CFPB Announces Corporate Repeat Offenders Registry

News,

On June 3, 2024,  the CFPB announced the establishment of a new offenders’ registry final rule. This registry is aimed at detecting and deterring corporate offenders who have violated consumer laws and are subject to federal, state, or local government or court orders.

Unfortunately, NCBA remains concerned about the final rule’s adverse impact on the practice of law and the potential for the disclosure of privileged information, such as attorney-client communications and confidential business practices.

NCBA’s March 29, 2023, comment letter noted our opposition to governmental regulations that interfere with the long-established principles that only the judiciary is empowered to regulate the practice of law. We requested the rule be amended prior to adoption, to curb potential infringement into the regulation of the practice of law as well as be prospective and apply only to final public orders entered after the rule’s effective date.

Another serious issue is that the final rule applies to any activities since 2017 and ultimately opens entities to public scrutiny or reputational risk based on orders that were entered into without an admission or finding of fault.

With the effective date of September 16, 2024, applicable covered nonbanks must register all covered orders from January 1, 2017, through the start of the submission period, and registration will begin for covered nonbanks as early as October 16, 2024.

The rule’s Executive Summary includes the following background and key points:

  1. Purpose and Focus:
    • The registry’s primary purpose is to identify repeat offenders and track recidivism trends among corporate entities.
    • It is part of the CFPB’s ongoing efforts to hold lawbreaking companies accountable and prevent corporate recidivism.
  2. How It Works:
    • When a financial company violates the law, a government agency may take enforcement action against them.
    • Typically, this results in an order entered by a court or the agency.
    • However, these orders are not always comprehensively tracked, even though they are publicly available.
    • The new registry will help law enforcement better understand and monitor bad actors who may attempt to restart scams, fraudulent schemes, or other illegal conduct that harms the public.
  3. Intended Users:
    • State attorneys general, state regulators, and various other law enforcement agencies are expected to use the registry.
    • Additionally, investors, creditors, business partners, and members of the public conducting due diligence or researching financial firms bound by law enforcement orders can benefit from this resource.
  4. Background:
    • Nonbank entities have historically faced inconsistent oversight, making it challenging for regulators to identify and address potential risks to consumers.
    • Congress has taken steps to increase transparency and oversight in the nonbank financial sector, including the passage of the SAFE Act in 2008, which requires mortgage loan originators to be registered and licensed.
  5. Authority to Register Nonbanks:
    • The Consumer Financial Protection Act grants the CFPB the authority to register nonbanks and to monitor risks posed by nonbanks to consumers.
    • The registry complements existing registries (such as the Nationwide Multistate Licensing System) by covering entities not subject to the same oversight as banks, credit unions, and certain mortgage companies.
  6. Requirements for Covered Nonbank Companies:
    • Covered nonbank companies must:
      • Register with the CFPB when they have violated consumer law.
      • Report certain final agency and court orders and judgments to the CFPB, including consent and stipulated orders related to consumer protection laws.
      • Provide a written attestation from a senior executive confirming compliance with relevant orders if supervised by the CFPB.

We will continue to monitor how this and other proposed regulations impact NCBA members and the creditors rights practice of law.

If you are interested in hearing directly from CFPB Director Rohit Chopra, he is scheduled to present the CFPB’s Semi-Annual Report before Senate Banking on June 12 and the House Financial Services Committee the next day. You can view the testimony online through the committees’ websites, but we will also provide a summary of the Director’s testimony.

Should you have any questions or are interested in supporting NCBA’s advocacy efforts, please contact nathan@creditorsbar.org.