The Consumer Financial Protection Bureau announced on Monday it is planning to use a dormant statutory authority, section 1024(a)(1)(C) of the Consumer Financial Protection Act (CFPA), to conduct examinations of nonbank covered persons where the Bureau “has reasonable cause to determine, by order, after notice to the covered person to respond, … that such covered person is engaging, or has engaged, in conduct that poses risks to consumers with regard to the offering or provision of consumer financial products or services.”[1] The Bureau’s “reasonable cause” determination must be based on consumer complaints submitted to the agency or information from other sources including whistleblower tips, litigation by private parties, press reports, or state and federal regulatory partners.
Under 12 C.F.R. part 1091, which was issued in 2013, the Bureau must issue a Notice of Reasonable Cause providing that it has reasonable cause to determine that a person is subject to its section 1024(a)(1)(C) authority. The recipient of such a notice may submit a written response, and in some instances, make an oral presentation, explaining why it should not be subject to the Bureau’s supervisory authority. Alternatively, the recipient may voluntarily consent to Bureau supervision. The Associate Director of the Bureau’s Supervision, Enforcement, and Fair Lending division then makes a recommendation to the Bureau’s Director whether the recipient of the Notice should be subject to the Bureau’s supervisory authority. The Director must then act on the recommendation and issue a final decision and order.
The Bureau is now soliciting public comments to address a proposed amendment to this rule. 12 C.F.R. § 1091.115 governs the confidentiality of these proceedings, and provides, among other things, that materials submitted to the Bureau by the person responding to the reasonable cause notice, as well as any communications between the person and the Bureau, are deemed confidential supervisory information. The Bureau seeks to add a provision that would make public, at the Director’s discretion, the Director’s final decision and order. Under the proposed rule, the recipient has seven days after the issuance of the Director’s decision and order to oppose its disclosure. The proposed amendment would also authorize the Director to release publicly the decision on the disclosure issue.
Comments are due 30 days after the proposed rule is published in the Federal Register.
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[1] 12 U.S.C. § 5514(a)(1)(C).
