CFPB’s Repeat Offender Registry – Part Two

QUESTION 

Last week, you published an article about the Repeat Offender rule. The questioner was pretty upset about it. But I am not upset about it. After all, if a company repeats violations, why shouldn’t the public know about it? 

I also run a mortgage lender, just like the other guy. I’m the President and CEO. My company is almost 30 years old. We’ve made it through upturns and downturns, and we’re positioned well for the next upturn. Along the way, we have had violations cited on banking audits. We corrected them and moved on. I can’t think of a single instance when the violation that we corrected got repeated. Not once has that happened. 

So, my view is different. Companies that make the same violations over and over again make it harder for companies like mine to be trusted by the public. I want a level playing field where my loan officers are able to provide our services without having to worry that a competitor is getting away with repeat violations. Repeat offenders are bad for business and mess with the public trust. 

I learned a lot from your article. I printed it out and sent it to my mortgage bankers association as well as all our employees. I want people to know that our company supports the Repeat Offender rule because it is good for business and strengthens the public trust. 

You ended last week’s article by saying that Part Two would further discuss other aspects of the Repeat Offender requirements. I look forward to reading it soon. 

What are other essential aspects of the Repeat Offender requirements? 

COMPLIANCE SOLUTION 

CMS Tune-up®

(Compliance Management System)

ANSWER 

I appreciate your message. The response to Part One was enormous. 

Clearly, this is a controversial subject. But, in a sense, it shouldn’t be. After all, analogously, if you obey the speed limit, it is not unreasonable to want others to follow the speed limit, too. Do you enjoy being tailgated? Are you entertained by cars swerving in and out of fast-moving traffic? Do you feel safe when somebody races past your car at 80 MPH in a 50 MPH zone? About 11% of Americans have had at least one speeding ticket.[i] Repeat driving offenses risk increased insurance fees, loss of a driver’s license (a privilege, not a right), a hazard to safety, destruction of property, and a threat to life.    

Why should some people get bent out of shape by calling a company that continues to violate banking laws a “repeat offender?” What else should it be called? If the term “recidivist” is a proxy, then go for it – use “recidivist.” Both terms infer a tendency to relapse, and "repeat offender," in particular, does seem to be associated with criminal behavior. It is quite a stretch to imply that mortgage companies that repeat offenses of legal and regulatory mandates are criminals. They are certainly not criminals. The problem is the terminology. Perhaps the CFPB can come up with a less objectionable term. 

A quick recap:

On Monday, June 3^rd, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) issued a Final Rule[ii] (“Rule”) requiring nonbank consumer financial services companies to register court orders or government agency orders in a new Nonbank Registry (“Registry”). This Rule is the “Repeat Offender” registration requirement. The effective compliance date is September 16, 2024. 

In Part One, I outlined the following areas: 

·       Repeat Offender Unit; 

·       Risk Profile; 

·       Agency and Court Orders; 

·       Registration; and 

·       Attestation. 

In Part Two, I will discuss[iii] optional alternative registration, timing requirements, the written statement requirement, and when the registration requirement comes to an end. Also, I provide tables for the submission periods and registration protocols. 

Optional Alternative Registration Requirements 

The Rule provides a limited one-time, alternative registration option for covered orders that are published on the Nationwide Multistate Licensing System (NMLS) Consumer Access website.[iv] 

As a covered nonbank, you may alternatively choose to file a special one-time registration for NMLS-published covered orders that were not issued or obtained, at least in part, by the CFPB. By “covered orders,” the CFPB means court orders or government agency orders.[v] 

If the alternative option is chosen, the nonbank must submit certain required information. After such submission, the nonbank has no further obligations to register any changes to or expiration of the order or to file written statements with respect to that order (if applicable). 

The alternative option is not available for any order issued or obtained at least in part by the CFPB, regardless of whether it is published on the NMLS Consumer Access website. 

Timing Requirements 

The timing requirements are a little bit tricky, so stay with me as I elaborate on them. I suggest you work with a compliance professional to ensure the filing and timing requirements are adhered to meticulously. 

