June 30, 2022

Volume XII, Number 181

Advertisement
Advertisement

June 30, 2022

Subscribe to Latest Legal News and Analysis

June 29, 2022

Subscribe to Latest Legal News and Analysis

June 28, 2022

Subscribe to Latest Legal News and Analysis

FinTechs in Crosshairs as CFPB Invokes Dormant Authority to Examine Nonbanks

On April 25, the CFPB announced that it is using its “dormant authority” in order to conduct examinations of nonbanks posing risks to consumers.  The Bureau has direct supervisory authority over banks and credit unions, certain nonbanks, in addition to large depository institutions with more than $10 billion in assets, and their service providers.  With this announcement, the CFPB intends invoke its authority under the Dodd-Frank Act to examine nonbanks “whose activities the CFPB has reasonable cause to determine pose risks to consumers. This authority is not specific to any particular consumer financial product or service.”

In conjunction with the announcement, the CFPB issued an amendment to a 2013 procedural rule allowing it to publish all or part of a determination that a company’s products and activities pose risks to consumers. Such a determination was previously treated as confidential, however, the amendment would give the CFPB Director the unilateral discretion to publish decisions on whether to start examining a particular nonbank on the agency’s website.  According to the CFPB, the new rule is meant to “increase the transparency of the risk-determination process.”

Comments to the proposed rule can be submitted within 30 days after its publication in the Federal Register.

Putting It Into Practice:  While ostensibly directed at FinTechs, this announcement is broader in scope and is not limited to any particular industry or product type and could be used on virtually any industry participant.  Further, making the Director’s decisions in such proceedings public sends a strong signal to all market participants about practices the CFPB believes present a risk to consumers and could be the subject of further supervisory or enforcement activity.

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XII, Number 119
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement

About this Author

Moorari Shah Bankruptcy Lawyer Sheppard Mullin Law Firm
Partner

Moorari Shah is a partner in the Finance and Bankruptcy Practice Group in the firm's Los Angeles and San Francisco offices. 

Areas of Practice

Moorari combines deep in-house and law firm experience to deliver practical, business-minded legal advice. He represents banks, fintechs, mortgage companies, auto lenders, and other nonbank institutions in transactional, licensing, regulatory compliance, and government enforcement matters covering mergers and acquisitions, consumer and commercial lending, equipment finance and leasing, and supervisory examinations,...

213-617-4171
A.J. S. Dhaliwal Bankruptcy Attorney Sheppard Mullin Washington DC
Associate

A.J. is an associate in the Finance and Bankruptcy Practice Group in the firm's Washington, D.C. office. 

A.J. has over a decade of experience helping banks, non-bank financial institutions, and other companies providing financial products and services in a wide range of matters including government enforcement actions, civil litigation, regulatory examinations, and internal investigations.

With a diversified regulatory, compliance, and enforcement background, A.J. counsels financial institutions in matters involving...

202-747-2323
Advertisement
Advertisement
Advertisement