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April 21, 2023

Better Markets Urges Stronger Safeguards Against Misrepresentation Of Federal Deposit Insurance

Better Markets filed a comment letter with the Consumer Financial Protection Bureau in response to the proposed Nonbank Registry Rule, a consumer financial protection innovation aimed at greater accountability for and monitoring of nonbanks subject to enforcement orders.  Under this proposal, nonbanks engaged in consumer financial services who are subject to federal and state judicial and administrative orders are required to submit a copy of the order, withadditional information and attestations, for inclusion in the CFPB’s new public registry.

Why It Matters.   The consumer financial services landscape is shifting.  No longer do consumers primarily do business with federally insured commercial banks subject to safety and soundness supervision and other intensive regulatory schemes.  Increasingly, consumers access credit and other financial products via nonbank entities such as FinTechs and payday lenders, who are not chartered commercial banks and whose deposits are not insured by the FDIC.  And, amid this consumer finance transition, studies have shown that credit risk is increasing nationwide while consumers are far too often left in the dark about their regulatory protections and their lenders’ regulatory obligations.

The CFPB has a critical role to play in this changing landscape.  Part of this role must be supplementing the Bureau’s rulemaking and enforcement tools with a monitoring tool that will track nonbank recidivism and geographic-, sector-, and entity-specific trends in lawbreaking.  The proposed Nonbank Registry will equip the CFPB, in addition to other federal and state regulators and law enforcement agencies, with information that will allow those regulators to better protect their constituencies.

What We Said.  We strongly support the goals and proposed implementation of the Nonbank Registry Rule.  Presently, there is no central repository of all nonbanks subject to orders, and finding all of that information would amount to a massive, unwieldy research project.  By compiling all nonbanks subject to orders in one registry, the CFPB and other regulators will be able to identify harmful trends in consumer finance and stop them in their tracks.  Further, the Nonbank Registry will provide consumers will a self-help tool, as consumers will have timely information about nonbanks who have violated consumer financial law and will be able to make more informed decisions about the nonbanks they do business with based on the registry’s entries.

We know that the nonbanks and their deep pocketed advocates will continue to attack the Bureau and its efforts to better protect consumers from illegality in consumer finance.  But the CFPB should continue to introduce innovative protections, such as the Nonbank Registry.  Requiring nonbanks who have broken the law to submit to the CFPB’s registry will create heightened accountability and deterrence against illegality, while arming the financial regulators and consumers with crucial information about bad actors.

Bottom Line.  The CFPB believes that nonbanks subject to enforcement orders related to consumer financial services pose ongoing risks to consumers in the markets for those products and services.  We agree, and the Nonbank Registry will ensure that these risks are monitored and mitigated.

Read our full Comment Letter here or click the button below.




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