[co-author: Stephanie Kozol]*
California Attorney General (AG) Rob Bonta, along with a coalition of AGs, has submitted a letter to the Consumer Financial Protection Bureau (CFPB) regarding a proposed final rule. This rule aims to establish a registry of nonbank entities that have been subject to orders related to consumer protection law violations.
Under the proposed rule, nonbank entities offering consumer financial products would be required to inform the CFPB if they become subject to an order issued by a federal, state, or local regulator, or a court concerning violations of consumer protection laws. The CFPB plans to make this information available through a searchable online registry, which would be accessible to regulators, businesses, and the public.
The registry intends to provide a centralized database for tracking orders against financial services companies across different jurisdictions and agencies. Currently, while enforcement actions typically result in public orders, there is no common database that comprehensively tracks these orders.
AG Bonta and the coalition express support for the rule, citing potential benefits such as improved identification of repeat offenders, more efficient resource allocation for enforcement actions, and increased transparency for various stakeholders.
This initiative is part of broader efforts by the California AG’s office to address financial consumer protection. Recent actions in this area include issuing warnings about potentially unlawful overdraft fees and supporting expanded CFPB supervisory authority over nontraditional digital payment applications.
The proposed registry comes at a time when financial technologies are rapidly evolving, presenting new challenges for regulators seeking to maintain consumer protection standards in an increasingly complex financial landscape.
Why It Matters
The implementation of this registry could significantly impact entities in the financial services industry. Companies may need to enhance their compliance protocols and reputation management strategies to avoid appearing in the registry, as presence could affect business relationships and consumer trust. The registry is likely to become a crucial tool in due diligence processes for mergers, acquisitions, and partnerships, potentially altering industry-standard vetting procedures.
Companies listed in the registry may face increased regulatory scrutiny, necessitating additional resources for regulatory affairs and compliance. This could lead to more frequent audits or examinations, and potentially result in legal challenges or financial consequences, such as difficulty securing funding or higher capital costs.
The public accessibility of the registry could also influence consumer choice, prompting financial service providers to develop strategies for maintaining or rebuilding consumer confidence. Furthermore, the centralization of information from various jurisdictions could complicate compliance efforts for companies operating across multiple states or countries.
As the industry adapts to this new regulatory tool, it may drive changes in industry-wide standards and best practices. Financial service providers might need to invest in improved data management systems to ensure prompt and accurate reporting of relevant orders. By understanding these potential impacts, companies can proactively address compliance issues, manage risks, and maintain their competitive position in an evolving regulatory landscape.
*Senior Government Relations Manager
