special district with a
population of less than 50,000. 5 U.S.C. 601(5).
\492\ U.S. Small Bus. Admin., Table of Small Business Size
Standards Matched to North American Industry Classification System
Codes, https://www.sba.gov/sites/default/files/2022-09/Table%20of%20Size%20Standards_NAICS%202022%20Final%20Rule_Effective%20October%201%2C%202022.pdf (current SBA size standards).
---------------------------------------------------------------------------
With certain exceptions, the final rule will apply to covered
persons as defined in the CFPA, including persons that engage in
offering or providing a consumer financial product or service.\493\
Among others,\494\ these products and services would generally include
those listed below, at least to the extent they are offered or provided
for use by consumers primarily for personal, family, or household
purposes.
---------------------------------------------------------------------------
\493\ For the full scope of the term ``covered person,'' see 12
U.S.C. 5481(6).
\494\ For the full scope of the term ``consumer financial
product or service,'' see 12 U.S.C. 5481(5).
---------------------------------------------------------------------------
Extending credit and servicing loans;
Extending or brokering certain leases of personal or real
property;
Providing real estate settlement services;
Engaging in deposit-taking activities, transmitting or
exchanging funds, or otherwise acting as a custodian of funds;
Selling, providing, or issuing stored value or payment
instruments;
Providing check cashing, check collection, or check
guaranty services;
Providing payments or other financial data processing
products or services to a consumer by any technological means;
Providing financial advisory services;
Collecting, analyzing, maintaining, or providing consumer
report information or certain other account information; and
Collecting debt related to any consumer financial product
or service.\495\
---------------------------------------------------------------------------
\495\ See 12 U.S.C. 5481(15) (defining term ``financial product
or service'').
---------------------------------------------------------------------------
The Registration and Publication Provisions will affect such
covered persons (as that term is defined in 12 U.S.C. 5481(6)) that (1)
do not fall within any of the listed exclusions in Sec. 1092.201(d),
such as those for insured depository institutions, insured credit
unions, and related persons (as that term is defined in 12 U.S.C.
5481(25)), and (2) have had covered orders issued against them. The
Supervisory Reports Provisions will affect such covered persons that
(1) are subject to supervision and examination by the Bureau pursuant
to CFPA section 1024(a),\496\ (2) have had covered orders issued
against them, (3) are at or above the $5 million annual receipts
threshold, unless such covered persons are subject to certain
exclusions, and (4) are not registering covered orders under the one-
time registration option for NMLS-published covered orders under Sec.
1092.203.
---------------------------------------------------------------------------
\496\ 12 U.S.C. 5514(a).
---------------------------------------------------------------------------
A major benefit of the final rule is that it will give the Bureau
comparatively high-quality data on covered orders. Currently, the
Bureau does not have high-quality data on the number of covered orders,
nor does it have reliable information on the number of small, covered
firms that are subject to covered orders. Therefore, the Bureau cannot
reliably estimate the precise number of small entities that would be
impacted by the final rule.
One commenter argued that the Bureau could not explain why its rule
would not have a significant economic impact on a substantial number of
small entities because the Bureau had not provided clear information
about the number of small entities that would be impacted by the rule.
Other commenters asserted that the Bureau's rule would affect a
substantial number of small entities, although they did not provide
evidence to support this assertion. One commenter argued that the
proposed rule would increase burdens for smaller financial technology
companies in particular. In response to these comments, the Bureau
notes that its certification under 5 U.S.C. 605(b) does not depend on
the total number of small entities that would be affected by the rule.
That is because the Bureau has concluded that, regardless of the number
of affected small entities, the economic impact of the rule for the
vast majority of affected small entities would not be significant.
Therefore, even if a substantial number of small entities were affected
by the rule,\497\ the rule still would not have a significant economic
impact on a substantial number of small entities within the meaning of
5 U.S.C. 605(b).
---------------------------------------------------------------------------
\497\ To be clear, commenters have not presented data
establishing that the final rule will in fact affect a substantial
number of small entities. The Bureau here simply notes that, even if
it were assumed that the final rule has some economic effect on a
substantial number of small entities, that impact will not be
significant for the vast majority of affected small entities.
---------------------------------------------------------------------------
The SBA Office of Advocacy asked if it would be possible for the
Bureau to obtain information on the number of small entities subject to
covered orders from States or Federal agencies that have issued these
covered orders. The Bureau indeed asked for similar information from
Federal agencies, State regulators, State attorneys general, and tribes
in interagency consultations for the proposed rule. The specific
question asked was: ``Approximately how many public final orders are
issued each year by agencies or courts in enforcement actions brought
by Federal, State, Tribal governments, or local government agencies
against covered person entities for violations of laws prohibiting
unfair, deceptive, or abusive acts or practices, in cases involving
consumer financial products or services? (In addition to the number of
such orders, the CFPB is interested in information regarding the
particular statutes or regulations prohibiting unfair, deceptive, or
abusive acts or practices that are cited in such enforcement actions.)
Approximately how many such orders are issued each year for violations
of Federal consumer financial laws?'' The Bureau also asked a similar
question in consultations for the final rule, as follows:
``Approximately how many orders issued or obtained by your agency
during the past seven years would qualify as `covered orders' as
defined in the draft final rule?'' While not definitive, the responses
the Bureau obtained to this question were consistent with its estimate
above that perhaps one percent, and at most five percent, of covered
entities are subject to covered orders. However, the Bureau concluded
for several reasons that this information was still not sufficient to
provide a rigorous quantitative estimate of the number of small
entities subject to covered orders. First, most agencies with whom the
Bureau consulted did not provide this requested information to the
Bureau. Second, many of these agencies do not track the number of
covered orders they have outstanding. Third, many of these agencies
cannot reliably determine whether entities subject to covered orders
qualify as ``small entities'' within the meaning of the RFA.
The SBA Office of Advocacy also asked if it would be possible for
the CFPB to use economic data from the Census Bureau's Statistics of
U.S.
[[Page 56145]]
Businesses to extrapolate the number of affected small entities. These
data indicate that, of entities listed in table 1 above, roughly 96
percent are small. In the notice of proposed rulemaking, the Bureau did
not estimate the number of small entities that will be affected by the
final rule because, even with an estimate of the number of small
entities in an industry, the Bureau could not provide a precise
estimate of the number of such entities subject to covered orders.
However, the Bureau notes that a conservative upper bound estimate of
the number of small entities that will be affected by the final rule
can be obtained if one assumes that all entities subject to covered
orders are small.\498\ In this case, if at most 5 percent of all
covered nonbanks are subject to covered orders and so will be affected
by the final rule,\499\ all such affected entities are small, and
roughly 96 percent of covered nonbanks in affected markets are small,
then at most 5.2 percent of small covered nonbanks are subject to
covered orders and so will be affected by the final rule.\500\ The
Bureau reiterates that this 5.2 percent number provides a conservative
upper bound on the fraction of small entities in relevant markets that
will be affected by the final rule, and the actual fraction of small
entities that will be affected by the final rule is likely to be
smaller. Nonetheless, this analysis indicates that the rule will not in
fact impact a substantial number of small entities. As explained above,
however, the Bureau's certification under 5 U.S.C. 605(b) does not
depend on the number of small entities affected by the rule.
---------------------------------------------------------------------------
\498\ To be clear, it is not the case that all entities subject
to covered orders are small entities. In response to comments, the
Bureau here is merely using a simplifying assumption to derive a
conservative upper bound estimate of the rule's potential impact on
small entities.
\499\ As explained above, the estimate that perhaps 1 percent,
and at most 5 percent, of covered nonbanks are subject to covered
orders is based on the Bureau's experience and expertise and is not
disputed by commenters.
\500\ Dividing 5% by 96% yields 5.2%.
---------------------------------------------------------------------------
A joint letter from State regulators misinterpreted the proposed
rule as arguing that because only 1 percent to 5 percent of covered
nonbanks would need to comply with the proposed rule's registration and
reporting requirements, the proposed rule would not have a significant
economic impact on a substantial number of small entities. In the
context of its discussion of the rule's impacts under CFPA section
1022(b)(2)(A), the Bureau indeed estimated that between 1 percent and 5
percent of all covered nonbanks (including both small entities and
larger entities) might be impacted by the proposed rule. In its RFA
analysis in the proposed rule, however, the Bureau did not estimate the
percentage of covered-nonbank small entities that might be affected by
the proposed rule. The Bureau's RFA analysis in the proposed rule thus
did not rely on that 1-to-5 percent estimate, and the Bureau's RFA
analysis here does not depend on that estimate, either. It is, however,
notable that the State-regulator commenters, which have significant
experience with enforcement actions against small entities and access
to a substantial amount of information about such actions through the
NMLS, do not argue that the percentage of covered-nonbank small
entities with covered orders is substantially higher than 1 percent to
5 percent. As noted above, if no more than approximately 5 percent of
covered-nonbank small entities will have covered orders subject to the
rule's requirements, then the rule will not impact a substantial number
of small entities.
