What's Happening?
On August 26, 2025, the Consumer Financial Protection Bureau (CFPB) published a proposed rule to narrow its supervisory authority over nonbanks. The rule aims to exercise oversight only in cases where there is a high likelihood of significant harm to consumers. This proposal seeks to define what constitutes 'risks to consumers' under the Consumer Financial Protection Act, providing clarity to institutions about the standards applied by the Bureau. The rule specifies that conduct poses risks if it is highly likely to cause significant consumer harm and is directly tied to the offering of a consumer financial product. The CFPB is requesting public comments on this proposal, with submissions due by September 25, 2025.
Why It's Important?
The proposed rule represents a shift in the CFPB's approach to nonbank supervision, potentially reducing regulatory scrutiny for many nonbank entities. This change could benefit nonbanks by providing clearer guidance for compliance and reducing uncertainty. However, nonbanks that fall under the stricter standard may face increased challenges due to the Bureau's focus on serious conduct. The impact on consumers remains uncertain, but the rule aims to ensure the Bureau acts within its statutory authority, potentially affecting consumer protection standards.
What's Next?
If finalized, the rule would take effect 30 days after publication. The CFPB's request for public comments indicates an opportunity for stakeholders to influence the final version of the rule. Nonbanks and consumer advocacy groups may engage in discussions to address concerns and potential impacts. The outcome of this proposal could lead to changes in how nonbanks operate and are regulated, affecting the broader financial services landscape.
