CFPB rescinds most Chopra-era amendments to its supervisory designation rule

The final rule would restore the confidentiality of decisions and orders in supervisory designation proceedings, reversing the amendment that had allowed for public disclosure. The rule would also reinstate the requirement that a “recommending official” provide a recommended determination to the director before a final decision is made, reversing the 2024 elimination of this role due to organizational restructuring. However, the Bureau would retain certain process adjustments from 2024, including: (i) allowing initiating officials to file written replies to respondents; (ii) permitting supplemental oral responses to be conducted by video; (iii) codifying supplemental briefing procedures; (iv) simplifying voluntary consent agreement procedures; and (v) updating the definition of “initiating official” to reflect current organizational structure. Other modifications made by the 2022–2024 amendments, such as revised notice requirements, procedural deadlines, and issue-exhaustion provisions are being eliminated, as the Bureau determined they are unnecessary or overly complex.

The Bureau explained these changes were intended to “simplify and clarify the process” and address concerns that the 2022-2024 rules could create reputational pressure for entities to consent to supervision to avoid public decisions and orders, even when the entities may have “meritorious” arguments. The CFPB concluded the harm from publication outweighed the benefits, noting that “a supervisory designation proceeding has a limited purpose of answering the threshold question of whether or not an entity should be subject to supervision.” The final rule will take effect on October 27.