The same state-regulator commenters cited NMLS data to argue that
the proposed rule would predominantly impact small nonbank entities,
because nearly 96 percent of state-licensed nonbank NMLS Call Report
filers are small. As explained above, the Bureau's analysis of the
Census Bureau's Statistics of U.S. Businesses data indicates that
roughly 96 percent of entities listed in table 1 are small, so the
Bureau agrees with these state-regulator commenters that a large
majority of entities in affected markets are small. The Bureau notes
that this does not necessarily imply that a large majority of affected
entities are small, since among entities in affected markets, it is
possible that large entities will disproportionately be subject to
covered orders and thus will be disproportionately affected by the
final rule. However, if one further assumes, as these commenters do,
that small entities will be impacted by the rule in roughly the same
proportion as other entities, the Bureau agrees that this indeed
implies that a large majority of affected entities will be small. This
finding merely reflects the fact that most nonbanks are likely small
businesses under the Small Business Administration's regulations. Since
most nonbanks likely qualify as small businesses, it is not surprising
that a rule addressing orders entered against nonbanks would
predominantly affect small businesses if small businesses were impacted
in proportion to their representation among all businesses. This fact,
however, does not affect the Bureau's assessment that the final rule
here will not have a significant economic impact on a substantial
number of small entities. As explained above, the final rule will not
have a significant economic impact on the vast majority of affected
entities, including affected small entities. Further, as also noted
above, the state-regulator commenters do not argue that the percentage
of covered-nonbank small entities with covered orders is substantially
higher than 1 percent to 5 percent. Again, if no more than 5 percent of
all covered nonbanks are subject to covered orders (as the commenters
do not dispute), and roughly 96 percent of all covered nonbanks in
affected markets are small (as the commenters and the Bureau agree),
then no more than 5.2 percent of small covered nonbanks can possibly be
subject to covered orders and so be affected by the final rule. This
implies that the rule will not impact a substantial number of small
entities (although, to reiterate, the Bureau's 5 U.S.C. 605(b)
certification does not depend on that fact).
1. Registration Provisions
The first set of provisions will require covered firms to register
using the nonbank registry and submit certain required information.
Required information includes identifying and administrative
information, as well as information regarding covered orders. This
information should be readily accessible to almost all entities
affected, and providing it through the nonbank registry should be
straightforward. Firms would not have to purchase new hardware or
software, or train specialized personnel, to comply with these final
provisions.
To obtain a quantitative estimate of the cost of these provisions,
the Bureau assesses the average hourly base wage rate for the reporting
requirement at $49.29 per hour. This is the mean hourly wage for
employees in four major occupational groups assessed to be most likely
responsible for the registration process: Management ($66.23/hr); Legal
Occupations ($64.34/hr); Business and Financial Operations ($43.55/hr);
and Office and Administrative Support ($23.05/hr).\501\ We multiply the
average hourly wage of $49.29 by the private industry benefits factor
of 1.42 to get a
[[Page 56146]]
fully loaded wage rate of $70.00/hr.\502\ The Bureau includes these
four occupational groups in order to account for the mix of specialized
employees that may assist in the registration process. The Bureau
assesses that the registration process will generally be completed by
office and administrative support employees that are generally
responsible for the registrant's paperwork and other administrative
tasks. Employees specialized in business and financial operations or in
legal occupations are likely to provide information and assistance with
the registration process. Senior officers and other managers are likely
to review the registration information before it is submitted and may
provide additional information. Assuming as outlined above a fully
loaded wage rate of roughly $70, and that complying with this final
provision would take around five hours of employees' time, yields a
cost impact of around $350 per firm. The cost would likely be even
lower for firms that have and exercise the option to register NMLS-
published covered orders under Sec. 1092.203. Because Sec. 1092.203
requires less information from covered nonbanks than Sec. 1092.202,
exercising the option made available in Sec. 1092.203 should take even
less employee time.\503\ Therefore, the impact of this final provision
on affected firms will be limited.
---------------------------------------------------------------------------
\501\ 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. The hourly wage estimates used
in the proposed rule were slightly different because they were drawn
from 2021 data.
\502\ As of December 2023, the ratio between total compensation
and wages for private industry workers is 1.42. See U.S. Bureau of
Labor Statistics, Employer Costs for Employee Compensation: Private
industry dataset (December 2023), https://www.bls.gov/web/ecec/ecec-private-dataset.xlsx.
\503\ In the unlikely event that a covered nonbank concluded
that registering an NMLS-published covered order under Sec.
1092.203 would be more costly than registering it under Sec.
1092.202, the covered nonbank could forgo the option presented in
Sec. 1092.203 and register the order under Sec. 1092.202 instead.
---------------------------------------------------------------------------
Several commenters disagreed with this cost assessment.\504\ One
preferred a higher estimate of $5,000 per year, based in part on the
argument that the scope of administrative information is ``wholly
unknown'' and can encompass a ``limitless breadth'' of information. The
Bureau disagrees with these claims. As explained above,\505\ Sec.
1092.202(c) only requires registered entities to submit the specific
``administrative information'' that is ``required by the nonbank
registry,'' and the Bureau has made clear that it will ``specify the
types of . . . administrative information registered entities would be
required to submit'' in ``filing instructions . . . issue[d] under . .
. Sec. 1092.102(a).'' \506\ Therefore, covered nonbanks should have no
need to hire outside legal counsel to ascertain what information
qualifies as ``administrative information'' required to be submitted
under the rule. Instead, the Bureau's filing instructions will specify
what categories of information covered nonbanks must submit as
``administrative information.''
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\504\ In this section, the Bureau discusses comments that
focused primarily on the rule's potential effects on small entities.
To the extent that these comments address the potential benefits and
costs of the rule for covered persons, the Bureau recognizes that
the comments are also relevant to its analysis under CFPA section
1022(b)(2)(A); it did not duplicate its responses to those comments
in its section 1022(b)(2)(A) discussion above simply to avoid
unnecessary repetition. Similarly, the Bureau has not repeated here
responses to comments about general impacts on covered persons that
are adequately addressed in its section 1022(b)(2)(A) discussion
above.
\505\ See the section-by-section discussion of Sec. 1092.201(a)
above.
\506\ 88 FR 6088 at 6118.
---------------------------------------------------------------------------
Another commenter based their disagreement on this cost assessment
on the operational cost of developing new technologies and databases to
satisfy the registration requirements. However, the Bureau does not
believe many, if any, entities will have to develop new technologies
and databases to comply with the Registration Provisions. Therefore,
the Bureau believes its $350 estimate is reasonable.
A joint letter from State regulators argued qualitatively that,
because many small entities subject to covered orders are not subject
to CFPB supervision, the costs imposed on them by the proposed rule
would be larger than the Bureau estimated. However, the cost analysis
performed both in the proposed rule and in this final rule does not
presuppose supervision by the CFPB. Further, even if a covered nonbank
is not subject to CFPB supervision, it would even under the baseline
generally be expected to have systems in place to comply with its
obligations under Federal consumer financial laws and other consumer-
protection laws, and the rule's registration requirements do not
significantly add to the legal obligations to which covered nonbanks
are already subject. Therefore, the Bureau again concludes that its
$350 estimate is reasonable.
Commenters also noted that the rule will impose ongoing costs on
entities after initial registration. The Bureau agrees that entities
registering orders under Sec. 1092.202 may incur ongoing costs to
comply with Sec. 1092.202(b)(2)(ii), which requires that covered
nonbanks submit revised registration filings within 90 days after any
amendment to a registered covered order or information required under
Sec. 1092.202(c) or (d). Similarly, Sec. 1092.202(f) requires a
registered entity to submit a revised filing within 90 days if a
covered order is terminated, modified, or abrogated, or if it ceases to
be a covered order by operation of Sec. 1092.202(e).\507\ The Bureau
believes that the cost of those subsequent filings would generally be
less than the cost of preparing and submitting the initial
registration. The Bureau also believes that most revised filings under
Sec. 1092.202(b)(2)(ii) or (f) would be submitted after the initial
year in which an entity first registers an order. In determining
whether a significant economic impact on a substantial number of small
entities (SISNOSE) exists, the Bureau calculates impacts on a periodic
(usually annual) basis that is relative to firm revenue. If the
analysis were extended past the initial year, calculated costs would
increase with time, but so would calculated firm revenue. The Bureau
believes that, in the case of the Registration Provisions, the ratio of
the two--which is the relevant number for SISNOSE analysis--likely
would not increase significantly over time, and in fact would very
likely decrease, because the cost of submissions under Sec.
1092.202(b)(2)(ii) or (f) would generally be less than the cost of
preparing and submitting the initial registration.
---------------------------------------------------------------------------
\507\ Covered nonbanks registering NMLS-published covered orders
under Sec. 1092.203 are not required to submit revised filings with
respect to such orders under Sec. 1092.202(b)(2)(ii) or (f).
---------------------------------------------------------------------------
The same commenters also noted that firms with multiple orders will
face higher costs. The Bureau agrees and noted this point in the
proposed rule.\508\ The Bureau also notes that there are even fewer
entities subject to multiple covered orders than there are entities
subject to any covered order. The Bureau further notes that the average
cost per order of registering orders is likely to be lower for firms
with more covered orders, in part because some of the costs involved
with registering orders (such as identifying and supplying the required
administrative information) would generally only need to be incurred
once.
---------------------------------------------------------------------------
\508\ See 88 FR 6088 at 6131.
---------------------------------------------------------------------------
Two commenters noted that even some entities not subject to covered
orders would still be impacted by the proposed rule, if they were
subject to orders they viewed as potentially covered, because they may
have to determine if the potentially covered orders are actually
covered. As it stated in the proposed rule, the Bureau agrees that some
firms may be unsure whether
[[Page 56147]]
they are covered persons not otherwise excluded from the rule, or
whether they are subject to covered orders. As stated in the proposed
rule, for firms unsure of their obligations under the Registration
Provisions, one option would be to hire outside legal counsel to advise
them on these issues, which the Bureau agrees could be costly for small
firms. However, another option for such firms would be to register
using the nonbank registry, even if doing so is not legally required.
