CFPB proposal on nonbank supervision creates concerning carveout

The CFPB’s proposed rule released Tuesday has elements that could harm consumers and disadvantage credit unions.  It would narrow the scope of its nonbank supervisory authority of nonbanks, with several aspects that concern America’s Credit Unions. 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 proposal would define “conduct that poses risks to consumers” as conduct that:

• Presents a high likelihood of significant harm to consumers; and
• Is directly connected to the offering or provision of a consumer financial product or service as defined in section 1002 of Dodd-Frank.

It would also define “offering or provision of consumer financial products or services” to require a direct connection to a statutorily defined consumer financial product or service. 
America’s Credit Unions 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 advocacy team is planning to file comments on the proposal, which are due by Sept. 25.