CFPB creates public database of nonbank repeat offenders

The Consumer Financial Protection Bureau (CFPB) is creating a public database to identify nonbank financial companies that violate consumer laws, aiming to avoid recidivism trends.  

On Monday, the U.S. consumer financial watchdog announced that it finalized a rule establishing the new registry. It requires lenders caught violating consumer law to report certain final agency and court orders and judgments, including consent and stipulated orders. In addition, it requires senior executives to attest in writing that the company is not “flouting” orders. 

“Too often, financial firms treat penalties for illegal activity as the cost of doing business,” CFPB Director Rohit Chopra said in prepared remarks. “The CFPB’s new rule will help law enforcement across the country detect and stop repeat offenders.”

This is the first-ever rule by the CFPB to utilize the authority to register nonbank entities, it said.

According to the CFPB, these orders are usually publicly available but are not comprehensively tracked by interested parties. State regulators, investors, creditors, business partners, and the public in general conducting due diligence or research are expected to use the information available. 

The final rule is effective on Sept. 16. Registration will begin as early as Oct. 16.

“MBA is disappointed with the CFPB’s final rule of a Public Orders Registry, as it creates a costly and duplicative reporting framework for the mortgage industry,” said Pete Mills, the Mortgage Bankers Association’s SVP of residential policy.

“Including mortgage lenders and servicers in the registry is an unnecessary and redundant move, which we outlined as such in a April 2023 comment letter, and contradicts the CFPB’s concerns about lowering costs. The CFPB missed an opportunity to simply add its enforcement information on mortgage companies to the already comprehensive consumer-facing data base maintained – and already operative – by the Conference of State Bank Supervisors’ NMLS Consumer Access portal.”

The CFPB has been focused on holding lawbreaking companies accountable. In early 2023, it created a repeat offender unit, “actively ensuring that a company, its senior management, and its board of directors are not treating any orders as suggestions.”

The CFPB believes that nonbank lenders generally face inconsistent oversight. 

In 2008, the U.S. Congress passed the SAFE Act, requiring mortgage loan originators to be registered and licensed. As a result, many banks, credit unions, and mortgage companies are known to regulators, but some nonbank firms are still not licensed or registered. 

The CFPB said it’s using its authority, supported by the Consumer Financial Protection Act, to register nonbanks, supporting its role in monitoring risks posed to consumers.   

For example, in February 2023, the CFPB permanently banned RMK Financial Corporation, which does business as Majestic Home Loans, from the mortgage lending industry following a series of repeat offenses — which occurred despite the CFPB’s law enforcement order issued in 2015. 

Based on feedback from the public, the CFPB stipulated that nonbank financial companies with orders published in the Nationwide Multistate Licensing System (NMLS) Consumer Access may use a simplified filing process. 

The Community Home Lenders of America (CHLA) said in a statement that while it “appreciates a staggered compliance period for smaller IMBs, CHLA renews our request in our comment letter to exempt smaller IMBs since they already report violations to the NMLS.”