On October 29, the Consumer Financial Protection Bureau (CFPB or Bureau) officially rescindedits rule requiring nonbank entities to register certain agency and court orders with the Bureau. This decision follows a proposal made earlier this year (discussed here), which highlighted concerns about the regulatory burden and costs imposed on nonbank entities, which could ultimately affect consumers.
Background:
The original rule, adopted in July 2024 (and discussed here), mandated nonbank covered persons to disclose final public orders related to consumer financial products or services. The rule aimed to enhance transparency and monitor risks associated with corporate recidivism. However, current CFPB leadership found that the speculative benefits did not justify the significant costs and burdens on the entities involved.
Key Reasons for Rescission:
- Cost-Benefit Analysis: The CFPB concluded that the costs imposed by the rule were not justified by the speculative benefits. The rule’s requirements were seen as duplicative and unnecessary, given existing mechanisms for monitoring compliance.
- Regulatory Burden: The rule was criticized for creating a significant regulatory burden, particularly for smaller nonbank entities. The CFPB acknowledged that the rule’s requirements could deter compliance professionals from serving in compliance roles due to potential legal exposure.
- Existing Oversight: The CFPB noted that other federal and state agencies are already empowered to enforce consumer financial laws, making the rule redundant.
- Public Availability of Information: The information required by the rule was already publicly available through other channels, reducing the need for a separate registry.
Impact:
The rescission of this rule is expected to relieve nonbank entities from the administrative and financial burdens associated with compliance. It also aligns with the CFPB’s broader strategy to streamline regulatory requirements and focus on more effective tools for consumer protection.
