The Consumer Financial Protection Bureau has the green light to begin regulating nonbank entities that deal in financial products, including mortgage loans.
The new federal regulator outlined Thursday what the rules and enforcement process will look like for mortgage lenders and servicers, payday lenders, consumer-reporting agencies, debt-collection companies and other firms are now within its purview.
The CFPB is still in process of drafting a proposed rule that will bring another few types of firms under its scope, including prepaid credit card companies, debt relief services, consumer credit firms, as well as shops that transmit money and perform other check-cashing activity.
On Thursday, the CFPB said it plans to propose the rule in the near future.
However, to date, the agency has authority to play in some once-unregulated spaces, and the agency’s new director Richard Cordray announced plans to move forward with oversight of nonbank firms.
The CFPB will conduct individual examinations, but the degree and frequency of the exams is contingent upon the risks posed to customers, as well as the nonbank’s business volume, product types and the extent of existing state oversight.
Prior to entering a business for an exam, CFPB staffers will review all publicly available information and data from state and federal regulators. Consumer financial products will be analyzed with an eye toward overall risk to consumers.
The CFPB says examiners will test products or services for compliance with federal consumer financial laws, while also evaluating how a product is developed, marketed, sold and managed. In addition, examiners will interview staff, while also entering businesses to observe operations.
“One important component that examiners will be looking for is the nonbank’s internal ability to detect, prevent, and remedy violations that may harm consumers,” the agency said.
Businesses will be advised of upcoming examinations, and the CFPB will seek corrective action when a violation of a federal consumer financial law is detected.
“When necessary, examiners will coordinate and work closely with CFPB’s enforcement staff to bring appropriate legal actions to address harm to consumers,” the CFPB wrote in a summary of its nonbank regulatory actions Thursday.
The agency said nonbank examinations will follow the same procedural manual outlined for regular CFPB examinations.
Write to Kerri Panchuk.
