Vol. 78 Wednesday, 

No. 128 July 3, 2013 

Part V 

Bureau of Consumer Financial Protection 

12 CFR Part 1091 

Procedural Rule To Establish Supervisory Authority Over Certain Nonbank 

Covered Persons Based on Risk Determination; Final Rule 


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40352 Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Rules and Regulations 

1 77 FR 31226 (May 25, 2012). 

2Public Law 111–203 (codified at 12 U.S.C. 5301 

et seq.). 

3The provisions of 12 U.S.C. 5514 apply to 

certain categories of covered persons, described in 

subsection (a)(1), and expressly exclude from 

coverage persons described in 12 U.S.C. 5515(a) or 

5516(a). ‘‘Covered persons’’ include ‘‘(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.’’ 

4 12 U.S.C. 5514(a)(1)(C). 

5 12 U.S.C. 5514(a)(1)(A), (D), and (E). In addition, 

the Bureau has supervisory authority over very 

large depository institutions and credit unions and 

their affiliates. 12 U.S.C. 5515(a). Furthermore, the 

Bureau has certain authorities relating to the 

supervision of other depository institutions and 

credit unions. 12 U.S.C. 5516(c)(1), (e). 

6 12 U.S.C. 5514(a)(1)(B). The Bureau has issued 

final rules establishing supervisory authority over 

larger participants of the consumer reporting and 

the consumer debt collection markets. See 77 FR 

42874 (July 20, 2012) (consumer reporting); 77 FR 

65775 (Oct. 31, 2012) (consumer debt collection). 

The larger participant rules are codified at 12 CFR 

part 1090. The Bureau has proposed a rule 

establishing supervisory authority over larger 

participants of the student loan servicing market. 78 

FR 18902 (March 28, 2013). The Bureau’s 

supervision authority also extends to service 

providers of those covered persons that are subject 

to supervision under12 U.S.C. 5514. 12 U.S.C. 

5514(e); see also 12 U.S.C. 5481(26) (defining 

‘‘service provider’’). 

7 12 U.S.C. 5511(b)(5). 

8 12 U.S.C. 5514(b); see also 12 U.S.C. 5481(14) 

(defining ‘‘Federal consumer financial law’’). 

9See 12 U.S.C. 5514(b) (authorizing the Bureau 

both to conduct examinations and to require reports 

from entities subject to supervision). 

BUREAU OF CONSUMER FINANCIAL 

PROTECTION 

12 CFR Part 1091 

[Docket No.: CFPB–2012–0021] 

RIN 3170–AA24 

Procedural Rule To Establish 

Supervisory Authority Over Certain 

Nonbank Covered Persons Based on 

Risk Determination 

AGENCY: Bureau of Consumer Financial 

Protection. 

ACTION: Final rule. 

SUMMARY: The Bureau of Consumer 

Financial Protection (Bureau) is 

publishing a final rule that establishes 

procedures to implement requirements 

of the Dodd-Frank Wall Street Reform 

and Consumer Protection Act of 2010. 

That statutory provision authorizes the 

Bureau 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. The Bureau is authorized to, 

among other things, require reports 

from, and conduct examinations of, 

nonbank covered persons subject to 

supervision under the Act. 

DATES: Effective August 2, 2013. 

FOR FURTHER INFORMATION CONTACT: 

Christopher J. Young, Senior Counsel, 

Office of Supervision Policy, Bureau of 

Consumer Financial Protection; 1700 G 

Street NW., Washington, DC 20552, 

(202) 435–7408. 

SUPPLEMENTARY INFORMATION: 

I. Background 

On May 25, 2012, the Bureau of 

Consumer Financial Protection (Bureau) 

published a notice of proposed 

rulemaking (Proposed Rule) in the 

Federal Register 1 to establish 

procedures to implement section 

1024(a)(1)(C) of the Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act of 2010 (Dodd-Frank Act) 2 (12 

U.S.C. 5514(a)(1)(C)). Under this 

provision of the Dodd-Frank Act, the 

Bureau has the authority to supervise 

any nonbank covered person 3 that the 

Bureau ‘‘has reasonable cause to 

determine, by order, after notice . . . 

and a reasonable opportunity . . . 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.’’ 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.4 The Bureau 

requested comments on all aspects of 

the Proposed Rule. The comment period 

ended on July 24, 2012, and the Bureau 

received 32 comments from industry 

trade associations, businesses, consumer 

groups, a regulatory association, and 

individuals. 

In addition to the Bureau’s 

supervisory authority under 12 U.S.C. 

5514(a)(1)(C), the Bureau has the 

authority to supervise (1) nonbank 

covered persons of any size that offer or 

provide: (a) Origination, brokerage, or 

servicing of loans secured by real estate 

for use by consumers primarily for 

personal, family or household purposes, 

or loan modification or foreclosure relief 

services in connection with such loans, 

(b) private education loans, and (c) 

payday loans; 5 and (2) ‘‘larger 

participant[s] of a market for other 

consumer financial products or services, 

as [the Bureau defines] by rule.’’ 6 The 

Bureau is authorized under the DoddFrank Act to ensure that ‘‘Federal 

consumer financial law is enforced 

consistently, without regard to the 

status of a person as a depository 

institution, in order to promote fair 

competition.’’ 7

The Bureau is authorized to supervise 

nonbank covered persons subject to 12 

U.S.C. 5514 of the Dodd-Frank Act for 

purposes of: (1) Assessing compliance 

with the requirements of Federal 

consumer financial law; (2) obtaining 

information about such persons’ 

activities and compliance systems or 

procedures; and (3) detecting and 

assessing risks to consumers and to 

markets for consumer financial products 

and services.8 Pursuant to 12 U.S.C. 

5514(b), the Bureau is authorized to 

conduct examinations of various scopes 

of supervised entities. In addition, the 

Bureau may, as appropriate, request 

information from supervised entities 

without conducting examinations.9

The Proposed Rule set forth proposed 

procedures by which the Bureau would 

bring a nonbank covered person under 

the Bureau’s supervisory authority 

pursuant to 12 U.S.C. 5514(a)(1)(C), and 

did not propose to impose any new 

substantive consumer protection 

requirements on entities subject to the 

rule. Although a rule is not necessary to 

implement 12 U.S.C. 5514(a)(1)C), the 

final rule will establish a consistent 

procedure applicable to all affected 

entities for bringing a nonbank covered 

person under the Bureau’s supervisory 

authority pursuant to 12 U.S.C. 

5514(a)(1)(C) and thereby provide 

transparency regarding the procedures 

the Bureau intends to use prior to 

commencement of a proceeding under 

12 U.S.C. 5514(a)(1)(C). Absent the final 

rule, the public would lack guidance 

regarding such procedures. Regardless 

of whether nonbanks offering or 

providing consumer financial products 

or services are subject to the Bureau’s 

supervisory authority, they are subject 

to the Bureau’s regulatory and 

enforcement authority and any 

applicable Federal consumer financial 

law. 

II. Summary of the Final Rule 

The final rule establishes the 

procedures by which a nonbank covered 

person may become subject to the 


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10See 5 U.S.C. 554, 556, and 557 (setting forth 

APA procedures for adjudications determined on 

the record after opportunity for an agency hearing). 11 5 U.S.C. 553(d)(1). 

supervisory authority of the Bureau 

pursuant to 12 U.S.C. 5514(a)(1)(C). The 

final rule is intended to provide an 

efficient, expeditious, and fair process 

by which the Bureau exercises its 

authority under 12 U.S.C. 5514(a)(1)(C). 

The final rule generally adopts the 

Proposed Rule, with certain 

modifications described in the sectionby-section analysis below. 

The final rule is divided into four 

subparts. Subpart A contains general 

provisions, including provisions 

regarding scope and purpose and 

definitions applicable to the entire final 

rule. Subpart B sets forth the procedures 

relating to the determination process, 

including: (1) Issuing a notice 

commencing a proceeding (Notice or 

Notice of Reasonable Cause), (2) 

contents of a Notice of Reasonable 

Cause, (3) service of a Notice, (4) 

response to a Notice, (5) conduct of a 

supplemental oral response, (6) manner 

of filing and serving papers, (7) issuance 

of recommended determinations, (8) 

determinations by the Director, (9) 

voluntary consent to Bureau’s authority, 

(10) notice and response included in an 

adjudication proceeding otherwise 

brought by the Bureau, and (11) relief 

available sought in a civil action or 

administrative adjudication. Subpart C 

sets forth a post-determination process 

whereby a respondent may petition the 

Director for the termination of 

supervision. Subpart D sets forth the 

rules for the construction of time limits, 

change of time limits, and effect of 

deadlines. 

