[Federal Register Volume 77, Number 102 (Friday, May 25, 2012)]
[Proposed Rules]
[Pages 31226-31237]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-12718]


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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1091

[Docket No. CFPB-2012-0021]
RIN 3170-AA24


Procedural Rules To Establish Supervisory Authority Over Certain 
Nonbank Covered Persons Based on Risk Determination

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Proposed rule; request for public comment.

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SUMMARY: This proposed rule establishes procedures to implement section 
1024(a)(1)(C) of Title X of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act of 2010 (12 U.S.C. 5514(a)(1)(C)). Pursuant to 
this provision, the Bureau of Consumer Financial Protection (Bureau) 
has the authority to supervise a nonbank covered person when the Bureau 
has reasonable cause to determine, by order, after notice to the person 
and a reasonable opportunity to respond, that such person is engaging, 
or has engaged, in conduct that poses risks to consumers with regard to 
the offering or provision of consumer financial products or services. 
This proposed rule sets forth the procedures by which the Bureau may 
subject a nonbank covered person to the Bureau's supervisory authority 
under 12 U.S.C. 5514(a)(1)(C). Under 12 U.S.C. 5514, the Bureau is 
authorized to require reports from, and conduct examinations of, 
entities made subject to its supervisory authority in this manner.

DATES: Comments must be received on or before July 24, 2012.

ADDRESSES: Interested parties are invited to submit written comments 
electronically or in paper form. Because paper mail in the Washington, 
DC area and at the Bureau is subject to delay, commenters are 
encouraged to submit

[[Page 31227]]

comments electronically. You may submit comments, identified by Docket 
No. CFPB-2012-0021 or RIN 3170-AA24 by any of the following methods:
     Electronic: http://www.regulations.gov. Follow the 
instructions for submitting comments.
     Mail/Hand Delivery/Courier: Monica Jackson, Administrative 
Specialist, Office of the Executive Secretary, Bureau of Consumer 
Financial Protection, 1700 G Street NW., Washington, DC 20552.
     Instructions: All comments should include the agency name 
and docket number or RIN for this rule making. Because paper mail in 
the Washington, DC area and at the bureau is subject to delay, 
commenters are encouraged to submit comments electronically. In 
general, all comments received will be posted without change to http://www.regulations.gov. Comments will be available for public inspection 
and copying at 1700 G Street NW., Washington, DC 20552, on official 
business days between the hours of 10 a.m. and 5 p.m. Eastern Time. You 
can make an appointment to inspect the documents by telephoning (202) 
435-7275.
    All comments, including attachments and other supporting materials, 
will become part of the public record and will be subject to public 
disclosure. Submit only information that you wish to make available 
publicly. Do not include sensitive personal information, such as 
account numbers or Social Security numbers. Comments will not be edited 
to remove any identifying or contact information, such as name and 
address information, email addresses, or telephone numbers.

FOR FURTHER INFORMATION CONTACT: Christopher Young, Senior Counsel, 
Office of Nonbank Supervision, Bureau of Consumer Financial Protection, 
1700 G Street NW., Washington, DC 20552, at (202) 435-7408.

SUPPLEMENTARY INFORMATION: 

I. Background

    Title X of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act of 2010 (Dodd-Frank Act) \1\ established the Bureau of 
Consumer Financial Protection (Bureau) on July 21, 2010. One of the 
Bureau's key responsibilities under the Dodd-Frank Act is the 
supervision of very large banks, thrifts, and credit unions, and their 
affiliates,\2\ and certain nonbank covered persons.\3\
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    \1\ Public Law 111-203 (12 U.S.C. 5301 et seq.).
    \2\ See 12 U.S.C. 5515(a). The Bureau also has certain 
authorities relating to the supervision of other banks, thrifts, and 
credit unions. See 12 U.S.C. 5516(c)(1), (e).
    \3\ The provisions of 12 U.S.C. 5514 apply to nondepository 
(nonbank) covered persons and expressly exclude from coverage 
persons described in 12 U.S.C. 5515(a) or 5516(a). A ``covered 
person'' means ``(A) any person that engages in offering or 
providing a consumer financial product or service; and (B) any 
affiliate of a person described [in (A)] if such affiliate acts as a 
service provider to such person.'' 12 U.S.C. 5481(6); see also 12 
U.S.C. 5481(5) (defining ``consumer financial product or 
service.''). Under 12 U.S.C. 5514(d), subject to certain exceptions, 
``to the extent that Federal law authorizes the Bureau and another 
Federal agency to * * * conduct examinations, or require reports 
from a [nonbank covered person] under such law for purposes of 
assuring compliance with Federal consumer financial law and any 
regulations thereunder, the Bureau shall have the exclusive 
authority to * * * conduct examinations [and] require reports * * * 
with regard to a [nonbank covered person], subject to those 
provisions of law.''
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    Under 12 U.S.C. 5514, the Bureau's supervision authority for 
nonbank covered persons varies by consumer financial product or service 
market. Specifically, 12 U.S.C. 5514 grants the Bureau authority to 
supervise nonbank covered persons that offer or provide to consumers: 
(1) Origination, brokerage, or servicing of residential mortgage loans 
secured by real estate, and related mortgage loan modification or 
foreclosure relief services; (2) private education loans; and (3) 
payday loans.\4\ In addition, the Bureau has the authority to supervise 
any nonbank covered person that it ``has reasonable cause to determine, 
by order, after notice * * * and a reasonable opportunity * * * to 
respond'' that such covered person ``is engaging, or has engaged, in 
conduct that poses risks to consumers with regard to the offering or 
provision of consumer financial products or services.'' \5\ The Bureau 
shall base such reasonable cause on complaints collected by the Bureau 
under 12 U.S.C. 5493(b)(3), or on information collected from other 
sources.\6\ This Proposal sets forth procedures to implement these 
risk-based provisions.
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    \4\ 12 U.S.C. 5514(a)(1)(A), (D), and (E). The Bureau's 
supervision authority also extends to service providers of these 
entities. See 12 U.S.C. 5514(e) (establishing the Bureau's 
supervisory authority relating to service providers); see also, 12 
U.S.C. 5481(26) (defining ``service provider'').
    \5\ 12 U.S.C. 5514(a)(1)(C). The Bureau also has the authority 
to supervise any ``larger participant of a market for other consumer 
financial products or services,'' as defined by rule by the Bureau. 
12 U.S.C. 5514(a)(1)(B), (a)(2). An initial rule to define who is a 
larger participant in other markets must be issued by July 21, 2012; 
a notice of proposed rulemaking for this initial rule was published 
in the Federal Register on February 17, 2012 at 77 FR 9592.
    \6\ 12 U.S.C. 5514(a)(1)(C).
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    The Bureau is authorized to supervise nonbank covered persons 
subject to 12 U.S.C. 5514 by requiring the submission of reports and 
conducting examinations to: (1) Assess compliance with the requirements 
of Federal consumer financial law; (2) obtain information about such 
persons' activities and compliance systems or procedures; and (3) 
detect and assess risks to consumers and to markets for consumer 
financial products and services.\7\ The Proposed Rule sets forth only 
procedures by which the Bureau may make a nonbank covered person 
subject to its supervisory authority under 12 U.S.C. 5514(a)(1)(C) and 
would not impose new substantive consumer protection requirements on 
any nonbank entity. Moreover, nonbank entities are subject to the 
Bureau's regulatory and enforcement authority and any applicable 
Federal consumer financial law, regardless of whether they are subject 
to the Bureau's supervisory authority.
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    \7\ 12 U.S.C. 5514(b)(1); see also 12 U.S.C. 5481(14) (defining 
``Federal consumer financial law'').
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II. Summary of the Proposal

    This Proposed Rule, if adopted, would govern the process by which a 
nonbank covered person may become subject to the supervisory authority 
of the Bureau pursuant to 12 U.S.C. 5514(a)(1)(C). In this Proposal, 
the Bureau has endeavored to establish an efficient, expeditious, and 
fair process to exercise the Bureau's authority under 12 U.S.C. 
5514(a)(1)(C). Under the proposed process, the Bureau would provide a 
nonbank covered person a notice (Notice or Notice of Reasonable Cause) 
stating that the Bureau may have reasonable cause to determine that 
such covered person is engaging, or has engaged, in conduct that poses 
risks to consumers with regard to the offering or provision of consumer 
financial products or services. The Proposal establishes mechanisms to 
provide the nonbank covered person a reasonable opportunity to respond 
to the Notice. The Bureau believes that the procedures established by 
this Proposed Rule would provide a recipient of a Notice (respondent) 
with a more robust process than required by Section 1024(a)(1)(C). For 
example, to satisfy the statutory requirement that the Bureau provide a 
reasonable opportunity to respond, the Bureau need not offer 
respondents an opportunity to participate in a supplemental oral 
response. The Proposed Rule, however, if adopted,

