WASHINGTON (7/30/12)--The Credit Union National Association (CUNA) in a comment letter said it strongly agrees with the Consumer Financial Protection Bureau's (CFPB) plan to begin supervision and regulation of non-depository institutions that provide risky consumer financial products or services.
The Dodd-Frank Wall Street Reform Act gave the CFPB the authority to supervise any nonbank that it has reasonable cause to determine is posing a risk to consumers, based on complaints or other information it receives. Nonbanks, as defined by the CFPB, would be companies that offer or provide consumer financial products or services, but do not have bank, thrift, or credit union charters. Mortgage lenders, mortgage servicers, payday lenders, consumer reporting agencies, debt collectors, and money services companies would meet this definition, according to the CFPB.
Under the CFPB's proposed nonbank rules, the agency would first tell a regulated nonbank that one or more of the products it is offering may be harmful to consumers. The nonbank entity would then be given a chance to respond to the CFPB allegations and to provide any documentation that might support its argument.
Nonbanks could also consent to CFPB regulatory actions, instead of filing a response, or they could petition the CFPB to terminate supervision authority over their business after two years.
CFPB Director Richard Cordray earlier this year said the proposed rules would allow the agency to reach nonbanks it would not otherwise supervise, while providing "a streamlined process that is fair and efficient."
CUNA said it supports the CFPB's efforts to "maintain a bright line between entities subject to its rulemaking and regulated entities that should not be." CUNA in the letter added that supervised nonbanks that ask the CFPB to stop supervising their activities "should adequately demonstrate why supervision is no longer required" and include a progress report demonstrating how the institution has reduced its risks to consumers.
The CFPB should also identify any remaining gaps in consumer protection in the financial markets, including under rulemakings concerning "larger participants" and other non-depository entities, CUNA added.
For the full comment letter, use the resource link.