Under the final rule, a Notice of 

Reasonable Cause does not constitute a 

notice of charges for any alleged 

violation of Federal consumer financial 

law or other law. The proceedings under 

the final rule are informal and do not 

constitute an adjudication proceeding 

with a hearing on the record under the 

Administrative Procedure Act (APA).10

Accordingly, no discovery is permitted, 

a supplemental oral response does not 

constitute a hearing on the record, and 

no witnesses may be called as part of a 

supplemental oral response. 

III. Legal Authority 

A. Rulemaking authority 

The Bureau is issuing this final 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 

Federal consumer financial law, 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 final rule relates solely to agency 

procedure and practice and thus is not 

subject to the 30-day effective date for 

substantive rules under the APA.11

Nevertheless, the Proposed Rule 

provided that the final rule would be 

effective 30 days after publication in the 

Federal Register. As discussed below, 

after considering the comments 

received, the Bureau adopts the 

proposed 30-day delayed effective date 

for the final rule. 

Request To Extend the Effective Date 

One commenter stated that the 

Bureau’s proposed 30-day delayed 

effective date did not provide a 

sufficiently long transition period for 

nonbanks not already subject to 

supervision to develop compliance and 

recordkeeping standards to prepare for 

potential supervision by the Bureau, 

and urged the Bureau to instead adopt 

an effective date of six months after 

publication. The Bureau appreciates 

that supervision by a Federal agency 

would be new to many nonbank covered 

persons potentially subject to the final 

rule but does not believe that this factor 

justifies a substantial delay of the 

effective date of the final rule. 

Although certain nonbank covered 

persons might choose to increase their 

compliance with Federal consumer 

financial law in response to the 

perceived possibility of supervision, 

entities offering or providing consumer 

financial products or services are 

already obligated to comply with 

applicable Federal consumer financial 

law. Therefore, nonbank covered 

persons potentially subject to the final 

rule should not require additional time 

to come into compliance with Federal 

consumer financial law. Moreover, as 

noted above, the final rule is not 

necessary to establish the Bureau’s 

supervisory authority under 12 U.S.C. 

5514(a)(1)(C). Rather, the final rule 

merely provides transparency and 

ensures consistency regarding the 

procedures that the Bureau intends to 

use in connection with its preexisting 

supervisory authority under 12 U.S.C. 

5514(a)(1)(C). Thus, delaying the 

effective date of the final rule would not 

actually delay the period before which 

entities may be subject to supervision 

under 12 U.S.C. 5514(a)(1)(C), and 

entities need not have waited for the 

issuance of the final rule to begin taking 

any measures they may wish to take in 

anticipation of potential supervision by 

the Bureau. 

The Bureau thus believes that a sixmonth postponement of the effective 

date as requested by the commenter is 

not warranted and adopts the effective 

date as proposed. 

Procedural Versus Substantive Rule 

Another commenter questioned the 

Bureau’s assertion in the supplementary 

information to the Proposed Rule that 

the rule is procedural, rather than 

substantive. The Bureau regards the 

final rule as procedural because, as 

discussed above, the final rule does not 

impose on nonbank covered persons 

any new substantive requirements. As 

noted above, nonbank covered persons 

already must comply with applicable 

Federal consumer financial law, and a 

final rule is not necessary to implement 

the Bureau’s supervisory authority 

under 12 U.S.C. 5514(a)(1)(C). 

In any event, the question whether the 

final rule is procedural or substantive is 

generally without consequence because, 

as a matter of discretion, the Bureau 

undertook notice and comment 

rulemaking procedures in promulgating 

the final rule and is finalizing a 30-day 

delayed effective date. 

IV. Section-by-Section Analysis of the 

Final Rule 

Subpart A—General 

Section 1091.100 Scope and Purpose 

Proposed § 1091.100 set forth the 

scope and purpose of the Proposed 

Rule. It stated that proposed part 1091 

establishes 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). The Bureau 

received a few comments that appear to 

have misinterpreted the scope and 

purpose of the Proposed Rule. 

A commenter asserted that Proposed 

Rule asserts an ‘‘extremely broad grant 

of jurisdiction’’ that ‘‘appears at odds’’ 

with the structure of the Dodd-Frank 

Act. The commenter argued that the 

Dodd-Frank Act lists under 12 U.S.C. 

5514(a)(1)(A)-(E) five discrete categories 

of nonbank entities that the Bureau may 


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12Regulation Z is codified at 12 CFR part 1026 

and implements the Truth in Lending Act which is 

codified at 15 U.S.C. 1601 et seq. 

13 12 U.S.C. 5514(b)(1). 

14For specific references in the Dodd-Frank Act 

to supervision authority over ‘‘persons’’ rather than 

particular activities see, e.g., 12 U.S.C. 5514(b)(1) 

(‘‘The Bureau shall require reports and conduct 

examinations on a periodic basis of ‘persons’ 

described in subsection (a)(1) . . . .’’) (emphasis 

added); 12 U.S.C. 5514(a)(1) (‘‘[T]his section shall 

apply to any covered ‘person’ who . . . .’’) 

(emphasis added). 

15 77 FR 31226, 31227 (May 25, 2012). A service 

provider is a person that provides a material service 

to a covered person in connection with a consumer 

financial product or service. 12 U.S.C. 5481(26)(A). 

The Dodd-Frank Act provides a non-exhaustive set 

of examples of such material services. 12 U.S.C. 

5481(26)(A)(i)–(ii). 

16One commenter suggested that the Bureau 

publish a policy that it will not examine any service 

provider until after it has examined the entity 

supervise. According to the commenter, 

the Proposed Rule employed 12 U.S.C. 

5514(a)(1)(C) to ‘‘supervise any nonbank 

entity if the [Bureau] determines on its 

own, and without appeal to any court, 

that a nonbank entity ‘poses a risk’ to 

consumers.’’ The commenter 

maintained that had ‘‘Congress intended 

to grant the [Bureau] such broad 

supervisory authority, it is unlikely it 

would have done so in the negative, 

limiting the authority to five discrete 

situations.’’ 

Another commenter stated that the 

Bureau should explain why the 

Bureau’s existing authorities relating to 

data collection, and regulatory and 

enforcement authority, are not sufficient 

to achieve the Bureau’s mission. The 

commenter also stated that the Bureau 

should make clear that the final rule 

will not pertain to mortgage lenders 

because they are already within the 

Bureau’s supervisory authority. This 

and another commenter asked the 

Bureau to clarify whether a law firm 

may be examined as a service provider. 

Assertions Relating to Jurisdiction 

The comment asserting that the 

Proposed Rule claims an extremely 

broad grant of jurisdiction in 

contravention of the Dodd-Frank Act 

misunderstands the purpose of the final 

rule and the structure of 12 U.S.C. 

5514(a)(1). As noted above, the purpose 

of the final rule is to provide 

transparency and ensure consistency 

regarding the procedures the Bureau 

intends to follow in exercising its 

authority under 12 U.S.C. 5514(a)(1)(C), 

not to establish or to define the scope 

of the Bureau’s 12 U.S.C. 5514(a)(1)(C) 

authority. The Dodd-Frank Act, not the 

final rule, establishes and defines the 

scope of that authority. In addition, the 

commenter’s understanding of the 

Bureau’s supervisory authority appears 

at odds with the language of 12 U.S.C. 

5514(a)(1)(C), which defines the covered 

persons subject to the Bureau’s 

authority under the provision not 

exclusively by reference to the category 

of activities in which they engage, but 

based on whether there is reasonable 

cause to believe that their conduct— 

whatever the particular activity 

involved—poses risks to consumers 

with regard to the offering or provision 

of consumer financial products or 

services. 

As to the commenter that requested 

the Bureau justify the need for 12 U.S.C. 