[[Page 31228]]

would provide such an opportunity to respondents.
    To provide a reasonable opportunity to respond to a Notice, the 
Proposed Rule would require that a Notice include a description of the 
basis for the assertion that the Bureau may have reasonable cause to 
determine that a respondent is a nonbank covered person that is 
engaging, or has engaged, in conduct that poses risks to consumers with 
regard to the offering or provision of consumer financial products or 
services. A Notice is intended to afford a respondent the opportunity 
to evaluate the assertions set forth therein and to formulate an 
appropriate response. The Proposed Rule would provide a respondent with 
two opportunities to respond to a Notice--first in writing and then, if 
requested by a respondent, through a supplemental oral response 
generally to be conducted by telephone. Under the Proposed Rule, a 
respondent would be required to include with the written response 
records, documents, or other items supporting the arguments set forth 
in the response that a respondent wants the Bureau's Assistant Director 
for Nonbank Supervision (Assistant Director) and the Bureau's Director 
(Director) to consider. A supplemental oral response, if requested, 
would provide a respondent with the opportunity to present arguments to 
the Bureau's Assistant Director or her or his designee.
    Under the Proposed Rule, a Notice of Reasonable Cause would not 
constitute a notice of charges for any alleged violation of Federal 
consumer financial law or other law. The proceedings under the Proposed 
Rule would be informal and would not constitute an adjudicatory 
proceeding under section 554 of the Administrative Procedure Act 
(APA).\8\ Appropriately, under the informal process that would be 
established by the Proposed Rule if made final, no discovery would be 
permitted, a supplemental oral response would not constitute a hearing 
on the record, and no witnesses would be permitted to be called as part 
of a supplemental oral response.
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    \8\ See 5 U.S.C. 554 and 556 (setting forth APA procedures for 
adjudications determined on the record after an opportunity for an 
agency hearing).
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    Under the Proposed Rule, the Bureau's Deputy Assistant Director for 
Nonbank Supervision (Deputy) would commence a proceeding by issuing a 
Notice. The response (both written and oral--if any) would then be 
considered by the Bureau's Assistant Director, who would provide to the 
Bureau's Director a recommended determination. The Director would make 
the final determination in any proceeding by adopting without revision, 
modifying, or rejecting the Assistant Director's recommended 
determination. The result would be either an order subjecting a 
respondent to the Bureau's supervisory authority under 12 U.S.C. 5514, 
or a notice stating that a respondent is not subject, as a result of 
the proceeding, to the Bureau's supervisory authority.
    In addition, under the Proposed Rule there would be two ways in 
which a respondent could consent to the Bureau's supervisory authority. 
First, the Proposed Rules provides for an expedited method by which a 
respondent may execute the consent agreement form attached to the 
Notice that is served on the respondent and file it with the Assistant 
Director in lieu of a response. Second, under the Proposed Rule, at any 
time during a proceeding, a respondent may voluntarily consent to the 
Bureau's supervisory authority under such terms as the parties may 
agree.
    The Proposed Rule also generally provides that if a determination 
by the Director results in an order bringing a respondent within the 
Bureau's supervisory authority under 12 U.S.C. 5514, the respondent 
would be permitted, after two years (and no more than annually 
thereafter), to petition the Director for the termination of such an 
order. However, under the Proposed Rule, where a respondent voluntarily 
consents to the Bureau's supervisory authority for a specified period 
of time, the respondent would not be permitted to petition for the 
termination of supervision during the period specified in the consent 
agreement. A petition for termination of an order provides a method for 
a respondent to inform the Bureau of actions taken and progress made to 
reduce the risks to consumers after the issuance of the order. Further, 
the Proposed Rule makes clear that nothing in the rule affects the 
relief the Bureau may seek in any civil action or administrative 
adjudication.
    Finally, the Proposed Rule provides that if the Bureau otherwise 
issues a notice of charges against a person under 12 CFR 1081.200,\9\ 
the Bureau may, in its sole discretion, also provide a notice and 
opportunity to respond as required by 12 U.S.C. 5514(a)(1)(C) in the 
notice of charges. In such a circumstance, the procedures set forth in 
proposed Sec.  1091.101--Sec.  1091.113 would not apply to the 
proceedings.
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    \9\ 12 CFR 1081.200 sets forth the procedures for the 
commencement of an adjudicative proceeding by the Bureau under 
section 1053 of the Dodd-Frank Act, 12 U.S.C. 5563, and also the 
contents of the notice of charges in such a proceeding.
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III. Legal Authority

A. Rulemaking Authority

    The Bureau is issuing this Proposed Rule pursuant to its authority 
under: (1) 12 U.S.C. 5512(b)(1), which grants the Bureau the authority 
to prescribe rules as may be necessary and appropriate to enable the 
Bureau to administer and carry out the purposes and objectives of the 
Federal consumer financial laws, and to prevent evasions of those laws; 
(2) 12 U.S.C. 5514(a)(1)(C), which authorizes the Bureau to supervise a 
nonbank covered person when it has reasonable cause to determine, by 
order, after notice to the person, and a reasonable opportunity to 
respond, that such person is engaging, or has engaged, in conduct that 
poses risks to consumers with regard to the offering or provision of 
consumer financial products or services; and (3) 12 U.S.C. 5514(b)(7), 
which authorizes the Bureau to prescribe rules to facilitate the 
supervision of nonbank covered persons under 12 U.S.C. 5514(a)(1).

B. Effective Date

    The Proposed Rule relates solely to agency procedure and practice 
and, thus, is not subject to the 30-day delayed effective date for 
substantive rules under section 553(d) of the APA.\10\ Although not 
required, the Proposal provides that the final rule will be effective 
30 days after publication in the Federal Register.
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    \10\ 5 U.S.C. 551 et seq.
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IV. Section-by-Section Description

Section .100 Scope and Purpose

    Proposed Sec.  1091.100 sets forth the scope and purpose of the 
Proposed Rule. It states that the part sets forth procedures to 
implement 12 U.S.C. 5514(a)(1)(C) and to facilitate the supervision of 
nonbank covered persons under 12 U.S.C. 5514(b)(7).

Section 1091.101 Definitions

    Proposed Sec.  1091.101 defines terms used in the Proposed Rule. If 
a term is defined in the Dodd-Frank Act, the Proposal generally 
incorporates that definition, with clarifications and modifications 
where necessary. The Bureau seeks comment on each of the definitions 
set forth in the Proposed Rule and any suggested clarification, 
modifications, or alternatives.
    Assistant Director. Under the Proposal, the term ``Assistant 
Director'' means the Bureau's Assistant Director for Nonbank 
Supervision or her or his

[[Page 31229]]

designee. This proposed definition provides that, in the event there is 
no Assistant Director, the Director of the Bureau may designate an 
alternative Bureau employee to perform the functions of the Assistant 
Director.
    Bureau. The Proposal provides that the term ``Bureau'' means the 
Bureau of Consumer Financial Protection.
    Consumer. The Proposal incorporates the definition of the term 
``consumer'' set forth in 12 U.S.C. 5481(4), which defines ``consumer'' 
as an individual or an agent, trustee, or representative acting on 
behalf of an individual.
    Consumer financial product or service. The Proposal incorporates 
the definition of the term ``consumer financial product or service'' 
set forth in 12 U.S.C. 5481(5). The Proposal provides that the term 
``consumer financial product or service'' means any financial product 
or service as defined in 12 U.S.C. 5481(15) that is described in one or 
more categories under: (a) 12 U.S.C. 5481(15) and is offered or 
provided for use by consumers primarily for personal, family, or 
household purposes; or (b) clause (i), (iii), (ix), or (x) of 12 U.S.C. 
5481(15)(A) \11\ and is delivered, offered, or provided in connection 
with a consumer financial product or service referred to in (a).
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    \11\ Under these clauses, the term ``financial product or 
service'' is generally defined to include, subject to certain 
exclusions: (1) Extending credit and servicing loans, 12 U.S.C. 
5481(15)(A)(i); (2) providing real estate settlement services or 
performing appraisals of real estate or personal property, 12 U.S.C. 
5481(15)(A)(iii); (3) collecting, analyzing, maintaining, or 
providing consumer report information or other account information 
used or expected to be used in connection with any decision 
regarding the offering or provision of a consumer financial product 
or service, 12 U.S.C. 5481(15)(A)(ix); and (4) collecting debt 
related to any consumer financial product or service, 12 U.S.C. 
5481(15)(A)(x).
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    Decisional employee. The Proposal states that the term ``decisional 
employee'' means any employee of the Bureau who has not engaged in: (a) 
assisting the Deputy in either determining whether to issue a Notice of 
Reasonable Cause, or presenting the Deputy's position in support of a 
Notice of Reasonable Cause, either in writing or in a supplemental oral 
response, to the Assistant Director; or (b) assisting the Assistant 
Director in the preparation of a recommended determination.
    Deputy. The Proposal states that the term ``Deputy'' means the 
Bureau's Deputy Assistant Director for Nonbank Supervision or her or 
his designee. If there is no Deputy, the term shall mean any 
alternative Bureau employee designated by the Assistant Director or 
Director to fulfill the duties of the Deputy under this part.
    Director. The Proposal states that the term ``Director'' means the 
Director of the Bureau or her or his designee. If there is no Director, 
the term shall mean a person authorized to perform the functions of the 
Director in accordance with the law, of her or his designee.
    Executive Secretary. The Proposal states that the term ``Executive 
Secretary'' means the Executive Secretary of the Bureau.
    Nonbank covered person. The provisions of 12 U.S.C. 5514 relate to 
``covered persons'' as defined in 12 U.S.C. 5481(6) that are not 
insured depository institutions or credit unions, or, in the case of 
such entities with assets of more than $10 billion, their affiliates, 
as set forth in 12 U.S.C. 5515 and 5516. The Proposal therefore 
excludes from the definition of ``nonbank covered persons'' persons 
described in 12 U.S.C. 5515(a) and 5516(a), and provides that the term 
``nonbank covered person'' means, except for persons described in 12 
U.S.C. 5515(a) and 5516(a): (a) any person that engages in offering or 
providing a consumer financial product or service; and (b) any 
affiliate of a person described in (a) if such affiliate acts as a 
service provider to such person.
    Notice of Reasonable Cause and Notice. The Proposal states that the 
terms ``Notice of Reasonable Cause'' and ``Notice'' mean a Notice 
issued under Sec.  1091.102.
    Person. The Proposal incorporates the definition of ``person'' set 
forth in 12 U.S.C. 5481(19). The Proposal therefore states that the 
term ``person'' means an individual, partnership, company, corporation, 
association (incorporated or unincorporated), trust, estate, 
cooperative organization, or other entity.
    Respondent. The Proposal states that the term ``respondent'' means 
a person who has been issued a Notice of Reasonable Cause by the Deputy 
under Sec.  1091.102.
    Response. The Proposal states that the term ``response'' means the 
response to a Notice of Reasonable Cause filed by a respondent with the 
Assistant Director under Sec.  1091.105.

