Federal Authority Proposes Elimination of Record for Recurrent Lawbreaker Non-Banks
In a recent proposal, the Consumer Financial Protection Bureau (CFPB) has put forth the rescinding of the Registry of Nonbank Covered Persons Subject to Certain Agency and Court Orders rule (NBR Rule). This rule, implemented in July 2024, required nonbank companies to register with the CFPB certain final public orders obtained or issued by government agencies or courts related to consumer financial products or services.
The CFPB's decision to rescind the NBR Rule is primarily driven by concerns about the costs imposed on regulated entities, which could potentially be passed on to consumers without providing tangible benefits. Numerous commenters, including the Small Business Administration’s Office of Advocacy and the Conference of State Bank Supervisors, have highlighted the significant regulatory burden of the NBR Rule.
The CFPB believes that other federal and state agencies are capable of enforcing consumer financial laws, making the NBR Rule unnecessary for monitoring and reducing risks to consumers.
If the NBR Rule is rescinded, nonbank financial firms could save substantial compliance costs. Estimates suggest that affected small entities might save between $28.7 million and $143.4 million over ten years. Operational efficiencies may also be experienced as firms no longer need to maintain and report compliance with the NBR Rule.
For consumers, potential cost savings could result if compliance costs are reduced, potentially leading to lower prices for financial services. However, the CFPB believes that the rule does not provide direct benefits to consumers that would be lost through its rescission, as other regulatory bodies continue to enforce consumer protections.
Acting Director of the CFPB, Russ Vought, has expressed concern that the costs of the NBR rule may be passed onto consumers without justified benefits. Vought also suggested that the rescission could lead to the development of new products, including for consumers in rural areas.
The CFPB is currently seeking comments and non-speculative, methodologically rigorous analysis of the NBR rule's costs and benefits. The proposed NBR rule rescission is part of a deregulatory trend at the CFPB.
Sources: [1] Federal Register, Vol. 88, No. 180, 2023 [2] Consumer Financial Protection Bureau, Proposed Rule: Registry of Nonbank Covered Persons Subject to Certain Agency and Court Orders, 2023 [3] Consumer Financial Protection Bureau, Press Release: CFPB Proposes to Rescind Registry of Nonbank Covered Persons Subject to Certain Agency and Court Orders Rule, 2023
- The proposed rescission of the NBR Rule by the Consumer Financial Protection Bureau (CFPB) is a key development in the realm of policy-and-legislation, as it could potentially impact the business operations of numerous nonbank financial firms, leading to potential cost savings and operational efficiencies.
- The ongoing debate surrounding the NBR Rule, including the concerns raised by the CFPB's Acting Director, Russ Vought, signifies the intersection of finance, politics, and general news, as decision-makers weigh potential benefits and costs to consumers and regulated entities alike.
