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CFPB Issues Proposed Rule Imposing Reporting Requirements on Certain Non-Bank Entities: Possible Implications for Money Transmitters, Debt Relief and Credit Repair Service Providers

On December 12, 2022, the Consumer Financial Protection Bureau (CFPB) issued a proposed rule pursuant to its authority under the Consumer Financial Protection Act of 2010 (CFPA). This rule would require certain non-bank entities to register with the CFPB upon obtaining final orders and judgments issued by local, state, or federal consumer financial protection agencies or courts. While it is not clear from the language of the text of the proposed rule, if adopted in its current form, this rule may impact debt relief providers, money transmitters, and credit repair service providers. 

The proposed rule specifies that all final public written orders and judgments, including consent and stipulated orders and judgments, obtained or issued by the CFPB or any local, state or federal agency for violating certain consumer protection laws must be reported to a CFPB registry. Insured depository institutions, insured credit unions, related persons, states, certain other entities, and natural persons would be excluded from this requirement. 

Further, the proposed rule seeks to require certain nonbanks subject to the CFPB’s supervisory authority under section 1024(a) of the CFPA to submit annual written statements regarding compliance with orders in the CFPB registry. Section 1024(a) applies to [any person and their affiliates that offer or provide a consumer financial product or service] that offer or provides, among other things, origination, brokerage, or servicing of loans for use by consumers primarily for personal, family, or household purposes. 

If the final rule mirrors the language of the proposed rule and takes a broad approach to defining which entities fall within its purview, it may also implicate companies that engage in money transmission activities. A recent enforcement action filed by the CFPB shows that entities that engage in money transmission activities may fall under the purview of section 1024(a) of the CFPA. On October 4, 2022, the CFPB issued an order against Choice Money Transfer, Inc., (“Choice Money”). According to the consent order, Choice Money provided international money transfers, known as “remittance transfers” to consumers. The CFPB explained that the remittance transfers involve transmitting funds and constitute payment services and are offered to consumers primarily for personal, family or household purposes. The CFPB therefore determined  that the services are considered “consumer financial product[s] or service[s]” under the CFPA. 

Additionally, other non-depository institutions including debt relief and credit repair service providers, may fall under the purview of the proposed rule. A June 28, 2021 enforcement action filed by the CFPB demonstrates that these entities may also fall under the purview of Section 1024(a) of the CFPA. In the June 28, 2021 stipulated final judgment and order, the CFPB banned Burlington Financial Group, LLC (“Burlington”) and named principals from engaging in activities including, among other things, offering or providing any financial-advisory, debt-relief, or credit-repair service. The CFPB described that Burlington is a “covered person” under the CFPA Section 1024(a). In its complaint, the CFPB alleged that Burlington offered or provided consumer financial products including debt management, debt settlement, debt relief and credit repair services, for use by consumers primarily for personal, family or household purposes.

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