WASHINGTON— The Consumer Financial Protection Bureau has finalized a rule to establish a registry it said is designed to detect and deter corporate offenders that have broken consumer laws and are subject to federal, state, or local government or court orders.
The CFPB said the registry will also help it to identify repeat offenders and recidivism trends and that the registry is part of its ongoing focus on holding lawbreaking companies accountable and stopping corporate recidivism.
“When a financial company violates the law, a government agency may take an enforcement action against them. Typically, this leads to an order entered by a court or the agency,” the Bureau said. “These orders are not suggestions. While these orders are publicly available, they are not comprehensively tracked. The CFPB’s new registry will facilitate better understanding of bad actors that seek to restart a scam, fraudulent scheme, or other illegal conduct that harms the public.”
The CFPB said it expects the registry will be used by state attorneys general, state regulators, and a range of other law enforcement agencies.
What Registry Will Do
“The registry will also assist investors, creditors, business partners, and members of the public that are conducting due diligence or research on financial firms bound by law enforcement orders,” the CFPB added.
According to the Bureau, the 2008 financial crisis exposed significant weaknesses in the oversight of nonbank financial companies.
“Nonbank financial companies have traditionally faced inconsistent oversight, making it more difficult for regulators to identify and address potential risks to consumers,” the CFPB said. “Congress has taken steps to increase oversight and transparency in the nonbank financial sector.
Not Licensed
“While the list of banks, credit unions, and many mortgage companies are known to regulators and the public, many other types of financial companies are not licensed or registered – either through the Nationwide Multistate Licensing System (NMLS) or other regulatory registries,” the CFPB said. “However, in the Consumer Financial Protection Act, Congress gave the newly created CFPB the authority to register nonbanks. This authority supports the CFPB’s role to monitor risks posed by nonbanks to consumers. It also supplements and supports already existing registries, like the NMLS, by covering entities that are not subject to the types of state and federal oversight already extended to certain individuals and entities, like in the mortgage industry.”
The CFPB said this marks the first-ever rule by the CFPB to utilize the authority to register nonbank entities.
The Requirements
The final rule requires covered nonbank companies to:
- Register with the CFPB when they have been caught violating consumer law: Generally, covered nonbanks will report certain final agency and court orders and judgments to the CFPB. These orders include consent and stipulated orders brought under consumer protection laws.
- Provide an attestation from a senior executive that the company is not flouting orders: For nonbank companies supervised by the CFPB, the entity subject to an order will provide a written attestation from an executive that confirms compliance with any relevant orders.
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