[Federal Register Volume 89, Number 79 (Tuesday, April 23, 2024)]
[Rules and Regulations]
[Pages 30259-30268]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-08430]



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 Rules and Regulations
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 This section of the FEDERAL REGISTER contains regulatory documents 
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  Federal Register / Vol. 89, No. 79 / Tuesday, April 23, 2024 / Rules 
and Regulations  

[[Page 30259]]



CONSUMER FINANCIAL PROTECTION BUREAU

12 CFR Part 1091

[Docket No. CFPB-2024-0006]


Procedures for Supervisory Designation Proceedings

AGENCY: Consumer Financial Protection Bureau.

ACTION: Final rule; request for public comment.

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SUMMARY: The Consumer Financial Protection Bureau (CFPB or Bureau) is 
updating the CFPB's procedures for designating nonbank covered persons 
for supervision, to conform to a recent organizational change and to 
further ensure that proceedings are fair, effective, and efficient for 
all parties.

DATES: This rule is effective on April 23, 2024. Comments must be 
received on or before May 23, 2024.

ADDRESSES: You may submit comments, identified by Docket No. CFPB-2024-
0006, by any of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments. A brief summary of 
this document will be available at https://www.regulations.gov/docket/CFPB-2024-0006.
     Email: [email protected]. 
Include Docket No. CFPB-2024-0006 in the subject line of the message.
     Mail/Hand Delivery/Courier: Comment Intake--Procedures for 
Supervisory Designation Proceedings, c/o Legal Division Docket Manager, 
Consumer Financial Protection Bureau, 1700 G Street NW, Washington, DC 
20552.
    Instructions: The CFPB encourages the early submission of comments. 
All submissions should include the agency name and docket number for 
this rule. Commenters are encouraged to submit comments electronically. 
In general, all comments received will be posted without change to 
https://www.regulations.gov.
    All submissions, including attachments and other supporting 
materials, will become part of the public record and subject to public 
disclosure. Proprietary information or sensitive personal information, 
such as account numbers or Social Security numbers, or names of other 
individuals, should not be included. Submissions will not be edited to 
remove any identifying or contact information.

FOR FURTHER INFORMATION CONTACT: George Karithanom, Regulatory 
Implementation & Guidance Program Analyst, Office of Regulations, at 
202-435-7700 or https://reginquiries.consumerfinance.gov/. If you 
require this document in an alternative electronic format, please 
contact [email protected].

SUPPLEMENTARY INFORMATION:

Background

    The Consumer Financial Protection Act of 2010 (CFPA) establishes 
the CFPB as an independent bureau in the Federal Reserve System and 
assigns the CFPB a range of rulemaking, enforcement, supervision, and 
other authorities.\1\
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    \1\ Public Law 111-203, title X, 124 Stat. 1376, 1955-2113 
(2010).
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    One of the supervisory authorities under the CFPA is section 
1024(a)(1)(C). It authorizes the CFPB to supervise a nonbank covered 
person that the CFPB ``has reasonable cause to determine, by order, 
after notice to the covered person and a reasonable opportunity for 
such covered person to respond . . . 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\ In 2013, 
the CFPB issued procedures to govern these supervisory designation 
proceedings (2013 rule).\3\ However, the authority was largely unused 
for a number of years.\4\ In 2022, the CFPB announced that it would 
begin to make active use of the supervisory designation authority, and 
it made a limited amendment to the procedures to establish a specific 
process for public release of final decisions and orders (2022 
rule).\5\
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    \2\ 12 U.S.C. 5514(a)(1)(C). The Bureau must base such 
reasonable-cause determinations on complaints collected by the 
Bureau under 12 U.S.C. 5493(b)(3), or on information collected from 
other sources. Id.
    \3\ 78 FR 40352 (July 3, 2013); see also 85 FR 75194 (Nov. 24, 
2020) (updating certain cross-references).
    \4\ The CFPB did, from time to time, issue enforcement consent 
orders that included the entity's consent to supervision.
    \5\ 87 FR 70703 (Nov. 21, 2022); see also 87 FR 25397 (Apr. 29, 
2022).
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    The CFPB has initiated a number of supervisory designation 
proceedings since the 2022 rule. On February 23, 2024, the CFPB 
publicly released the first decision and order in a contested 
proceeding, which discusses the CFPB's view of the section 
1024(a)(1)(C) authority.\6\ Other institutions have consented to CFPB 
supervision, in some cases without a proceeding and in other cases 
during a proceeding. The CFPB looks forward to a productive supervisory 
relationship with all the institutions that are now within its 
supervisory authority.
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    \6\ World Acceptance Corp., File No. 2023-CFPB-SUP-0001 (Nov. 
30, 2023), available at https://www.consumerfinance.gov/compliance/supervision-examinations/institutions/.
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    In late February 2024, the CFPB began a transition to a new 
organizational structure for its supervision and enforcement work. The 
functions of the Associate Director of the Division of Supervision, 
Enforcement, and Fair Lending are being transferred to the Supervision 
Director as head of a Division of Supervision and the Enforcement 
Director as head of a Division of Enforcement. This rule is in part 
intended to implement that change in the context of supervisory 
designation proceedings.

Legal Authority

    Section 1024(b)(7) of the CFPA authorizes the CFPB to ``prescribe 
rules to facilitate supervision'' of the nonbank covered persons 
described in section 1024(a), as well as to facilitate ``assessment and 
detection of risks to consumers.'' \7\ Additionally, section 1022(b)(1) 
provides, in relevant part, that the CFPB Director ``may prescribe 
rules . . . as may be necessary or appropriate to enable the Bureau to 
administer and carry out the purposes and objectives of the Federal 
consumer financial laws, and to prevent evasions thereof.'' \8\ The 
CFPB issues this rule based on its authority under section 1024(b)(7) 
and section 1022(b)(1).
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    \7\ 12 U.S.C. 5514(b)(7).
    \8\ 12 U.S.C. 5512(b)(1).