5514(a)(1)(C) in light of the Bureau’s 

other authorities, the Bureau notes that 

Congress provided the Bureau with 

various complementing authorities to 

enable the Bureau to achieve its 

statutory purposes and objectives 

relating to consumer financial 

protection. These authorities, which 

include supervision, as well as market 

research and data collection, regulation, 

and enforcement, are not mutually 

exclusive, but rather complement and 

reinforce each other. For example, 

where the Bureau issues a substantive 

rule under its regulatory authority, such 

as Regulation Z,12 it may also be 

appropriate to supervise a nonbank 

covered person to examine whether the 

person is in compliance with that 

regulation pursuant to 12 U.S.C. 

5514(a)(1)(C), where the Bureau has 

reasonable cause to determine that the 

person is engaging, or has engaged, in 

conduct that poses risks to consumers 

regarding the offering or provision of 

consumer financial products or services. 

Relatedly, the Bureau notes that if an 

entity is subject to the Bureau’s 

supervisory authority, the Bureau may 

examine the entire entity for compliance 

with all Federal consumer financial law, 

assess enterprise-wide compliance 

systems and procedures, and assess and 

detect risks to consumers or to markets 

for consumer financial products and 

services posed by any activity of the 

entity, not just the activities that 

initially rendered the entity subject to 

Bureau supervisory authority. This 

authority results from the Dodd-Frank 

Act’s conferral of authority on the 

Bureau to supervise ‘‘covered person[s]’’ 

described in 12 U.S.C. 5514(a)(1)(A)–(E). 

In addition, the Dodd-Frank Act directs 

the Bureau to require reports and 

conduct examinations on a periodic 

basis of such persons for purposes of (a) 

assessing compliance with the 

requirements of Federal consumer 

financial law, (b) obtaining information 

about the activities and compliance 

systems or procedures of such persons, 

and (c) detecting and assessing risks to 

consumers and to markets for consumer 

financial products and services.13 By 

granting the Bureau supervisory 

authority over such ‘‘covered persons,’’ 

as opposed to over particular activities 

in which they engage, the Dodd-Frank 

Act establishes that the Bureau’s 

supervisory authority is not limited to 

the products or services that qualified a 

person for supervision, but also 

includes other activities of such a 

person that involve other consumer 

financial products or services or are 

subject to Federal consumer financial 

law.14

Applicability to Mortgage Lenders 

The procedures established by the 

final rule will be used only to assess 

whether a nonbank covered person will 

be made subject to the Bureau’s 

supervisory authority based on a 

reasonable-cause determination. There 

would ordinarily be no reason to make 

such a determination and thus invoke 

the procedures set forth in the final rule 

with respect to a nonbank covered 

person already subject to the Bureau’s 

supervisory authority. Potentially, 

however, if the Bureau believed that a 

nonbank entity qualified for supervision 

under another provision of 12 U.S.C. 

5514(a), the entity disagreed, and the 

Bureau believed that there might be 

reasonable cause to determine that the 

entity was engaging, or had engaged, in 

conduct that poses risks to consumers 

with regard to the offering or provision 

of consumer financial products or 

services, the Bureau might use the 

procedures in the final rule to establish 

supervisory authority under 12 U.S.C. 

5514(a)(1)(C). The Bureau would not be 

conceding the lack of supervisory 

authority on another basis by 

proceeding in this manner. Therefore, 

the Bureau declines to establish an 

exclusion from coverage for entities 

subject to supervision under another 

provision of 12 U.S.C. 5514. 

Attorneys as Service Providers 

The Proposed Rule did not address 

the scope or manner of the Bureau’s 

supervisory authority over service 

providers to nonbank covered persons 

pursuant to 12 U.S.C. 5514. The 

Proposed Rule simply proposed 

procedures for use by the Bureau to 

subject a nonbank covered person to the 

Bureau’s supervisory authority under 12 

U.S.C. 5514(a)(1)(C), and observed that 

the Dodd-Frank Act vests the Bureau 

with supervisory authority over service 

providers to persons described in 12 

U.S.C. 5514(a)(1).15 Consequently, 

comments regarding which service 

providers the Bureau may supervise, 

and how, are beyond the scope of the 

final rule.16


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receiving the services. The Bureau notes that 

policies regarding the Bureau’s supervision of 

service providers are also beyond the scope of the 

final rule, which is limited to establishing 

procedures the Bureau intends to follow in 

implementing 12 U.S.C. 5514(a)(1)(C). 

17Unless otherwise noted herein, when 

discussing the Proposed Rule in this section-bysection analysis, the term ‘‘[initiating official]’’ will 

be used in place of the term ‘‘Deputy.’’ 

18Because the Assistant Director’s role in the 

process has been transferred to the Associate 

Director, this section-by-section analysis of the final 

rule refers to the ‘‘[Associate Director]’’ in place of 

the Assistant Director in discussing the functions of 

the Assistant Director under the Proposed Rule. 

19Under these specified 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). 

For the foregoing reasons, the Bureau 

adopts § 1091.100 as proposed with 

minor technical revisions for 

consistency. 

Section 1091.101 Definitions 

Section 1091.101 defines terms used 

in the final rule that are applicable to all 

of part 1091. If a term is defined in the 

Dodd-Frank Act, the final rule generally 

incorporates that definition, with 

clarifications and modifications as 

appropriate. The Bureau received 

comments on several definitions set 

forth in the Proposed Rule and 

discusses the comments below in the 

context of the definition to which they 

relate. 

Assistant Director. The Proposed Rule 

stated that the term ‘‘Assistant Director’’ 

means the Bureau’s Assistant Director 

for Nonbank Supervision or his or her 

designee. The proposed definition 

provided 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 

under the rule. The Bureau did not 

receive any substantive comments on 

this definition. 

However, subsequent to the issuance 

of the Proposed Rule, the Bureau 

reorganized its supervision offices into 

the Office of Supervision Policy and the 

Office of Supervision Examinations, 

each headed by an Assistant Director. 

As a result of that restructuring, there is 

no longer an Office of Nonbank 

Supervision. The Bureau has therefore 

revised the Proposed Rule to delete the 

reference to Nonbank Supervision, but 

otherwise adopts the proposed 

definition with only minor technical 

revisions for consistency. As revised, 

the term ‘‘Assistant Director’’ means an 

Assistant Director for Supervision, and 

thus refers to the Assistant Directors for 

both the Offices of Supervision Policy 

and Supervision Examinations. The 

definition under the final rule further 

provides that if there is no Assistant 

Director, the Associate Director may 

designate an alternative Bureau 

employee to perform the functions of an 

Assistant Director under part 1091. 

Associate Director. The Proposed Rule 

did not define the term ‘‘Associate 

Director’’ in large part because at the 

time the Proposed Rule was issued, the 

Bureau did not have an Associate 

Director of Supervision, Enforcement, 

and Fair Lending. An Associate Director 

has since been appointed. The Bureau 

therefore is revising the Proposed Rule 

to formally include the Associate 

Director in the procedures established 

by the final rule and to provide the 

Bureau with more flexibility in 

assigning personnel to handle the key 

functions under such procedures. As 

described in greater detail in the 

section-by-section analysis of 

§§ 1091.102–.108 below, the functions 

of the Assistant Director under the 

Proposed Rule have been transferred to 

the Associate Director, or his or her 

designee, under the final rule. Similarly, 

under the final rule, the functions of the 

Deputy under the Proposed Rule have 

been transferred to the Assistant 

Director or his or her designee, and the 

term ‘‘initiating official’’ is used to 

identify the Assistant Director or his or 

her designee as discussed in the sectionby-section analysis for the definition of 

the term ‘‘initiating official’’ below.17

This modification does not change the 

basic structure of the Proposed Rule, 

which designated separate Bureau 

personnel to perform the functions of (1) 

issuing a notice, (2) considering written 

and oral responses and issuing a 

recommended determination, and (3) 

rendering a final determination. 

For the reasons discussed above, the 

final rule defines the term ‘‘Associate 

Director’’ to mean the Associate Director 

of the Bureau for Supervision, 

Enforcement, and Fair Lending, or his or 

her designee. The definition under the 

final rule provides that if there is no 

Associate Director, the Director of the 

Bureau may designate an alternative 

Bureau employee to perform the 

functions of the Associate Director 

under part 1091.18

Bureau. The Proposed Rule stated that 

that the term ‘‘Bureau’’ means the 

Bureau of Consumer Financial 

Protection. The Bureau did not receive 

any substantive comments on this 

section and adopts it as proposed with 

minor technical revisions for 

consistency. 

Consumer. The Proposed Rule 

incorporated the definition of the term 

‘‘consumer’’ set forth in 12 U.S.C. 