Initially, the Rule has a phased-in implementation. During the implementation submission period, nonbanks are categorized into three institutional types, as follows:

 1)    Larger Participant CFPB-Supervised Covered Nonbanks;

 

2)    Other CFPB-Supervised Covered Nonbanks (i.e., CFPB-supervised covered nonbanks that do not meet the definition of a larger participant under the CFPB’s regulations); and

 

3)    All Other Covered Nonbanks (i.e., covered nonbanks that the CFPB does not supervise).

 

For each category, the final rule provides a 90-day window for covered nonbanks to register all covered orders with effective dates from January 1, 2017, until the start of that implementation submission period.

 

The table below identifies registration submission periods based on the Rule’s effective date of September 16, 2024. 

Implementation Submission Periods[vi]

 

Covered Nonbank Type	Registration Submission Period	Registration Deadline
Larger Participant CFPB-Supervised Covered Nonbanks	October 16, 2024 through January 14, 2025	January 14, 2025
Other CFPB-Supervised Covered Nonbanks	January 14, 2025  through April 14, 2025	April 14, 2025
All Other Covered Nonbanks	April 14, 2025 through July 14, 2025	July 14, 2025
* Any dates that fall on a Saturday, Sunday, or Federal holiday should be converted to the next day that is not a Saturday, Sunday, or Federal holiday. Accordingly, the Bureau has adjusted the submission period dates, as listed above.

Two orders are subject to registration: orders that 

1.     Have an effective date from January 1, 2017, through the start of the nonbank’s submission period, and 

2.     For orders issued prior to September 16, 2024, the order remains effective as of September 16, 2024. 

Here’s how this works. I will use the institutional category two (above)—Other CFPB-Supervised Covered Nonbanks—to illustrate the protocol. It reflects the Bureau’s example.[vii] My protocol table shows how to determine the analysis. 

Protocol for Registration of Covered Orders - Example

 

Order Types	Order Timeframe	Registration Disposition
First Order	Order takes effect[viii] on January 1, 2016, and expires on January 1, 2026.	Do not register (effective January 1, 2016) because it takes effect before January 1, 2017.
Second Order	Order takes effect on January 1, 2017, and expires on October 30, 2025.	Register (effective January 1, 2017) because it takes effect on or after January 1, 2017 (and prior to the start of the applicable submission period) and remains in effect as of September 16, 2024.
Third Order	Order that becomes effective on January 1, 2025, and expires on January 1, 2031.	Register (effective January 1, 2025) because it takes effect on or after September 16, 2024, and prior to the start of the applicable submission period.
Note 1: Continue to comply with the ongoing registration requirements for these orders until they expire or are terminated.
Note 2: If a new order is issued and effective on or after the start date of the implementation submission period, follow the ongoing registration timing requirements.

 

Understanding the Ongoing Registration Timing Requirements 

After the start of a nonbank’s implementation submission period, it must begin complying with the Rule’s ongoing registration timing requirements to register new orders and submit changes or updates related to previously registered covered orders. 

The nonbank should access the CFPB’s Nonbank Registry and provide a registration submission within the identified 90-day window for each of the following events: 

1.     Within 90 days after the date of updates or changes to the nonbank’s identifying information or administrative information. 

2.     Within 90 days after the date of any amendments made to previously registered orders, including changes to submitted order information. 

3.     Within 90 days after the effective date of any new order(s) applicable to the nonbank (with effective dates on or after the start of the applicable implementation period). 

4.     Within 90 days after the effective date of termination or expiration, submit a revised filing of a previously registered covered order. 

Written Statement – Attestation 

In Part One, I discussed the annual filing requirement of the written statement. It is, in effect, an attestation.[ix] 

·       For CFPB-Supervised Covered Nonbanks, these written statements must be submitted annually on or before March 31 of each year. 

·       For Larger Participant CFPB-Supervised Covered Nonbanks that register by December 31, 2024, the first written statement submission is required by March 31, 2025. It would cover all applicable orders registered with an effective date from October 16, 2024 to December 31, 2024. 

