The Consumer Financial Protection Bureau (CFPB) has finalized a rule to establish a registry to detect and deter corporate offenders who have violated consumer laws and are subject to federal, state, or local government or court orders, per a June 3rd press release. The registry aims to identify repeat offenders and recidivism trends, enabling the CFPB to hold lawbreaking companies accountable and stop corporate recidivism.
Key Points
The registry will require covered nonbank companies to register with the CFPB when they have been caught violating consumer law, typically through consent or stipulated orders brought under consumer protection laws.
Nonbank companies supervised by the CFPB will need to provide a written attestation from an executive confirming compliance with relevant orders.
The registry will facilitate a better understanding of bad actors who seek to restart scams, fraudulent schemes, or other illegal conduct that harms the public.
The CFPB expects the registry to be used by state attorneys general, state regulators, and other law enforcement agencies, as well as investors, creditors, business partners, and the public conducting due diligence on financial firms.
The rule aims to address weaknesses in the oversight of nonbank financial companies exposed by the 2008 financial crisis, as these companies have traditionally faced inconsistent oversight.
The CFPB has made changes to the proposed rule based on public feedback, such as allowing registrants with orders published on the NMLS Consumer Access website to use a simplified filing process.
Impact
The registry will enhance transparency and accountability in the nonbank financial sector, making it easier for regulators and the public to identify and address potential risks to consumers.
It will support the CFPB's role in monitoring risks posed by nonbanks to consumers and supplement existing registries like the Nationwide Multistate Licensing System (NMLS).
The registry is part of the CFPB's ongoing focus on holding lawbreaking companies accountable and stopping corporate recidivism, including through its Repeat Offender Unit.
It will assist law enforcement agencies, investors, creditors, and others in conducting due diligence and research on financial firms bound by law enforcement orders.
Online Business Lenders
The article does not explicitly mention whether the registry will include online business lenders. However, the rule applies to "covered nonbank companies" that have violated consumer laws and are subject to government or court orders. If online business lenders fall under this category and meet the criteria, they would likely be required to register with the CFPB under this rule.
One example that Director Rohit Chopra mentioned in his prepared remarks was "in 2019 the CFPB fined the online lender Enova International $3.2 million for legal violations including withdrawing funds without borrowers’ consent and backtracking on loan extensions. When we investigated Enova’s compliance with the 2019 order, we found the company was continuing its illegal behavior and imposed another $15 million penalty." This seems to be from one of Enova's consumer lending products not one of its business lending products.
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