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[[Page 30260]]

Discussion

Subpart A--General

    1091.101 Definitions.
    The rule makes technical changes to definitions.

Subpart B--Determination and Voluntary Consent Procedures

    1091.201 Voluntary consent to supervisory authority.\9\
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    \9\ Formerly Sec. Sec.  1091.103(b) and 1091.110.
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    The initiating official and respondents have resolved the large 
majority of proceedings by consent. Under the 2013 rule, there were two 
provisions that established separate procedural avenues for entering 
into a consent agreements. One provision (former Sec.  1091.103(b)) 
required the initiating official to enclose a proposed consent 
agreement with the Notice of Reasonable Cause (Notice), and the other 
provision (former Sec.  1091.110) authorized consent agreements to be 
agreed at any time. There were small differences between the two 
provisions.
    Under this rule, a proposed consent agreement will continue to be 
enclosed with the Notice, and consent agreements can also be agreed at 
any other time. However, the Bureau is combining the two previous 
provisions into one provision (Sec.  1091.201) and harmonizing their 
differences, in order to reduce complexity and risk of confusion. One 
of the two previous provisions stated that the consent agreement does 
not constitute an admission by the respondent, while the other did not 
address that point expressly; new Sec.  1091.201 clarifies that a 
consent agreement does not constitute an admission. One of the two 
previous provisions contemplated a two-year period for supervision 
while the other allowed duration to be addressed on a case-by-case 
basis; new Sec.  1091.201 takes the latter course. All consent 
agreements under both previous provisions were for two years, and the 
CFPB anticipates that will continue to be the typical duration. But 
addressing duration on a case-by-case basis rather than by rule will 
provide flexibility if a longer or shorter period were hypothetically 
warranted.
    1091.202 Notice of Reasonable Cause.\10\
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    \10\ Formerly Sec. Sec.  1091.102 to 1091.104.
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    The Supervision Director as initiating official commences a 
contested proceeding by serving the respondent with a Notice of 
Reasonable Cause (Notice). The Notice is the ordinary means by which 
the CFPB provides notice under section 1024(a)(1)(C) of the CFPA, 
although there may sometimes be proceedings in which additional notice 
is provided at later points in the proceeding, for example through 
supplemental briefing.
    Paragraph (c) simplifies certain general background information 
about the section 1024(a)(1)(C) process that was included in the Notice 
under the 2013 rule.
    Paragraph (d) includes an update to the method for serving the 
Notice. The 2013 rule included methods of service that were patterned 
on how a notice of charges is served under the Rules of Practice for 
Adjudication Proceedings.\11\ In order to provide an additional measure 
of flexibility, this rule also permits other methods that are 
``reasonably calculated to give notice.''
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    \11\ See 12 CFR 1081.113(d)(1).
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    Paragraph (e) codifies that the initiating official may withdraw a 
Notice. The 2013 rule did not expressly address this subject.
    1091.203 Response.\12\
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    \12\ Formerly Sec.  1091.105.
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    This provision governs the response, which is the respondent's 
opportunity to respond to the Notice. The rule makes minor technical 
changes to the provision.
    1091.204 Reply by initiating official.
    This new provision provides the initiating official with the option 
of filing a written reply to the response. Under the 2013 rule, there 
was no such reply. Because of the initiating official's role in 
formulating the Notice, the initiating official will likely have 
observations that are useful to the Director in considering the 
response.
    1091.205 Supplemental oral response.\13\
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    \13\ Formerly Sec.  1091.106.
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    This provision governs a supplemental oral response before the 
Director, which a respondent can request in its response under Sec.  
1091.203. Under the 2013 rule, a respondent presented the supplemental 
oral response to the Associate Director for Supervision, Enforcement, 
and Fair Lending. However, as discussed in connection with Sec.  
1091.206 below, in light of the elimination of the Associate Director 
position, the rule merges the Associate Director's and Director's 
adjudicative roles.\14\ The rule also gives the Director more 
flexibility regarding whether a supplemental oral response is in person 
at the Bureau's headquarters, by telephone, or by video conference, 
consistent with ongoing changes to working practices and possible 
future public health needs.\15\
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    \14\ Because the existing definition of the term Director under 
Sec.  1091.101 includes a designee of the Director, there might be 
circumstances where the Director delegates the responsibility for 
being present at a supplemental oral response to a designee.
    \15\ See also Sec.  1091.203(b)(3).
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    1091.206 Determination by the Director.\16\
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    \16\ Formerly Sec.  1091.109.
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    After the Notice, response, reply (if any), and supplemental oral 
response (if any), the rule provides for the Director to make a final 
determination in a proceeding.
    Under the 2013 rule, the Associate Director of the Division of 
Supervision, Enforcement, and Fair Lending submitted a recommended 
determination to the Director, and then the Director issued a final 
determination. But as noted above, the role of Associate Director will 
no longer exist under the new organizational structure. The Associate 
Director's supervision-related functions are being transferred to the 
Supervision Director, who serves as initiating official in the context 
of supervisory designation proceedings. Accordingly, this rule merges 
the adjudicative roles of the Associate Director and Director in these 
proceedings. This change, in addition to aligning with the new 
organizational structure, will make proceedings more efficient. The 
former two-stage process resulted in a more complex and resource-
intensive process and a longer timeline for resolving proceedings. 
Merging the adjudicative roles of Associate Director and Director does 
not diminish any of the respondent's opportunities to express its views 
to the Bureau, but merely streamlines the Bureau's internal decision-
making process after those views are expressed.
    Paragraph (b) codifies the fact that the Director may sometimes 
request supplemental briefing before making a final determination, 
which is consistent with the 2013 rule but was not expressly discussed 
in the 2013 rule.
    Paragraph (d) requires a separation of functions between Bureau 
employees who advise the Director in the Director's adjudicative role 
on the one hand and Bureau employees who advise the initiating official 
on the other. This separation is not required by the Administrative 
Procedure Act, but the Bureau maintains it as a matter of policy. The 
2013 rule included a similar separation of functions at the Director 
level, although at the Associate Director level it did not mandate a 
separation between the Associate Director's advisers and initiating 
official's advisers.

[[Page 30261]]

Subpart C--Post-Determination Procedures

    1091.301 Petition for termination of order.\17\
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    \17\ Formerly Sec.  1091.113.
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    This provision governs petitions by respondents to terminate an 
existing order. The rule makes technical changes to conform to changes 
elsewhere in the procedures. It also codifies the fact that the 
Director might sometimes request supplemental briefing, similar to 
Sec.  1091.206(b).

