The CFPB proposed a rule that establishes procedures under which it may supervise a nonbank. Section 1024 of the Dodd Frank Act grants the CFPB the authority to supervise any nonbank that poses a risk to consumers with regard to the offering or provision of consumer financial products or services. Under the proposed rule, the CFPB must first issue a Notice of Reasonable Cause, which informs the nonbank that the CFPB may have reasonable cause to determine that the nonbank is engaging in conduct that poses a risk to consumers. After the Notice of Reasonable Cause is issued, the nonbank will have an opportunity to respond, and based upon the response, and in conjunction with a recommendation from the Deputy Assistant Director, the Director of Nonbank Supervision will make a final determination about whether the nonbank is subject to the CFPB’s supervisory authority. According to the proposal, the Notice of Reasonable Cause does not constitute a notice of charges for any alleged violation of federal consumer financial law or other law. Moreover, the proceedings are informal and do not constitute an adjudicatory proceeding under the Administrative Procedure Act. The comment period ends July 24, 2012. Click here for the press release and here for the proposal.
Alert May 29, 2012