5481(4). That provision defines 

‘‘consumer’’ as an individual or an 

agent, trustee, or representative acting 

on behalf of an individual. The Bureau 

did not receive any substantive 

comments on this definition and adopts 

it as proposed with minor technical 

revisions for consistency. 

Consumer financial product or 

service. The Proposed Rule incorporated 

the definition of the term ‘‘consumer 

financial product or service’’ set forth in 

12 U.S.C. 5481(5). The Proposed Rule 

provided 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: (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) 19 and is delivered, offered, 

or provided in connection with a 

consumer financial product or service 

referred to in (1). 

The Bureau received one comment 

recommending modification to the 

definition of the term ‘‘consumer 

financial product or service.’’ This 

commenter asserted that the definition 

of the term is ambiguous. The 

commenter stated that, as proposed, the 

definition fails to provide clear notice as 

to which products are subject to the 

definition and which products are not. 

The commenter explained that some of 

the financial products it offers are sold 

for both consumer and business uses. 

The commenter urged the Bureau to 

modify the definition of the term 

‘‘consumer financial product or service’’ 

to make clear that the Bureau intends to 

base reasonable-cause determinations 

solely on risk associated with products 

that are used exclusively for personal, 

household, or family purposes. 

The Bureau declines to adopt the 

commenter’s request, because the 

commenter’s proposed definition of the 

term ‘‘consumer financial product or 

service’’ would be narrower than the 

definition in the Dodd-Frank Act. The 

definition of that term in the Act 

includes not only financial products or 

services ‘‘offered or provided ‘for use 

by’ consumers primarily for personal, 

family or household purposes’’ but also, 

for certain types of financial products or 


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20 12 U.S.C. 5481(5). 

21The Bureau also notes that the treatment of 

service providers affiliated with nonbank covered 

persons under the final rule for purposes of 12 

U.S.C. 5514(a)(1)(C) is consistent with the treatment 

of such affiliated service providers for purposes of 

12 U.S.C. 5514(a)(1)(A), (B), (D), and (E). The same 

rationale that applies to treating affiliated service 

providers as covered persons under 12 U.S.C. 

5514(a)(1)(A), (B), (D) and (E) applies equally to the 

treatment of affiliated service providers under 12 

U.S.C. 5514(a)(1)(C). 

services, those ‘‘delivered, offered, or 

provided ‘in connection with’ a 

consumer financial product or service’’ 

of the first type.20 The Bureau is not 

aware of any reason that it should treat 

as less significant for purposes of 

determining the scope of its supervisory 

authority under 12 U.S.C. 5514(a)(1)(C) 

the risks to consumers that may arise in 

the offering or provision of the second 

type of consumer financial product or 

service. 

Accordingly, the Bureau adopts the 

definition of the term ‘‘consumer 

financial product or service’’ as 

proposed with minor technical revisions 

for consistency. 

Decisional employee. The Proposed 

Rule stated that the term ‘‘decisional 

employee’’ means any employee of the 

Bureau who has not engaged in: (1) 

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 

[Associate] Director; or (2) assisting the 

[Associate] Director in the preparation 

of a recommended determination. The 

Bureau received one comment on this 

definition expressing appreciation for 

the Bureau’s efforts to separate the 

functional roles of Bureau employees 

with respect to the procedures the 

Bureau will follow under 12 U.S.C. 

5514(a)(1)(C). The Bureau adopts the 

definition as proposed with minor 

technical revisions for consistency. 

Director. The Proposed Rule stated 

that the term ‘‘Director’’ means the 

Director of the Bureau or his or her 

designee. The Proposed Rule provided 

that if there is no Director the term shall 

mean a person authorized to perform 

the functions of the Director under part 

1091, or his or her designee. The Bureau 

did not receive any substantive 

comments on this definition and adopts 

it as proposed with minor technical 

revisions for consistency. 

Executive Secretary. The Proposed 

Rule stated that the term ‘‘Executive 

Secretary’’ means the Executive 

Secretary of the Bureau. The Bureau did 

not receive any substantive comments 

on this definition and adopts it as 

proposed with minor technical revisions 

for consistency. 

Initiating official. As noted in the 

section-by-section analysis of the term 

‘‘Associate Director’’ above, the 

Proposed Rule defined the term 

‘‘Deputy,’’ which in the final rule is 

replaced with the term ‘‘initiating 

official.’’ 

The final rule further revises the 

definition of the term ‘‘initiating 

official’’ to provide the Bureau with 

more flexibility in staffing the key 

functions of the rule with Bureau 

personnel. As revised, the term 

‘‘initiating official’’ means an Assistant 

Director of the Office of Supervision or 

Office of Examinations, or a Bureau 

employee designated to act as an 

‘‘initiating official’’ by an Assistant 

Director. The final rule states that if 

there is not an Assistant Director, the 

Associate Director may designate a 

Bureau employee to perform the 

functions of an initiating official under 

part 1091. 

The Bureau adopts the proposed 

definition with the revisions described 

above and with other minor technical 

revisions for consistency. 

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 Proposed Rule therefore 

excluded from the definition of the term 

‘‘nonbank covered persons,’’ persons 

described in 12 U.S.C. 5515(a) and 

5516(a), and provided that the term 

‘‘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 (1) if such affiliate 

acts as a service provider to such 

person. 

The Bureau received a comment 

asserting that the Bureau’s authority to 

supervise based on reasonable-cause 

determinations under 12 U.S.C. 

5514(a)(1)(C) should not extend to 

affiliates of nonbank covered persons 

that act as service providers. The 

commenter expressed concern about the 

potential for affiliated service providers 

being unaware of the possibility that 

they could be brought under the 

Bureau’s supervisory authority. The 

commenter asserted that affiliate service 

providers that do not themselves offer or 

provide consumer financial products or 

services would not anticipate that their 

work for their affiliated nonbank entities 

could subject them to Bureau 

supervision. 

The Bureau believes that it is 

appropriate to include affiliated service 

providers under the definition of the 

term ‘‘nonbank covered person.’’ This 

definition derives from the definition of 

the term ‘‘covered person’’ provided in 

12 U.S.C. 5481(6). By including 

affiliated service providers in the 

definition of the term ‘‘covered person,’’ 

Congress expressed its intention that 

these particular service providers be 

subject to the Bureau’s supervisory 

authority over covered persons as set 

forth in the Act.21 Accordingly, the 

Bureau declines to revise the definition 

of ‘‘nonbank covered person’’ to exclude 

affiliated service providers and adopts 

the definition as proposed with minor 

technical revisions for consistency. 

Notice of Reasonable Cause and 

Notice. The Proposed Rule stated that 

the terms ‘‘Notice of Reasonable Cause’’ 

and ‘‘Notice’’ mean a Notice issued 

under § 1091.102. The Bureau did not 

receive any substantive comments on 

this definition and adopts it as proposed 

with minor technical revisions for 

consistency. 

Person. The Proposed Rule 

incorporated the definition of the term 

‘‘person’’ set forth in 12 U.S.C. 5481(19). 

The Proposed Rule therefore stated that 

the term ‘‘person’’ means an individual, 

partnership, company, corporation, 

association (incorporated or 

unincorporated), trust, estate, 

cooperative organization, or other 

entity. The Bureau did not receive any 

substantive comments on this definition 

and adopts it as proposed with minor 

technical revisions for consistency. 

Respondent. The Proposed Rule 

stated that the term ‘‘respondent’’ means 

a person who has been issued a Notice 

of Reasonable Cause by the [initiating 

official] under § 1091.102. The Bureau 

did not receive any substantive 

comments on this definition and adopts 

it as proposed with minor technical 

revisions for consistency. 

Response. The Proposed Rule stated 

that the term ‘‘response’’ means the 

response to a Notice of Reasonable 

Cause filed by a respondent with the 

[Associate] Director under § 1091.105. 

The Bureau did not receive any 

substantive comments on this definition 

and adopts it as proposed with minor 

technical revisions for consistency. 

Subpart B—Determination and 

Voluntary Consent Procedures 

Subpart B sets forth the procedures 

relating to the Bureau’s process for 

determining, after notice to a person and 

a reasonable opportunity to respond, 


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22 12 U.S.C. 5511(b). 

whether there is reasonable cause to 

determine, based on complaints and 

information from other sources, that the 

respondent is a 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 therefore subject to the Bureau’s 

supervisory authority under 12 U.S.C. 