Subpart D--Miscellaneous Provisions

    1091.401 Methods of filing and serving documents.\18\
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    \18\ Formerly Sec.  1091.107.
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    The rule clarifies the method of filing and serving documents, 
which will generally be by email. The service of the Notice at the 
start of a proceeding, when a respondent's email address may not be 
known, is governed by a specific rule under Sec.  1091.202(d).
    1091.402 Time limits.\19\
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    \19\ Formerly Sec.  1091.114.
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    The rule simplifies the former method for calculating time limits 
under the 2013 rule, which varied by delivery channel to allow 
additional time for mail or delivery services to arrive. This 
complexity has generated confusion for some respondents and is no 
longer warranted because email is generally instantaneous.
    1091.403 Word limits.
    The rule introduces a word limit for the Notice, response, and 
certain other key filings, based on Federal Rules of Appellate 
Procedure 32(a)(7)(B) and 32(f). Relatedly, it introduces a 
certification of word count based on Federal Rule of Appellate 
Procedure 32(g). In past proceedings, some parties' outside counsel 
submitted very lengthy filings in the absence of any page or word 
limit. Like any word limit, the CFPB intends the new limit to help 
focus arguments and mitigate expense for all participants.
    1091.404 Changes to methods of filing and service, time limits, and 
word limits.\20\
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    \20\ Formerly Sec.  1091.115(a) and (b).
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    This provision governs changes to the methods set out in Sec. Sec.  
1091.401 to 1091.403. In the case of changes to time limits or word 
limits, the provision notes that they are disfavored. Under the 
provision, a change can be approved in one of three ways: by consent of 
the initiating official and the respondent, with notice to the 
Director; by written request to the Director; or upon the Director's 
own motion. The possibility of changes by consent is intended to avoid 
the need for the Director to become involved in minor issues that are 
not controversial between the initiating official and the respondent. 
However, the provision states that the Director can direct otherwise. 
There may also be circumstances where the initiating official believes 
that a potential change warrants a decision by the Director through a 
written request and so withholds consent, even if the initiating 
official does not oppose the change.
    1091.405 Confidentiality of proceedings.\21\
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    \21\ Formerly Sec.  1091.115(c).
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    The 2022 rule created a process for the CFPB to publicly release 
final decisions and orders. This rule maintains the 2022 rule's 
approach, although it clarifies that consent agreements entered into by 
the initiating official and respondent under Sec.  1091.201 are not 
subject to the public release process. These agreements are generally 
short formal documents without reasoning that is significant or could 
form the basis for precedent. Relatedly, the CFPB notes that an order 
entered as provided in Sec.  1091.206(a)(1), because a respondent has 
failed to file a response and so has defaulted under Sec.  1091.203(c), 
would typically not have content that warrants public release. However, 
such orders are subject to the process under Sec.  1091.405 for 
considering public release, because of the possibility that some may 
include reasoning that warrants public release.
    1091.406 Multiple respondents.
    The rule clarifies that multiple respondents might be named in a 
Notice, as well as clarifying the process for adding an additional 
respondent or respondents to a pending proceeding. Including multiple 
respondents in one proceeding--for example, business partners--may, in 
appropriate cases, avoid the delay and inefficiency of serial 
proceedings and also would allow the Bureau to consider related issues 
at once.\22\
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    \22\ Because additional respondents might be added to a 
proceeding at any stage, the provision gives the Director 
flexibility to decide what process is appropriate in order to 
provide the additional respondents a reasonable opportunity to 
respond to the supplemental Notice.
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    1091.408 Issue exhaustion.\23\
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    \23\ Formerly Sec.  1091.105(d).
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    The Supreme Court has explained that: ``Administrative review 
schemes commonly require parties to give the agency an opportunity to 
address an issue before seeking judicial review of that question.'' 
\24\ New Sec.  1091.408 is an express issue exhaustion provision that 
parallels Sec.  1081.408 of the Rules of Practice for Adjudication 
Proceedings. The CFPB is adopting it for the same reasons that the CFPB 
explained in the context of the Rules of Practice.\25\ The new issue 
exhaustion provision is generally similar to former Sec.  1091.105(d), 
which was titled ``Waiver,'' together with principles of administrative 
law that would apply in the absence of an express issue exhaustion 
provision.
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    \24\ Carr v. Saul, 141 S. Ct. 1352, 1358 (2021).
    \25\ See 88 FR 18382, 18387-88 (Mar. 29, 2023) (discussing 12 
CFR 1081.408).
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Effective Date and Transitional Arrangements
    This rule is effective upon Federal Register publication. It 
applies to proceedings initiated on or after the effective date. It 
also applies to proceedings that are pending on the effective date, 
except to the extent the Director determines that is not just or 
practicable.\26\
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    \26\ The CFPB notes the Supreme Court commonly applies rule 
changes, ``insofar as just and practicable,'' to pending proceedings 
in Federal courts. E.g., 344 FRD. 850, 851 (U.S. 2023); 340 FRD. 
810, 811 (U.S. 2022); 337 FRD. 813, 814 (U.S. 2021). The CFPB also 
notes that the above transitional arrangements, although not 
codified, form an operative part of the rule.
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Section 1022(b)(2) Analysis

    In developing this rule, the Bureau has considered its benefits, 
costs, and impacts in a manner consistent with section 1022(b)(2)(A) of 
the CFPA.\27\ In addition, the Bureau has consulted with the prudential 
regulators and the Federal Trade Commission, including regarding 
consistency of the rule with any prudential, market, or systemic 
objectives administered by those agencies, in a manner consistent with 
section 1022(b)(2)(B) of the CFPA.\28\
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    \27\ 12 U.S.C. 5512(b)(2)(A).
    \28\ 12 U.S.C. 5512(b)(2)(B). Whether section 1022(b)(2)(A) and 
section 1022(b)(2)(B) are applicable to this rule is unclear, but in 
order to inform the rulemaking more fully the Bureau performed the 
described analysis and consultations.
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    Among other sources of supervisory authority, the Bureau can 
supervise a nonbank covered person that the Bureau ``has a reasonable 
cause to determine, by order, after notice to the covered person and a 
reasonable opportunity for such covered person to respond . . . 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.'' \29\ The Bureau established a rule to implement a procedure 
to fulfil this statutory authority in 2013 (2013 rule) and amended this 
rule in 2022 (2022 rule). The Bureau is issuing this

[[Page 30262]]

final rule to amend the procedures governing the CFPB's supervisory 
designation proceedings.
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    \29\ 12 U.S.C. 5514(a)(1)(C). The Bureau must base such 
reasonable-cause determinations on complaints collected by the 
Bureau under 12 U.S.C. 5493(b)(3), or on information collected from 
other sources. Id.
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A. Data Limitations and Quantification of Benefits, Costs, and Impacts

    The data are generally limited with which to quantify potential 
costs, benefits, and impacts of the rule's provisions. The CFPB has 
conducted a limited number of supervisory designation proceedings under 
the prior 2013 and 2022 rules, but the CFPB does not have quantitative 
data regarding the costs to respondents or other impacts of those 
proceedings. The CFPB also does not have quantitative data to predict 
the impacts of the changes made by this rule relative to the prior 
legal and procedural framework, which is the comparison that is 
relevant for this analysis.
    In light of these data limitations, the analysis below generally 
provides a qualitative discussion of the benefits, costs and impacts of 
the rule. General economic principles and the Bureau's experience and 
expertise in consumer financial markets, together with the limited data 
that are available, provide insight into these benefits, costs, and 
impacts.

B. Baseline for Analysis

    In evaluating the rule's benefits, costs, and impacts of the rule, 
the CFPB considers the impacts against a baseline that includes the 
legal and procedural framework regarding supervisory designation 
proceedings for nonbank covered persons that existed before the 
issuance of the rule. Therefore, the baseline for the analysis of the 
rule includes separate adjudicative roles for the Director and the 
Associate Director for Supervision, Enforcement, and Fair Lending--that 
is, the statutory baseline implemented by the 2013 rule as amended by 
the 2022 rule.

