WASHINGTON–The Defense Credit Union Council (DCUC) is expressing concerns over the Consumer Protection Bureau’s (CFPB) proposed rule on the legal standard for designating nonbank entities for supervision.
In a letter to the Bureau, DCUC said while it supports the CFPB’s broader goals of consistency, transparency, and streamlined oversight, the proposal, as written, would weaken supervisory authority over nonbank financial firms and create an imbalanced regulatory landscape.
“The CFPB’s proposal narrows its own ability to oversee nonbanks at a time when their number and complexity are growing,” wrote Chief Advocacy Officer Jason Stverak. “This not only increases risks to consumers but also places regulated credit unions—already subject to rigorous federal and state examinations—at a competitive disadvantage.”
The Key Concerns
According to DCUC, its key concerns include:
- Requiring a “high likelihood of significant harm” would exclude many harmful practices that often only surface during examinations. “Minor but widespread abuses, such as deceptive fees, could escape supervision despite their collective impact on consumers,” DCUC said.
- Limiting supervision to conduct “directly connected” to financial products ignores vital ancillary activities like cybersecurity, data protection, loan servicing, and debt collection—”functions that directly affect consumers’ financial well-being.”
- At a time when the CFPB already examines few nonbank entities and faces staff reductions, narrowing the standard “would further reduce scrutiny of high-risk actors while increasing pressure on credit unions that comply with higher regulatory expectations.”
Ability to be Adaptable
DCUC further stated that as the financial services industry evolves, the CFPB must maintain strong and adaptable oversight—especially of nonbank firms that lack the same supervisory rigor as depository institutions.
“Removing nonbank financial companies from the scope of supervision creates immeasurable risks for consumers and the broader industry,” Stverak added. “CFPB must keep its authority strong to ensure fair competition and consumer protection.”
