On October 29, 2023, the Consumer Financial Protection Bureau (CFPB) announced the withdrawal of two proposed regulations intended to create public registries for nonbank financial companies. The Bureau rescinded the plans for the Registry of Nonbank Covered Persons Subject to Certain Agency and Court Orders and the Registry of Supervised Nonbanks That Use Form Contracts To Waive or Limit Consumer Legal Protections. The decision was made due to concerns over high compliance costs, duplication with existing systems, and a lack of measurable consumer benefits.
Both proposed rules aimed to enhance the CFPB’s oversight and monitoring capabilities regarding compliance among nonbank financial entities. The Nonbank Orders Rule required entities under specific public orders to register with the Bureau and submit annual executive attestations of compliance. Meanwhile, the Form Contracts Rule would have mandated the reporting of contract terms that potentially limited consumer rights, such as arbitration clauses.
Upon review, the CFPB determined that the costs associated with these regulations, including the burden of paperwork and operational demands, outweighed any speculative benefits. The Bureau highlighted existing overlapping systems, such as the Nationwide Multistate Licensing System, as further justification for its decision. Additionally, limited agency resources played a significant role in the withdrawal.
Impact of the CFPB’s Decision
The rescission of these initiatives marks a notable shift in the Bureau’s approach to regulatory oversight of nonbanks. By ending its efforts to establish registries for enforcement orders and contract terms, the CFPB is pivoting towards a strategy focused on risk-based examinations rather than broad public registration requirements.
As a result of this decision, nonbank entities will not be required to implement new compliance measures. However, they are encouraged to stay informed about the CFPB’s evolving priorities as the Bureau aims to concentrate on targeted supervisory practices.
In summary, the CFPB’s withdrawal of the registry proposals reflects a critical reassessment of regulatory strategies. The decision underscores the Bureau’s commitment to balancing regulatory oversight with the practical realities faced by nonbank financial firms.