C. Potential Benefits and Costs to Consumers and Covered Persons

    The rule would apply to covered persons as defined in the CFPA, 
which are generally persons that engage in offering or providing a 
consumer financial product or service.\30\ Relative to the statutory 
baseline, this rule implements several changes that the Bureau believes 
streamlines and improves transparency in the decision-making process, 
and clarifies the rights of nonbank covered entities subject to this 
rule. Notably, this rule eliminates the role of the Associate Director 
in filing a recommendation prior to the Director's final determination 
and instead assigns the Director to receive responses, including 
optional supplementary oral responses, in order to make a final 
determination. Furthermore, it clarifies the process by which persons 
may enter consent agreements with the Bureau, among other procedural 
changes. Overall, the Bureau believes these changes will not diminish 
the rights of respondents to reply to a Notice of Reasonable Cause, do 
not impose significant costs relative to the statutory baseline, 
increase transparency in the decision-making process, and clarify the 
processes by which covered persons may either respond or enter into a 
consent agreement with the Bureau.
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    \30\ For the full scope of the term ``covered person,'' see 12 
U.S.C. 5481(6).
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    The rule eliminates the role of the Associate Director in making a 
recommendation to the Director. This reflects a broader organizational 
structural change at the CFPB that eliminates the position of Associate 
Director of Supervision, Enforcement, and Fair Lending. Relative to the 
baseline, the rule makes no changes to the rights to respond by nonbank 
covered entities, maintains separation of roles between the initiating 
official and decisional employees in the determination process, 
maintains the requirement that the Director include the basis for their 
decision in their final determination, and should reduce the amount of 
time on net between service of the Notice and the final 
determination.\31\ The rule also codifies the ability for the Director 
to request additional briefing from the respondent, the initiating 
official, or both. Because there is no reduction in the ability of 
nonbank covered entities to respond to the Notice and access 
information constituting the basis for the Director's determination, 
there are no additional costs imposed on nonbank covered entities. 
Furthermore, the Bureau believes the reduction in time and general 
streamlining of the decisional process will benefit nonbank covered 
entities by improving the efficiency of this rule's application.
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    \31\ The length of time that the Director has to make a final 
determination is increased relative to baseline; however, the 
elimination of the role of the Associate Director and streamlining 
of the decisional process reduces the total amount of time between 
Notice and determination.
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    The rule allows for the initiating official to reply to the 
respondent's response to the Notice. The Bureau believes this may 
benefit respondents by allowing for more transparency in the 
determination process. The 2013 rule did not allow for the initiating 
official to respond to the written reply but did allow for the 
initiating official to participate in the optional supplementary oral 
response. Moreover, the 2013 rule did not preclude the initiating 
official from advising the Associate Director in drafting their 
recommendation. By allowing for a reply by the initiating official to 
the respondent's written response, the Bureau believes respondents 
could gain more insight into the decisional process which could then be 
incorporated into an optional supplementary oral response.
    The rule also sets out changes in the process by which a person may 
voluntarily consent to the Bureau's supervisory authority. 
Specifically, the rule consolidates two previous provisions regarding 
consent agreements. Under one provision of the 2013 rule, a respondent 
could respond to a Notice by signing an enclosed consent agreement that 
led to the respondent being supervised for two years. Under a separate 
provision, the respondent and the Bureau could enter into a consent 
agreement at any time, with a duration to be determined by case-by-case 
negotiation. Under the new rule, a proposed consent agreement will 
continue to be enclosed with the Notice and an agreement can also be 
reached at any other time, but the rule will no longer mandate a two-
year period in the former case.
    Relative to the baseline, the removal of the default option of a 
two-year consent agreement, to be replaced with the option for a 
consent agreement with a negotiated length of time, may impose 
additional costs on covered entities subject to this rule. However, the 
Bureau believes several factors limit the expected realized costs of 
this change. First, as mentioned above, the Bureau has conducted a 
limited number of supervisory designation proceedings under this 
authority. The Bureau anticipates it will continue to conduct a limited 
number of proceedings relative to the size of the market of covered 
entities subject to this rule. Second, based on prior experience and 
expertise, the Bureau anticipates that the majority of consent 
agreements will continue to last for a period of two years. Third, in a 
case where the complexity or severity of potential consumer risks 
merits a supervisory relationship longer than two years in the 
initiating official's assessment, there are other features of the rule 
that limit any additional realized costs relative to baseline on the 
covered entity, notably the option to contest the Notice and the 
ability for the Bureau to issue a new Notice at the end

[[Page 30263]]

of the initial two-year order under the baseline.\32\
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    \32\ As noted elsewhere in this analysis, the substantive costs 
associated with contested proceedings have not changed appreciably 
between the statutory baseline and the proposed rule. Hence, a 
covered entity issued Notice has the option to accept a negotiated 
consent agreement with potentially different costs relative to 
baseline or undergo contested proceedings with similar costs 
relative to baseline.
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    There is a large population of firms potentially subject to this 
rule.\33\ The Bureau does not currently have access to comprehensive 
data on the number of nonbank covered persons subject to supervisory 
authority. To establish an estimate of the population of nonbank 
covered entities potentially subject to this rule, the Bureau uses the 
latest Economic Census publicly available data and North American 
Industry Classification System (NAICS) industry codes that align with 
financial services.\34\ The Bureau estimates there are approximately 
154,430 entities in these covered industries. It should also be noted 
that this estimate does not include other nonbank covered entities not 
categorized in one of the enumerated industries, e.g., if consumer 
financial services are not their primary business activity. To date, 
the Bureau has exercised its supervisory authority under the 2013 and 
2022 rules on fewer than a dozen covered entities and in any given 
year, and the Bureau anticipates exercising authority under this rule 
on the same number of entities. Hence, the Bureau believes the impact 
of this rule will be relatively limited, mitigating the realization of 
any potential costs associated with changes relative to baseline.
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    \33\ The procedures established in the 2013 rule and this rule 
are only to assess whether a nonbank covered person will be made 
subject to the Bureau's supervisory authority based on a reasonable-
cause determination. In general, there is no reason to make a 
determination under the 2013 rule or this rule with respect to a 
nonbank covered entity subject to the Bureau's supervisory authority 
under some other provision of section 1024(a) of the CFPA, 12 U.S.C. 
5514(a). However, as discussed in the 2013 rule this is possible. 
Therefore, the Bureau does not exclude from coverage of the 2013 
rule or this final rule nonbank covered entities that may be subject 
to supervision under a separate provision of section 1024(a).
    \34\ The relevant NAICS codes examined are 5222 (Nondepository 
credit intermediation); 5223 (Activities related to credit 
intermediation); 523920 (Portfolio management); 523930 (Investment 
advice); 532112 (Passenger car leasing); 532120 (Truck, utility 
trailer, and recreational vehicle rental and leasing); 5313 
(Activities related to real estate); 561450 (Consumer reporting); 
and 561440 (Debt collection).
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    The majority of cases initiated under the 2013 rule have been 
settled by consent agreement and all past consent agreements have been 
for two years. The Bureau expects similar outcomes under this rule. 
However, the initiating official may assess that a longer period of 
time is necessary to maintain an effective supervisory relationship if 
a particular case is complex or poses severe risks to consumers.\35\ In 
this case, a covered entity undergoing a supervisory proceeding under 
this rule may receive Notice with a proposed consent agreement lasting 
longer than two years.\36\
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    \35\ In principle, an initiating official may assess that a 
shorter period of time is sufficient for a supervisory relationship. 
While the Bureau anticipates that this would be a rare occurrence 
given the Bureau's experience and expertise suggest that the minimum 
period of time to allow for an examination and follow-up is 
generally two years, this would likely lessen the costs associated 
with application of this rule on a nonbank covered entity.
    \36\ The respondent may otherwise understand that the Bureau and 
initiating official propose a consent agreement lasting longer than 
two years, e.g., via other communications with the Bureau and 
initiating official.
---------------------------------------------------------------------------

