Consumer Financial Protection Bureau Starts Nonbank Supervision Program

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On January 5, 2011, the Consumer Financial Protection Bureau (“CFPB”) launched the first federal nonbank supervision program. “We will begin dealing face-to-face with payday lenders, mortgage servicers, mortgage originators, private student lenders and other firms that often compete with banks but have largely escaped any meaningful federal oversight,” said Richard Cordray the newly appointed director of the CFPB.

Coverage of the Nonbank Supervision Program

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), a “nonbank” is a company that offers or provides consumer financial products or services but does not have a bank, thrift, or credit union charter. Nonbanks include companies such as mortgage lenders, mortgage servicers, payday lenders, consumer reporting agencies, debt collectors, credit counseling agencies, and money services companies.

The CFPB’s nonbank supervision will begin in phases. With a director appointed, the CFPB has the authority to oversee nonbanks, regardless of size, in certain specific markets: mortgage companies (originators, brokers, and servicers including loan modification or foreclosure relief services); payday lenders; and private education lenders.

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Published In: Administrative Agency Updates, Consumer Protection Updates, Finance & Banking Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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