U.S. Chamber Comments on CFPB Procedures for Supervisory Designation Proceedings; Rescission

To Whom It May Concern:

The U.S. Chamber of Commerce Center for Capital Markets Competitiveness ("Chamber") appreciates the opportunity to comment on the Consumer Financial Protection Bureau's ("CFPB") Proposed Rulemaking on Procedures for Supervisory Designation Proceedings; Rescission ("the proposal" or "the rescission").[1]

The proposal states the CFPB proposes to rescind the amendments to Procedures for Supervisory Designation Proceedings that it adopted on April 29, 2022,[2] on November 21, 2022,[3] and on April 23, 2024 ("the amendments").[4] As noted in the proposal, the amendments "provided for public release of final decisions and orders by the Director and made other changes to the CFPB's procedures for designating nonbank covered persons for supervision."[5]

The CFPB stated it is proposing to rescind the amendments due to concerns with the fact that under the amendments, if an entity that exercises its statutory right to contest a designation as a non-bank covered person, the entity could be the subject of a publicly released order asserting that the entity ''is engaging, or has engaged, in conduct that poses risks to consumers.''[6] In contrast, no such orders or decisions exist for entities that agree to the designation, rather than challenging it. The CFPB notes that this difference "may put inappropriate pressure on entities to consent to designation."[7] In addition, the CFPB requested comments on the impact of the public release of this information on supervised entities and on the supervisory process. The CFPB also requested comments on its preliminary view that the other provisions in the amendments are unnecessary.

The Chamber strongly supports the proposal to rescind the amendments. In response to the CFPB's request for comments on the amendments, the Chamber previously sent the CFPB a letter commenting on the amendments on May 31, 2022, attached here as Appendix A. In that letter, the Chamber strongly objected to the amendments and requested that the CFPB rescind the amendments. In response to the proposal, we write to reaffirm our position that the amendments should be rescinded and express support for the CFPB's proposal to rescind the amendments.

The Chamber agrees with the CFPB's conclusion that publishing decisions and orders on an entity's supervised status-particularly only in cases where the entity contests the designation-is harmful, unfair, and encourages entities to accept the designation even if they have strong arguments against it. We are aware of multiple companies that felt pressured to acquiesce to designation given an implicit threat from the CFPB under the amendments that it would publish a decision or order. As we noted in our May 31, 2022, comments on the amendments, there are at least five reasons the CFPB should not publish these determinations:

1. The amendments purport to allow the CFPB to publicly release Confidential Supervisory Information ("CSI"). The CFPB's decisions and orders regarding whether a nonbank covered person is subject to the CFPB's supervision due to engaging in conduct that poses risks to consumers are CSI. The CFPB previously evaluated whether such decisions and orders should be made public and decided against doing so in 2013, when it first promulgated its rule implementing its risk-based authority to supervise this third category of covered persons.[8] Specifically, the CFPB stated: "The Bureau agrees that all aspects of a proceeding under the final rule relate to the Bureau's supervisory process and should be deemed confidential supervisory information under 12 CFR 1070.2(i)(1)."[9] The CFPB had the correct view the first time it considered this issue in 2013, and should revert to a rule that maintains such supervisory determinations as CSI.

2. Publishing risk-based determinations could have negative consequences for entities that outweigh any associated benefit. A public statement that the CFPB has determined that an entity's activities pose risks to consumers has obvious negative consequences: competitive disadvantage, reputational harm and associated negative consequences in the marketplace (e.g., loss of partnership opportunities), and increased costs to mitigate these consequences (e.g., an expanded marketing campaign), to name a few.

3. Publishing supervisory determinations as provided in the amendments can distort the marketplace and hurt consumers. Under the amendments, the CFPB could announce that a company poses risk to consumers without either having conducted an investigation or a supervisory exam. In short, the CFPB may announce that an entity poses risks to consumers-altering consumer behavior in the process-only to find out, when it does subsequently conduct a supervisory exam, that no consumer has been harmed by the entity's products. The CFPB should not inject its opinions into the marketplace in this manner since doing so will impair competition, distort the marketplace, and lead to worse outcomes for consumers.