    An order lasting longer than two years may pose additional costs 
relative to the baseline for the covered entity via additional 
supervisory activity. The Bureau has previously estimated the cost of 
compliance with supervisory activity based on reported average exam 
length and labor costs incurred by firms to participate in supervisory 
exams.\37\ This calculation results in an estimate of approximately 
$27,000 in labor costs to comply with a supervisory examination. The 
Bureau recognizes that this estimate reflects national average labor 
costs and are thus subject to variability with respect to specific 
firms' realized costs. Furthermore, the Bureau recognizes that the 
staffing estimates are assessments for an average firm's needs and may 
also be subject to variability with respect to specific firms' 
requirements. The Bureau is open to public comments that provide 
additional data on estimates of staffing requirements and costs for 
compliance with supervisory activities.\38\
---------------------------------------------------------------------------

    \37\ For an estimate of the length of examination, see Office of 
the Inspector General of the Board of Governors of the Federal 
Reserve System and the CFPB, ``The Bureau Can Improve Its Risk 
Assessment Framework for Prioritizing and Scheduling Examination 
Activities'' (Mar. 25, 2019) at 13, available at https://oig.federalreserve.gov/reports/bureau-risk-assessment-framework-mar2019.pdf.
    \38\ The Bureau has previously estimated the cost of compliance 
with supervisory activity based on reported average exam lengths, 
which would average one supervisory examination per year and require 
one-tenth of a full-time equivalent attorney and one full-time 
compliance officer. Furthermore, the Bureau estimates that 
supervisory examinations would last for 8 weeks on average, with an 
additional two weeks of preparation (supra note 38). Using the 
national average hourly labor cost of $84.84 for attorneys and 
$38.55 for compliance officers, the Bureau estimates that the direct 
labor costs for a supervisory examination would total approximately 
$19,000 (See U.S. Bureau of Labor Statistics, National Occupational 
Employment and Wage Estimates United States, May 2023, https://www.bls.gov/oes/current/oes-nat.htm). Assuming that wages represent 
approximately 70.4% of the total labor costs using the estimate of 
total compensation for private employees (See U.S. Bureau of Labor 
Statistics, Employer Costs for Employee Compensation: Private 
Industry Database, March 2024, https://www.bls.gov/web/ecec/ecec-private-dataset.xlsx), this results in an estimate of approximately 
$27,000 in labor costs to comply with a supervisory examination.
---------------------------------------------------------------------------

    The Bureau anticipates that the majority of consent agreements 
under this rule will continue to be for two years, posing no 
significant additional costs on covered entities. The Bureau recognizes 
that for some entities undergoing supervisory activity under this rule, 
the complexity of the entity or the severity of consumer risk may 
result in a consent agreement lasting longer than two years, with each 
additional year imposing additional costs relative to baseline of 
approximately $27,000. In principle, it is possible that entities 
undergoing supervisory activity under this rule may enter into a 
consent agreement longer than three years; however, the Bureau 
anticipates this to be unlikely.
    Finally, the Bureau notes that there are features of this rule and 
the statutory baseline that further limit any expected realized costs 
posed by the proposed rule. First, by their nature, consent agreements 
necessitate both parties' agreement to the order. A respondent may 
negotiate with the initiating official over the parameters of a consent 
agreement or may enter contested proceedings.\39\ In general, entering 
into contested proceedings represents a cost on the respondent; 
however, insofar as there have been no substantive changes in the costs 
associated with entering contested proceedings relative to the 
baseline, the difference between these costs and the costs associated 
with the 2013 rule's provision to accept a two-year consent agreement 
represents an upper limit on the additional costs represented by this 
final rule relative to baseline.\40\ Second, in cases where the

[[Page 30264]]

initiating official assesses that there is substantial complexity or 
severe consumer risks that merit supervisory activity beyond two years, 
under the statutory baseline a nonbank covered entity subject to 
application of the rule could opt for a two-year consent agreement; 
however, the Bureau could reissue a Notice at the end of this period, 
leading to additional costs associated with receipt, consideration, and 
reply to a fresh Notice. Under this final rule, the initiating official 
could propose a longer consent agreement that, subject to negotiation 
and acceptance of this consent agreement by the respondent, could avoid 
the potential need for another designation after two years and costs 
associated with receipt, consideration, and reply to a fresh Notice.
---------------------------------------------------------------------------

    \39\ Under the 2013 rule, there have been substantive 
communications between respondents and the Bureau prior to entering 
into any consent agreement, regardless under which provision of the 
2013 rule the consent agreement was made. The Bureau anticipates 
that substantive communications will continue under this final rule 
and does not assess there to be significant changes in costs 
associated with these communications relative to baseline.
    \40\ A hypothetical firm that would contest the Notice under the 
2013 rule would presumably continue to contest under this proposed 
final rule and incur no additional costs relative to baseline. A 
firm that would accept a two-year consent agreement under the 2013 
rule but opt for contested proceedings under this rule would incur 
additional costs relative to baseline equivalent to the difference 
in costs between a contested proceeding and the two-year consent 
agreement. Hence, their realized costs would be this difference. 
Similarly, a firm that would accept a two-year consent agreement 
under the 2013 rule and a possibly longer consent agreement under 
this final rule would incur additional costs relative to baseline 
equivalent to the difference between the costs associated with the 
consent agreement under this rule and those associated with the 
consent agreement under the 2013 rule. Moreover, the costs 
associated with a possibly longer consent agreement would be 
necessarily less than the costs of contested proceedings.
---------------------------------------------------------------------------

    In summary, while the elimination of the two-year default option 
for consent agreement, to be replaced with the option for a consent 
agreement with negotiated length of time, may impose additional costs 
relative to baseline, the Bureau assesses these additional costs to be 
negligible. First, that the Bureau would be authorized to undertake 
supervisory activities with respect to a nonbank under this rule would 
not necessarily mean that the Bureau would in fact undertake such 
activities regarding that covered person in the near future. Rather, 
the supervision of any particular covered person as a result of this 
rule would be probabilistic in nature. Second, for a covered person 
undergoing supervisory activity under this rule, the Bureau anticipates 
the majority of cases will be settled by consent agreements lasting two 
years, imposing no additional costs. Third, for those entities where 
supervisory activity results in a proposed consent agreements lasting 
longer than two years, these potential realized costs are further 
mitigated by other features of the rule.\41\
---------------------------------------------------------------------------

