Rule breaking nonbanks to be listed on new public register

The Consumer Financial Protection Bureau has announced a new public registry to help identify repeat offenders among nonbanks and other financial firms.

Firms that have broken consumer laws and are subject to orders from federal, state, or local government or courts, will be added to the platform to enable easier tracking of orders following enforcement action. The information is already publicly available, but orders are not comprehensively tracked.

“Too often, financial firms treat penalties for illegal activity as the cost of doing business,” said CFPB director Rohit Chopra. “The CFPB’s new rule will help law enforcement across the country detect and stop repeat offenders.”

CFPB expects the registry to be used by investors and other members of the public in their due diligence or research into financial firms, and by state attorneys general, regulators, and law enforcement to identify companies that may restart a scam, fraudulent scheme, or other illegal conduct that harms the public.

“Nonbank firms are often licensed and regulated at the state level, but problems can have consequences across the nation, Chopra said. “During the early 2000s states had attempted to stop many of the abuses in the mortgage market, including those perpetrated by nonbanks, but were consistently rebuffed by federal regulators.”

The authority given to the CFPB by the Consumer Financial Protection Act allows it to register nonbanks to help it monitor their risks to consumers. The finalizing of the rule to establish the registry is the first time the CFPB has utilized the authority to register nonbank entities.

It means that covered nonbanks will have to:

• Register with the CFPB when they have been caught violating consumer law: Generally, covered nonbanks will report certain final agency and court orders and judgments to the CFPB. These orders include consent and stipulated orders brought under consumer protection laws.
• Provide an attestation from a senior executive that the company is not flouting orders: For nonbank companies supervised by the CFPB, the entity subject to an order will provide a written attestation from an executive that confirms compliance with any relevant orders

It’s expected that the rule will help stop repeat offenders including mortgage and payday lenders, debt collectors, and credit reporting companies.