The Consumer Financial Protection Bureau has finalized a rule rolling back its 2022–2024 amendments to supervisory designation procedures, once again treating decisions and orders as confidential supervisory information.
Why it matters: The move alters how the Bureau can bring nonbank financial firms, including fintechs, lenders, credit bureaus, and debt collectors, under its supervisory authority. The rule takes effect October 27.
The big picture:
- Section 1024 of the Consumer Financial Protection Act allows the CFPB to supervise nonbanks that pose risks to consumers.
- Under the 2013 rule, proceedings were confidential, and entities could either contest designation or consent voluntarily.
- Amendments adopted between 2022 and 2024 allowed the CFPB Director to publish final decisions and orders, creating public exposure for firms that chose to contest.
The new rule:
- Rescinds the 2022–2024 framework and restores the 2013 procedures.
- Decisions and orders will no longer be released publicly.
- Establishes a “recommending official” who prepares a determination before the Director makes a final decision, reinstating a step removed in the 2024 reorganization.
- Retains limited process updates from 2024, such as video participation in oral responses, simplified consent agreements, and the ability for officials to request supplemental briefing.
The debate:
- Industry groups representing fintechs, installment lenders, and banks argued that public release unfairly harmed reputations, discouraged candid communication, and chilled innovation.
- Consumer advocates countered that transparency is necessary for accountability and helps the market understand why entities are designated.
- The Bureau ultimately sided with industry concerns, stating reputational pressures could lead firms to consent to supervision even when designation was unwarranted.
Between the lines: The CFPB noted that most designations historically occur by consent, with few contested cases producing public orders. The Bureau also warned that redacted public decisions risk misleading readers and that publication could encourage misinterpretation as evidence of wrongdoing.
What’s next:
- The Bureau is considering a separate rulemaking to define more clearly what constitutes “risks to consumers.”
- Firms in industries such as nonbank lending, debt collection, consumer reporting, and fintech payments remain potential targets for designation, but those proceedings will again occur behind closed doors.