Section 1091.102 Issuance of Notice of Reasonable Cause

    Proposed Sec.  1091.102 relates to the issuance of a Notice of 
Reasonable Cause, which initiates the proceedings that culminate in a 
determination by the Director under Sec.  1091.109 of the Proposed 
Rule, or a respondent's voluntary consent to supervision by the Bureau. 
Section 1091.102 provides that the Deputy is authorized to issue a 
Notice of Reasonable Cause and, consistent with 12 U.S.C. 
5514(a)(1)(C), that such Notice shall be based on complaints collected 
by the Bureau, or on information from other sources.
    The Bureau seeks comment on the issuance of a Notice of Reasonable 
Cause and any suggested modifications or alternatives.

Section 1091.103 Contents of Notice

    Proposed Sec.  1091.103 details the required content of a Notice. 
To ensure that a respondent has a reasonable opportunity to address the 
substance of a Notice, proposed Sec.  1091.103 provides that a Notice 
must set forth, among other things, the basis for the assertion that 
the Bureau may have reasonable cause to determine that a respondent is 
a nonbank covered person that is engaging, or has engaged, in conduct 
that poses risks to consumers with regard to the offering or provision 
of consumer financial products or services.
    Under proposed Sec.  1091.103, a Notice must also contain a 
statement informing a respondent how to file a timely response, and of 
the required contents of a response. A Notice must also inform a 
respondent that he or she may request a supplemental oral response, and 
that a respondent may, in lieu of filing a response, voluntarily 
consent to the Bureau's supervisory authority under 12 U.S.C. 5514 by 
filing an executed consent form attached to a Notice served on a 
respondent. Section 1091.103 further provides that a Notice shall 
inform a respondent that a failure to respond, as set forth in a 
Notice, may result in a determination by the Director without further 
opportunity to respond by the respondent. As set forth in proposed 
Sec.  1091.103, a Notice must also inform a respondent of the various 
timelines associated with the process.
    The Bureau seeks comment on the proposed contents of a Notice and 
any suggested modifications or alternatives.

Section 1091.104 Service of Notice

    Proposed Sec.  1091.104 provides that a Notice shall be served 
pursuant to methods including electronic transmission (where a 
respondent has consented), personal service, first class U.S. Mail, or 
commercial courier or express delivery service. Proposed Sec.  1091.104 
further requires that the Deputy submit a copy of a Notice and any 
attached documents, records or other items to the Assistant Director, 
who shall proceed as set forth in the Proposal.
    The Bureau seeks comment on the proposed requirements relating to 
the service of a Notice and any suggested modifications or 
alternatives.

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Section 1091.105 Response

    Proposed Sec.  1091.105 sets forth the requirements for responding 
to a Notice of Reasonable Cause. Specifically, Sec.  1091.105 provides 
that any response must be filed within 20 days of service of a Notice, 
and the failure to file a timely response shall result in a waiver of a 
respondent's right to respond, authorize the Assistant Director to 
issue a recommended determination, and the Director a final 
determination, on the basis of the Notice. Proposed Sec.  1091.105 
further provides that a respondent may respond to a Notice of 
Reasonable Cause either by contesting that it is a nonbank covered 
person that is engaging, or has engaged, in conduct that poses risks to 
consumers with regard to the offering or provision of consumer 
financial products or services, or by voluntarily consenting to the 
Bureau's supervisory authority under 12 U.S.C. 5514. Where a respondent 
wishes to contest the assertions in a Notice, proposed Sec.  1091.105 
mandates that the response: (1) Set forth the basis for a respondent's 
contention that the respondent should not be subject to supervision 
pursuant to 12 U.S.C. 5514(a)(1)(C); (2) include all records, 
documents, or other items upon which a respondent relies; and (3) 
include an affidavit signed by the respondent attesting that the 
information contained in the response is true, accurate, and without 
any omission that would cause the response to be materially misleading. 
The Proposed Rule further provides that documents, records or other 
items submitted by a respondent with a response shall be deemed 
confidential supervisory information under 12 CFR 1070.2(i)(1)(iv). In 
addition, under proposed Sec.  1091.105, if a respondent wishes also to 
present arguments in a supplemental oral response, the respondent must 
make such a request in the response. A failure to do so will constitute 
a waiver of a respondent's opportunity to present a supplemental oral 
response.
    Finally, proposed Sec.  1091.105 states that the failure to timely 
raise an issue in, or submit records, documents, or other items with, 
the response constitutes a waiver of a respondent's right to raise the 
issue, or submit the records, documents, or other items, at any future 
stage of consideration under this Proposed Rule and in any petition for 
judicial review. The Bureau intends for the waiver to remove any 
incentive for a respondent to wait until after filing a response, such 
as at a supplemental oral response or during judicial review, to raise 
an argument or present documents or other information for the first 
time. This will help ensure that the Bureau is aware of all relevant 
issues upon which a respondent wishes to rely at the earliest 
opportunity before reaching a determination under this Proposed Rule.
    The Bureau seeks comment on the proposed contents of and 
requirements relating to the response and any suggested modifications 
or alternatives.

Section 1091.106 Supplemental Oral Response

    Proposed Sec.  1091.106 provides that a respondent may request a 
supplemental oral response and sets forth the procedures for the 
conduct of a supplemental oral response. Under proposed Sec.  1091.106, 
supplemental oral responses will generally be held via telephone. In 
the Bureau's view, conducting such oral responses by telephone allows 
for more flexibility and is less burdensome than conducting an in 
person response.
    Proposed Sec.  1091.106 further provides that the Assistant 
Director may impose limitations on the conduct of a supplemental oral 
response and provides a non-exhaustive set of such limitations. The 
Bureau believes that providing the Assistant Director with authority to 
impose such limitations will help ensure that a supplemental oral 
response focuses on a respondent's and Deputy's arguments supporting 
their respective legal and factual assertions in the matter.
    Proposed Sec.  1091.106 further makes clear that no discovery will 
be permitted, and no witnesses will be called, in connection with a 
supplemental oral response. This limitation is appropriate given the 
informal nature of the procedures set forth in this Proposed Rule. The 
prohibition on discovery and the calling of witnesses in connection 
with a supplemental oral response also furthers the Bureau's objective 
of providing a timely and efficient determination process, saving both 
the Bureau and respondents the time and expenses typically expended on 
discovery.
    Proposed Sec.  1091.106 also prescribes the timing of a 
supplemental oral response. Specifically, under the proposed section, 
within 14 days of receiving a respondent's request for a supplemental 
oral response, the Assistant Director shall serve on a respondent a 
notice advising of the date, time, and relevant information relating to 
the conduct of a supplemental oral response, with a copy to the Deputy. 
To allow a respondent and the Deputy sufficient time to prepare for a 
supplemental oral response, and to make arrangements to participate, 
proposed Sec.  1091.106 provides that a supplemental oral response 
shall be scheduled not less than ten days after the date of such 
service. Finally, proposed Sec.  1091.106 states that if a respondent 
fails to participate in a scheduled supplemental oral response, such a 
failure constitutes a respondent's waiver of the opportunity to present 
a supplemental oral response.
    The Bureau seeks comment on the proposed procedures for a 
supplemental oral response and any suggested modifications or 
alternatives.

