The Consumer Financial Protection Bureau (CFPB) announced it will rescind a rule it finalized last year, invoking its authority to supervise nonbank entities. The financial services industry welcomed the move, asserting the rule places undue burdens on covered entities.
The rule created a public registry of nonbank entities for the purposes of providing more efficient and effective monitoring, detection, assessment, public awareness and mitigating potential risks to consumers stemming from violations of federal consumer financial protection laws, in particular, entities with past violations and repeat violators.
The nonbank registry (NBR) rule took effect on Sept. 16, 2024. However, the bureau announced in May it would not prioritize enforcement of the rule, under the direction of acting director Russ Vought. The CFPB indicated it was considering rescinding the rule, along with several others, in its Spring 2025 Unified Agenda.
Several financial industry advocates argued the rule was overly burdensome during the notice and comment period prior to its finalization, including the American Bankers Association, the Consumer Bankers Association, the Bank Policy Institute, the Conference of State Bank Supervisors and the Small Business Administration Office of Advocacy.
In its final rule rescinding the NBR, published in the Federal Register on Oct. 29, the CFPB said it agreed with commenters’ expressed concerns about “the costs the rule imposes on regulated entities, which may be passed on to consumers,” which the bureau contended “are not justified by the speculative and unquantified benefits to consumers discussed in the analysis proffered in the NBR rule.”
“The bureau agrees with commenters who supported rescission of the NBR rule because its various features are duplicative, unnecessary or significantly burdensome,” the CFPB wrote. “As stated in the proposed rescission rule, … the bureau does not believe the speculative and unquantified benefits to consumers and the public that were proffered in the NBR rule justify the costs the rule imposes on regulated entities.”
Mortgage Bankers Association President and CEO Bob Broeksmit is among those who have referred to the rule as “unnecessary and duplicative,” as he did in a statement praising the bureau for listening to its members’ calls to pull it back.
“[T]his registry would have created compliance burdens without improving consumer protection or market transparency,” Broeksmit said. “Virtually all the information in the CFPB registry is already available in the NMLS (National Multistate Licensing System) Consumer Access database managed by state regulators. We are also pleased to see the CFPB withdraw its unnecessary contracts terms registry, as mortgage contracts are generally standard forms or governed by federal law and the registry would have provided little public benefit.”
Multiple individuals, including several who commented anonymously, were among those who supported the NBR rule.
Consumer advocates representing the Americans for Financial Reform Education Fund argued that “a centralized public repository of nonbank enforcement and agency orders will greatly help state and federal regulators, consumer advocates, and the public identify repeat offenders and more effectively spot patterns and practices of misconduct.”
The organization cited enforcement actions alleging harm against military families, student borrowers and older adults as cause justification for the existence of the registry. It further asserted rescinding the registry “would help corporate scofflaws conceal their patterns of violations from the public and state regulators while the current CFPB leadership has turned away from rigorous enforcement of federal consumer financial protection law.”
The bureau contended that commenters who opposed the rule’s rescission “provided no quantifiable support for the claim that the NBR rule promotes or enhances transparency, competition, and consumer choice.”
The bureau also asserted that no commenters responded to its request for “non-speculative and methodologically rigorous analysis of the purported benefits and costs that were identified when the [NBR rule] was promulgated,” which was included in its proposed rule for rescinding the NBR rule.
Garris Horn LLP Co-Managing Partner Richard Horn agreed with arguments for rescinding the NBR rule, noting that information about enforcement actions against nonbanks is already publicly available.
“These registries would have been unnecessarily burdensome, and exposed companies to substantial new legal and reputational risk,” Horn wrote on his firm’s website.