As explained above and in the proposed rule, the cost associated with
registering an order is likely low--a few hours of an employee's time.
In addition, if firms have a good-faith basis to believe they are not
covered nonbanks (or that their orders are not covered orders), they
may submit a notice to the nonbank registry stating as such under Sec.
1092.202(g). Preparing and submitting such notices would take at most a
few hours of an employee's time. The Bureau further notes that the mere
act of registering an order or submitting a Sec. 1092.202(g) notice is
unlikely to have significant indirect costs because Sec. 1092.102(c)
would provide that the rule ``does not alter any applicable process
whereby a person may dispute that it qualifies as a person subject to
Bureau authority.'' Firms should generally choose the lowest cost
option available to them, and low-cost options--either registering
under the nonbank registry or filing a notice under proposed Sec.
1092.202(g)--are options available to firms.
2. Supervisory Reports Provisions
This second set of provisions will require that affected supervised
entities designate an attesting executive for each applicable covered
order. The attesting executive will be a duly appointed senior
executive officer (or, if no such officer exists, the highest-ranking
individual at the entity charged with managerial or oversight
responsibilities) (i) whose assigned duties include ensuring the
supervised registered entity's compliance with Federal consumer
financial law, (ii) who possesses knowledge of the supervised entity's
systems and procedures for achieving compliance with the covered order,
and (iii) who has control over the supervised entity's efforts to
comply with the covered order. The Bureau believes that, even under the
baseline scenario, most supervised entities would take active steps to
comply with covered orders, and therefore would already have such an
officer or individual in place to oversee the entity's compliance with
its obligations under the covered order. Therefore, the Bureau
anticipates that this designation requirement will impose little or no
additional impact on most supervised registered entities. The Bureau
notes that the impacts may be higher for supervised entities that lack
a high-ranking officer or other employee with the requisite
qualifications to serve as an attesting executive, but the Bureau
believes that there are few such entities because the Bureau expects
most supervised registered entities maintain adequate board and
management oversight consistent with an appropriate compliance
management system. Furthermore, covered nonbanks that have opted to
register NMLS-published covered orders under Sec. 1092.203 will not be
subject to the Supervisory Reports Provisions with respect to such
orders.
The Bureau sought comment on whether proposed section 203(b)'s
designation requirement is likely to impose material additional impacts
on supervised registered entities, beyond the impacts those entities
are already likely to incur as part of fulfilling their obligations
under the covered orders to which they are subject. The SBA Office of
Advocacy claimed that, in the proposed rule, the Bureau provided no
basis for its claim that most supervised entities would already have
such an officer or individual in place. This claim is incorrect. In the
proposed rule, as in this final rule, the Bureau explained its
reasoning. The Bureau anticipates that most supervised entities will
take active steps to comply with covered orders, as the law requires.
Therefore, the Bureau believes that, even under the baseline scenario,
most supervised entities would already have an officer or individual
satisfying Sec. 1092.204(b)'s requirements in place to oversee the
entity's compliance with its obligations under the covered order. This
belief is supported by the Bureau's experience with supervising
nonbanks, which includes examining their compliance systems. Based on
its supervision experience, the Bureau believes it is unlikely that
many entities subject to its supervision would have difficulty
designating an individual who satisfies the criteria identified in
Sec. 1092.204(b).
The Supervisory Reports Provisions will also require that the
supervised registered entity submit a written statement signed by the
applicable attesting executive for each covered order to which it is
subject. In the written statement, the attesting executive will: (i)
generally describe the steps that the attesting executive has
undertaken to review and oversee the supervised registered entity's
activities subject to the applicable covered order for the preceding
calendar year; and (ii) attest whether, to the attesting executive's
knowledge, the supervised registered entity during the preceding
calendar year identified any violations or other instances of
noncompliance with any obligations that were imposed in a public
provision of the covered order by the applicable agency or court based
on a violation of a covered law.
The Bureau cannot precisely quantify the impact of the written-
statement requirement on impacted firms. But based on its experience
and expertise, the Bureau believes that most entities subject to
covered orders endeavor in good faith to comply with them and will
already have in place some manner of systems and procedures to help
achieve such compliance. For these entities, the proposed written-
statement requirement would require little more than submitting a
written statement from the attesting executive that generally describes
the steps the executive took consistent with the established systems
and procedures to reach conclusions regarding entity compliance with
the orders.
Thus, relative to the baseline, the written-statement requirement
will impose only modest costs on most covered entities, related
primarily to the time and effort needed to (i) memorialize the
attesting executive's existing oversight of compliance and (ii)
determine whether the supervised registered entity during the preceding
calendar year identified any violations or other instances of
noncompliance with any obligations that were imposed in a public
provision of the covered order by the applicable agency or court based
on a violation of a covered law. While the attesting executive will
sign the written statement and generally describe the steps the
executive has taken to oversee the supervised registered entity's
activities subject to the applicable order, the Bureau expects that
other employees in other major occupational groups (Legal Occupations,
Business and Financial Operations, and Office and Administrative
Support) will support the attesting executive in preparing the
statement. Assuming that satisfying the written-statement requirement
would take twenty hours of employees' time, and that the average cost
to entities of an employee's time is roughly $70 an hour as discussed
above, yields an estimate that the cost of this requirement on covered
entities would be roughly $1,400 per entity.
One commenter criticized this estimate, arguing that many small
entities do not have employees in the various occupational groups
assumed above and in particular would have to
[[Page 56148]]
contract with outside legal counsel to comply with the Supervisory
Reports Provisions. However, the Bureau notes that the Supervisory
Reports Provisions only requires that the attesting executive generally
describe the steps the executive has taken to oversee compliance and
state whether or not the company has identified a violation; it does
not require the company to conduct any new analysis, legal or
otherwise, in order to make that determination. The Supervisory Reports
Provisions would not require, for example, an entity to hire counsel to
conduct an assessment of past conduct for violations of orders it has
not already identified. Therefore, for a sufficiently small entity that
would be forced to employ management only (at a fully loaded wage rate
of $66.23 times 1.42 or $94.05 per hour as discussed above) to satisfy
the written-statement requirements, assuming again that compliance
takes twenty hours of employee time, yields a cost estimate of
approximately $1,881 for such firms. This is substantially lower than
the $3,000 to $6,000 estimate provided by the commenter.
The Bureau acknowledges that, under the baseline, some supervised
registered entities may not have in place systems and procedures to
allow them to confidently identify violations or other instances of
noncompliance with any obligations that were imposed in a public
provision of the covered order. As discussed elsewhere in this
preamble, the Supervisory Reports Provisions will likely prompt some
such entities to adopt new or additional compliance systems and
procedures, imposing a greater cost on them. However, as noted above,
based on its experience and expertise, the Bureau believes that most
entities subject to covered orders endeavor in good faith to comply
with them and will already have in place some manner of systems and
procedures to help achieve such compliance. Therefore, the Bureau
believes that the number of supervised registered entities that will
put in place significant new compliance systems and procedures as a
result of the final rule will be relatively small.
Several commenters argued that employees would be reluctant to act
as attesting executives because of the Supervisory Reports Provisions
and would require a salary premium to do so, raising costs for affected
entities. The Bureau acknowledges that, among entities subject to
covered orders that lack adequate compliance systems, employees could
indeed be reluctant to act as attesting executives under these
provisions and might require a salary premium to do so. However, as
discussed above, the Bureau believes that most entities that are
subject to covered orders endeavor in good faith to comply with them.
Therefore, the Bureau believes that most entities will already have in
place some manner of systems and procedures to help achieve such
compliance. As a result, attesting executives for most entities should
not require a salary premium in order to comply with the written-
statement requirements. The Bureau acknowledges that some firms without
sufficient systems and procedures in place to comply with covered
orders may be forced to pay attesting executives a salary premium
because of the Supervisory Reports Provisions, but believes that there
will be few such firms. Furthermore, while the Bureau cannot precisely
quantify the salary premium that would be required by attesting
executives at such firms, the Bureau notes that an estimate of $25,000
provided by one commenter represents less than .5 percent of annual
receipts of entities with more than $5 million per year in annual
receipts.
In addition, the Supervisory Reports Provisions will require
entities to maintain records related to the written statement for five
years. Conservatively assuming that ensuring the necessary documents
are properly stored also requires ten hours of employee time adds $700
to the costs to affected entities of this final provision.
One commenter appeared to disagree with this cost assessment and
argued, in reference to the recordkeeping requirements of the
Supervisory Reports Provisions, that the added costs of compliance
would be significant enough to cause small entities in the debt-
collection industry material financial hardship, if not cause them to
cease operations. However, this commenter did not directly dispute the
Bureau's cost estimate of ten hours of employee time, nor did the
commenter provide data or analysis to dispute this estimate, which as
noted above implies a cost of compliance of roughly $700.
