On October 29, 2023, the Consumer Financial Protection Bureau (CFPB) announced the withdrawal of two proposed rulemakings aimed at creating public registries for nonbank financial companies. The rules, which included 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and the Registry of Supervised Nonbanks That Use Form Contracts to Waive or Limit Consumer Legal Protections, were rescinded due to concerns about compliance costs and a lack of identifiable benefits to consumers.
The CFPB’s decision reflects a significant shift in its regulatory approach. Originally, the proposals were intended to enhance the Bureau’s access to compliance data and market monitoring information from nonbank financial firms. The first proposal mandated that nonbank covered persons report public agency or court orders to a CFPB registry. Furthermore, supervised entities would have needed to provide annual executive attestations to confirm compliance. However, the Bureau concluded that the associated costs and paperwork requirements outweighed the speculative advantages outlined in the initial proposal.
Reasons for Withdrawal
In its final notices, the CFPB highlighted several key factors that led to the withdrawal of these initiatives. The Bureau identified overlapping state and federal disclosure systems, such as the Nationwide Multistate Licensing System, as a rationale for rescinding the Registry of Nonbank Covered Persons. Additionally, limited agency resources played a role in the decision, prompting the Bureau to reconsider its regulatory strategy.
The second proposal, which required supervised nonbanks to register information regarding form contract terms, faced similar scrutiny. The CFPB found that the proposed registry would impose significant compliance costs on these entities while offering uncertain benefits. This decision underscores the Bureau’s recognition of the need for a more streamlined and effective regulatory framework.
Implications for Nonbank Entities
With the CFPB’s withdrawal of these registry initiatives, nonbank financial companies are not required to undertake any new compliance actions at this time. Instead, the Bureau appears to be refocusing its efforts on targeted, risk-based examinations rather than broad public registration requirements.
This shift signals a move away from extensive public registration for nonbank entities, effectively concluding previous attempts to establish registries specifically for enforcement orders and contract terms. As the regulatory landscape evolves, nonbank firms should remain vigilant and continue to monitor the CFPB’s priorities to ensure compliance with any future developments.
The Bureau’s decision marks a notable moment in its regulatory journey, emphasizing the importance of balancing consumer protection with realistic compliance expectations for financial institutions.