    \41\ The Bureau acknowledges that there are limitations in the 
estimates associated with relevant costs; however, with the 
estimates presented here, the Bureau believes the additional costs 
imposed on nonbank covered entities subject to this rule relative to 
baseline would be negligible (based on the limited number of 
supervisory activities the Bureau anticipates each year under this 
rule, the probabilistic nature that any particular entity would 
undergo supervisory activities under this rule, and the likelihood 
any supervisory activities would result in a consent agreement 
longer than two years).
---------------------------------------------------------------------------

    The rule also makes certain other procedural changes to the 
processes for making and terminating designations, including: codifying 
the Director's authority to request supplemental briefing; imposing a 
word limit on key filings; clarifying procedures for filing and serving 
documents, with documents being generally filed and served by email; 
clarifying applicable procedures when there are multiple respondents; 
and codifying an issue exhaustion requirement that is generally similar 
to existing law. The rule further clarifies that the process for 
publicly releasing decisions and orders does not apply to consent 
agreements, because they lack sufficient content to serve as a 
precedent for future proceedings. The Bureau does not believe these 
changes impose significant additional costs onto nonbank covered 
persons relative to the baseline.
    The rule will not have an impact on insured depository institutions 
or insured credit unions with $10 billion or less in assets as 
described in section 1026(a) of the CFPA.\42\ Nor will the proposed 
rule have a unique impact on rural consumers.
---------------------------------------------------------------------------

    \42\ 12 U.S.C. 5516(a).
---------------------------------------------------------------------------

Regulatory Matters

    As a rule of agency organization, procedure, or practice, this rule 
is exempt from the notice-and-comment rulemaking requirements of the 
Administrative Procedure Act.\43\ However, the Bureau is accepting 
comments on the rule.
---------------------------------------------------------------------------

    \43\ 5 U.S.C. 553(b).
---------------------------------------------------------------------------

    Because no notice of proposed rulemaking is required, the 
Regulatory Flexibility Act does not require an initial or final 
regulatory flexibility analysis.\44\ Moreover, the Bureau's Director 
certifies that this rule will not have a significant economic impact on 
a substantial number of small entities. Therefore, an analysis is also 
not required on that basis.\45\ This is for two independent reasons. 
First, the costs associated with the changes made by this rule relative 
to the baseline of the existing procedures are limited, as discussed 
above. Second, the number of entities that will be subject to the 
procedures is small, and within that group the number that would be 
small entities is likely to be either none or in the single digits each 
year, representing a very small fraction of small entities in the 
relevant consumer finance markets.
---------------------------------------------------------------------------

    \44\ 5 U.S.C. 603, 604.
    \45\ 5 U.S.C. 605(b).
---------------------------------------------------------------------------

    The Bureau has also determined that this rule does not impose any 
new or revise any existing recordkeeping, reporting, or disclosure 
requirements on covered entities or members of the public that would be 
collections of information requiring approval by the Office of 
Management and Budget under the Paperwork Reduction Act.\46\
---------------------------------------------------------------------------

    \46\ 44 U.S.C. 3501-3521.
---------------------------------------------------------------------------

Severability

    If any provision of part 1091, or any application of a provision, 
is stayed or determined to be invalid, the remaining provisions or 
applications are severable and shall continue in effect.

List of Subjects in 12 CFR Part 1091

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

Authority and Issuance

0
For the reasons set forth above, the Bureau revises 12 CFR part 1091 as 
set forth below:

PART 1091--PROCEDURES FOR SUPERVISORY DESIGNATION PROCEEDINGS

Subpart A--General
Sec.
1091.100 Scope and purpose.
1091.101 Definitions.
Subpart B--Determination and Voluntary Consent Procedures
Sec.
1091.201 Voluntary consent to supervisory authority.
1091.202 Notice of Reasonable Cause.
1091.203 Response.
1091.204 Reply by initiating official.
1091.205 Supplemental oral response.
1091.206 Determination by the Director.
Subpart C--Post-Determination Procedures
Sec.
1091.301 Petition for termination of order.
Subpart D--Miscellaneous Provisions
Sec.
1091.401 Methods of filing and serving documents.
1091.402 Time limits.
1091.403 Word limits.
1091.404 Changes to methods of filing and service, time limits, and 
word limits.
1091.405 Confidentiality of proceedings.
1091.406 Multiple respondents.
1091.407 Adjudication proceedings otherwise brought by the Bureau.
1091.408 Issue exhaustion.
1091.409 No limitation on relief sought in civil action or 
administrative adjudication.

[[Page 30265]]

PART 1091--PROCEDURES FOR SUPERVISORY DESIGNATION PROCEEDINGS

    Authority: 12 U.S.C. 5512(b)(1), 5514(a)(1)(C), 5514(b)(7).

Subpart A--General


Sec.  1091.100  Scope and purpose.

    This part sets forth procedures to implement section 1024(a)(1)(C) 
of the Consumer Financial Protection Act of 2010 (12 U.S.C. 
5514(a)(1)(C)) and establishes rules to facilitate the Bureau's 
supervisory authority over certain nonbank covered persons pursuant to 
section 1024(b)(7) of the Act (12 U.S.C. 5514(b)(7)).


Sec.  1091.101  Definitions.

    For the purposes of this part, the following definitions apply:
    Bureau, consumer, consumer financial product or service, and 
covered person have the definitions in 12 U.S.C. 5481.
    Decisional employee means an employee of the Bureau who has not 
engaged in assisting the initiating official in either determining 
whether to issue a Notice of Reasonable Cause, or presenting the 
initiating official's position in support of a Notice of Reasonable 
Cause, either in writing or in a supplemental oral response, to the 
Director.
    Director means the Director of the Bureau or his or her designee. 
If there is no Director, the term means a person authorized to perform 
the functions of the Director under this part, or his or her designee. 
For purposes of when the Director receives, files, or serves documents, 
the Director includes an employee acting on behalf of the Director.
    Initiating official means the Supervision Director or another 
Bureau employee designated by the Director. For purposes of receiving, 
filing, and serving documents or participating in a supplemental oral 
response, the initiating official includes an employee acting on behalf 
of the initiating official.
    Nonbank covered person means a covered person, except for persons 
described in 12 U.S.C. 5515(a) and 5516(a).
    Notice of Reasonable Cause and Notice mean a Notice issued under 
Sec.  1091.202.
    Person has the definition in 12 U.S.C. 5481.
    Respondent means a person who has been issued a Notice of 
Reasonable Cause under Sec.  1091.202 or who has entered into a consent 
agreement under Sec.  1091.201.
    State has the definition in 12 U.S.C. 5481.