The Bureau notes that, for the purposes of this final rule, the
term ``supervised registered entity'' excludes persons with less than
$5 million in annual receipts resulting from offering or providing
consumer financial products and services described in CFPA section
1024(a). Relative to this final rule, the proposed rule further
included in the term ``supervised registered entity'' persons with more
than $1 million in annual receipts. Therefore, relative to the proposed
rule that was discussed by commenters, the Supervisory Reports
Provisions will affect fewer small entities, and the entities they will
affect will have higher annual receipts on average. The estimated
combined costs of around $2,100 imposed by the Supervisory Reports
Provisions as discussed above on most affected entities should be
roughly 0.04 percent or less of annual receipts. Therefore, the impact
of this final provision on most affected small entities will be
limited.
The costs of the Supervisory Reports Provisions may be higher at
larger entities because identifying instances of noncompliance with
obligations imposed in a public provision of a covered order may be
more complex at larger entities. But because larger entities will
generally have greater annual receipts, the applicable compliance costs
as a percentage of annual receipts will likely remain nominal for
larger entities, even if the absolute value of those compliance costs
tends to increase as entity size increases. The costs will also likely
be higher at entities with multiple instances of noncompliance with
public provisions of covered orders, or with multiple covered orders.
However, there are fewer entities subject to multiple covered orders
than there are entities subject to any covered order.
Two commenters claimed that the proposed rule did not contain any
assessment of the burden of the rule on entities large enough to be
both not exempt and supervised (and so subject to the Supervisory
Reports Provisions) but small enough to satisfy the SBA's definition of
``small.'' This claim is not correct. The proposed rule contained
analysis, comparable to the analysis in this final rule above, on the
effect of the Supervisory Reports Provisions on small entities. This
means that the proposed rule analyzed the effect of the Supervisory
Reports Provisions on small entities large enough to be impacted by it.
The final rule here does the same.
3. Publication Provisions
For affected covered nonbanks, the main effect of the third set of
provisions will be that (1) their identifying information, (2)
information regarding covered orders that they provide to the Bureau,
and (3) for supervised registered entities, the name and title of the
attesting executive, may be posted on the internet by the Bureau.\509\
Much of
[[Page 56149]]
this information would be public even under the baseline, so the
additional direct effect of this information being posted on the
Bureau's website should be small.
---------------------------------------------------------------------------
\509\ As explained elsewhere in this preamble, the Bureau
intends to publish this information but is retaining the discretion
not to publish the information based on operational considerations,
such as resource constraints. The analysis here assumes that the
Bureau will effectuate its intended approach of publishing the
stated information. If, however, the Bureau were not to publish any
of the information it collects under the final rule, the potential
impacts on small entities discussed in this section largely would
not be realized--except that, to a more limited extent, some of the
impacts associated with the Publication Provisions could result from
the Bureau's sharing of registry information with other government
agencies under memorandums of understanding or other inter-agency
arrangements. Similarly, if the Bureau were to publish only a
portion of the information that it currently intends to publish, the
Publication Provisions' impacts on small entities likely would be
more limited than the impacts associated with the Bureau's current
publication plans.
---------------------------------------------------------------------------
However, because covered nonbanks will provide this information
only if they are subject to covered orders, consumers might interpret
the presence of a covered nonbank on the Bureau's website as negative
information about that covered nonbank. Therefore, these provisions may
have negative reputational costs for the covered nonbanks whose
information is published on the Bureau's website. Yet covered orders
would be public information even under the baseline with no rule.
Therefore, these provisions will not make public any non-public orders.
This will limit the likely costs on covered nonbanks of these
provisions.
These provisions will allow certain information related to covered
orders that is already available to the general public to be
centralized on the Bureau's website. This will make the information
more readily accessible than it would otherwise be. A large body of
research has studied the circumstances under which providing consumers
better access to information does, and does not, improve consumer
outcomes.\510\ One consensus from this research is that well-designed
information disclosures can be effective at directing consumer
attention. For example, one study found that providing certain
borrowers with information about the costs of their loans reduced
borrowing.\511\ However, another consensus from this research is that
information disclosures do not always materially affect consumer
decision-making, and that the impact of information disclosures on
consumer decision-making depends on their design and implementation.
Impactful information disclosures are typically more direct (e.g.,
disclosing the costs of a particular type of loan to prospective
borrowers) and more timely (e.g., disclosed to prospective borrowers at
the time they are obtaining a loan) than the information that will be
centralized and published under this final provision. Therefore, the
Bureau believes that most consumers will not change their behavior due
to this final provision, so the impact of this final provision on most
affected entities will likely not be significant. The Bureau
acknowledges that the issues disclosed by a few covered orders may be
so controversial among consumers that their publication on the Bureau
website could impose a substantial impact on the firms affected by
those orders. However, as noted above, covered orders would be public
information even under the baseline with no rule. Therefore, covered
orders that disclose particularly controversial practices would likely
be well-known among consumers even under the baseline. As a result, the
Bureau believes that these final provisions are unlikely to have a
significant economic impact on a substantial number of small entities.
---------------------------------------------------------------------------
\510\ For one review of this research, see Thomas A. Durkin and
Gregory Elliehausen, Truth in Lending: Theory, History, and a Way
Forward (2011).
\511\ See Marianne Bertrand and Adair Morse, Information
Disclosure, Cognitive Biases, and Payday Borrowing, 66 The Journal
of Finance 1865, 1865-93 (2011).
---------------------------------------------------------------------------
The SBA Office of Advocacy critiqued the analysis of the
Publication Provisions in the proposed rule as ``confusing and
contradictory'' because it concluded that the Publication Provisions
could have a significant impact on a few small entities but would not
have a significant impact on a substantial number of small entities.
But the possibility that a provision may have a significant economic
impact on a limited number of small entities does not mean that the
provision will have a significant economic impact on a substantial
number of small entities. Because the Bureau has found that few small
entities would be significantly affected by the Bureau's re-publication
through its registry of orders that are already public, the Bureau has
concluded that the possibility of such significant impacts in
relatively rare cases does not indicate that a SISNOSE exists. The
Bureau's conclusion about the impact of the Publication Provisions is
therefore neither confusing nor contradictory.
Another commenter argued that larger firms are more likely to have
public relations funding to counteract the negative publicity of
appearing on the Bureau's website, and so this provision would have an
especially large relative effect on small firms. The Bureau
acknowledges that larger firms are more likely to have more funding for
public relations. However, the Bureau also notes that larger firms are
also more likely to attract attention from consumers, regulators, the
media, and other public parties. Hence the Bureau does not necessarily
agree that this provision would have an especially large relative cost
for small firms. Furthermore, even if a provision may have a somewhat
larger effect on smaller firms, that does not mean that the provision
has a significant economic impact on a substantial number of small
entities. A relevant consideration in determining whether the provision
here will have a significant economic impact on a substantial number of
small entities is the fraction of small nonbank entities that will be
significantly impacted by the provision. The commenter did not provide
such estimates.
For the reasons described above, the Bureau believes that no
provision of the final rule will have a significant economic impact on
a substantial number of small entities. Moreover, the impact of each
provision is sufficiently small that the three provisions together will
not have a significant economic impact on a substantial number of small
entities.
Accordingly, the Director certifies that this final rule will not
have a significant economic impact on a substantial number of small
entities. Thus, a FRFA is not required for this final rule.
X. Paperwork Reduction Act
Under the Paperwork Reduction Act of 1995 (PRA),\512\ Federal
agencies are generally required to seek approval from the Office of
Management and Budget (OMB) for information collection requirements
prior to implementation. Under the PRA, the Bureau may not conduct nor
sponsor, and, notwithstanding any other provision of law, a person is
not required to respond to, an information collection unless the
information collection displays a valid control number assigned by OMB.
The information collection requirements in this final rule are
mandatory. Certain information collected under these requirements may
be made available to the public, while other information would not be
made available to the public, in accordance with applicable law.
---------------------------------------------------------------------------
\512\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------
The collections of information contained in this rule, and
identified as such, have been submitted to OMB for review under section
3507(d) of the PRA. A complete description of the information
collection requirements (including the burden estimate methods) is
provided in the information collection request that the Bureau has
submitted to OMB under the requirements of the PRA. The information
collection request
[[Page 56150]]
submitted to OMB requesting approval under the PRA for the information
collection requirements contained herein is available at
www.regulations.gov as well as on OMB's public-facing docket at
www.reginfo.gov.
Title of Collection: Nonbank Registration--Agency and Court Orders
Registration.
OMB Control Number: 3170-0076.
Type of Review: Request for approval of a new information
collection.
Affected Public: Private sector.
Estimated Number of Respondents: 7,752.
Estimated Total Annual Burden Hours: 35 hours.
In the notice of proposed rulemaking, the Bureau invited comments
on: (a) Whether the collection of information is necessary for the
proper performance of the functions of the Bureau, including whether
the information will have practical utility; (b) the accuracy of the
Bureau's estimate of the burden of the collection of information,
including the validity of the methods and the assumptions used; (c)
ways to enhance the quality, utility, and clarity of the information to
be collected; and (d) ways to minimize the burden of the collection of
information on respondents, including through the use of automated
collection techniques or other forms of information technology. The
comments on the rule generally, and those relating to its burdens and
utility, are summarized above. The Bureau is always interested in
comments on its information collections, and how to improve their
utility and reduce their burdens. These may be made at
[email protected].
XI. Congressional Review Act
Pursuant to the Congressional Review Act,\513\ the Bureau will
submit a report containing this rule and other required information to
the U.S. Senate, the U.S. House of Representatives, and the Comptroller
General of the United States at least 60 days prior to the rule's
published effective date. The Office of Information and Regulatory
Affairs has designated this rule as a ``major rule'' as defined by 5
U.S.C. 804(2).
