Written by: Internal Analysis & Opinion Writers
The Consumer Financial Protection Bureau has proposed a new rule aiming to create a standardized definition of what it means for a nonbank financial company to pose “risks to consumers.” The goal is to make supervision clearer, more consistent, and limited to significant threats rather than being applied on an ad‑hoc basis.
Under current practice, the CFPB may designate certain nonbanks for supervision if they are found to be engaging in conduct that threatens consumer safety or welfare—often without formal, binding standards. The proposed rule would bind the CFPB to a written framework, setting out specific criteria to guide when a nonbank becomes subject to regulation based on risk.
The Bureau notes that the lack of clear rules has created uncertainty for many nonbank firms. Without a consistent definition, companies may struggle to predict whether their products or practices could trigger supervision. The proposal is designed to give firms greater predictability about their exposure to regulatory oversight.
One key component of the proposal is a requirement for supervised nonbanks that use certain contract terms—especially those that may limit or waive consumer legal protections—to enroll in a formal registry. The CFPB believes that publishing such a registry would improve transparency and help the agency prioritize its supervisory work.
Another major shift: under the new rule, the CFPB expects that fewer nonbank entities will be designated for supervision under “risks to consumers,” all things equal. The trade‑off is meant to reduce regulatory burden for firms who are not engaging in high risk conduct, while focusing the CFPB’s resources on those that do pose serious risks.
Critics of the change argue that narrower oversight could allow some bad actors to sidestep scrutiny. Consumer advocates worry that reducing the scope of supervision might leave some harmful practices unchecked. Supporters counter that without clearer rules, the CFPB’s approach has been uneven and unpredictable.
The proposal includes a public comment period ending September 25, 2025. Stakeholders from the fintech, lending, and consumer protection sectors are expected to weigh in on how to balance clarity, fairness, and consumer safety.
If adopted, the rule would represent a significant shift in how nonbanks are regulated—providing well‑defined thresholds for supervision and potentially reducing the number of firms subject to oversight. However, its effectiveness will depend heavily on the precise wording and how aggressively the CFPB applies the new criteria.
