WASHINGTON (5/28/12)--The Consumer Financial Protection Bureau's (CFPB) proposed nonbank supervisory and notification procedures, which were unveiled late last week, would allow the agency to reach nonbanks it would not otherwise supervise, while providing "a streamlined process that is fair and efficient," CFPB Director Richard Cordray said in a release.
The Dodd-Frank Wall Street Reform Act gave the CFPB the authority to supervise any nonbank that it has reasonable cause to determine is posing a risk to consumers based on complaints or other information it receives, the agency said.
Under the proposed notification rules, the CFPB would first tell a regulated nonbank that one or more of the products it is offering may be harmful to consumers. The nonbank entity would then be given a chance to respond to the CFPB allegations, and to provide any documentation that might support its argument. Nonbanks could also consent to CFPB regulatory actions, instead of filing a response.
Nonbanks could also petition the CFPB to terminate supervision authority over their business after two years, the CFPB said.
The CFPB defines nonbanks as companies that offer or provide consumer financial products or services, but do not have bank, thrift, or credit union charters. Mortgage lenders, mortgage servicers, payday lenders, consumer reporting agencies, debt collectors, and money services companies would meet this definition, according to the CFPB.
The Credit Union National Association (CUNA) is reviewing the nonbank proposal and will file a comment letter that, consistent with its ongoing communications with the CFPB, will urge the agency to focus its efforts on such entities that are engaging in abusive practices in the financial marketplace and take steps to alleviate regulatory burdens for credit unions. CUNA will have a particlar focus on ensuring credit union service organizations are not needlessly entangled in new regulations.
The CFPB will accept public comment on the proposed rule until July 24.