---------------------------------------------------------------------------
\513\ 5 U.S.C. 801 et seq.
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List of Subjects in 12 CFR Part 1092
Administrative practice and procedure, Consumer protection, Credit,
Intergovernmental relations, Law enforcement, Nonbank registration,
Registration, Reporting and recordkeeping requirements, Trade
practices.
Authority and Issuance
For the reasons set forth above, the Bureau amends 12 CFR chapter X
by adding part 1092 to read as follows:
PART 1092--NONBANK REGISTRATION
Subpart A--General
Sec.
1092.100 Authority and purpose.
1092.101 General definitions.
1092.102 Submission and use of registration information.
1092.103 Severability.
Subpart B--Registry of Nonbank Covered Persons Subject to Certain
Agency and Court Orders
1092.200 Scope and purpose.
1092.201 Definitions.
1092.202 Registration and submission of information regarding
covered orders.
1092.203 Optional one-time registration of NMLS-published covered
orders.
1092.204 Annual reporting requirements for supervised registered
entities.
1092.205 Publication and correction of registration information.
1092.206 Nonbank registry implementation dates.
Subpart C--[Reserved]
Appendix A to Part 1092--List of State Covered Laws
Authority: 12 U.S.C. 5512(b) and (c); 12 U.S.C. 5514(b).
Subpart A--General
Sec. 1092.100 Authority and purpose.
(a) Authority. The regulation in this part is issued by the Bureau
pursuant to section 1022(b) and (c) and section 1024(b) of the Consumer
Financial Protection Act of 2010, codified at 12 U.S.C. 5512(b) and
(c), and 12 U.S.C. 5514(b).
(b) Purpose. The purpose of this part is to prescribe rules
governing the registration of nonbanks, and the collection and
submission of registration information by such persons, and for public
release of the collected information as appropriate.
(1) This subpart contains general provisions and definitions used
in this part.
(2) Subpart B of this part sets forth requirements regarding the
registration of nonbanks subject to certain agency and court orders.
Sec. 1092.101 General definitions.
For the purposes of this part, unless the context indicates
otherwise, the following definitions apply:
(a) Affiliate, consumer, consumer financial product or service,
covered person, Federal consumer financial law, insured credit union,
person, related person, service provider, and State have the same
meanings as in 12 U.S.C. 5481.
(b) Bureau means the Consumer Financial Protection Bureau.
(c) Include, includes, and including mean that the items named may
not encompass all possible items that are covered, whether like or
unlike the items named.
(d) Nonbank registry means the Bureau's electronic registry
identified and maintained by the Bureau for the purposes of this part.
(e) Nonbank registry implementation date means, for a given
requirement or subpart of this part, or a given person or category of
persons, the date(s) determined by the Bureau to commence the
operations of the nonbank registry in connection with that requirement
or subpart.
Sec. 1092.102 Submission and use of registration information.
(a) Filing instructions. The Bureau shall specify the form and
manner for electronic filings and submissions to the nonbank registry
that are required or made voluntarily under this part. The Bureau also
may provide for extensions of deadlines or time periods prescribed by
this part for persons affected by declared disasters or other emergency
situations.
(b) Coordination or combination of systems. In administering the
nonbank registry, the Bureau may rely on information a person
previously submitted to the nonbank registry under this part and may
coordinate or combine systems in consultation with State agencies as
described in 12 U.S.C. 5512(c)(7)(C) and 12 U.S.C. 5514(b)(7)(D).
(c) Bureau use of registration information. The Bureau may use the
information submitted to the nonbank registry under this part to
support its objectives and functions, including in determining when to
exercise its authority under 12 U.S.C. 5514 to conduct examinations and
when to exercise its enforcement powers under subtitle E of the
Consumer Financial Protection Act of 2010. However, this part does not
alter any applicable process whereby a person may dispute that it
qualifies as a person subject to Bureau authority.
(d) Calculation of time periods. In computing any date or period of
time prescribed by this part, exclude the day of the event that
triggers the period; count every day, including intermediate Saturdays,
Sundays, and Federal holidays; and include the last day of the period.
If any provision of this part would establish a deadline for an action
that is a Saturday, Sunday, or Federal
[[Page 56151]]
holiday, the deadline is extended to the next day that is not a
Saturday, Sunday, or Federal holiday.
Sec. 1092.103 Severability.
If any provision of this part, 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.
Subpart B--Registry of Nonbank Covered Persons Subject to Certain
Agency and Court Orders
Sec. 1092.200 Scope and purpose.
(a) Scope. This subpart requires nonbank covered persons that are
subject to certain public agency and court orders to register with the
Bureau and to submit a copy of each such public order to the Bureau.
This subpart also requires certain nonbank covered persons that are
supervised by the Bureau to prepare and submit an annual written
statement, signed by a designated individual, regarding compliance with
each such public order. Finally, this subpart also describes the
registration information the Bureau may make publicly available.
(b) Purpose. The purposes of the information collection
requirements contained in this subpart are:
(1) To support Bureau functions by monitoring for risks to
consumers in the offering or provision of consumer financial products
or services, including developments in markets for such products or
services, pursuant to 12 U.S.C. 5512(c)(1);
(2) To prescribe rules regarding registration requirements
applicable to nonbank covered persons, pursuant to 12 U.S.C.
5512(c)(7);
(3) To facilitate the supervision of persons described in 12 U.S.C.
5514(a)(1), pursuant to 12 U.S.C. 5514(b);
(4) To assess and detect risks to consumers, pursuant to 12 U.S.C.
5514(b); and
(5) To ensure that persons described in 12 U.S.C. 5514(a)(1) are
legitimate entities and are able to perform their obligations to
consumers, pursuant to 12 U.S.C. 5514(b).
Sec. 1092.201 Definitions.
For the purposes of this subpart, unless the context indicates
otherwise, the following definitions apply:
(a) Administrative information means contact information regarding
persons subject to this subpart and other information submitted or
collected to facilitate the administration of the nonbank registry
including information submitted under Sec. Sec. 1092.202(g) and
1092.204(f).
(b) Attesting executive means, with respect to any covered order
regarding a supervised registered entity, the individual designated by
the supervised registered entity to perform the supervised registered
entity's duties with respect to the covered order under Sec. 1092.204.
(c) Covered law means a law listed in paragraphs (c)(1) through (6)
of this section, to the extent that the violation of law found or
alleged arises out of conduct in connection with the offering or
provision of a consumer financial product or service:
(1) A Federal consumer financial law;
(2) Any other law as to which the Bureau may exercise enforcement
authority;
(3) The prohibition on unfair or deceptive acts or practices under
section 5 of the Federal Trade Commission Act, 15 U.S.C. 45, or any
rule or order issued for the purpose of implementing that prohibition;
(4) A State law prohibiting unfair, deceptive, or abusive acts or
practices that is identified in appendix A to this part;
(5) A State law amending or otherwise succeeding a law identified
in appendix A to this part, to the extent that such law is materially
similar to its predecessor; or
(6) A rule or order issued by a State agency for the purpose of
implementing a prohibition on unfair, deceptive, or abusive acts or
practices contained in a State law described in paragraph (c)(4) or (5)
of this section.
(d) Covered nonbank means a covered person that is not any of the
following:
(1) An insured depository institution or insured credit union;
(2) A person who is a covered person solely due to being a related
person;
(3) A State;
(4) A natural person;
(5) A motor vehicle dealer that is predominantly engaged in the
sale and servicing of motor vehicles, the leasing and servicing of
motor vehicles, or both, within the meaning of 12 U.S.C. 5519(a),
except to the extent such a person engages in functions that are
excepted from the application of 12 U.S.C. 5519(a) as described in 12
U.S.C. 5519(b); or
(6) A person that qualifies as a covered person based solely on
conduct that is the subject of, and that is not otherwise exempted
from, an exclusion from the Bureau's rulemaking authority under 12
U.S.C. 5517.
(e) Covered order--(1) In general. Covered order means a final
public order issued by an agency or court, whether or not issued upon
consent, that:
(i) Identifies a covered nonbank by name as a party subject to the
order;
(ii) Was issued at least in part in any action or proceeding
brought by any Federal agency, State agency, or local agency;
(iii) Contains public provisions that impose obligations on the
covered nonbank to take certain actions or to refrain from taking
certain actions;
(iv) Imposes such obligations on the covered nonbank based on an
alleged violation of a covered law; and
(v) Has an effective date on or later than January 1, 2017.
(2) Exception. The term ``covered order'' does not include an order
issued to a motor vehicle dealer that is predominantly engaged in the
sale and servicing of motor vehicles, the leasing and servicing of
motor vehicles, or both, within the meaning of 12 U.S.C. 5519(a),
except to the extent such order is in connection with the functions
that are excepted from the application of 12 U.S.C. 5519(a) as
described in 12 U.S.C. 5519(b).
(f) Effective date means, in connection with a covered order, the
effective date as identified in the covered order; provided that if no
other effective date is specified, then the date on which the covered
order was issued shall be treated as the effective date for purposes of
this subpart. If the issuing agency or a court stays or otherwise
suspends the effectiveness of the covered order, the effective date
shall be delayed until such time as the stay or suspension of
effectiveness is lifted.