5514(a)(1)(C). The Bureau received 

several comments on the Proposed Rule 

that are generally applicable to subpart 

B. The Bureau addresses these 

comments prior to its analysis of the 

specific sections of subpart B. 

A number of commenters urged the 

Bureau to define the type of ‘‘risks’’ 

posed to consumers that could give rise 

to supervision under 12 U.S.C. 

5514(a)(1)(C). Other commenters asked 

the Bureau to define what constitutes 

‘‘reasonable cause’’ for purposes of the 

rule. A number of commenters 

requested that the Bureau revise the 

Proposed Rule to require the Bureau to 

verify complaints. A few commenters 

asked the Bureau to identify what 

‘‘information from other sources’’ it 

would consider in issuing a Notice of 

Reasonable Cause. One commenter 

asserted that the Dodd-Frank Act 

requires a formal hearing under the 

Administrative Procedure Act (APA) 

because determinations under 12 U.S.C. 

5514(a)(1)(C) are to be made by ‘‘order’’ 

of the Bureau. 

Define Risk 

As noted above, several commenters 

asserted that the Proposed Rule failed 

adequately to define the types of 

conduct that pose risks to consumers 

within the meaning of 12 U.S.C. 

5514(a)(1)(C). For example, two 

commenters urged the Bureau to clarify 

that prohibited ‘‘risks’’ include only 

inappropriate or undisclosed financial 

risks to consumers. Another commenter 

asserted that, although it may be 

‘‘impracticable to provide a laundry 

list’’ of products, services, or actions 

that might pose risks, even a nonexhaustive list would allow businesses 

to evaluate not only their compliance 

with existing law, but also compliance 

with the Bureau’s expectations. This 

commenter stated that, unlike other 

consumer protection laws and 

regulations that are codified, the Bureau 

will be creating new law as it goes 

along. The commenter argued that, 

without a clear understanding of what 

conduct is prohibited under the rule, it 

will be difficult to understand what 

conduct would subject nonbank covered 

persons to supervision. 

In a similar vein, another commenter 

stated that the ‘‘utilization of consumer 

financial products and services 

inherently involves risk’’ and that to 

avoid acting in an arbitrary and 

capricious manner, the Bureau must set 

forth clear and detailed descriptions of 

the process that it will follow and the 

factors that it will consider to determine 

whether a covered person’s conduct 

poses more risks to consumers than is 

inherently present in the product or 

transaction without that conduct. 

In objecting to the Bureau’s decision 

not to define or ask for comments 

regarding whether to define the terms 

‘‘risk determination’’ or ‘‘risk’’ in the 

Proposed Rule, a commenter asserted 

that any ‘‘risk paradigm’’ must be 

clarified with respect to the unfair, 

deceptive, or abusive acts or practices 

(UDAAP) provisions of the Dodd-Frank 

Act. This commenter asserted that 

because the hearing prescribed in this 

part may deem actions that do not 

violate Federal law to be risky, the 

Bureau must define the terms 

‘‘unauthorized,’’ ‘‘deceptive,’’ and 

‘‘abusive’’ before issuing a final rule. 

Regarding a related issue, one 

commenter requested that the Bureau 

define the term ‘‘risk’’ to include a safe 

harbor from a reasonable-cause 

determination under the final rule 

where a respondent can demonstrate 

reliance upon written reports or 

judgments issued by the Bureau. 

First, the Bureau notes that the phrase 

‘‘risks to consumers’’ is taken directly 

from 12 U.S.C. 5514(a)(1)(C). The phrase 

is not defined by that or any other 

provision of the Dodd-Frank Act, and 

neither the Dodd-Frank Act nor any 

other law requires the Bureau to define 

the phrase before implementing 12 

U.S.C. 5514(a)(1)(C). Second, the Bureau 

notes that the final rule is not a 

substantive conduct rule. The final rule 

neither prohibits any conduct nor 

requires any disclosures. It merely sets 

forth the procedures the Bureau intends 

to use in connection with the exercise 

of its existing authority under 12 U.S.C. 

5514(a)(1)(C). Among other things, the 

final rule establishes procedures for 

issuing Notices of Reasonable Cause, 

responding to such Notices, considering 

responses, and rendering 

determinations. Consistent with the 

narrow purpose of the Proposed Rule, it 

is beyond the scope of the final rule to 

establish substantive standards for what 

constitutes ‘‘risks to consumers.’’ 

The Bureau also believes that the 

procedures established by the final rule 

provide sufficient opportunity for 

respondents to address, and for the 

Bureau to evaluate, whether, consistent 

with 12 U.S.C. 5514(a)(1)(C), any 

particular covered person is subject to 

the Bureau’s risk-based supervision 

authority. As discussed below, a Notice 

under the final rule is required to 

contain a description of the basis for the 

Bureau’s assertion that there may be 

reasonable cause to determine that a 

respondent is engaging, or has engaged, 

in conduct that poses risks to 

consumers. A reasonable opportunity to 

respond to such Notice does not 

necessitate that the Bureau identify in 

advance of the issuance of a Notice the 

types of conduct that the Bureau has 

determined may pose risks to 

consumers. Accordingly, the Bureau 

declines commenters’ requests that the 

Bureau define the term ‘‘risks to 

consumers’’ for purposes of the final 

rule. 

For similar reasons, the Bureau 

declines the commenter’s request to 

include a safe harbor in the final rule 

from a reasonable-cause determination 

where a respondent can demonstrate 

reliance upon written reports or 

judgments issued by the Bureau. The 

Bureau believes that the final rule, 

consistent with 12 U.S.C. 5514(a)(1)(C), 

provides respondents with a reasonable 

opportunity to present to the Bureau, in 

a response, information supporting any 

asserted reliance on Bureau decisions or 

guidance. The Bureau observes that a 

covered person’s reliance on written 

reports or judgments issued by the 

Bureau would likely be a relevant 

consideration in evaluating risk. 

The Bureau notes that in evaluating 

risks to consumers for purposes of 12 

U.S.C. 5514(a)(1)(C), it expects to 

consider, consistent with the objectives 

set forth in the Dodd-Frank Act,22

whether a nonbank covered person has 

engaged in conduct that would pose 

risks to consumers because, for 

example, it involves potentially unfair, 

deceptive, or abusive acts or practices, 

or because the conduct otherwise 

potentially violates applicable Federal 

consumer financial law. 

Define Reasonable Cause 

Several commenters requested that 

the Bureau define the term ‘‘reasonable 

cause.’’ One commenter asserted that 

without such a definition, nonbank 

covered persons would have no 

guidance on how to comply with the 

law or how to protect consumers. 

Another commenter complained that 

although the term ‘‘reasonable cause’’ is 

vital to a full understanding of the 

Bureau’s authority to subject a nonbank 

to its supervision authority, this term is 

not defined by the rule. 

The Bureau does not believe that it is 

necessary to define the term ‘‘reasonable 

cause’’ in the final rule for three 


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23The factors for exercising the Bureau’s 

supervisory authority on a risk basis include: ‘‘the 

asset size of the covered person,’’ ‘‘the volume of 

transactions involving consumer financial products 

or services in which the covered person engages,’’ 

‘‘the risks to consumers created by the provision of 

such consumer financial products or services,’’ ‘‘the 

extent to which such institutions are subject to 

oversight by State authorities for consumer 

protection,’’ and ‘‘any other factors that the Bureau 

determines to be relevant to a class of covered 

persons.’’ 12 U.S.C. 5514(b)(2). 24 12 U.S.C. 5514(b)(2). 

reasons. First, the Bureau notes that the 

term ‘‘reasonable cause’’ is adopted in 

the final rule without revision from 12 

U.S.C. 5514(a)(1)(C). The term is not 

defined by that or any other provision 

of the Dodd-Frank Act, and neither the 

Dodd-Frank Act nor any other law 

requires the Bureau to define the term 

to implement 12 U.S.C. 5514(a)(1)(C). 

