Joint Comments to CFPB on the Proposal to Rescind Certain Amendments to the CFPB's Procedures for Supervisory Designation Proceedings

Dear Acting Director Vought,

The American Bankers Association and Consumer Bankers Association (collectively, the Associations) appreciate the opportunity to comment on the Consumer Financial Protection Bureau’s (Bureau) proposed rescission of amendments adopted on April 29, 2022; November 21, 2022; and April 23, 2024, to the Procedures for Supervisory Designation Proceedings (collectively, the Amendments). In sum, through the Amendments, the Bureau established a process to publicly release its decision to exercise its supervisory authority over a nonbank entity that may pose risks to consumers regarding the provision of consumer financial products or services. We support the Bureau’s proposal to maintain the confidentiality of these decisions as reflected by its proposal to rescind the Amendments.

Section 1024(a)(1)(C) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) authorizes the Bureau to supervise nonbanks that "pose[] risks to consumers" (Nonbank Risk-Based Supervision Authority). That authority allows the Bureau to move quickly to supervise, for a two-year period, entities that present an immediate risk of harm to consumers. We supported the Bureau when it established procedures in 2013 by which the agency would subject a nonbank to supervision under this authority.

In 2022, the Bureau established a process permitting the public release of all or part of any decision or order subjecting a nonbank to the Bureau’s supervision. At the time, we opposed the public release of these orders, as described in the comment letter that we sent on May 31, 2022 (see Appendix A). We continue to oppose the public release of these orders and support the Bureau's Proposal to rescind this amendment.

Confidentiality often encourages candid communication and cooperation between bank management, the board, and the supervisory authority. The Bureau's decision to release its orders raises concerns about the potential implications of disclosing supervisory information. We question whether the public release of these orders provides helpful guidance to regulated entities about the Bureau’s interpretation of the law and regulations it enforces.

A Decision and Order released by the Bureau in 2024 (Order) shows that public release of these orders does not necessarily benefit the public. The Bureau’s description in the Order of the conduct of the company is based exclusively on the allegations made in unverified consumer complaints – not on a fully developed record and finding that the company has violated a law or regulation. The Order does not list a statute or regulation that the company may have violated. Instead, the Order states "[t]here is no need to determine whether [the company’s] conduct . . . rises to the level of a legal violation because . . . section 1024(a)(1)(C) does not require an entity to have violated any law in order to be eligible for supervision." Consequently, the release of the Order did not provide the public with guidance on specific conduct that violated a specific statute or regulation. Instead, the release of this (and potentially other) orders will exacerbate the challenges of "regulation by enforcement." Public release will generate uncertainty among regulated entities and increase their legal exposure, which discourages innovation in the design and delivery of financial services.

Rather than publicly release these orders, we recommend the Bureau adopt procedures permitting the public release of the name of each nonbank subject to the Bureau's supervision pursuant to its Nonbank Risk-Based Supervision Authority and issue Supervisory Highlights publications to inform companies of emerging risks to consumers.
Thank you for your consideration of this comment.

Sincerely,

Jonathan Thessin
Vice President/Senior Counsel
American Bankers Association

Brian Fritzsche
Vice President, Associate General Counsel
Consumer Bankers Association