CFPB Expands Its Reach to Supervise Nonbanks

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The Consumer Financial Protection Bureau is putting all nonbank financial companies on notice that the bureau can take supervisory actions regardless of their size if the company’s activities pose a risk to consumers.

The Dodd-Frank Act gave the CFPB the explicit authority to conduct examinations and take supervisory actions against large nonbanks.

In a final rule issued Wednesday, the consumer bureau lays out its procedures for exercising supervisory authority over other nonbanks when the bureau has “reasonable cause” to believe the entity is engaged in potentially unfair, deceptive and abusive practices that may violate federal consumer laws.

“Although the DFA does not require that the CFPB issue this rule, the CFPB is issuing it to be transparent in the procedures it intends to use to implement its authority under the Dodd-Frank Act,” the bureau said.

Once the consumer bureau notifies a targeted company, it can start an examination and require the company to file reports.

The Dodd-Frank Act also gave the CFPB explicit supervisory authority over nonbank mortgage companies of all sizes. One commenter asked the CFPB to exclude mortgage companies from this new rule. But the bureau declined to provide such exclusion.

“This is an important step in our effort to continue building a strong supervision program,” said CFPB director Richard Cordray. “This rule clearly lays out how we plan to implement our supervisory authority over nonbanks that we determine pose risk to consumers. We are also providing the industry with a streamlined process that is fair and efficient.”