Section 1091.107 Manner of Filing Papers

    Proposed 1091.107 provides for filing of papers in a proceeding 
under the Proposed Rule by electronic transmission under such 
conditions as specified by the Assistant Director or Director. This 
section also authorizes other methods of filing and service if a 
respondent demonstrates electronic filing is not practicable and the 
Assistant Director or Director permits an alternative method of filing 
or service.
    The Bureau seeks comment on the proposed manner of filing papers 
and any suggested modifications or alternatives.

Section 1091.108 Recommended Determination

    Proposed Sec.  1091.108 provides that the Assistant Director shall 
make a recommended determination and submit to the Director either a 
proposed order that would bring a respondent within the Bureau's 
supervisory authority under 12 U.S.C. 5514, or a proposed notification 
containing the determination that a respondent is not subject to the 
Bureau's supervisory authority under 12 U.S.C. 5514 on the basis of the 
proceeding. Under proposed Sec.  1091.108, if a respondent has not 
voluntarily consented to the Bureau's supervisory authority, and has 
not requested the opportunity to present a supplemental oral response, 
a recommended determination shall be made not later than 45 days from 
the receipt of a timely-filed response, or not later than 45 days after 
the service of a Notice of Reasonable Cause when a respondent fails to 
file a timely response. If a respondent has requested the opportunity 
to present a supplemental oral response, a recommended determination 
shall be made not later than 90 days after the service of a Notice of 
Reasonable Cause. Proposed Sec.  1091.108 further sets forth the 
required content of the Assistant Director's recommended determination, 
and the documents and items that must accompany the recommended

[[Page 31231]]

determination sent to the Director by the Assistant Director.
    The Bureau seeks comment on the proposed content of, and procedures 
relating to, the recommended determination and any suggested 
modifications or alternatives.

Section 1091.109 Determination by the Director

    Proposed Sec.  1091.109 provides that, not later than 45 days after 
receipt of the Assistant Director's recommended determination, the 
Director shall make a final determination by adopting without revision, 
modifying, or rejecting the Assistant Director's recommended 
determination. Under the proposed section, the Director shall issue to 
a respondent, with copies to the Assistant Director and Deputy, an 
order bringing a respondent within the Bureau's supervisory authority 
under 12 U.S.C. 5514, or a notification containing the determination 
that a respondent is not subject to the Bureau's supervisory authority 
under 12 U.S.C. 5514 on the basis of the proceeding. Proposed Sec.  
1091.109 also provides that the Director may rely on the assistance and 
advice only of decisional employees in reaching a final determination.
    The Bureau seeks comment on the proposed content of, and procedures 
relating to, the determination and any suggested modifications or 
alternatives.

Section 1091.110 Petition for Termination of Order

    Proposed Sec.  1091.110 provides that a respondent may petition the 
Director for the termination of an order bringing a respondent within 
the Bureau's supervisory authority under 12 U.S.C. 5514, and sets forth 
the required contents of such a petition. Under proposed Sec.  
1091.110, a respondent may so petition no sooner than two years after 
the issuance of the order, and no more frequently than annually 
thereafter, except that in the case of a voluntary consent to 
supervision, a respondent may not petition for early termination of the 
supervisory authority period set forth in the consent agreement. A 
petition is a respondent's opportunity to inform the Bureau of the 
actions taken and the progress made to reduce risk to consumers after 
the issuance of an order. A petition should set forth the reasons 
supporting a respondent's petition for the termination of the order. 
Under proposed Sec.  1091.110, the Deputy would be permitted to file a 
response to a petition for termination setting forth the Deputy's 
recommendation to terminate or modify the order, or to deny the 
petition, and the reasons supporting such a recommendation within 30 
days of her or his receipt of a copy of a petition. Proposed Sec.  
1091.110 further provides that within 90 days of a respondent 
submitting a petition for termination, the Director shall either 
terminate or modify the order, or deny the petition. This section also 
specifies the manner in which a petition for termination must be filed.
    The Bureau seeks comment on the proposed content of, and procedures 
relating to, the petition for termination of an order and any suggested 
modifications or alternatives.

Section 1091.111 Construction of Time Limits

    Proposed Sec.  1091.111 provides common rules for computing time 
limits, taking into account the effect of weekends and holidays on time 
periods that are ten days or less. This section also sets forth when 
filing or service is effective. With regard to time limits for 
responsive papers, proposed Sec.  1091.111 incorporates a three-day 
extension for mail service, and a one-day extension for overnight 
delivery and electronic transmission. A one-day extension for service 
by electronic transmission reflects that electronic transmissions may 
result in delays in actual receipt by the person served.
    The Bureau seeks comment on the proposed construction of time 
limits and any suggested modifications or alternatives.

Section 1091.112 Change of Time Limits and Effect of Deadlines

    Proposed Sec.  1091.112 provides that requests for the extension of 
time may be granted in the limited circumstances in which the extension 
is necessary to prevent substantial prejudice. The Bureau intends for 
this section to further the Bureau's goal of ensuring the timely 
conclusion of matters. Accordingly, the section provides that requests 
for the extension of time are strongly disfavored and may only be 
granted when a party makes a strong showing that the denial of the 
request would substantially prejudice the party. Finally, proposed 
Sec.  1091.112 states that deadlines for action by the Assistant 
Director or Director established in this Proposed Rule confer no 
substantive rights on respondents.
    The Bureau seeks comment on the proposed procedures relating to the 
change of time limits and effect of deadlines and any suggested 
modifications or alternatives.

Section 1091.113 Voluntary Consent to Bureau's Authority

    Proposed Sec.  1091.113 provides that nothing in the Proposed Rule 
shall affect a person's ability to voluntarily consent, at any time, to 
the Bureau's supervisory authority under 12 U.S.C. 5514 as mutually 
agreed to by the parties. Voluntary consent under this section is an 
alternative to voluntarily consenting to the Bureau's supervision as 
provided under proposed Sec.  1091.103(b), which allows a respondent to 
execute and file a consent agreement form in lieu of filing a written 
response. Proposed Sec.  1091.113 also provides that a consent 
agreement that specifies the period during which the person will be 
subject to the Bureau's supervisory authority precludes such a person 
from petitioning for the termination of the order under proposed Sec.  
1091.110 during the agreed-to supervisory period. Additionally, 
proposed Sec.  1091.113 provides that a person entering into a consent 
agreement waives any right to judicial review of that agreement.
    The Bureau seeks comment on the proposed procedures relating to a 
respondent's voluntary consent to the Bureau's authority under 12 
U.S.C. 5514 and any suggested modifications or alternatives.

Section 1091.114 Notice and Response Included in Adjudication 
Proceeding Otherwise Brought by the Bureau

    Proposed Sec.  1091.114 provides that if the Bureau issues a notice 
of charges against a person under 12 CFR 1081.200,\12\ the Bureau may, 
in its sole discretion, also provide the notice and opportunity to 
respond required by 12 U.S.C. 5514(a)(1)(C) in the notice of charges. 
In such a circumstance, the procedures set forth in proposed Sec.  
1091.101-Sec.  1091.113 would not apply to the proceedings. The Bureau 
intends to use the administrative adjudication proceedings set forth in 
12 CFR 1081.200 to provide notice and a reasonable opportunity to 
respond as required by 12 U.S.C. 5514(a)(1)(C) only in certain cases 
where the Bureau has otherwise brought an administrative action against 
a respondent. The Bureau believes that the flexibility provided by this 
section would enhance efficiency and reduce burdens to respondents and 
the Bureau by allowing a determination under 12 U.S.C. 5514(a)(1)(C) 
and an

[[Page 31232]]

adjudicative proceeding to be handled in a single forum.
---------------------------------------------------------------------------

    \12\ 12 CFR 1081.200 sets forth the procedures for the 
commencement of an adjudicative proceeding by the Bureau under 12 
U.S.C. 5563, and also the contents of the notice of charges in such 
a proceeding.
---------------------------------------------------------------------------

    The Bureau seeks comment on the proposed procedures relating to 
providing notice and a reasonable opportunity to respond under 12 
U.S.C. 5514(a)(1)(C) in an adjudicative proceeding brought by the 
Bureau pursuant to 12 part CFR 1081.200 and any suggested modifications 
or alternatives.

Section 1091.115 No Limitation on Relief Sought in Civil Action or 
Administrative Adjudication

    This section clarifies that nothing in this part shall be construed 
to limit the relief the Bureau may seek in any civil action or 
administrative adjudication.
    The Bureau seeks comment on this section and any suggested 
modifications or alternatives.