Second, the Bureau disagrees with the 

commenter that the lack of a definition 

of the term ‘‘reasonable cause’’ results in 

nonbank covered persons having ‘‘no 

guidance for compliance with the law 

and protection of consumers.’’ Nonbank 

covered persons and other persons are 

required, irrespective of the final rule, to 

comply with applicable Federal 

consumer financial law. Third, the 

purpose of the final rule is not to 

establish or describe the supervisory 

authority of the Bureau as it relates to 

nonbank covered persons described in 

12 U.S.C. 5514(a)(1)(C). The Bureau’s 

supervisory authority in this regard is 

established by 12 U.S.C. 5514(a)(1)(C), 

and a rule is not necessary to further 

delineate that authority. Rather, the 

purpose of the final rule is to provide 

transparency and ensure consistency 

regarding the procedures the Bureau 

intends to follow in exercising its 

authority under 12 U.S.C. 5514(a)(1)(C). 

12 U.S.C. 5514(b)(2)(A)–(E) Risk Criteria 

A couple of commenters argued that 

in making reasonable-cause 

determinations, the Bureau must 

consider the criteria enumerated in 12 

U.S.C. 5514(b)(2)(A)–(E) relating to riskbased supervision, something these 

commenters felt the Proposed Rule 

failed to do.23 One commenter asserted 

that the Proposed Rule did not 

adequately explain the interrelatedness 

of these criteria to each other and to the 

Proposed Rule. Another commenter 

noted that the Proposed Rule made no 

mention of these factors which, the 

commenter argued, Congress clearly 

intended to limit the exercise of the 

Bureau’s authority by focusing the 

Bureau’s efforts on the most problematic 

issues. 

The Bureau believes that these 

commenters have misinterpreted the 

scope and purpose of 12 U.S.C. 

5514(b)(2). That subsection describes 

how the Bureau must ‘‘exercise its 

authority under paragraph [(b)](1),’’ 24

which in turn authorizes the Bureau to 

supervise ‘‘persons described in 

subsection (a)(1).’’ The final rule does 

not address the exercise of the Bureau’s 

supervisory authority under subsection 

(b)(1). Rather, the final rule establishes 

procedures for implementing subsection 

(a)(1)(C) to bring a nonbank covered 

person under the Bureau’s supervisory 

authority. Nevertheless, although not 

expressly applicable to an (a)(1)(C) 

proceeding, the Bureau may consider 

the (b)(2) factors to the extent applicable 

in making a reasonable-cause 

determination. 

For the reasons discussed above, the 

Bureau declines to revise the Proposed 

Rule to define the term ‘‘reasonable 

cause’’ in the final rule. 

Consideration of Past Conduct in Risk 

Determinations 

A commenter stated that any assertion 

of supervisory authority by the Bureau 

based upon past (but not ongoing) riskposing activity should be required 

clearly to state the basis for the Bureau’s 

belief that such conduct is likely to 

recur. This commenter also 

recommended that there should be 

something akin to a ‘‘statute of 

limitations’’ where past conduct cannot 

be the basis for a Notice, and that 

activity more than three years in the 

past should not be a permissible basis 

for reasonable cause. 

Contrary to the commenter’s 

assertion, the Bureau does not believe 

that requiring the Bureau to state its 

belief that the risk-posing conduct 

giving rise to a proceeding is likely to 

recur is consistent with the Dodd-Frank 

Act. The plain language of 12 U.S.C. 

5514(a)(1)(C) covers conduct that a 

nonbank covered person ‘‘is engaging, 

or has engaged, in’’ that poses risks to 

consumers. The Bureau further believes 

that past conduct may pose risks to 

consumers, even if the identical conduct 

is not likely to recur, to the extent that 

such conduct indicates weak 

compliance systems that might lead to 

other potential law violations or harms 

to consumers. Additionally, the DoddFrank Act does not require, and the 

Bureau does not believe it is appropriate 

to adopt, the equivalent of a statute of 

limitations. Accordingly, the Bureau 

declines to revise the Proposed Rule to 

add the language suggested by the 

commenter regarding recurring activity 

or to impose a statute of limitations as 

requested by commenters. The Bureau 

notes that it intends to consider both 

past and present conduct of nonbank 

covered persons in evaluating whether 

there is reasonable cause to proceed 

under 12 U.S.C. 5514(a)(1)(C), but that 

in considering past conduct, it expects 

to take into account, among other 

factors, the length of time since conduct 

occurred. 

Verify Complaints and Describe 

Information From Other Sources 

The Bureau received a number of 

comments requesting that the Bureau 

verify any complaints used as the basis 

for issuing a Notice of Reasonable Cause 

or reaching a final determination under 

12 U.S.C. 5514(a)(1)(C). In expressing 

concerns about the use of complaints, a 

commenter stated that complaints 

provide ‘‘anecdotal, unverified, and 

incomplete accounts of consumer 

satisfaction with financial products and 

services.’’ This commenter asserted that 

‘‘complaints are an unreliable means of 

targeting supervision of financial 

institutions, particularly given the small 

number of complaints typically 

generated by smaller providers of 

financial services.’’ Another commenter 

stated that the Proposed Rule does not 

contain any ‘‘mechanism to ensure that 

only legitimate and verifiable 

complaints are considered.’’ The 

commenter stated that without a 

mechanism to systematically root out 

‘‘baseless complaints from legitimate 

ones,’’ businesses will be left 

defenseless against baseless complaints, 

and the Bureau will leave itself 

vulnerable to making decisions based on 

inaccurate information. The commenter 

specifically requested that the Bureau 

revise the Proposed Rule to state that in 

making reasonable-cause 

determinations, the Bureau will 

consider only complaints that, after 

‘‘reasonable inquiry’’ by the Bureau, are 

found to have merit. 

The Bureau received similar 

comments questioning the Bureau’s 

reliance on complaints as a basis for 

issuing reasonable-cause determinations 

on the ground that complaints do not 

accurately reflect an entity’s compliance 

with applicable law. A trade association 

for the debt collection industry stated 

that reviewing ‘‘consumer inquiries and 

complaints about the debt collection 

industry is not a proper, reasonable, or 

accurate gauge of the industry’s level of 

compliance with consumer protection 

laws, such as the [Fair Debt Collection 

Practices Act (FDCPA)].’’ This 

commenter was also concerned that 

complaints would be treated the same 

by the Bureau, regardless of their nature. 

The commenter noted the importance of 

providing adequate procedural and 

training measures to ensure that any 

data gathered at the outset clearly 


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distinguishes between complaints of 

FDCPA violations and complaints that 

do not assert law violations or simply 

inquire into the rights and 

responsibilities of collectors and 

consumers during the collection 

process. The commenter urged the 

Bureau to clarify how consumer 

complaints will be used in determining 

‘‘reasonable cause’’ under the rule. 

Similar comments expressed concern 

that that the Proposed Rule would not 

require the Bureau to consider the 

nature and severity of complaints. A 

commenter urged the Bureau to look not 

just at the number of complaints 

regarding a company, but also at the 

nature of the complaints submitted 

against a company. Voicing a related 

concern, another commenter asserted 

that there is a danger that consumers 

might equate the number of complaints 

against a nonbank covered person with 

the risks the person actually poses to 

consumers. 

The Bureau also received comments 

expressing concern that third parties 

may submit complaints to the Bureau on 

behalf of consumers. In this regard, a 

commenter stated that because the 

Bureau’s complaint system permits the 

submission of complaints by third 

parties on behalf of consumers, the 

system runs the risk of being inundated 

with complaints from ‘‘credit repair 

organizations, debt settlement 

companies, advocacy groups, 

politicians, competitors, and even blog 

sites dedicated to airing gripes about 

specific companies.’’ 

In emphasizing the potential for 

meritless complaints, a commenter 

noted that ‘‘the federal financial 

agencies estimated in the Accuracy and 

Integrity Rule that the percentage of 

frivolous or irrelevant disputes could 

range from 25 percent to 94 percent of 

all disputes [referring to complaints 

under the Fair Credit Reporting Act].’’ 

The commenter asserted that the 

procedure the Bureau uses to verify 

complaints it receives is insufficient, 

and therefore that the Bureau should not 

make a determination that a covered 

person is engaging, or has engaged, in 

conduct that poses risks to consumers 

based solely on the number of 

complaints or on unverified information 

from other sources. This commenter 

recommended that, instead, the Bureau 

should consider risks associated with 

specific products and acknowledge that 

the strong financial performance of 

some products during the recent crisis 

indicates lower consumer risks. 