Subpart B--Determination and Voluntary Consent Procedures


Sec.  1091.201  Voluntary consent to supervisory authority.

    (a) At any time, a person and the initiating official may enter 
into a consent agreement by which the person voluntarily consents to 
the Bureau's supervisory authority under 12 U.S.C. 5514. The consent 
agreement shall constitute an order authorized by 12 U.S.C. 
5514(a)(1)(C).
    (b) A consent agreement under this section does not constitute an 
admission that a person 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.
    (c) A consent agreement may specify a period of time that the 
person will be subject to the Bureau's authority under 12 U.S.C. 5514. 
If the consent agreement specifies a period of time, it shall not be 
eligible for a petition for termination pursuant to Sec.  1091.301. If 
the consent agreement does not specify a period of time, the consent 
agreement will continue until terminated pursuant to Sec.  1091.301.
    (d) A consent agreement under this section shall state that the 
person waives any right to judicial review of the consent agreement.
    (e) The initiating official encloses a proposed consent agreement 
with the Notice of Reasonable Cause in accordance with Sec.  
1091.202(c)(6).


Sec.  1091.202  Notice of Reasonable Cause.

    (a) Generally. The initiating official is authorized to issue a 
Notice of Reasonable Cause to a person stating that the Bureau may have 
reasonable cause 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.
    (b) Basis of Notice. A Notice of Reasonable Cause shall be based 
on:
    (1) Complaints collected through the system under 12 U.S.C. 
5493(b)(3); and/or
    (2) Information from other sources.
    (c) Contents of Notice. A Notice of Reasonable Cause is subject to 
the word limit in Sec.  1091.403 and shall contain the following:
    (1) 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, including a summary of the documents, 
records, or other items relied on by the initiating official to issue a 
Notice. Such summary will be consistent with the protection of 
sensitive information, including compliance with Federal privacy law 
and whistleblower protections;
    (2) A statement that this proceeding is governed by 12 U.S.C. 
5514(a)(1)(C) and 12 CFR part 1091;
    (3) A statement that failure to respond within 30 days, in the 
manner specified by Sec.  1091.203, will constitute a waiver of the 
right to respond and may result in a default determination by the 
Director;
    (4) Instructions for filing documents with the Director;
    (5) Instructions for serving documents on the initiating official; 
and
    (6) In an appendix, a proposed consent agreement under Sec.  
1091.201.
    (d) Service of Notice. A Notice of Reasonable Cause shall be served 
on a respondent by any means that are reasonably calculated to give 
notice. This includes, but is not limited to, the methods available 
under 12 CFR 1081.113(d)(1). The initiating official shall promptly 
file a copy of the Notice and a record of service with the Director.
    (e) Withdrawal of Notice. The initiating official may withdraw the 
Notice at any time. Such a withdrawal shall not prevent the initiation 
of another proceeding under this part.


Sec.  1091.203  Response.

    (a) Timing and word limit. Within 30 days of service of a Notice, a 
respondent shall file any response with the Director and serve it on 
the initiating official, according to the instructions set forth in the 
Notice. The response is subject to the word limit in Sec.  1091.403.
    (b) Content of the response. (1) If the respondent disputes 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, the response 
shall set forth the basis for the respondent's position.
    (2) The response shall be accompanied by appendices that include 
(and are limited to) all documents, records, or other evidence a 
respondent wishes to use to support the arguments or assertions set 
forth in the response.
    (3) If the respondent wishes to present a supplemental oral 
response, the

[[Page 30266]]

response must include that request. The respondent may also include, 
for the Director's consideration, the respondent's preference for the 
supplemental oral response to be by telephone, by video conference, or 
in person at the Bureau's headquarters in Washington, DC. A 
respondent's failure to request to present a supplemental oral response 
shall constitute a waiver of the opportunity to present a supplemental 
oral response.
    (4) The response shall include an email address for serving 
documents on the respondent, which may be its attorney's email address.
    (5) The response shall be accompanied, as an appendix, by 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.
    (c) Default. If a respondent does not file a response within the 
time period set forth in paragraph (a) of this section, it shall 
constitute a waiver of the respondent's right to respond. At the 
initiating official's request, the Director may issue a decision and 
order as provided in Sec.  1091.206(a)(1)).
    (d) No Discovery. There shall be no discovery in connection with a 
response.


Sec.  1091.204  Reply by initiating official.

    If the respondent files and serves a response, within 21 days the 
initiating official may file a reply with the Director and serve it on 
the respondent. The reply is subject to the word limit in Sec.  
1091.403.


Sec.  1091.205  Supplemental oral response.

    (a) If the respondent makes a timely request in a response under 
Sec.  1091.203 for the opportunity to present a supplemental oral 
response, the Director shall issue an order setting forth the date, 
time, and general information relating to the conduct of a supplemental 
oral response.
    (b) There shall be no discovery permitted or witnesses called in 
connection with a supplemental oral response.
    (c) 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:
    (1) An officer, managing or general member, or partner authorized 
to represent the respondent; or
    (2) An attorney in good standing of the bar of the highest court of 
any State.
    (d) If a respondent is a natural person, the respondent shall be 
represented in any supplemental oral response by:
    (1) The respondent personally; or
    (2) An attorney in good standing of the bar of the highest court of 
any State.
    (e) The Director shall cause an audio recording of a supplemental 
oral response to be made by a court reporter or other designated 
person. A respondent may purchase a copy or transcript of the recording 
at the respondent's own expense.
    (f) The initiating official may participate in any supplemental 
oral response conducted under this section.
    (g) A respondent's failure to participate in a supplemental oral 
response scheduled by the Director shall constitute the respondent's 
waiver of the opportunity to present a supplemental oral response.


Sec.  1091.206  Determination by the Director.

    (a) Within 60 days after the supplemental oral response, or, if 
there is no supplemental oral response, the deadline for the reply, the 
Director shall issue either:
    (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 is terminating the proceeding. 
Such notification shall have no precedential effect and shall not 
prevent the initiation of another proceeding under this part.
    (b) The Director may, on the Director's own motion at any time 
before making a determination under paragraph (a) of this section, 
request that the respondent, initiating official, or both provide any 
supplemental briefing that Director considers appropriate.
    (c) Any decision and order issued by the Director pursuant to 
paragraph (a)(1) of this section shall include the basis for the 
decision and an effective date for the order.
    (d) Only decisional employees may advise and assist the Director in 
the consideration and disposition of a proceeding under this part.
    (e) A decision and order issued pursuant to paragraph (a)(1) of 
this section shall constitute final agency action under 5 U.S.C. 704.

Subpart C--Post-Determination Procedures


Sec.  1091.301  Petition for termination of order.