V. Request for Comment

    The Proposed Rule relates solely to agency procedure and practice 
and, thus, is not subject to the notice-and-comment requirements of the 
APA.\13\ Although the Proposed Rule is exempt from these requirements, 
the Bureau invites comment on all aspects of this notice of proposed 
rulemaking and on the specific issues upon which comment is solicited 
elsewhere herein, including on any appropriate modifications or 
exceptions to the Proposed Rule.
---------------------------------------------------------------------------

    \13\ 5 U.S.C. 553(b)(A).
---------------------------------------------------------------------------

VI. Section 1022(b)(2) of the Dodd-Frank Act (12 U.S.C. 5512(b)(2))

    In developing the Proposed Rule, the Bureau has considered the 
potential benefits, costs, and impacts, and has consulted or offered to 
consult with the prudential regulators and the Federal Trade 
Commission, including with regard to consistency with any prudential 
market, or systemic objectives administered by such agencies.\14\
---------------------------------------------------------------------------

    \14\ The provisions of 12 U.S.C. 5512(b)(2)(A) address the 
consideration of the potential benefits and costs of regulation to 
consumers and covered persons, including the potential reduction of 
access by consumers to consumer financial products or services; the 
impact on depository institutions and credit unions with $10 billion 
or less in total assets as described in 12 U.S.C. 5516; and the 
impact on consumers in rural areas. The provisions of 12 U.S.C. 
5512(b)(2)(B) further address consultation between the Bureau and 
other federal agencies during the rulemaking process. The manner and 
extent to which these provisions apply to procedural rules and to 
benefits, costs and impacts that are compelled by statutory changes 
rather than discretionary Bureau action is unclear. Nevertheless, to 
inform this rulemaking more fully, the Bureau performed the 
described analyses and consultations.
---------------------------------------------------------------------------

    Under 12 U.S.C. 5514(a)(1)(C), the Bureau has the authority to 
supervise any nonbank covered person that it ``has reasonable cause to 
determine, by order, after notice * * * and a reasonable opportunity * 
* * to respond'' that such covered person ``is engaging, or has 
engaged, in conduct that poses risks to consumers with regard to the 
offering or provision of consumer financial products or services.'' The 
Proposed Rule is intended to provide an efficient, expeditious, and 
fair process to implement 12 U.S.C. 5514(a)(1)(C).\15\ Although a rule 
is not necessary to implement this statutory provision, the Proposed 
Rule, if adopted, establish a consistent procedure applicable to all 
affected entities, and provide transparency regarding the applicable 
process prior to commencement of a proceeding. Absent the Proposed 
Rule, the public would lack any guidance regarding the Bureau's process 
under 12 U.S.C. 5514(a)(1)(C). Nonbank covered persons will incur 
certain costs in considering and responding to a Notice from the Bureau 
under the rule, but these costs would generally exist in the absence of 
the rule.
---------------------------------------------------------------------------

    \15\ The Bureau notes that there is little publicly available 
data with which to effectively measure or quantify the benefits, 
costs, and impacts of the Proposed Rule. Where benefits or costs are 
not readily quantifiable or where data is not reasonably available, 
the Bureau will conduct qualitative analyses relying on information 
from available sources.
---------------------------------------------------------------------------

    For major provisions of the Proposal, the Bureau considered the 
benefits and costs of certain alternatives. For example, the Proposed 
Rule would provide respondents an opportunity to participate in a 
supplementary oral response, which would generally be conducted via 
telephone. The Bureau believes that the proposed approach, if adopted, 
would benefit covered persons by offering an additional method of 
responding to a Notice compared with the alternative of not permitting 
any oral response. At the same time, the Bureau believes that the 
proposed approach would be less costly than the alternative of 
requiring that all oral responses be conducted in person at a 
designated location. Also in connection with supplemental oral 
responses, the Proposed Rule would permit, but not require, a 
respondent to be represented by counsel. The Bureau considered 
requiring representation by counsel, but opted to provide respondents 
with the opportunity to receive the benefits of representation, while 
not mandating that respondents incur the costs of such representation.
    The Proposed Rule also permits respondents to consent to the 
Bureau's supervisory authority under standard terms in lieu of filing a 
response, or to enter into a negotiated agreement at any time 
consenting to the Bureau's supervisory authority. The Bureau believes 
that this approach, if adopted, would provide a streamlined resolution 
process that would reduce the costs to the Bureau and those respondents 
who wish to consent to the Bureau's supervisory authority, compared to 
the alternative of permitting only negotiated consent agreements.
    The Proposed Rule will have no unique impact on insured depository 
institutions or insured credit unions with $10 billion or less in 
assets as described in 12 U.S.C. 5516(a). Nor would the Proposed Rule 
have a unique impact on rural consumers.
    The Bureau requests comments on the potential benefits, costs, and 
impacts of the Proposed Rule.

VII. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996, requires each 
agency to consider the potential impact of its regulations on small 
entities, including small businesses, small governmental units, and 
small not-for-profit organizations. The RFA defines a ``small 
business'' as a business that meets the size standard developed by the 
Small Business Administration pursuant to the Small Business Act.\16\
---------------------------------------------------------------------------

    \16\ 5 U.S.C. 601(3). The Bureau may establish an alternative 
definition after consultation with the Small Business Administration 
and an opportunity for public comment.
---------------------------------------------------------------------------

    The RFA generally requires an agency to conduct an initial 
regulatory flexibility analysis (IRFA) and a final regulatory 
flexibility analysis (FRFA) of any rule subject to notice-and-comment 
rulemaking requirements, unless the agency certifies that the rule will 
not have a significant economic impact on a substantial number of small 
entities. The Bureau also is subject to certain additional procedures 
under the RFA involving the convening of a panel to consult with small 
business representatives prior to proposing a rule for which an IRFA is 
required.\17\
---------------------------------------------------------------------------

    \17\ 5 U.S.C. 609.
---------------------------------------------------------------------------

    As discussed above in section V, a notice of proposed rulemaking is 
not required for this rulemaking. The Proposed Rule therefore is not a 
``rule'' as defined by the RFA.\18\ Nevertheless, the Bureau opted to 
issue a notice of proposed rulemaking to receive public comment.
---------------------------------------------------------------------------

    \18\ 5 U.S.C. 601(2) (``the term `rule' means any rule for which 
the agency publishes a general notice of proposed rulemaking 
pursuant to section 553(b) of this title, or any other law * * *.'')
---------------------------------------------------------------------------

    An IRFA would not otherwise be required because the Proposed Rule, 
if

[[Page 31233]]

adopted, would not have a significant economic impact on any small 
entities. The Proposed Rule sets forth only procedures by which a 
nonbank covered person may become subject to the Bureau's current 
supervisory authority pursuant to 12 U.S.C. 5514(a)(1)(C). The Proposed 
Rule establishes a transparent and streamlined process by which the 
Bureau would exercise its existing legal authority and would not impose 
new substantive requirements. Accordingly, the undersigned certifies 
that this Proposed Rule will not have a significant impact on a 
substantial number of small entities.

VIII. Paperwork Reduction Act

    The Bureau has determined that the Rule does not impose any new 
recordkeeping, reporting or disclosure requirements on covered entities 
or members of the public that would be collections of information 
requiring OMB approval under 44 U.S.C. 3501, et seq.

List of Subjects in 12 CFR Part 1091

    Administrative practice and procedures, Consumer protection, 
Credit, Trade practices.

Authority and Issuance

    For the reasons set forth above, the Bureau proposes to add part 
1091 to Chapter X in Title 12 of the Code of Federal Regulations to 
read as set forth below.

Title 12--Banks and Banking

Chapter X--Bureau of Consumer Financial Protection

PART 1091--PROCEDURAL RULES TO ESTABLISH SUPERVISORY AUTHORITY OVER 
CERTAIN NONBANK COVERED PERSONS BASED ON RISK DETERMINATION

Sec.
1091.100 Scope and purpose.
1091.101 Definitions.
1091.102 Issuance of Notice of Reasonable Cause.
1091 103 Contents of Notice.
1091.104 Service of Notice.
1091 105 Response.
1091 106 Supplemental oral response.
1091.107 Manner of filing and serving papers.
1091.108 Recommended determination.
1091.109 Determination by the Director.
1091.110 Petition for termination of order.
1091.111 Construction of time limits.
1091.112 Change of time limits and effect of deadlines.
1091.113 Voluntary consent to Bureau's authority.
1091.114 Notice and response included in adjudication proceeding 
otherwise brought by the Bureau.
1091.115 No limitation on relief sought in civil action or 
administrative adjudication.

    Authority:  Sections 1022(b)(1), 1024(a)(1)(C), and 1024(b)(7) 
of Title X of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act of 2010, Pub. L. 111-203 (12 U.S.C. 5512(b)(1), 
5514(a)(1)(C), and 5514(b)(7)).


Sec.  1091.100   Scope and purpose.

    This part implements section 1024(a)(1)(C) of Title X of the Dodd-
Frank Wall Street Reform and Consumer Protection Act of 2010, Public 
Law 111-203 (12 U.S.C. 5514(a)(1)(C)) (Dodd-Frank Act), and establishes 
rules to facilitate the Bureau's supervision authority over certain 
nonbank covered persons pursuant to section 1024(b)(7) of the Dodd-
Frank Act (12 U.S.C. 5514(b)(7)).


