MBA asks CFPB to withdraw proposed nonbank registry rule

The MBA is asking the consumer watchdog to withdraw a proposed rule requiring nonbank financial services providers to report enforcement actions

The Mortgage Bankers Association (MBA) and state-affiliated regulator associations are asking the Consumer Financial Protection Bureau (CFPB) to withdraw a proposed rule requiring nonbank financial services providers to report certain public agency enforcement actions and court orders.

The proposed rule, which the CFPB unveiled in December, conflicts with the CFPB’s responsibility to limit regulatory burden or to consider the costs and benefits its actions would impose, according to MBA.

The rule, the organizations say, “fails on both accounts.”

“MBA supports the Bureau’s efforts to effectively deter unlawful behavior and to identify entities that engage in repeat violations of consumer financial services laws,” MBA SVP of Residential Policy and Strategic Industry Engagement Pete Mills wrote in a letter to the CFPB. “However, the Bureau should be more focused on helping mortgage lenders lower origination costs by removing – and not proposing – duplicative regulatory requirements that will provide little benefit to consumers.”

The main concern is that the information sought by the CFPB is public. Many public local, state, or federal consumer financial protection agency or court orders are captured through the Nationwide Multistate Licensing System (NMLS) Consumer Access portal.

“As part of its supervisory authority, the Bureau is required to the fullest extent possible to use reports that have already been provided to federal and state agencies and use information that has been reported publicly,” the MBA said in its announcement about the letter. “Additionally, the Bureau must tailor rules with consideration of the extent of current state supervision.”

The result is that the Bureau “downplays” the role of public registries, including the NMLS, the MBA said, and consequently overestimates the potential consumer benefits the new rule would bring.

“Requiring an individual to attest to compliance with consent orders will only serve as an unfair public shaming tool, which will discourage competent compliance and risk management professionals from serving in these important roles in the mortgage industry,” the letter states. “The requirement is unlikely to improve outcomes for consumers as companies already have procedures set up to intake and escalate complaints due to the CFPB complaint portal. This requirement is also redundant as public consent orders are already signed by a company officer.”

State regulator associations, led by the Conference of State Bank Supervisors (CSBS), also submitted a letter to the CFPB that rejected the Bureau’s reasoning for the proposed rule.

In February, the Community Home Lenders of America (CHLA) sent a letter to the Bureau, stating that small independent mortgage banks (IMBs) should be exempt from the proposed rule, arguing that the proposed requirement is redundant, as IMBs already routinely provide such information to the NMLS system.

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