September 16, 2024, is the effective date for the final rule creating the CFPB Nonbank Registry for covered nonbank financial institutions, also known as the “Repeat Offender” Registry. The rule requires nonbanks that offer consumer financial products and services to register information about their company and to report the existence of orders that enforce certain consumer protection laws and are issued or obtained (e.g., sought from a court) by a government agency. This information will be published in the CFPB’s new “Nonbank Registry,” which will be publicly available.
We first alerted our readers to this pending CFPB rule and the creation of the Nonbank Registry in our January 2024 MortgageLaw Minute. The CFPB believes this registry will make it easier for consumers to identify and avoid unscrupulous actors and, through public listing, potentially help deter companies from engaging in unfair practices. Whether that is true remains to be seen. However, what is certain is that for nonbank mortgage lenders, the registry adds new compliance burdens and imposes potential personal liability on those executives and managers who are required to attest to the entity’s compliance with orders entered into the Nonbank Registry.
As the implementation date approaches, here is a more detailed summary of the requirements.
The rule requires nonbank mortgage lenders to register certain final orders and submit supporting information to the CFPB.
The rule only applies to non-depository entities that offer or provide a consumer financial product or service (“Covered Nonbanks”). Banks and credit unions are exempt, but nonbank mortgage lenders are considered Covered Nonbanks and, therefore, subject to the rule and its requirements.
Covered Nonbanks will be required to register final, written public orders with the CFPB—including consent orders brought by a government agency—with an effective date on or after January 1, 2017, that are still in effect as of September 16, 2024, and were issued in connection with an action alleging a violation of (a) federal consumer financial laws; (b) other laws enforced by the CFPB; or (c) certain federal and state unfair, deceptive, or abusive acts or practices (UDAAP) laws (a “Covered Order”). The entity must also submit a copy of the Covered Order.
Importantly, an order is a Covered Order only if it contains public provisions that impose obligations on the Covered Nonbank to take, or refrain from taking, certain actions. Therefore, we expect lenders to attempt to negotiate consent orders with regulators that are not publicly disclosed to avoid having to register such orders.
Additionally, the Covered Nonbank must submit the following information to the CFPB: (1) identity information (e.g., the Covered Nonbank’s legal name and principal place of business); (2) administrative information (e.g., information regarding a Covered Nonbank’s affiliates); and (3) information about the Covered Order (e.g., the effective date, the date of expiration, all covered laws found to have been, or alleged to have been, violated, etc.). Any changes to the information reported must be reported to the CFPB within 90 days of the change.
In order to assist Covered Nonbanks in complying with the rule and submitting information to the registry, the CFPB has issued a Filing Instruction Guide (FIG).
The rule requires CFPB-supervised Nonbanks to provide an annual written statement from an executive attesting to compliance with each Covered Order.
In addition to the initial registration requirement for a Covered Order, the rule also requires CFPB-supervised Nonbanks—which includes most Nonbank mortgage lenders—to annually submit a written attestation for each Covered Order from an “attesting executive” that describes the steps taken to oversee the activities subject to the Covered Order and whether the executive knows of any violations of, or other instances of noncompliance with, the Covered Order. The written attestation must be submitted to the Nonbank Registry on or before March 31 of each calendar year.
The “attesting executive” must be the highest-ranking duly appointed senior executive officer (or, if there is no executive, the highest-ranking individual) whose assigned duties include ensuring the supervised registered entity’s compliance with federal consumer financial law, who has knowledge of the entity’s systems and procedures for achieving compliance with the Covered Order, and who has control over the entity’s efforts to comply with the Covered Order. The final rule requires CFPB-supervised Covered Nonbanks to maintain records sufficient to provide reasonable support for the written statement for five years after the submission.
The rule contains an alternative registration option for certain NMLS-published covered orders.
Although the registration requirements of the rule cover a large swath of the financial industry, there is some good news for nonbank mortgage lenders. The CFPB permits registrants with Covered Orders published in the Nationwide Multistate Licensing System & Registry (NMLS) a streamlined filing process if the Covered Order was not issued or obtained, at least in part, by the CFPB. A Covered Nonbank choosing to streamline must still submit certain required information but then has no ongoing obligation to comply with the new rule’s notification and the written statement requirement with respect to that Covered Order. NMLS licensees should pay close attention to the streamlined filing process and exemptions from annual reporting offered in section 2.5.3 starting on page 58 of the FIG.
Initial reporting deadlines vary from October 16, 2024, to July 14, 2025, based on company size and primary regulator. For each category in Table 1, the final rule provides a 90-day window to register all covered orders with effective dates from January 1, 2017, until the start of that implementation submission period.
The Nonbank Registry Portal that Covered Nonbanks must use to register and submit the information regarding Covered Orders is not yet live. The CFPB has announced that it plans to go live with the Portal on October 16, 2024. Access to the Portal can be found here once it is live.
Questions about this memo, including any general regulatory questions, can be addressed to Doug at doug.foster@mortgagelaw.com. Please note that our firm is available for all services and issues relating to residential mortgage lending. Our team can be accessed through www.mortgagelaw.com/our-team.