Several commenters also expressed 

concern that the Proposed Rule did not 

adequately describe what may be used 

as ‘‘information from other sources’’ and 

requested the Bureau to describe these 

other sources of information, and/or 

provide examples of such sources. One 

commenter asked whether information 

from ‘‘other sources’’ might include 

privileged information. Another raised 

concern about using internet blogs, 

which the commenter deemed 

unreliable. As with complaints, 

commenters requested that the Proposed 

Rule be revised to require that 

information from other sources be 

verified by the Bureau. Lastly, the 

Bureau received a comment requesting 

guidance on how the Bureau will use 

data sources. 

In response to these comments, the 

Bureau notes that it intends to look at 

many factors relating to complaints and 

information from other sources in 

deciding whether there is a sufficient 

basis to initiate a proceeding under 12 

U.S.C. 5514(a)(1)(C). These factors may 

include, among others, the nature of the 

conduct relating to the complaints or 

other information, the severity of risk 

alleged, the number of consumers 

potentially affected, and the number of 

complaints or amount of information 

from other sources received. The Bureau 

is committed to using its limited 

resources where most needed and 

intends to consider complaints and 

information from other sources with the 

efficient use of Bureau resources in 

mind. 

At the same time, the Bureau notes 

that the purpose of the final rule is to 

establish procedures that the Bureau 

intends to use to exercise its authority 

under 12 U.S.C. 5514(a)(1)(C) through 

which a nonbank covered person might 

become subject to the Bureau’s 

supervisory authority. This process is 

not intended to determine whether a 

nonbank covered person has, in fact, 

violated applicable Federal consumer 

financial law or harmed consumers. The 

level of inquiry necessary to make a 

finding of a violation of law would 

instead occur, where consistent with 

Bureau prioritization and resources, in 

the course of supervisory activity such 

as an examination. It is not required 

under, and would defeat the purpose of, 

12 U.S.C. 5514(a)(1)(C), to mandate that 

the Bureau make a finding of a law 

violation before concluding that there is 

‘‘reasonable cause to determine’’ that a 

nonbank covered person’s conduct 

poses risks to consumers with regard to 

the offering or provision of consumer 

financial products or services. 

Finally, the Bureau notes that 

‘‘information from other sources’’ may, 

as the phrase suggests, come from a 

variety of places. Such information 

sources might include, among others, 

judicial opinions and administrative 

decisions. Given the potential range of 

sources, the Bureau does not believe it 

would serve a useful purpose to provide 

a list (even a nonexclusive list) of such 

sources in the final rule. 

For the reasons stated above, the 

Bureau declines to revise the Proposed 

Rule to require the Bureau to verify 

complaints or to identify ‘‘other sources 

of information’’ that form the basis for 

a Notice or a determination of 

reasonable cause. 

Request for Formal Adjudication Under 

the Administrative Procedure Act 

In response to the comment that 

determinations under 12 U.S.C. 

5514(a)(1)(C) require a hearing on the 

record, the Bureau notes that there is no 

statutory requirement that the process to 

exercise the Bureau’s authority under 12 

U.S.C. 5514(a)(1)(C) be a formal 

adjudication with a hearing on the 

record under the APA. Rather, 12 U.S.C. 

5514(a)(1)(C) states only that the Bureau 

must provide to a respondent ‘‘notice’’ 

and a ‘‘reasonable opportunity to 

respond.’’ Nor does Due Process 

necessitate formal adjudication with a 

hearing on the record in this context. As 

stated above, the sole consequence of a 

determination that an entity is a covered 

person that is engaging, or has engaged, 

in conduct that poses risks to consumers 

with regard to the offering or provision 

of a consumer financial product or 

service under 12 U.S.C. 5514(a)(1)(C) is 

that such person becomes subject to 

Bureau supervisory authority. 

Supervision alone does not impose any 

penalty on a person, does not deprive it 

of any property, and does not restrict its 

ability to engage in a viable business. 

The Bureau has wide discretion in 

establishing the procedures it will adopt 

to implement 12 U.S.C. 5514(a)(1)(C). 

The Bureau has sought to establish a 

process that meets the statutory 

requirement of providing a respondent 

with a notice and a reasonable 

opportunity to respond and that is also 

fair and efficient. The Bureau believes 

that a formal adjudication with a 

hearing on the record would 

unnecessarily add complexity to, 

lengthen, and add to the cost of, the 

process established by the final rule and 

declines to revise the Proposed Rule to 

require a formal adjudication with a 

hearing on the record. 

Confidentiality of Proceedings 

The Bureau received several 

comments regarding the confidentiality 

of the process established by the final 

rule. Some commenters expressed the 

view that all aspects of a proceeding 

should be confidential, while others 

urged the Bureau to make information 


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25See also 12 CFR 1070.2(q) (defining 

‘‘supervised financial institution’’ to mean a 

‘‘financial institution that is ‘or may become’ 

subject to the CFPB’s supervisory authority’’). 

26Section 1091.115 of the final rule appeared as 

§ 1091.112 in the Proposed Rule. 

27A final determination may result in an order 

bringing a person under the Bureau’s supervisory 

authority based on a reasonable-cause 

determination, or may result in a notice indicating 

that a person will not be so brought under the 

Bureau’s supervisory authority. 

28 12 U.S.C. 5514(a)(1)(C) (‘‘[T]he Bureau has 

reasonable cause to determine, by order, ‘after’ 

notice to the covered person and a reasonable 

opportunity for such covered person to respond. 

. . .’’ (emphasis added)). 

regarding the entire process available to 

the public. Preliminarily, the Bureau 

notes that proposed § 1091.105 relating 

to responses, stated 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).’’ After consideration of 

the comments regarding confidentiality, 

the Bureau agrees that all aspects of a 

proceeding under the final rule relate to 

the Bureau’s supervisory process and 

should be deemed confidential 

supervisory information under 12 CFR 

1070.2(i)(1).25 As noted below, the 

Bureau therefore revises proposed 

§ 1091.115 26 to add a new paragraph (c), 

which states: ‘‘In connection with a 

proceeding under this part, including a 

petition for termination under 

§ 1091.113, 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).’’ 

Section 1091.102 Issuance of Notice of 

Reasonable Cause 

Section 1091.102 relates to the 

issuance of a Notice of Reasonable 

Cause, which initiates a proceeding that 

culminates in a determination by the 

Director under § 1091.109 of the final 

rule, or a respondent’s voluntary 

consent to supervision by the Bureau.27

Section 1091.102 of the Proposed Rule 

provided that the [initiating official] is 

authorized to issue a Notice of 

Reasonable Cause stating that the 

Bureau may have reasonable cause to 

determine that a 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 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 received several 

comments on proposed § 1091.102 

discussed below. 

Concerns Regarding Use of ‘‘May Have’’ 

Reasonable Cause To Determine 

Statement in Notice 

The Bureau received a few comments 

expressing concern that, under the 

Proposed Rule, a Notice of Reasonable 

Cause would state that the Bureau ‘‘may 

have’’ reasonable cause to determine 

that a 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. 

One commenter interpreted this 

language in the Proposed Rule as not 

requiring the Bureau to articulate a 

‘‘reasonable cause’’ in a Notice. This 

commenter asserted that under the 

Proposed Rule it is enough that Bureau 

staff merely ‘‘suppose, surmise, or 

conjecture’’ that there might possibly be 

a ‘reasonable cause’ to assume risky 

conduct.’’ Similarly, another commenter 

argued that the ‘‘may have reasonable 

cause’’ standard is vague and not in 

accordance with the statute. 

In response, the Bureau notes that 

these commenters appear to be 

confusing the Bureau’s basis for issuing 

a Notice with the reasonable cause 

necessary to support a final 

determination of reasonable cause under 

12 U.S.C. 5514(a)(1)(C). The Bureau 

clarifies that the initiating official issues 

a Notice indicating that there ‘‘may’’ be 

reasonable cause to determine that a 

person’s activities pose risks to 

consumers but that a reasonable-cause 

determination will not be made until 

the Director makes a final 

determination. At the final stage of the 

process set forth in the final rule, the 

Director will issue a final determination 

indicating that there ‘‘is’’ reasonable 

cause to determine that a nonbank 

covered person’s activities pose risks to 

consumers, or a notice stating that the 

person will not be made subject to the 

Bureau’s authority. The Dodd-Frank Act 

provides that the Bureau’s reasonablecause determinations under 12 U.S.C. 

