A binding definition of “risk to consumers” that must be considered in any decision to bring a nonbank service provider under consumer bureau supervision will be out for a 30-day comment period under a notice slated for publication Tuesday in the Federal Register.
According to the notice, the Consumer Financial Protection Bureau (CFPB) is proposing to adopt a standard definition of “conduct that poses risks to consumers with regard to the offering or provision of consumer financial products or services” that will bind it in proceedings to designate nonbank covered persons for bureau supervision. The definition would require conduct that: (a) presents a high likelihood of significant harm to consumers; and (b) is directly connected to the offering or provision of a consumer financial product or service as defined in section 1002 of the Consumer Financial Protection Act (CFPA).
Additionally, the bureau is asking for comment on whether “risks to consumers” must be potential violations of law within the context of section 1024(a)(1)(C).
The notice states the bureau is seeking input on all aspects of the standard, among them, the basis for deciding the bureau may have reasonable cause to determine that a nonbank is engaging “or has engaged” in covered conduct. It also seeks a specific link in such conduct to a statutorily defined “consumer financial product or service.”
The CFPB has previously noted that section 1024(a)(1)(C) “does not specify the character or magnitude of ‘risks to consumers’” required to subject a covered person to supervision.
In an order last November, the CFPB placed Google Payment Corp. under its supervision and, among other things, noted that the statute, which does define several key terms, does not define risk. Russell Vought, director of the Office of Management and Budget (OMB) and acting director of the CFPB, withdrew the order this May.
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