Banking and Finance Law Daily Wrap Up, CONSUMER FINANCIAL PROTECTION BUREAU—Comments split on CFPB nonbank supervision proposal, (Sep 26, 2025)

By Kathleen Bianco, J.D.

Opposing comments contend that the proposed definition would hinder CFPB’s ability to address emerging risks to consumers, while supportive comments applaud action as a “step in the right direction.”

Several industry associations and industry organizations have submitted comments on a proposed rule by the Consumer Financial Protection Bureau that would narrowly define “risks to consumers” in supervisory designation proceedings. The Consumer Bankers Association (CBA), the American Bankers Association (ABA), the Center for Responsible Lending (CRL), and the Independent Community Bankers of America (ICBA), filed comments opposing the rule. While the opposing groups supported the need for regulatory clarity, they argue that the proposed definition would significantly undermine the CFPB’s ability to supervise nonbank financial entities, particularly those posing emerging threats to consumers. Alternatively, the American Fintech Services Association and the American Fintech Council filed comments supporting the proposal and suggesting that the Bureau could do more.

Background. The CFPB issued a proposed rule seeking to provide clarity in the designation of nonbank entities subject to Bureau supervision (see Banking and Finance Law Daily, Aug. 25, 2025). The rule under consideration looks to provide a concrete meaning to the phrase “risks to consumers” in order to avoid inconsistent interpretations of that phrase and to provide transparency on the type of activities that would be subject to supervision. Section 1024(a)(1)(C) of the Consumer Financial Protection Act of 2010 (CFPA) allows for supervision of a nonbank covered person if the CFPB determines that the person is or has engaged in conduct that poses risks to consumers with regard to the offering or provision of consumer financial products or services. Under the proposed rule, the conduct provision will be clarified to allow supervision only if the conduct presents a high likelihood of significant harm to consumers; and is directly connected to the offering or provision of a consumer financial product or service as defined in section 1002 of the CFPA.

CBA/ABA comments. The CBA and ABA filed joint comments emphasizing that the CFPB’s current broad, risk-based authority is essential for swift oversight of evolving market practices. They cite the growing role of nonbanks in consumer finance, noting that nonbank mortgage companies originated 63.1 percent of first-lien home purchase loans in 2023, fintechs like PayPal and Chime accounted for nearly 21 percent of new checking accounts opened in 2024, and 72 percent of consumers used online or mobile payment accounts in 2023. They contend that narrowing the CFPB’s authority could leave significant gaps in federal oversight, exposing consumers to harm from unsupervised entities and weakening the Bureau’s ability to fulfill its Congressional mandate for fair competition and consistent enforcement. While acknowledging the benefit of regulatory clarity in the context of supervision and enforcement, the CBA and ABA oppose the adoption of the proposed rule and recommend that the CFPB retain its current flexible framework.

Center for Responsible Lending comments. The Center for Responsible Lending (CRL) similarly opposes the rule, arguing that redefining “risk to consumers” under §1024(a)(1)(C) to require a “high likelihood of significant harm” contradicts both the statute’s plain language and the legislative intent. CRL cautions that this interpretation would severely limit the CFPB’s ability to examine non-depository institutions in emerging markets, such as personal loans, where no “larger participant” rule have been established. It could also prevent examinations based on consumer complaints or incomplete public information, shifting the Bureau’s focus from proactive supervision to reactive enforcement and undermining its ability to detect and prevent harm early. For these reasons, the CRL urges withdrawal of the proposed rulemaking or a change in the language that “properly interprets ‘risks to consumer’ to apply where there is a ‘possibility’ or ‘chance’ of injury to consumers.”

Opposition from Independent Community Bankers of America. The Independent Community Bankers of America (ICBA) argue that the proposed “high likelihood” and “significant harm” standard is out of step with the statutory intent, prior CFPB interpretations, and the “realities of the modern financial market,” and would create dangerous gaps in consumer protection. ICBA points to the risk of unsupervised low-probability but high-impact events, such as fintech bankruptcies or crypto collapses, and warns that the rule’s “direct connection” requirement could allow harmful practices to be outsourced to third parties, enabling nonbanks to evade oversight. The organization also asserts that the proposed change would increase competitive inequities between regulated community banks and unsupervised nonbanks, undermining regulatory coordination, and contradicting Congress’s intent to grant the CFPB flexible authority to address evolving risks. ICBA advocates for maintaining the current “reasonable cause” standard and intensifying supervision of nonbanks.

AFSA/AFC input. Alternatively, the American Financial Services Association (AFSA) and the American Fintech Council (AFC) have filed a joint letter applauding the CFPB’s proposal asserting that it is a “step in the right direction,” but urging further refinement. In their letter, the AFSA and AFC claim that the current statutory language is overly vague and subjective, leading to inconsistent and potentially unfair supervision of non-bank financial entities. While they fully support the proposal’s emphasis on a finding of a “high likelihood of significant harm” to invoke supervision authority and the need for a “direct connection” to consumer financial services, they also recommend that only extraordinary, objectively verifiable risks—not routine business risks—should trigger supervision. They also assert that compliance with existing laws should be presumed to indicate low risk and caution against CFPB overreach into areas already regulated by other agencies. Finally, they call for greater transparency and the inclusion of quantitative criteria to guide supervisory decisions, ensuring businesses can operate with clearer expectations.

Companies: American Bankers Association; Consumer Bankers Association; the Center for Responsible Lending; Independent Community Bankers of America

RegulatoryActivity: BankingFinance BankingOperations CFPB ConsumerCredit DoddFrankAct PrudentialRegulation