Sec.  1091.101  Definitions.

    For the purposes of this part, the following definitions apply:
    Assistant Director means the Bureau's Assistant Director for 
Nonbank Supervision or her or his designee. If there is no Assistant 
Director, the Director may designate an alternative Bureau employee to 
fulfill the duties of the Assistant Director under this part.
    Bureau means the Bureau of Consumer Financial Protection.
    Consumer means an individual or an agent, trustee, or 
representative acting on behalf of an individual.
    Consumer financial product or service means any financial product 
or service, as defined in 12 U.S.C. 5481(15) that is described in one 
or more categories under:
    (1) 12 U.S.C. 5481(15) and is offered or provided for use by 
consumers primarily for personal, family, or household purposes; or
    (2) Clause (i), (iii), (ix), or (x) of 12 U.S.C. 5481(15)(A) and is 
delivered, offered, or provided in connection with a consumer financial 
product or service referred to in subparagraph (1) of this paragraph.
    Decisional employee means any employee of the Bureau who has not 
engaged in:
    (1) Assisting the Deputy in either determining whether to issue a 
Notice of Reasonable Cause, or presenting the Deputy's position in 
support of a Notice of Reasonable Cause, either in writing or in a 
supplemental oral response, to the Assistant Director; or
    (2) Assisting the Assistant Director in the preparation of a 
recommended determination.
    Deputy means the Bureau's Deputy Assistant Director for Nonbank 
Supervision or her or his designee. If there is no Deputy, the term 
shall mean any alternative Bureau employee designated by the Assistant 
Director or Director to fulfill the duties of the Deputy under this 
part.
    Director means the Director of the Bureau or her or his designee. 
If there is no Director, the term shall mean a person authorized to 
perform the functions of the Director in accordance with the law, or 
her or his designee.
    Executive Secretary means the Executive Secretary of the Bureau.
    Nonbank covered person means, except for persons described in 12 
U.S.C. 5515(a) and 5516(a):
    (1) Any person that engages in offering or providing a consumer 
financial product or service; and
    (2) Any affiliate of a person described in subparagraph (1) of this 
paragraph if such affiliate acts as a service provider to such person.
    Notice of Reasonable Cause and Notice mean a Notice issued under 
Sec.  1091.102.
    Person means an individual, partnership, company, corporation, 
association (incorporated or unincorporated), trust, estate, 
cooperative organization, or other entity.
    Respondent means a person who has been issued a Notice of 
Reasonable Cause under Sec.  1091.102.
    Response means the response to a Notice of Reasonable Cause filed 
by a respondent with the Assistant Director under Sec.  1091.105.


Sec.  1091.102  Issuance of Notice of Reasonable Cause.

    (a) The Deputy is authorized to issue a Notice of Reasonable Cause 
to a nonbank covered person stating that the Bureau may have reasonable 
cause to determine that the nonbank covered person is engaging, or has 
engaged, in conduct that poses risks to consumers with regard to the 
offering or provision of consumer financial products or services.
    (b) A Notice of Reasonable Cause shall be based on:
    (1) Complaints collected through the system under 12 U.S.C. 
5493(b)(3); or
    (2) Information from other sources.
    (c) Except as provided in Sec.  1091.114, a notice required under 
12 U.S.C. 5514(a)(1)(C) shall contain the information set forth in 
Sec.  1091.103, and be served on respondent as described in Sec.  
1091.104.


Sec.  1091.103  Contents of Notice.

    (a) A Notice of Reasonable Cause shall contain the following:
    (1) A description of the basis for the assertion that the Bureau 
may have reasonable cause to determine that a

[[Page 31234]]

respondent is a nonbank covered person that is engaging, or has 
engaged, in conduct that poses risks to consumers with regard to the 
offering or provision of consumer financial products or services; and
    (2) A statement informing a respondent that:
    (i) A respondent may file with the Assistant Director a written 
response to a Notice of Reasonable Cause no later than 20 days after a 
Notice is served on a respondent;
    (ii) The written response shall include the elements addressed in 
Sec.  1091.105(b):
    (iii) A respondent may request in its response to a Notice an 
opportunity to present a supplemental oral response to the Assistant 
Director as set forth in Sec.  1091.106;
    (iv) A failure to timely file a response to a Notice shall 
constitute a waiver of a respondent's right to respond, and may result 
in a default determination by the Director, based on the Notice, that a 
respondent is a nonbank covered person that is engaging, or has 
engaged, in conduct that poses risks to consumers with regard to the 
offering or provision of consumer financial products or services and 
the issuance of a decision and order subjecting a respondent to the 
Bureau's supervisory authority pursuant to 12 U.S.C. 5514(a)(1)(C);
    (v) The Assistant Director shall serve a respondent with a notice 
of the date and time of a supplemental oral response, if a respondent 
has requested the opportunity to present a supplemental oral response, 
within 14 days of the Assistant Director's receipt of a timely-filed 
response; and
    (vi) If a respondent has not requested the opportunity to present a 
supplemental oral response, the Assistant Director shall, not later 
than 45 days of receiving a timely-filed response, or not later than 45 
days after the service of a Notice of Reasonable Cause when a 
respondent fails to file a timely response, provide a recommended 
determination to the Director including either a proposed decision and 
order subjecting a respondent to the Bureau's supervisory authority 
pursuant to 12 U.S.C. 5514(a)(1)(C), or a proposed notification that 
the Bureau has determined not to subject a respondent to the Bureau's 
supervisory authority at that time, pursuant to Sec.  1091.108.
    (b) A Notice shall be accompanied by a form of consent agreement by 
which a respondent may voluntarily consent to the Bureau's authority to 
supervise a respondent under 12 U.S.C. 5514. A completed and executed 
form of consent agreement under this paragraph:
    (1) Shall not constitute an admission that a respondent is a 
nonbank covered person that has engaged, or is engaging, in conduct 
that poses risks to consumers with regard to the offering or provision 
of consumer financial products or services;
    (2) Shall result in an order by the Director that a respondent is 
subject to the Bureau's supervisory authority under 12 U.S.C. 5514 for 
a period of two years from the date of such order; and
    (3) Shall include a provision that a respondent entering into a 
consent agreement waives any right to judicial review of such consent 
agreement.
    (c) Nothing in this section shall be construed as requiring the 
Bureau to produce any documents or information to a respondent other 
items than as set forth in this section.


Sec.  1091.104  Service of Notice.

    (a) A Notice shall be served on a respondent as follows:
    (1) To individuals. A Notice shall be served on a respondent that 
is an individual by delivering a copy of the Notice to the individual 
or to an agent authorized by appointment or by law to receive such a 
Notice. Delivery, for purposes of this paragraph, means handing a copy 
of a Notice to the individual; or leaving a copy at the individual's 
office with a clerk or other person in charge thereof; or leaving a 
copy at the individual's dwelling house or usual place of abode with 
some person of suitable age and discretion then residing therein; or 
sending a copy of a Notice addressed to the individual through the U.S. 
Postal Service by Registered Mail, Certified Mail or Express Mail 
delivery, or by third-party commercial carrier, for overnight delivery 
and obtaining a confirmation of receipt.
    (2) To corporations or entities. Notice shall be served on a person 
other than an individual by delivering a copy of a Notice to an 
officer, managing or general agent, or any other agent authorized by 
appointment or law to receive such a Notice, by any method specified in 
paragraph (a)(1) of this section.
    (3) Upon persons registered with the Bureau. In addition to any 
other method of service specified in paragraph (a)(1) or (a)(2) of this 
section, Notice may be served on a person currently registered with the 
Bureau by sending a copy of a Notice addressed to the most recent 
business address shown on the person's registration form by U.S. Postal 
Service certified, registered or Express Mail and obtaining a 
confirmation of receipt or attempted delivery.
    (4) Upon persons in a foreign country. Notice may be served on a 
person in a foreign country by any method specified in paragraph (a)(1) 
or (2) of this section, or by any other method reasonably calculated to 
give notice, provided that the method of service used is not prohibited 
by the law of the foreign country.
    (5) Record of service. The Bureau shall maintain and file a record 
of service of a Notice on a respondent, identifying the party given 
Notice, the method of service, the date of service, the address to 
which service was made, and the person who made service. If service is 
made in person, the certificate of service shall state, if available, 
the name of the individual to whom a Notice was given. If service is 
made by U.S. Postal Service Registered Mail, Certified Mail or Express 
Mail, the Bureau shall maintain the confirmation of receipt or 
attempted delivery.
    (6) Waiver of service. In lieu of service as set forth in paragraph 
(a)(1) or (a)(2) of this section, the party may be provided a copy of a 
Notice by First Class Mail or other reliable means if a waiver of 
service is obtained from the party.
    (b) The Deputy shall promptly submit a copy of a Notice and a copy 
of the certificate of service to the Assistant. The Assistant Director 
shall proceed as set forth in this Proposal upon receipt of a Notice.


Sec.  1091.105  Response.