4. By immediately imposing reputational consequences on an entity, as the CFPB could do under the amendments, the CFPB may sour the supervisory relationship with the entity at the outset. As a result, the CFPB would impair the collaboration that facilitates effective supervision and that ultimately benefits consumers.

5. The amendments may discourage companies from offering products that benefit consumers. If a published order or decision raises concerns about a particular product or type of product, competitors may be more hesitant to enter into the market and risk being labeled as an entity whose products pose a risk to consumers. The CFPB should encourage innovation, not distort the marketplace by casting doubt upon particular products or types of product offerings through such an arbitrary process. Additionally, other companies - that may or may not already be subject to supervision - may be discouraged from pursuing partnerships with companies named in risk-based supervisory determinations or pursuing business lines that they offer.

As we noted in our May 31, 2022, comments, there is a public interest in the CFPB disclosing risks to consumers that it identifies. Such disclosures allow consumers to avoid such harms and responsible companies to learn from others' mistakes. However, naming an individual company as a purported source of risk to consumers-importantly, before the CFPB has begun supervision-is not the proper way to disclose such risks. Rather, the CFPB should continue to use other tools at its disposal to communicate such concerns. There is no substantial benefit to publicly naming a company as posing risks to consumers without previously examining or investigating that company, and certainly no benefit that outweighs the undue harms such an announcement could cause.

For the reasons detailed in this letter and in Appendix A, rescinding the amendments resolves the significant potential harms created by the provision to publicly release decisions and orders on the classification of regulated entities. As we commented in our original letter, the amendments created new, material impacts on entities and should not have been issued as a procedural rule. Rescinding the amendments would correct this error. The proposal would also eliminate regulations that altered the CFPB's supervisory determination process unnecessarily and for reasons that were unclear.

If the CFPB rescinds the amendments, we encourage the CFPB to also take steps to ensure that decisions and orders on an entity's supervised status are not published in the future. Rescinding the amendments would create a reasonable reliance by impacted entities that the CFPB will not publish any such decisions and orders made after the amendments are rescinded. To prevent any due process violations against impacted entities rights, we encourage the CFPB to take the further affirmative step of codifying a provision that states that the CFPB will not publish decisions and orders on an entity's supervised status.

We thank you for your consideration of these comments and would be happy to discuss these issues further.

Sincerely

Bill Hulse

Senior Vice President

Center for Capital Markets Competitiveness

U.S. Chamber of Commerce

[1] See CFPB, Proposed rule; request for comment; Procedures for Supervisory Designation Proceedings; Rescission, 90 Fed. Reg. 20,401 (May 14, 2025), https://www.govinfo.gov/content/pkg/FR-2025-05-14/pdf/2025-08347.pdf (hereinafter "Proposal").

[2] See CFPB, Procedural rule; request for public comment; Supervisory Authority Over Certain Nonbank Covered Persons Based on Risk Determination; Public Release of Decisions and Orders, 87 Fed. Reg. 25,397 (Apr. 29, 2022), https://www.govinfo.gov/content/pkg/FR-2022-04-29/pdf/2022-09107.pdf.

[3] See CFPB, Final rule; Supervisory Authority Over Certain Nonbank Covered Persons Based on Risk Determination; Public Release of Decisions and Orders, 87 Fed. Reg. 70,703 (Nov. 21, 2022), Consumerfinance.gov/rules-policy/regulations/1026/.

[4] See CFPB, Final rule;request for public comment; Procedures for Supervisory Designation Proceedings, 89 Fed. Reg. 30,259 (Apr. 23, 2024), https://www.govinfo.gov/content/pkg/FR-2024-04-23/pdf/2024-08430.pdf.

[5] See Proposal at 20,401.

[6] See id.

[7] See id.

[8] See CFPB, Procedural Rule to Establish Supervisory Authority Over Certain Nonbank Covered Persons Based on Risk Determination, 78 Fed. Reg. 40,352 (July 3, 2013).

[9] Id. at 40,360.