·       For Other CFPB-Supervised Covered Nonbanks, the first written statement submission is required on March 31, 2026. It will cover all applicable orders registered with an effective date on or after the beginning of their implementation submission period, January 14, 2025 to December 31, 2025. 

As I pointed out in Part One, the written statement is where governance plays a role because the designated executive must provide:

(1) a description of the steps the executive has taken to review and oversee the covered nonbank’s activities subject to the order during the preceding calendar year, and

(2) attest whether, to the executive’s knowledge, the institution identified any violations or noncompliance with any applicable obligations imposed in the order’s public provisions during the preceding calendar year. 

I think the timing requirement for the written statement is so sufficiently complex that consulting a compliance professional would be helpful, and careful planning should be undertaken. Written statements constitute a central pillar of the Rule. Complying with its mandates is essential. 

To elucidate just how complex the timing of the written statement[x] can be, consider these two scenarios:

Scenario One: Consider a scenario where on or before December 31, 2026, a CFPB-Supervised Covered Nonbank has three previously registered applicable orders (first registered prior to January 1, 2026) and two new orders (effective between January 1, 2026, and December 31, 2026, and registered, or required to be registered, by March 31, 2027), the covered nonbank would file written statements for each of those five orders on or before March 31, 2027. 

Scenario Two: Or another scenario where a CFPB-Supervised Covered Nonbank registers its first covered order between January 1, 2027 and March 31, 2027, and thus would not qualify as a supervised registered entity at any point during 2026, it does not need to file a written statement until March 31, 2028. 

Expiration and Termination 

The ongoing registration requirements apply to an order until it is deemed to expire under the Rule or all relevant provisions are fully terminated.[xi] 

An agency or court may terminate an order or may terminate under its own terms on a date expressly provided for in the order. However, an order that does not expressly provide for a termination date and is not terminated earlier is deemed to expire ten years after its effective date. That said, if the order expressly provides for a termination date that is longer than ten years, the order is not deemed to expire until the expressly provided termination date. 

The Rule requires the nonbank to file a notice with the CFPB within 90 days of the date of any modification, termination, or abrogation of the order. 

If either expiration or termination occurs, or the order is modified such that it is no longer a covered order, then, after a covered nonbank files a final notice with the CFPB, the nonbank is relieved of further registration obligations with respect to that order. Additionally, the nonbank need not submit further written statements regarding that order. 

Jonathan Foxx, Ph.D., MBA
Chairman & Managing Director 

Lenders Compliance Group

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[i] Insurify, January 2024

[ii] Registry of Nonbank Covered Persons Subject to Certain Agency and Court Orders, Final Rule, 12 CFR Part 1092, June 3, 2024, Consumer Financial Protection Bureau

[iii] Executive Summary of the Nonbank Registration of Orders Rule, June 3, 2024, Consumer Financial Protection Bureau contains an outline of certain topics similar to the ones provided in this article.

[iv] NMLS Consumer Access, Nationwide Multistate Licensing System, Nationwide Mortgage Licensing System and Registry, https://www.nmlsconsumeraccess.org

[v] See CFPB’s New Repeat Offender Registry – Part One, June 6, 2024, Mortgage FAQs, where I outline in detail the elements of a covered order pursuant to the Rule. https://mortgage-faqs.blogspot.com/2024/06/cfpbs-repeat-offender-registry-part-one.html

[vi] Op. cit. iii, Implementation Submission Periods, adapted and modified, Source: Table 1, p.6

[vii] Op. cit. iii, Implementation Submission Period Timing Requirements, adapted and modified, p. 7

[viii] The Rule's registration requirements apply to covered orders that remain in effect on September 16, 2024, or have an effective date on or after that date.

[ix] The annual attestation requirement pertains to “supervised registered entities,” which is generally defined as a nonbank “subject to supervision and examination by the Bureau pursuant to 12 U.S.C. 5514(a)” (viz., mortgage lenders, brokers, and servicers) that has $5 million or more in annual receipts from all consumer financial products and services.

[x] Op. cit. iii, Written Statement Submission, adapted and modified, pp. 8

[xi] Op. cit. iii, When Do Registration Requirements End for a Covered Order?, adapted and modified, pp. 8-9