(g) Identifying information means existing information available to
the covered nonbank that uniquely identifies the covered nonbank,
including the entity's legal name, State (or other jurisdiction) of
incorporation or organization, principal place of business address, any
doing business as or fictitious business names, and any unique
identifiers issued by a government agency or standards organization.
(h) Insured depository institution has the same meaning as in 12
U.S.C. 5301(18)(A).
(i) Local agency means a regulatory or enforcement agency or
authority of a county, city (whether general law or chartered), city
and county, municipal corporation, district, or other political
subdivision of a State, other than a State agency.
(j) NMLS means the Nationwide Multistate Licensing System.
(k) NMLS-published covered order means a covered order that is
published on the NMLS Consumer Access website,
[[Page 56152]]
www.NMLSConsumerAccess.org, except that no covered order issued or
obtained at least in part by the Bureau shall be an NMLS-published
covered order.
(l) Order includes any written order or judgment issued by an
agency or court in an investigation, matter, or proceeding.
(m) Public means, with respect to a covered order or any portion
thereof, published by the issuing agency or court, or required by any
provision of Federal, State, or local law, rule, or order to be
published by the issuing agency or court. The term does not include
orders or portions of orders that constitute confidential supervisory
information of any Federal, State, or local agency.
(n) Registered entity means any person registered or required to be
registered under this subpart.
(o) Remain(s) in effect means, with respect to any covered order,
that the covered nonbank remains subject to public provisions that
impose obligations on the covered nonbank to take certain actions or to
refrain from taking certain actions based on an alleged violation of a
covered law.
(p) State agency means the attorney general (or the equivalent
thereof) of any State and any other State regulatory or enforcement
agency or authority.
(q) Supervised registered entity means a registered entity that is
subject to supervision and examination by the Bureau pursuant to 12
U.S.C. 5514(a) except as provided in paragraphs (q)(1) through (4) of
this section. For purposes of this definition, the term ``subject to
supervision and examination by the Bureau pursuant to 12 U.S.C.
5514(a)'' includes an entity that qualifies as a larger participant of
a market for consumer financial products or services under any rule
issued by the Bureau pursuant to 12 U.S.C. 5514(a)(1)(B) and (a)(2), or
that is subject to an order issued by the Bureau pursuant to 12 U.S.C.
5514(a)(1)(C). The term ``supervised registered entity'' does not
include:
(1) A service provider that is subject to Bureau examination and
supervision solely in its capacity as a service provider and that is
not otherwise subject to Bureau supervision and examination;
(2) A motor vehicle dealer that is predominantly engaged in the
sale and servicing of motor vehicles, the leasing and servicing of
motor vehicles, or both, within the meaning of 12 U.S.C. 5519(a),
except to the extent such a person engages in functions that are
excepted from the application of 12 U.S.C. 5519(a) as described in 12
U.S.C. 5519(b);
(3) A person that qualifies as a covered person based solely on
conduct that is the subject of, and that is not otherwise exempted
from, an exclusion from the Bureau's supervisory authority under 12
U.S.C. 5517; or
(4) A person with less than $5 million in annual receipts resulting
from offering or providing all consumer financial products and services
described in 12 U.S.C. 5514(a). For purposes of this exclusion:
(i) The term ``annual receipts'' has the same meaning as that term
has in 12 CFR 1090.104(a); and
(ii) A person's receipts from offering or providing a consumer
financial product or service subject to a larger participant rule under
12 U.S.C. 5514(a)(1)(B) count as receipts for purposes of the exclusion
in this paragraph (q)(4) regardless of whether the person qualifies as
a larger participant.
Sec. 1092.202 Registration and submission of information regarding
covered orders.
(a) Scope of registration requirement. This section shall apply
only with respect to covered orders with an effective date on or after
the effective date of this subpart, or that remain in effect as of the
effective date of this subpart.
(b) Requirement to register and submit information regarding
covered orders. (1) Each covered nonbank that is identified by name as
a party subject to a covered order described in paragraph (a) of this
section shall register as a registered entity with the nonbank registry
in accordance with this section if it is not already so registered, and
shall provide or update, as applicable, the information described in
this subpart in the form and manner specified by the Bureau.
(2) Each covered nonbank required to register under this section
shall:
(i) Submit a filing containing the information described in
paragraphs (c) and (d) of this section to the nonbank registry within
the later of 90 days after the applicable nonbank registry
implementation date under Sec. 1092.206 or 90 days after the effective
date of any applicable covered order; and
(ii) Submit a revised filing amending any information described in
paragraphs (c) and (d) of this section to the nonbank registry within
90 days after any amendments are made to the covered order or any of
the information described in paragraph (c) or (d) of this section
changes.
(c) Required identifying information and administrative
information. A registered entity shall provide all identifying
information and administrative information required by the nonbank
registry. In filing instructions issued pursuant to Sec. 1092.102(a),
the Bureau may require that covered nonbanks that are affiliates make
joint or combined submissions under this section.
(d) Information regarding covered orders. A registered entity shall
provide the following information for each covered order subject to
this section:
(1) A fully executed, accurate, and complete copy of the covered
order, in a format specified by the Bureau; provided that any portions
of a covered order that are not public shall not be submitted, and
these portions shall be clearly marked on the copy submitted;
(2) In connection with each applicable covered order, information
identifying:
(i) The agency(ies) and court(s) that issued or obtained the
covered order, as applicable;
(ii) The effective date of the covered order;
(iii) The date of expiration, if any, of the covered order, or a
statement that there is none;
(iv) All covered laws found to have been violated or, for orders
issued upon the parties' consent, alleged to have been violated; and
(v) Any docket, case, tracking, or other similar identifying
number(s) assigned to the covered order by the applicable agency(ies)
or court(s).
(3) If the registered entity is a supervised registered entity, the
name and title of its attesting executive for purposes of Sec.
1092.204 with respect to the covered order.
(e) Expiration of covered order status. A covered order shall cease
to be a covered order for purposes of this subpart as of the later of:
(1) Ten years after its effective date; or
(2) If the covered order expressly provides for a termination date
more than ten years after its effective date, the expressly provided
termination date.
(f) Requirement to submit revised and final filings with respect to
certain covered orders. (1) If a covered order is terminated, modified,
or abrogated (whether by its own terms, by action of the applicable
agency, or by a court), or if an order ceases to be a covered order for
purposes of this subpart by operation of paragraph (e) of this section,
the registered entity shall submit a revised filing to the nonbank
registry within 90 days after the effective date of such termination,
modification, or abrogation, or the date such order ceases to be a
covered order.
(2) If, due to such termination, modification, or abrogation of a
covered order, or due to the application of paragraph (e) of this
section, the order
[[Page 56153]]
no longer remains in effect or is no longer a covered order, then,
following its final filing under paragraph (f)(1) of this section with
respect to such covered order, the registered entity will have no
further obligation to update its filing or to file written statements
with respect to such covered order under this subpart.
(g) Notification by certain persons of non-registration under this
section. A person may submit a notice to the nonbank registry stating
that it is not registering pursuant to this section because it has a
good-faith basis to believe that it is not a covered nonbank or that an
order in question is not a covered order. Such person shall promptly
comply with this section upon becoming aware of facts or circumstances
that would not permit it to continue representing that it has a good-
faith basis to believe that it is not a covered nonbank or that an
order in question is not a covered order.
Sec. 1092.203 Optional one-time registration of NMLS-published
covered orders.
(a) One-time registration option with respect to an NMLS-published
covered order. With respect to any NMLS-published covered order, a
covered nonbank that is identified by name as a party subject to the
order may elect to comply with the one-time registration option
described in this section in lieu of complying with the requirements of
Sec. Sec. 1092.202 and 1092.204.
(b) Information to be provided. The covered nonbank, in the form
and manner specified by the Bureau, shall provide such information that
the Bureau determines is appropriate for the purpose of identifying the
covered nonbank and the NMLS-published covered order, and otherwise for
the purpose of coordinating the nonbank registry with the NMLS.
(c) No further obligation to provide or update information with
respect to the NMLS-published covered order. Upon providing such
information, the covered nonbank shall have no further obligation under
this subpart to provide information to, or update information provided
to, the nonbank registry regarding the NMLS-published covered order.
Sec. 1092.204 Annual reporting requirements for supervised
registered entities.
(a) Scope of annual reporting requirements. (1) This section shall
apply only with respect to covered orders with an effective date on or
after the applicable nonbank registry implementation date under Sec.
1092.206 and as to which information is provided or required to be
provided under Sec. 1092.202.
(2) A supervised registered entity is not required to comply with
this section with respect to any NMLS-published covered order for which
it chooses to comply with the one-time registration option described in
Sec. 1092.203.
(b) Requirement to designate attesting executive. Subject to
paragraph (a) of this section, a supervised registered entity subject
to a covered order shall designate as its attesting executive for the
covered order for purposes of this subpart its highest-ranking duly
appointed senior executive officer (or, if the supervised registered
entity does not have any duly appointed officers, the highest-ranking
individual charged with managerial or oversight responsibility for the
supervised registered entity) whose assigned duties include ensuring
the supervised registered entity's compliance with Federal consumer
financial law, who has knowledge of the entity's systems and procedures
for achieving compliance with the covered order, and who has control
over the entity's efforts to comply with the covered order. The
supervised registered entity shall annually designate one attesting
executive for each such covered order to which it is subject and for
all submissions and other purposes related to that covered order under
this subpart. The supervised registered entity shall authorize the
attesting executive to perform the duties of an attesting executive on
behalf of the supervised registered entity with respect to the covered
order as required in this section, including submitting the written
statement described in paragraph (d) of this section.
