The Consumer Financial Protection Bureau (CFPB) announced that it is invoking a largely unused legal provision to examine nonbank financial companies that pose risks to consumers. The CFPB believes that utilizing this dormant authority will help protect consumers and level the playing field between banks and nonbanks. The CFPB is also seeking public comments on a procedural rule to make this process more transparent.
“Given the rapid growth of consumer offerings by nonbanks, the CFPB is now utilizing a dormant authority to hold nonbanks to the same standards that banks are held to,” said CFPB director Rohit Chopra, in a statement. “This authority gives us critical agility to move as quickly as the market, allowing us to conduct examinations of financial companies posing risks to consumers and stop harm before it spreads.”
US Congress tasked the CFPB with supervising certain nonbanks, in addition to large depository institutions with more than $10 billion in assets, and their service providers. Nonbanks do not have a bank, thrift, or credit union charter; many operate nationally and brand themselves as “fintechs.”
The CFPB is also issuing a procedural rule today to increase the transparency of the risk-determination process. Unlike other provisions of law regarding nonbank supervision, entities subject to supervision based on risk are given notice and an opportunity to respond. In order to provide greater guidance to the marketplace on how the CFPB will make determinations, the CFPB is updating an aspect of its procedures for risk determinations to authorize the release of certain information about any final determinations made. The company involved will have an opportunity to provide input to the CFPB on what information is released to the public.