    (a) Timing. Within 20 days of service of a Notice, a respondent 
shall file any response with the Assistant Director according to the 
instructions set forth in a Notice.
    (b) Content of the response. (1) The response shall set forth the 
basis for a respondent's contention that the respondent is not a 
nonbank covered person that is engaging, or has engaged, in conduct 
that poses risks to consumers with regard to the offering or provision 
of consumer financial products or services.
    (2) The response shall include all documents, records or other 
evidence a respondent wishes to use to support the arguments or 
assertions set forth in the response. Documents, records or other items 
submitted by a respondent with a response shall be deemed confidential 
supervisory information under 12 CFR 1070.2(i)(1)(iv).
    (3) Any request to present a supplemental oral response must be 
included in the response. A respondent's failure to request to present 
a supplemental oral response shall constitute the respondent's waiver 
of the opportunity to present a supplemental oral response.

[[Page 31235]]

    (4) A response shall include an affidavit or declaration, made by 
the individual respondent if a natural person, or, if a corporate or 
other entity that is not a natural person, by an officer, managing or 
general member or partner authorized to represent the respondent, 
affirming that the response is true and accurate and does not contain 
any omissions that would cause the response to be materially 
misleading.
    (5) Notwithstanding any other provisions of this paragraph, a 
respondent may respond by voluntarily consenting to the Bureau's 
authority to supervise the respondent under 12 U.S.C. 5514 by 
completing and executing the consent agreement form provided to the 
respondent with a Notice of Reasonable Cause in accordance with Sec.  
1091.103(b).
    (c) Default. Failure of a respondent to file a response within the 
time period set forth in paragraph (a) of this section shall constitute 
a waiver of the respondent's right to respond, and shall, based on the 
Notice, authorize the Assistant Director, without further notice to the 
respondent, to issue a proposed decision and order as provided in Sec.  
1091.108(c)(1) and the Director to issue a decision and order as 
provided in Sec.  1091.109(a)(1).
    (d) Waiver. A respondent shall be deemed to have waived the right, 
at any future stage of the Assistant Director's or the Director's 
consideration of the matter and in any petition for judicial review, to 
rely on any argument, record, document, or other information that the 
respondent does not raise or include in its response.
    (e) No Discovery. There shall be no discovery in connection with a 
response.


Sec.  1091.106  Supplemental oral response.

    (a) A respondent may request in a response under Sec.  1091.105 the 
opportunity to present to the Assistant Director a supplemental oral 
response in support of a respondent's assertion that the respondent is 
not a nonbank covered person that is engaging, or has engaged, in 
conduct that poses risks to consumers with regard to the offering or 
provision of consumer financial products or services.
    (b) The conduct of a supplemental oral response shall be subject to 
the following procedures:
    (1) A supplemental oral response shall be conducted by telephone 
unless the Assistant Director directs that it be conducted in some 
other manner.
    (2) The Assistant Director may impose any limitations on the 
conduct of a supplemental oral response, including but not limited to 
establishing a time limit for the presentation of a supplemental oral 
response, and limiting the subjects to be addressed in a supplemental 
oral response.
    (3) There shall be no discovery permitted or witnesses called in 
connection with a supplemental oral response.
    (4) If a respondent is a corporate or other entity, and not a 
natural person, the respondent shall be represented in any supplemental 
oral response by:
    (i) An officer, managing or general member or partner authorized to 
represent the respondent; or
    (ii) An attorney in good standing of the bar of the highest court 
of any state.
    (5) If a respondent is a natural person, the respondent shall be 
represented in any supplemental oral response by:
    (i) Herself or himself; or
    (ii) An attorney in good standing of the bar of the highest court 
of any state.
    (6) The Assistant Director shall cause a recording of a 
supplemental oral response to be made. A respondent may purchase a copy 
or transcript of the recording at the respondent's own expense.
    (c) The Deputy may participate in any supplemental oral response 
conducted under this section.
    (d) The Assistant Director shall serve on a respondent, within 14 
days after the Assistant Director receives the respondent's timely-
filed response requesting a supplemental oral response, a notice 
setting forth the date, time and general information relating to the 
conduct of a supplemental oral response. The date of a supplemental 
oral response shall be scheduled not less than ten days after the date 
the respondent is served with the notice of supplemental oral response.
    (e) The notice of supplemental oral response shall be served on a 
respondent pursuant to Sec.  1091.107.
    (f) The Assistant Director shall send a copy of the notice of 
supplemental oral response to the Deputy.
    (g) A respondent's failure to participate in a supplemental oral 
response scheduled by the Assistant Director shall constitute the 
respondent's waiver of the opportunity to present a supplemental oral 
response.


Sec.  1091.107  Manner of filing and serving papers.

    Unless otherwise specified by the Assistant Director or Director, a 
respondent shall file the response and any other paper with the 
Executive Secretary at the mailing or electronic address provided by 
the Bureau, and the Assistant Director and Director shall serve any 
paper, other than a Notice as set forth in Sec.  1091.104, on a 
respondent, by:
    (a) Electronic transmission upon any condition specified by the 
Assistant Director or Director; or
    (b) Any of the following methods if a respondent demonstrates 
electronic filing is not practicable and the Assistant Director or 
Director permits:
    (1) Personal delivery;
    (2) Delivery through a reliable commercial courier service or 
overnight delivery service; or
    (3) Mailing the papers by first class, registered, certified, or 
Express mail.


Sec.  1091.108  Recommended determination.

    (a) If a respondent did not voluntarily consent to the Bureau's 
supervision authority, and did not request the opportunity to present a 
supplemental oral response, not later than 45 days after receipt of a 
timely-filed response, or not later than 45 days after the service of a 
Notice of Reasonable Cause when a respondent fails to file a timely 
response, the Assistant Director shall make a recommended determination 
whether there is reasonable cause for the Bureau to determine that the 
respondent is a nonbank covered person that is engaging, or has 
engaged, in conduct that poses risks to consumers with regard to the 
offering or provision of consumer financial products or services which 
should result in an order subjecting the respondent to the Bureau's 
authority under 12 U.S.C. 5514(a)(1)(C).
    (b) If a respondent did request the opportunity to present a 
supplemental oral response, not later than 90 days after service of a 
Notice of Reasonable Cause, the Assistant Director shall make a 
recommended determination whether there is reasonable cause for the 
Bureau to determine that the respondent is a nonbank covered person 
that is engaging, or has engaged, in conduct that poses risks to 
consumers with regard to the offering or provision of consumer 
financial products or services which should result in an order 
subjecting the respondent to the Bureau's authority under 12 U.S.C. 
5514(a)(1)(C).
    (c) Upon making the recommended determination described in 
paragraphs (a) and (b) of this section, the Assistant Director shall 
submit to the Director either:
    (1) A proposed decision and order that would subject a respondent 
to the Bureau's supervisory authority pursuant to 12 U.S.C. 
5514(a)(1)(C) if adopted by the Director; or
    (2) A proposed notification that a respondent should not be 
subjected to the Bureau's supervisory authority

[[Page 31236]]

under 12 U.S.C. 5514(a)(1)(C) based on the proceedings. Such a 
notification shall have no precedential effect and shall not prevent 
the issuance of another Notice of Reasonable Cause pursuant to either 
Sec.  1091.102, or the procedures set forth in Sec.  1091.114, at any 
time, or from issuance of a decision and order subjecting a respondent 
to the Bureau's authority pursuant to either of those sections.
    (d) Any proposed decision and order issued by the Assistant 
Director pursuant to paragraph (c)(1) of this section shall set forth:
    (1) A statement that the Assistant Director has preliminarily 
determined based on reasonable cause that a respondent is a nonbank 
covered person that is engaging, or has engaged, in conduct that poses 
risks to consumers with regard to the offering or provision of consumer 
financial products or services;
    (2) The basis for the Assistant Director's determination; and
    (3) A proposed order directing that, pursuant to this 
determination, as of a specified date a respondent shall be subject to 
the Bureau's supervisory authority under 12 U.S.C. 5514.
    (e)(1) The Assistant Director shall include with the recommended 
determination submitted to the Director copies of the following:
    (i) The Notice of Reasonable Cause;
    (ii) The record of service of a Notice of Reasonable Cause;
    (iii) A respondent's response and any documents, records or other 
items filed with the written response;
    (iv) Any document, record, or other item considered by the 
Assistant Director to be material in making a recommended 
determination; and
    (v) A recording of a supplemental oral response, if a supplemental 
oral response was conducted, and/or a transcript if a transcript was 
prepared at a respondent's request or if requested by the Director.
    (2) The requirement that the Assistant Director provide to the 
Director the items described in subparagraph (1) of this paragraph 
shall confer no substantive rights on a respondent and any omission of 
an item may be cured by the Assistant Director to the extent 
applicable.


Sec.  1091.109  Determination by the Director.