    (a) Any person subject to an order under 1091.206(a)(1) may, no 
sooner than two years after issuance of such an order and no more 
frequently than annually thereafter, petition for termination of the 
order. The same applies to an order under Sec.  1091.201, subject to 
the limitations in Sec.  1091.201(c).
    (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. A petition for termination must be filed with the Director and 
served on the initiating official and is subject to the word limit in 
Sec.  1091.403.
    (c) The initiating official shall, within 30 days of receipt of a 
petition for termination, file a recommendation with the Director and 
serve it on the respondent. The initiating official's recommendation 
shall state whether the initiating official recommends that the order 
be terminated, or modified, or that the petition for termination be 
denied and the basis for such recommendation. The recommendation is 
subject to the word limit in Sec.  1091.403.
    (d) 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. At any time before issuing a decision, the 
Director may, on the Director's own motion, request that the respondent 
and initiating official provide any supplemental briefing that Director 
considers appropriate.
    (e) The decision of the Director made pursuant to paragraph (d) of 
this section shall constitute final agency action under 5 U.S.C. 704.

Subpart D--Miscellaneous Provisions


Sec.  1091.401  Methods of filing and serving documents.

    (a) By the respondent. The respondent files documents with the 
Director, and serves documents on the initiating official, in 
accordance with the instructions in the Notice.
    (b) By the initiating official. The initiating official serves 
documents on the respondent at the email address specified in the 
Response (except for service of the Notice, which is governed by Sec.  
1091.202(d)). The initiating official

[[Page 30267]]

files documents with the Director by any appropriate method.
    (c) By the Director. The Director serves documents on the 
respondent at the email address specified in the Response. The Director 
serves documents on the initiating official by any appropriate method.
    (d) Changes. Changes to the methods of filing and serving documents 
are addressed in Sec.  1091.404.


Sec.  1091.402  Time limits.

    In computing any period of time prescribed by this part, or by 
order of the 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. Changes to time limits are addressed in Sec.  
1091.404.


Sec.  1091.403  Word limits.

    (a) Calculation of word limits. A Notice, response, reply, petition 
for termination, or recommendation on a petition for termination must 
contains no more than 13,000 words. This word limit does not apply to 
any cover page, table of contents, table of citations, signature block, 
or appendices. Changes to word limits are addressed in Sec.  1091.404.
    (b) Certification of word count. A document referenced in paragraph 
(a) of this section must be accompanied by an appendix stating the 
number of words in the document, not including any cover page, table of 
contents, table of citations, signature block, or appendices. It must 
be signed by counsel for the party filing the document, or by another 
representative if that party does not have counsel.


Sec.  1091.404  Changes to methods of filing and service, time limits, 
and word limits.

    (a) Generally. This section governs a change to a method of filing 
or service, to a time limit, or to a word limit, whether prescribed by 
this part or by the Director. Changes to time limits or word limits are 
disfavored.
    (b) Change upon consent. The initiating official and respondent may 
agree in writing to a change, unless the Director specifies otherwise. 
The initiating official shall file notice of the change with the 
Director.
    (c) Change upon written request to Director. The initiating 
official or the respondent may file a written request to the Director 
for a change, for good cause shown. The mere filing of a written 
request for a change does not alleviate the obligation to meet an 
applicable requirement, absent written confirmation that the request 
has been granted.
    (c) Change upon Director's own motion. The Director may make a 
change on the Director's own motion.
    (e) No conferral of rights. Deadlines for action by the Bureau 
established in this part do not confer any rights on respondents.


Sec.  1091.405  Confidentiality of proceedings.

    (a) General rule. In connection with a proceeding under this part, 
including a petition for termination under Sec.  1091.301, all 
documents, records or other items submitted by a respondent to the 
Bureau, all documents prepared by, or on behalf of, or for the use of 
the Bureau, and any communications between the Bureau and a person, 
shall be deemed confidential supervisory information under 12 CFR 
1070.2(i)(1). However, this paragraph does not apply to the version of 
a document that is released on the Bureau's website under paragraph (b) 
of this section.
    (b) Publication of final decisions and orders by the Director. The 
Director will make a determination regarding whether a decision or 
order under Sec.  1091.206(a)(1) or Sec.  1091.301(d) will be publicly 
released on the Bureau's website, in whole or in part. The respondent 
may file a submission regarding that issue, within ten days after 
service of the decision or order. The Director will not release 
information in a decision or order to the extent it would be exempt 
from disclosure under 5 U.S.C. 552(b)(4) or (b)(6) or the Director 
determines there is other good cause. The Director may also decide that 
any determination regarding public release will itself be released on 
the website, in whole or in part. Section 1091.206(d) is not applicable 
to determinations under this paragraph.


Sec.  1091.406  Multiple respondents.

    (a) Notice issued to multiple respondents. The initiating official 
may issue and serve a Notice with respect to multiple respondents. The 
respondents may elect to make either joint or separate responses to 
such a Notice under Sec.  1091.203 and be jointly or separately 
represented at a supplemental oral response under Sec.  1091.205.
    (b) Supplemental Notice to add respondents. The initiating official 
may issue a supplemental Notice in a pending proceeding to add one or 
more respondents. The Director will adopt such procedural steps as may 
be appropriate to ensure that the added respondents have a reasonable 
opportunity to respond to the supplemental Notice.


Sec.  1091.407  Adjudication proceedings otherwise brought by the 
Bureau.

    (a) The Bureau may, in its 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 part 1081. Also, a person 
may agree to submit to the Bureau's supervisory authority under 12 
U.S.C. 5514(a)(1)(C) as part of a consent order entered into in 
connection with an adjudication proceeding or civil action.
    (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. Sec.  1091.201 to 1091.206 and 1091.401 
to 1091.406 will be inapplicable to such proceeding.


Sec.  1091.408  Issue exhaustion.

    (a) Scope. This section applies to any argument to support a 
respondent's position, including any argument that could be a basis for 
setting aside Bureau action under 5 U.S.C. 706 or any other source of 
law.
    (b) Duties to raise arguments. A respondent must raise an argument 
in its written response, or else it is not preserved for judicial 
review of a proceeding under subpart B. A respondent must raise an 
argument in its petition for termination, or else it is not preserved 
for judicial review of a proceeding under subpart C. If the Director 
requests supplemental briefing, and if a given argument is within the 
scope of the supplemental briefing requested, the respondent must raise 
the argument in the supplemental briefing or else it is not preserved 
for judicial review of a proceeding under subpart B or subpart C, as 
applicable.
    (c) Manner of raising arguments. An argument must be raised in a 
manner that complies with this part and that provides a fair 
opportunity to consider the argument.
    (d) Discretion to consider unpreserved arguments. The Director has 
discretion to consider an unpreserved argument,

[[Page 30268]]

including by considering it in the alternative. If the Director 
considers an unpreserved argument in the alternative, the argument 
remains unpreserved.


Sec.  1091.409  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, 
including for the reasons set forth in 12 U.S.C. 5514(a)(1)(C).

Rohit Chopra,
Director, Consumer Financial Protection Bureau.
[FR Doc. 2024-08430 Filed 4-22-24; 8:45 am]
BILLING CODE 4810-AM-P