The Consumer Financial Protection Bureau (CFPB) issued a rule today that outlines its authority to supervise certain non-banks believed to pose risks to consumers.
This rule outlines procedures to notify a non-bank that it is being considered for supervision because the CFPB may have reasonable cause to determine that it poses a risk to consumers.
CFPB also has the authority under the Dodd-Frank Act to supervise non-banks, regardless of size, in certain specific markets such as mortgage companies. This would extend to include originators, brokers and servicers of loan modifications or foreclosure relief services.
The rule also sets out the proceeds that the agency will follow to give the non-bank in question an opportunity to respond to such notice. For example, the rule dictates what the CFPB requires in both the notice and the response.
Additionally, the rule creates a mechanism for non-banks to file a petition to terminate the CFPB’s supervisory authority after two years.
CFPB defines those non-banks subject to its new rule as companies that offer or provide consumer financial products or services, but do not have a bank, thrift or credit union charter.
Under the rule, notifying a non-bank means that the CFPB may be supervising it, in which case the Bureau is authorized to require reports from and conduct examinations of non-banks subject to its supervision.
Although the Dodd-Frank Act does not require the CFPB to issue this rule on non-bank supervision, the agency says it issues the rule to be transparent in the procedures it intends to use to implement its authority.
The rule is effective 30 days after publication in the Federal Register, the agency said in a release.
Written by Jason Oliva