On August 26, 2025, the Consumer Financial Protection Bureau (CFPB or the Bureau) published a proposed rule that would narrow its supervisory authority over nonbanks. Under the proposed rule, the CFPB plans to exercise oversight over nonbanks only in cases where there is a “high likelihood of significant harm to consumers.”
If finalized, the rule would define what it means for a nonbank to pose “risks to consumers” under § 1024(a)(1)(C) of the Consumer Financial Protection Act (CFPA). This provision gives the CFPB authority to directly supervise nonbank covered persons when the Bureau has reason to believe their conduct may threaten consumers when offering or providing of financial products or services.
Link to Background Background
Until now, the CFPB has not formally addressed the meaning of “risks to consumers” under § 1024(a)(1)(C), opting instead to issue orders on an individual “case-by-case” basis. According to the CFPB, the status quo creates uncertainty and the potential for inconsistent application of the rule. The proposed rule, the CFPB says, will “ensure that the Bureau acts within the bounds of its statutory authority and provide clarity to institutions about the standard the Bureau applies.”
Link to Proposed Rule Proposed Rule
At a high level, the proposed rule tightens the definition of “risks to consumers,” imposing a stricter standard for the Bureau’s supervisory activity. The rule specifies that conduct poses “risks to consumers” if it (a) is highly likely to cause significant consumer harm, and (b) is directly tied to the offering or provision of a consumer financial product, as defined in § 1002 of the CFPA. The CFPB intends this change to signal a focus on “serious conduct” within the specific categories of products and services the Bureau oversees.
Link to Impact Impact
The proposed rule continues a recent string of actions by the Bureau aimed at reducing its nonbank oversight and overall regulatory footprint. Nonbanks will, of course, generally welcome the reduced regulatory scrutiny and benefit from the enhanced clarity regarding the definition of “risks to consumers.” On the flip side, nonbanks that find themselves in the CFPB’s crosshairs under the new (stricter) standard will likely face tough battles given the Bureau’s targeted focus on “serious conduct.” Ultimately, the impact of the rule on consumers remains to be seen, but it should provide nonbanks with clearer guidance for compliance and help to ensure the Bureau “acts within the bounds of its statutory authority.”
The CFPB is requesting public comments on this proposal, with submissions due by September 25, 2025. If finalized, this rule would take effect 30 days after publication.