CFPB Finalizes Rule for Supervising Nonbanks Engaged in ‘Risky’ Conduct (July 3, 2013)
July 3, 2013
The Consumer Financial Protection Bureau has finalized its rule outlining procedures to supervise nonbanks engaged in conduct that poses risk to consumers. The CFPB may supervise not only nonbank providers of consumer financial products and services, but its authority also extends to a nonbank’s affiliate service providers, according to the rule. The final rule will be effective 30 days after its publication in the Federal Register.
The CFPB’s final rule substantially incorporates its proposed rule issued in May 2012, based on the Dodd-Frank Act authorizing the CFPB to supervise any nonbank that the agency has determined “is engaging, or has engaged, in conduct that poses risks to consumers with regard to the offering or provision of consumer financial products or services.”
The new guidance essentially clarifies when the CFPB might exercise its authority to explore risky consumer financial products and services, Jeremy T. Rosenblum, a partner with Ballard Spahr LLP, tells Paybefore. “The general rule remains [the CFPB] is not going to supervise 99 percent of the companies that are not larger participants or providers to large banks, but they do reserve the right to investigate and then go after a company that they think poses some special risk to consumers,” he says.
“If [the CFPB] were to find a systemic legal violation in a particular industry, it might attempt to assert supervisory authority over all companies in that industry that it identifies as having committed violations,” Ballard Spahr said in a July 2 note.