(c) Requirement to provide attesting executive(s) with access to
documents and information. A supervised registered entity subject to
this section shall provide its attesting executive(s) with prompt
access to all documents and information related to the supervised
registered entity's compliance with all applicable covered order(s) as
necessary to make the written statement(s) required in paragraph (d) of
this section.
(d) Annual requirement to submit written statement to the Bureau
for each covered order. On or before March 31 of each calendar year,
the supervised registered entity shall, in the form and manner
specified by the Bureau, submit to the nonbank registry a written
statement with respect to each covered order described in paragraph
(a)(1) of this section to which it is subject. The written statement
shall be signed by the attesting executive on behalf of the supervised
registered entity. In the written statement, the attesting executive
shall:
(1) Generally describe the steps that the attesting executive has
undertaken to review and oversee the supervised registered entity's
activities subject to the applicable covered order for the preceding
calendar year; and
(2) Attest whether, to the attesting executive's knowledge, the
supervised registered entity during the preceding calendar year
identified any violations or other instances of noncompliance with any
obligations that were imposed in a public provision of the covered
order by the applicable agency or court based on a violation of a
covered law.
(e) Requirement to maintain and make available related records. A
supervised registered entity shall maintain documents and other records
sufficient to provide reasonable support for its written statement
under paragraph (d) of this section and to otherwise demonstrate
compliance with the requirements of this section with respect to any
submission under this section, for five years after such submission is
required. The supervised registered entity shall make such documents
and other records available to the Bureau upon request.
(f) Notification of entity's good-faith belief that requirements do
not apply. A person may submit a notice to the nonbank registry stating
that it is neither designating an attesting executive nor submitting a
written statement pursuant to this section because it has a good-faith
basis to believe that it is not a supervised registered entity or that
an order in question is not a covered order. Such person shall promptly
comply with this section upon becoming aware of facts or circumstances
that would not permit it to continue representing that it has a good-
faith basis to believe that it is not a supervised registered entity or
that an order in question is not a covered order.
Sec. 1092.205 Publication and correction of registration
information.
(a) Internet publication of registration information. The Bureau
may make available to the public the information submitted to the
nonbank registry pursuant to Sec. Sec. 1092.202 and 1092.203 by means
that include publishing such information on the Bureau's publicly
available internet site within a timeframe determined by the Bureau in
its discretion, except that:
(1) The publication described in this paragraph (a) will not
include the written statement submitted under Sec. 1092.204, which
will be treated as Bureau confidential supervisory
[[Page 56154]]
information subject to the provisions of 12 CFR part 1070 of this
chapter; and
(2) The publication described in this paragraph (a) will not
include administrative information.
(b) Other publications of information. In addition to the
publication described in paragraph (a) of this section, the Bureau may,
at its discretion, compile and aggregate information submitted by
persons pursuant to this subpart and make any compilations or
aggregations of such information publicly available as the Bureau deems
appropriate.
(c) Correction of submissions to the nonbank registry. If any
information submitted to the nonbank registry under this subpart was
inaccurate when submitted and remains inaccurate, the covered nonbank
shall file a corrected report in the form and manner specified by the
Bureau within 30 days after the date on which such covered nonbank
becomes aware or has reason to know of the inaccuracy. In addition, the
Bureau may at any time and in its discretion direct a covered nonbank
to correct errors or other non-compliant submissions to the nonbank
registry made under this subpart.
Sec. 1092.206 Nonbank registry implementation dates.
(a) Applicable dates. The applicable nonbank registry
implementation date for purposes of this subpart shall be as follows:
(1) For a covered nonbank that is a larger participant of a market
for consumer financial products or services described under 12 U.S.C.
5514(a)(1)(B) as defined by one or more rules issued by the Bureau, 30
days after this subpart takes effect with respect to that covered
nonbank;
(2) For a covered nonbank described under any other provision of 12
U.S.C. 5514(a)(1), 120 days after this subpart takes effect with
respect to that covered nonbank; and
(3) For any other covered nonbank, 210 days after this subpart
takes effect with respect to that covered nonbank.
(b) Calculation of dates. If paragraph (a) of this section would
establish a nonbank registry implementation date on a date that is a
Saturday, Sunday, or Federal holiday, the applicable nonbank registry
implementation date will be the next day that is not a Saturday,
Sunday, or Federal holiday.
Subpart C--[Reserved]
Appendix A to Part 1092--List of State Covered Laws
Alabama
Ala. Code sec. 5-18A-13(j).
Ala. Code sec. 8-19-5.
Alaska
Alaska Stat. sec. 06.20.200.
Alaska Stat. sec. 06.40.090.
Alaska Stat. sec. 06.60.320.
Alaska Stat. sec. 06.60.340.
Alaska Stat. sec. 45.50.471.
Arizona
Ariz. Rev. Stat. sec. 6-611.
Ariz. Rev. Stat. sec. 6-710(8).
Ariz. Rev. Stat. sec. 6-909(C).
Ariz. Rev. Stat. sec. 6-947(D).
Ariz. Rev. Stat. sec. 6-984(D).
Ariz. Rev. Stat. sec. 6-1309(A).
Ariz. Rev. Stat. sec. 44-1522(A).
Ariz. Rev. Stat. sec. 44-1703(4).
Arkansas
Ark. Code Ann. sec. 4-75-208(a).
Ark. Code Ann. sec. 4-88-107.
Ark. Code Ann. sec. 4-88-108(a)(1).
Ark. Code Ann. sec. 4-88-304(a).
Ark. Code Ann. sec. 4-90-705.
Ark. Code Ann. sec. 4-107-203.
Ark. Code Ann. sec. 4-112-101 to 4-112-114.
Ark. Code Ann. sec. 4-115-102.
Ark. Code Ann. sec. 23-39-405.
California
Cal. Bus. & Prof. Code sec. 17200 to 17209.
Cal. Bus. & Prof. Code sec. 17500.
Cal. Civ. Code sec. 1770.
Cal. Civ. Code sec. 1788.101(a), (b)(1), (7), (8), (9),
(10).
Cal. Fin. Code sec. 4995.3(b).
Cal. Fin. Code sec. 22755(b), (i).
Cal. Fin. Code sec. 90003.
Colorado
Colo. Rev. Stat. sec. 5-3.1-121.
Colo. Rev. Stat. sec. 5-20-109(b).
Colo. Rev. Stat. sec. 6-1-105.
Connecticut
Conn. Gen. Stat. sec. 36a-267.
Conn. Gen. Stat. sec. 36a-498(g)(2).
Conn. Gen. Stat. sec. 36a-539(d)(2), (6).
Conn. Gen. Stat. sec. 36a-561(3), (4).
Conn. Gen. Stat. sec. 36a-580 to 36a-589.
Conn. Gen. Stat. sec. 36a-607(c)(2)(5).
Conn. Gen. Stat. sec. 36a-646.
Conn. Gen. Stat. sec. 36a-700.
Conn. Gen. Stat. sec. 42-110b.
Conn. Gen. Stat. sec. 42-240 to 42-253.
Delaware
Del. Code Ann. tit. 5, sec. 2114.
Del. Code Ann. tit. 5, sec. 2209(a)(3).
Del. Code Ann. tit. 5, sec. 2315(a)(3).
Del. Code Ann. tit. 5, sec. 2418(2), (9).
Del. Code Ann. tit. 5, sec. 2904(a)(3).
Del. Code Ann. tit. 6, sec. 2513.
Del. Code Ann. tit. 6, sec. 2532, 2533.
District of Columbia
D.C. Code sec. 26-1114(d)(2), (9).
D.C. Code sec. 28-3814.
D.C. Code sec. 28-3904.
Florida
Fla. Stat. sec. 501.97.
Fla. Stat. sec. 501.204.
Fla. Stat. sec. 560.114(1)(d).
Fla. Stat. sec. 560.309(10).
Fla. Stat. sec. 560.406(2).
Fla. Stat. sec. 687.141(2), (3).
Fla. Stat. sec. 817.801 to 817.806.
Georgia
Ga. Code Ann. sec. 7-7-2(1), (3), (4).
Ga. Code Ann. sec. 10-1-372.
Ga. Code Ann. sec. 10-1-393.
Hawaii
Haw. Rev. Stat. sec. 443B-18.
Haw. Rev. Stat. sec. 454F-17(2), (9), (14).
Haw. Rev. Stat. sec. 477E-1 to 477E-6.
Haw. Rev. Stat. sec. 480-2.
Haw. Rev. Stat. sec. 480J-45(7), (10).
Haw. Rev. Stat. sec. 481A-3.
Haw. Rev. Stat. sec. 489D-23(2), (4).
Idaho
Idaho Code sec. 26-31-317(2), (9).
Idaho Code sec. 26-2505(2).
Idaho Code sec. 28-46-413(8).
Idaho Code sec. 48-603.
Idaho Code sec. 48-603A.
Illinois
815 Ill. Comp. Stat. sec. 122/4-5(3), (8).
815 Ill. Comp. Stat. sec. 505/2 to 505/2AAAA.
815 Ill. Comp. Stat. sec. 510/2.
815 Ill. Comp. Stat. sec. 635/7-13(2), (9).
Indiana
Ind. Code sec. 24-4.4-3-104.6(b), (i).