    (a) Not later than 45 days after receipt of the Assistant 
Director's recommended determination, the Director shall, after 
considering the recommended determination and all documents, records, 
and other items submitted therewith by the Assistant Director, make a 
determination either adopting without revision, modifying, or rejecting 
the Assistant Director's recommended determination, and shall issue to 
respondent, with copies to the Assistant Director and the Deputy:
    (1) A decision and order subjecting the respondent to the Bureau's 
supervisory authority pursuant to 12 U.S.C. 5514(a)(1)(C); or
    (2) A notification that the Director has determined that the 
respondent is not subject to the Bureau's supervisory authority under 
12 U.S.C. 5514(a)(1)(C) as a result of the proceedings. Such 
notification shall have no precedential effect and shall not prevent 
the issuance of another Notice of Reasonable Cause pursuant to either 
Sec.  1091.102, or the procedures set forth in Sec.  1091.114, at any 
time, or the issuance of an order subjecting the respondent to the 
Bureau's authority pursuant to either of those sections.
    (b) Any decision and order issued by the Director pursuant to 
paragraph (a)(1) of this section shall set forth:
    (1) That the Director adopts the Assistant Director's proposed 
decision and order without revision as the Director's decision and 
order; or that the Director rejects or modifies the Assistant 
Director's proposed determination for reasons set forth by the 
Director;
    (2) A statement that the Director has determined that the Bureau 
has reasonable cause to determine that a respondent is a nonbank 
covered person that is engaging, or has engaged, in conduct that poses 
risks to consumers with regard to the offering or provision of consumer 
financial products or services;
    (3) The basis for the Director's determination, which may be an 
adoption of the basis set forth in Assistant Director's proposed 
decision; and
    (4) An order directing that, pursuant to this determination, as of 
a specified date a respondent shall be subject to the Bureau's 
supervisory authority under 12 U.S.C. 5514 and informing a respondent 
that a respondent may petition for termination of the Bureau's 
supervisory authority after two years from the date of the order, and 
no more than annually thereafter.
    (c) Only decisional employees may advise and assist the Director in 
the consideration and disposition of a proceeding under this part.
    (d) A decision and order issued pursuant to paragraph (a)(1) of 
this section shall constitute final agency action under 5 U.S.C. 704.
    (e) Any item required to be served on a respondent under this 
section shall be served pursuant to Sec.  1091.107.


Sec.  1091.110  Petition for termination of order.

    (a) Any person subject to an order issued pursuant to Sec.  
1091.109(a)(1) may, no sooner than two years after issuance of such an 
order and no more frequently than annually thereafter, petition the 
Director for termination of the order.
    (b) A petition for termination submitted pursuant to paragraph (a) 
of this section shall set forth the reasons supporting termination of 
the order, including any actions taken by a respondent since issuance 
of the order to address the conduct that led to issuance of the order, 
and may include any supporting information or evidence that the 
petitioner believes is relevant to the Director's determination of the 
matter.
    (c) A petition for termination shall be filed by the petitioner 
with the Executive Secretary at the mailing or electronic address 
provided by the Bureau.
    (d) The Director shall, promptly upon receipt of a petition for 
termination, send a copy of same to the Deputy.
    (1) The Deputy may, within 30 days of her or his receipt of a copy 
of a petition for termination, file with the Director a response to the 
petition stating whether the Deputy recommends that the order should be 
terminated, modified, or that the petition for termination should be 
denied and the basis for such recommendation.
    (2) The Deputy shall serve a copy of the response to a petition for 
termination on the petitioner at the time of filing it with the 
Director.
    (e) Not later than 90 days after submission of a petition under 
paragraph (a) of this section, the Director shall issue a written 
decision either terminating or modifying the order, or denying the 
petition. If the Director modifies the order or denies the petition, 
the Director shall explain the basis for his or her decision with 
respect to the petition and send the written decision to the petitioner 
and the Deputy.
    (1) The Director shall serve the written decision on a petition for 
termination of order on a respondent pursuant to Sec.  1091.107.
    (2) The Director shall send a copy of the written decision on a 
petition for termination of order to the Assistant Director and Deputy 
promptly upon issuing the written decision.
    (f) Any item required to be served on a petitioner in this section 
shall be served pursuant to Sec.  1091.107.
    (g) The decision of the Director made pursuant to paragraph (e) of 
this section shall constitute final agency action under 5 U.S.C. 704.

[[Page 31237]]

Sec.  1091.111  Construction of time limits.

    (a) General rule. In computing any period of time prescribed by 
this part, or by order of the Assistant Director or Director, the date 
of the act or event that commences the designated period of time is not 
included. The last day so computed is included unless it is a Saturday, 
Sunday, or Federal holiday as set forth in 5 U.S.C. 6103(a). When the 
last day is a Saturday, Sunday, or Federal holiday, the period runs 
until the end of the next day that is not a Saturday, Sunday, or 
Federal holiday. Intermediate Saturdays, Sundays, and Federal holidays 
are included in the computation of time, except when the time period 
within which an act is to be performed is ten days or less, not 
including any additional time allowed for in paragraph (c) of this 
section.
    (b) Filing or service of papers. Filing and service are deemed to 
be effective:
    (1) In the case of personal service or same day commercial courier 
delivery, upon actual receipt by the person served;
    (2) In the case of overnight commercial delivery service, U.S. 
Express Mail delivery, or first class, registered, or certified mail, 
upon deposit in or delivery to an appropriate point of collection; or
    (3) In the case of electronic transmission, including email, upon 
transmission.
    (c) Calculation of time for service and filing of responsive 
papers. Whenever a time limit is measured by a prescribed period from 
the service of any notice or paper, the applicable time limits are 
calculated as follows:
    (1) If service is made by first class, registered, or certified 
mail, add three calendar days to the prescribed period;
    (2) If service is made by express mail or overnight delivery 
service, add one calendar day to the prescribed period; or
    (3) If service is made by electronic transmission, add one calendar 
day to the prescribed period.


Sec.  1091.112  Change of time limits and effect of deadlines.

    (a) Except as otherwise provided by law, the Assistant Director 
until the issuance of a recommended determination, or the Director at 
any time thereafter, may extend the time limits prescribed by this part 
or by any notice or order issued pursuant to this part. Any request for 
an extension of a time limit by a respondent must be for good cause 
shown, in writing, and filed with the Assistant Director or Director, 
as appropriate. The mere filing of a written request for an extension 
does not alleviate a respondent of the obligation to meet an applicable 
time limit absent written confirmation that an extension has been 
granted.
    (b) In considering all requests for extensions of time filed 
pursuant to paragraph (a) of this section, the Assistant Director or 
Director, as appropriate, shall adhere to a policy of strongly 
disfavoring such requests, except in circumstances where the requesting 
party makes a strong showing that the denial of the request would 
substantially prejudice its case.
    (c) Deadlines for action by the Deputy, Assistant Director or the 
Director established in this part confer no substantive rights on 
respondents.


Sec.  1091.113  Voluntary consent to Bureau's authority.

    (a) Notwithstanding any other provision, pursuant to a consent 
agreement agreed to by the Bureau, a person may voluntarily consent to 
the Bureau's supervisory authority under 12 U.S.C. 5514, and such 
voluntary consent agreement shall not be subject to any right to 
judicial review.
    (b) The consent agreement of any person, pursuant to paragraph (a) 
of this section, that specifies the duration of time that such person 
will be subject to the Bureau's authority under 12 U.S.C. 5514 shall 
not be eligible for a petition for termination of order pursuant to 
Sec.  1091.110, and a respondent entering into a consent agreement 
waives any right to judicial review of such consent agreement.


Sec.  1091.114  Notice and response included in adjudication proceeding 
otherwise brought by the Bureau.

    (a) Notwithstanding sections Sec.  1091.102 through Sec.  1091.104, 
the Bureau may, in its sole discretion, provide the notice and 
opportunity to respond required by 12 U.S.C. 5514(a)(1)(C) in a notice 
of charges otherwise brought by the Bureau pursuant to 12 CFR 1081.200 
and the adjudication proceedings pursuant to that part.
    (b) If the Bureau chooses to proceed in the manner described in 
paragraph (a) of this section, it shall so indicate in the notice of 
charges, and any order of the Director resulting from the notice of 
charges shall constitute the order referred to in 12 U.S.C. 
5514(a)(1)(C).
    (c) If the Bureau proceeds pursuant to paragraph (a) of this 
section, the provisions of Sec.  1091.100 through Sec.  1091.113 will 
be inapplicable to such proceeding. If the Bureau proceeds pursuant to 
this part, then the provisions of 12 CFR part 1081 shall be 
inapplicable to such proceedings.


Sec.  1091.115  No limitation on relief sought in civil action or 
administrative adjudication.

    Nothing in this part shall be construed to limit the relief the 
Bureau may seek in any civil action or administrative adjudication, 
including but not limited to, seeking an order to have a person deemed 
subject to the Bureau's supervisory authority under 12 U.S.C. 5514 for 
the reasons set forth in 12 U.S.C. 5514(a)(1)(C) or otherwise.

    Dated: May 20, 2012.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2012-12718 Filed 5-24-12; 8:45 am]
BILLING CODE 4810-AM-P