On May 14, the Consumer Financial Protection Bureau (CFPB or Bureau) published a proposed rule to rescind amendments to its Procedures for Supervisory Designation Proceedings, originally adopted in 2022 and 2024. This proposal marks a significant shift in the Bureau’s approach to supervising nonbank entities. Public comments on the rescission will be accepted until June 13, 2025.
As background, CFPA § 1024(a)(1)(C) gives the CFPB discretion to supervise nonbanks that do not qualify for supervision under one of the primary grounds in the CFPA (offer/broker/service mortgages, offer student loans, offer small dollar loans, larger market participant). The discretionary supervisory authority can apply to “any [nonbank] covered person who … the Bureau has reasonable cause to determine, by order, after notice to the covered person and a reasonable opportunity for such covered person to respond, based on complaints collected through the system under § 1013(b)(3) … or information from other sources, that such covered person is engaging, or has engaged, in conduct that poses risks to consumers with regard to the offering or provision of consumer financial products or services.”
We previously discussed the CFPB’s use of its “dormant authority” to assert supervisory powers over nonbanks, a move that included publicizing supervisory designations based on perceived consumer risks. This authority was notably exercised in the case of World Acceptance Corp., where the CFPB found reasonable cause to supervise the company due to consumer complaints about its practices.
The Bureau has particular concerns about the manner in which the 2022 and 2024 amendments provided for public release of decisions and orders. Under those amendments, if an entity consented to supervisory designation, then there would be no public release of any decision or order. However, if the entity contested designation, that choice may result in a public decision and order asserting that the entity “is engaging, or has engaged, in conduct that poses risks to consumers.” The Bureau now expresses concerns that these amendments may unduly pressure entities to consent to supervisory designation to avoid public disclosure. This procedural disparity could affect businesses’ reputations, prompting the CFPB to reconsider the necessity of these amendments.
The proposed rescission aligns with recent shifts in CFPB policy under Acting Director Russell Vought, appointed by President Trump. As forecast in its 2025 Supervision and Enforcement Priorities (discussed here), the CFPB’s current focus is moving away from nonbank financial platforms, prioritizing traditional depository institutions instead.