Ind. Code sec. 24-4.5-7-410(c), (g).
Ind. Code sec. 24-5-0.5-3.
Ind. Code sec. 24-5-0.5-10.
Iowa
Iowa Code sec. 535D.17(2), (9).
Iowa Code sec. 537.3209(1).
Iowa Code sec. 538A.3(4).
Iowa Code sec. 714.16(2)(a).
Iowa Code sec. 714H.3.
Kansas
Kan. Stat. Ann. sec. 50-626.
Kan. Stat. Ann. sec. 50-1017(2), (3).
Kentucky
Ky. Rev. Stat. Ann. sec. 286.9-100(7).
Ky. Rev. Stat. Ann. sec. 286.11-039(f).
Ky. Rev. Stat. Ann. sec. 286.12-110(1)(a)(4).
Ky. Rev. Stat. Ann. sec. 365.050.
Ky. Rev. Stat. Ann. sec. 367.170.
Ky. Rev. Stat. Ann. sec. 367.381(2).
Ky. Rev. Stat. Ann. sec. 380.010 to 380.990.
Louisiana
La. Rev. Stat. Ann. sec. 6:1055.
La. Rev. Stat. Ann. sec. 6:1092(D)(2), (9).
La. Rev. Stat. Ann. sec. 6:1393(A)(3)(b).
La. Rev. Stat. Ann. sec. 6:1412(A)(2).
La. Rev. Stat. Ann. sec. 9:3574.3(2), (3).
La. Rev. Stat. Ann. sec. 51:1405.
La. Rev. Stat. Ann. sec. 51:1915.
Maine
Me. Rev. Stat. tit. 5, sec. 207.
Me. Rev. Stat. tit. 9-A, sec. 5-118(2), (3), (4).
Me. Rev. Stat. tit. 9-B, sec. 242.
Me. Rev. Stat. tit. 10, sec. 1212.
Me. Rev. Stat. tit. 32, sec. 6155(1).
Me. Rev. Stat. tit. 32, sec. 6198(5).
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Maryland
Md. Code Ann., Com. Law sec. 12-1208(2).
Md. Code Ann., Com. Law sec. 13-303.
Md. Code Ann., Com. Law sec. 14-1302(b).
Md. Code Ann., Com. Law sec. 14-1323.
Md. Code Ann., Com. Law sec. 14-1914(a).
Md. Code Ann., Com. Law sec. 14-3807.
Md. Code Ann., Educ. sec. 26-601 to 26-604.
Md. Code Ann., Fin. Inst. sec. 12-1001 to 12-1017.
Md. Code Ann., Real Prop. sec. 7-501 to 7-511.
Massachusetts
Mass. Gen. Laws ch. 93, sec. 105(d).
Mass. Gen. Laws ch. 93A, sec. 2.
Mass. Gen. Laws ch. 93L, sec. 8.
Michigan
Mich. Comp. Laws sec. 445.903.
Mich. Comp. Laws sec. 445.1823(e).
Minnesota
Minn. Stat. sec. 58B.07(2).
Minn. Stat. sec. 325D.09.
Minn. Stat. sec. 325D.44.
Minn. Stat. sec. 325F.67.
Minn. Stat. sec. 325F.69.
Minn. Stat. sec. 332A.02-332A.19.
Mississippi
Miss. Code Ann. sec. 75-24-5.
Miss. Code Ann. sec. 75-67-109.
Miss. Code Ann. sec. 75-67-445.
Miss. Code Ann. sec. 75-67-516.
Miss. Code Ann. sec. 75-67-617.
Miss. Code Ann. sec. 81-18-27(h).
Miss. Code Ann. sec. 81-19-23(b)(i).
Missouri
Mo. Rev. Stat. sec. 407.020.
Mo. Rev. Stat. sec. 443.737(2), (9).
Montana
Mont. Code Ann. sec. 30-14-103.
Mont. Code Ann. sec. 30-14-2001 to 30-14-2015.
Mont. Code Ann. sec. 30-14-2103(1)(f).
Mont. Code Ann. sec. 31-1-723(5), (7), (18).
Mont. Code Ann. sec. 31-1-724(2).
Mont. Code Ann. sec. 32-5-309.
Nebraska
Neb. Rev. Stat. sec. 45-804(5).
Neb. Rev. Stat. sec. 45-812.
Neb. Rev. Stat. sec. 45-919(1)(j).
Neb. Rev. Stat. sec. 59-1602.
Neb. Rev. Stat. sec. 87-302.
Nevada
Nev. Rev. Stat. sec. 598.746(5).
Nev. Rev. Stat. sec. 598.787.
Nev. Rev. Stat. sec. 598.0915 to 598.0925.
Nev. Rev. Stat. sec. 604A.5021(5), (6).
Nev. Rev. Stat. sec. 604A.5049(5), (6).
Nev. Rev. Stat. sec. 604A.5072(5), (6).
Nev. Rev. Stat. sec. 604A.582.
Nev. Rev. Stat. sec. 604A.592.
Nev. Rev. Stat. sec. 675.280.
New Hampshire
N.H. Rev. Stat. Ann. sec. 358-A:2.
N.H. Rev. Stat. Ann. sec. 383:10-h.
N.H. Rev. Stat. Ann. sec. 397-A:14(g), (n).
N.H. Rev. Stat. Ann. sec. 399-A:14(I).
N.H. Rev. Stat. Ann. sec. 399-F:4(III).
New Jersey
N.J. Stat. Ann. sec. 17:11C-41(g).
N.J. Stat. Ann. sec. 17:16F-39(b).
N.J. Stat. Ann. sec. 17:16ZZ-9(b).
N.J. Stat. Ann. sec. 56:8-2.
New Mexico
N.M. Stat. Ann. sec. 57-12-3.
N.M. Stat. Ann. sec. 58-7-8(C).
N.M. Stat. Ann. sec. 58-15-3(G).
N.M. Stat. Ann. sec. 58-21-21.
N.M. Stat. Ann. sec. 58-21A-12.
N.M. Stat. Ann. sec. 58-21B-13(C)(2), (9).
New York
N.Y. Banking Law sec. 719(2), (9).
N.Y. Exec. Law sec. 63(12).
N.Y. Fin. Serv. sec. 702(i).
N.Y. Gen. Bus. Law sec. 349.
N.Y. Gen. Bus. Law sec. 458-e.
N.Y. Gen. Bus. Law sec. 458-h.
N.Y. Gen. Bus. Law sec. 521-d.
N.Y. Gen. Bus. Law sec. 741.
N.Y. Real Prop. Law sec. 280-b(2).
North Carolina
N.C. Gen. Stat. sec. 25A-44(4).
N.C. Gen. Stat. sec. 53-180(g).
N.C. Gen. Stat. sec. 53-270(4).
N.C. Gen. Stat. sec. 66-106 to 66-112.
N.C. Gen. Stat. sec. 75-1.1.
N.C. Gen. Stat. sec. 75-121.
N.C. Gen. Stat. sec. 75-122.
North Dakota
N.D. Cent. Code sec. 13-04.1-09(4), (10).
N.D. Cent. Code sec. 13-08-12(9).
N.D. Cent. Code sec. 13-10-17(2).
N.D. Cent. Code sec. 13-11-23(1)(p).
N.D. Cent. Code sec. 51-15-02.
N.D. Cent. Code sec. 51-15-02.3.
Ohio
Ohio Rev. Code Ann. sec. 1321.11.
Ohio Rev. Code Ann. sec. 1321.41(N).
Ohio Rev. Code Ann. sec. 1321.44.
Ohio Rev. Code Ann. sec. 1321.60(A).
Ohio Rev. Code Ann. sec. 1321.651(B).
Ohio Rev. Code Ann. sec. 1322.40(I).
Ohio Rev. Code Ann. sec. 1345.02.
Ohio Rev. Code Ann. sec. 1345.21 to 1345.28.
Ohio Rev. Code Ann. sec. 4165.02.
Ohio Rev. Code Ann. sec. 4710.02(F)(1).
Ohio Rev. Code Ann. sec. 4710.04.
Oklahoma
Okla. Stat. Ann. tit. 15, sec. 753(21), (29).
Okla. Stat. Ann. tit. 59, sec. 2095.18(2), (9).
Okla. Stat. Ann. tit. 59, sec. 3111.
Okla. Stat. Ann. tit. 78, sec. 53.
Oregon
Or. Rev. Stat. sec. 86A.163.
Or. Rev. Stat. sec. 86A.236(3), (5), (13).
Or. Rev. Stat. sec. 646.607.
Or. Rev. Stat. sec. 646.608(1)(d), (u).
Or. Rev. Stat. sec. 646A.720(10).
Or. Rev. Stat. sec. 725.060.
Or. Rev. Stat. sec. 725A.058.
Pennsylvania
7 PA. Cons. Stat. sec. 6123(a)(3).
18 PA. Cons. Stat. sec. 7311(b.1).
73 PA. Cons. Stat. sec. 201-3.
73 PA. Cons. Stat. sec. 2183(4).
73 PA. Cons. Stat. sec. 2188(c)(2).
73 PA. Cons. Stat. sec. 2270.4.
73 PA. Cons. Stat. sec. 2270.5.
73 PA. Cons. Stat. sec. 2501 to 2511.
Rhode Island
R.I. Gen. Laws sec. 5-80-8(5).
R.I. Gen. Laws sec. 6-13.1-2.
