WASHINGTON —A proposed rule released by the CFPB has “elements that could harm consumers and disadvantage credit unions,” according to America’s Credit Unions.
The trade group said the proposed rule would “narrow the scope of its nonbank supervisory authority of nonbanks.”
America’s Credit Unions noted the CFPB currently can supervise a nonbank it “has reasonable cause to determine … is engaging, or has engaged, in conduct that poses risks to consumers with regard to the offering or provision of consumer financial products or services.”
The CFPB proposal would define “conduct that poses risks to consumers” as conduct that:
- Presents a high likelihood of significant harm to consumers
- Is directly connected to the offering or provision of a consumer financial product or service as defined in section 1002 of Dodd-Frank.
Additional Definition
The proposal would further define “offering or provision of consumer financial products or services” to require a direct connection to a statutorily defined consumer financial product or service.
In a statement on its website, America’s Credit Unions said it “supports strong, even-handed consumer protection across the marketplace, and as drafted, the proposal could create a carveout for nonbank actors whose practices can harm consumers and disadvantage supervised credit unions.”
The trade group said it plans to file a comment letter by the Sept. 25 deadline.
The CFPB Proposal
According to its notice, the CFPB is proposing to adopt a standard definition of “conduct that poses risks to consumers with regard to the offering or provision of consumer financial products or services” that will bind it in proceedings to designate nonbank covered persons for bureau supervision.
The definition would require conduct that (a) presents a high likelihood of significant harm to consumers and (b) is directly connected to the offering or provision of a consumer financial product or service as defined in Section 1002 of the Consumer Financial Protection Act, the CFPB said.
Additionally, the Bureau is asking for comment on whether “risks to consumers” must be potential violations of law within the context of Section 1024(a)(1)(C).
‘All Aspects Considered’
The notice states the Bureau is seeking input on all aspects of the standard, among them, the basis for deciding the bureau may have reasonable cause to determine that a nonbank is engaging “or has engaged” in covered conduct. It also seeks a specific link in such conduct to a statutorily defined “consumer financial product or service.”
The CFPB has previously noted that Section 1024(a)(1)(C) “does not specify the character or magnitude of ‘risks to consumers’” required to subject a covered person to supervision.
In an order from November 2024, the CFPB placed Google Payment Corp. under its supervision and, among other things, noted that the statute, which does define several key terms, does not define risk. Russell Vought, director of the Office of Management and Budget and acting director of the CFPB, withdrew the order in May of this year.