5514(a)(1)(C) must follow notice and a 

reasonable opportunity to respond.28

Accordingly, the Bureau believes it 

would not be appropriate to state 

unequivocally in a Notice that the 

Bureau ‘‘has reasonable cause to 

determine’’ that the respondent’s 

conduct poses risks to consumers. The 

Bureau therefore declines to revise the 

proposed content of the Notice to state 

that the Bureau ‘‘has,’’ as opposed to 

‘‘may have,’’ reasonable cause to 

determine that an entity’s conduct poses 

risks to consumers. 

The Bureau also received a comment 

requesting that the Bureau meet with a 

respondent prior to issuing a Notice to 

that respondent. The commenter 

recognized that this may not be feasible 

in every instance. The Bureau agrees 

with the commenter that meeting with 

a potential respondent prior to sending 

out a Notice may not be feasible in 

some, and perhaps many, instances, and 

as stated above, one of the purposes of 

the final rule is to establish uniform 

procedures applicable to all persons 

potentially subject to the final rule that 

the Bureau intends to follow in 

implementing its authority under 12 

U.S.C. 5514(a)(1)(C). Moreover, the 

Bureau believes that the commenter’s 

suggestion would add an additional 

layer to the process established by the 

final rule that would unnecessarily 

lengthen and complicate the process. 

Accordingly, the Bureau declines to 

revise the Proposed Rule to adopt a 

provision requiring the Bureau to meet 

with a prospective respondent prior to 

issuing a Notice. 

For the reasons discussed above, the 

Bureau adopts § 1091.102 as proposed 

with minor technical revisions for 

consistency. 

Section 1091.103 Contents of Notice 

Section 1091.103 details the required 

contents of a Notice of Reasonable 

Cause. To ensure that a respondent 

would have a reasonable opportunity to 

address the substance of a Notice, 

proposed § 1091.103 provided 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. 

Proposed § 1091.103 further stated 

that a Notice must contain a statement 

informing a respondent of how to file a 

timely response, and of the required 

contents of a response. Under proposed 

§ 1091.103, a Notice would be required 

to 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 form of consent agreement 

attached to a Notice served on a 

respondent. Proposed § 1091.103 further 

provided that a Notice shall inform a 

respondent that failure to respond, as 

set forth in a Notice, may result in a 

determination by the Director without 


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29 It is the Bureau’s policy to place complaints in 

the public database 15 days after forwarding the 

complaint to the company in question. 77 FR 

37558, 37568 (June 22, 2012). Thus, typically the 

company should already have copies of the 

complaints that the Bureau might rely on in issuing 

a Notice. 

further opportunity for the respondent 

to respond. As set forth in proposed 

§ 1091.103, a Notice would also inform 

a respondent of the various timelines 

associated with the process. 

The Bureau received a number of 

comments on the proposed contents of 

a Notice and related issues discussed 

below. 

Information in, and Items 

Accompanying, a Notice 

Several commenters recommended 

that a Notice should include copies of 

the complaints collected by the Bureau 

and/or the information from other 

sources that were used in the decision 

to issue the Notice. One commenter 

stated that the Bureau should include in 

the Notice a statement detailing what 

specific risk to consumers is under 

consideration, what conduct the 

respondent is engaging in, or has 

engaged in, that the Bureau alleges 

poses risks to consumers, and how those 

risks are increased by the respondent’s 

alleged conduct. This commenter asked 

the Bureau to release a model Notice. 

Another commenter recommended that 

the Bureau provide copies of underlying 

complaints with a Notice, asserting that 

without a copy of the underlying 

complaint, ‘‘a respondent wishing to 

object or to accede to the notice will 

have limited information upon which to 

make a reasonably informed decision.’’ 

Some other commenters asked the 

Bureau to revise the Proposed Rule to 

provide greater detail regarding the 

items relied on to issue a Notice of 

Reasonable Cause. One commenter 

recommended that the Bureau include 

detailed information regarding any 

consumer complaints, in addition to 

copies of the complaints, together with 

the Notice of Reasonable Cause. Another 

commenter urged the Bureau to require 

that the Notice state with specificity the 

basis for the Bureau’s assertions and 

include an inventory of any complaints 

and other information relied upon by 

the Bureau. This commenter asserted 

that such a showing is crucial to a 

respondent’s ability to prepare 

adequately its response and assemble 

‘‘documents, records or other evidence’’ 

in support of its position. 

Similarly, a commenter requested that 

the Bureau explain how much detail it 

expects to provide in the Notice, as well 

as the level of detail it expects to receive 

in response. The commenter asked the 

Bureau to clarify whether it intends to 

include in the Notice detailed 

information regarding the consumer 

complaints, if any, on which the Bureau 

bases its assertions, and whether it will 

provide copies of any such complaints 

together with the Notice of Reasonable 

Cause. The commenter further asked 

whether the Bureau expects respondents 

specifically to address each complaint 

and any resolution thereof in its 

response. 

The Bureau also received several 

comments taking issue with proposed 

§ 1091.103(c), which stated that 

‘‘[n]othing 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.’’ One commenter 

stated that this provision ‘‘seems 

unreasonable,’’ and ‘‘in the interest of 

open and honest communication,’’ 

urged the Bureau to ‘‘be willing to share 

any and all relevant information with 

respondents.’’ Another commenter 

asserted in connection with this 

provision that the good faith efforts of 

nonbank covered persons will continue 

to be frustrated by the lack of clearly 

defined requirements and expectations 

in the rule. Similarly, the Bureau 

received a comment suggesting a 

specific revision to § 1091.103(c) to 

require the Bureau to produce to a 

respondent documents or information 

‘‘as otherwise relevant, material and 

necessary for respondent to prepare its 

response to the Notice.’’ This 

commenter encouraged the Bureau to 

include in the final rule a process by 

which a respondent, upon receiving a 

Notice of Reasonable Cause, may 

request additional relevant information 

from the Bureau and requested the 

establishment of a reasonable time 

frame in which the Bureau must provide 

such additional information or, 

conversely, state with specificity the 

reason for its denial of the request. 

The Bureau does not believe that a 

reasonable opportunity to respond 

requires the Bureau to provide copies of 

all complaints or information from other 

sources relied on by the Bureau in 

issuing a Notice along with a Notice. 

Respondents should typically already 

have, or have access to, copies of any 

complaints, pleadings, judicial 

opinions, or independent studies on 

which the initiating official may rely in 

issuing a Notice.29 Other information 

that the initiating official might rely on 

in issuing a Notice could contain 

confidential or other personally 

identifiable information regarding 

consumers or others. 

For the same reasons, the Bureau does 

not believe it is necessary or appropriate 

to provide respondents with the right to 

request additional information from the 

Bureau. The final rule, moreover, 

prohibits discovery and permitting such 

requests would not be consistent with 

the informal, expeditious nature of the 

proceedings. Thus, the Bureau rejects 

the commenter’s request that the Bureau 

add language to § 1091.103(c) requiring 

the Bureau to produce items ‘‘as 

otherwise relevant, material and 

necessary for respondent to prepare its 

response to the Notice.’’ 

Nevertheless, after consideration of 

the comments received, the Bureau 

agrees that it may be helpful to 

respondents to include in a Notice more 

information on items that the initiating 

official relied on in issuing a Notice 

than was required under the Proposed 

Rule. Thus, the Bureau revises the 

Proposed Rule to require under the final 

rule that the Notice set forth not just a 

‘‘description of the basis’’ for, but also 

a ‘‘summary of the documents, records, 

or other items relied on,’’ by the 

initiating official in issuing a Notice. 

Accordingly, as finalized, 

§ 1091.103(a)(1) reads: ‘‘A Notice of 

Reasonable Cause shall contain the 

following: 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.’’ 

Statement of Verification 

Another commenter suggested that a 

Notice include a ‘‘statement of 

verification undertaken by the Bureau 

. . . of . . . the specific harms and risks 

that the Bureau believes the entity’s 

activities pose to consumers,’’ which 

should also ‘‘state the basis for the 

Bureau’s belief that such conduct will 

recur if the assertion is based upon past 

but not ongoing activities.’’ 

Under the final rule, the Notice must 

describe the basis for the assertion that 

the Bureau may have a ‘‘reasonable 

cause to determine’’ that the conduct of 

a nonbank covered person poses risks to 

consumers and provide a summary of 

the documents, records, or other items 

relied on by the initiating official in 

issuing a Notice. Accordingly, the 

Notice would describe the risks the 

Bureau believes the respondent’s 


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30The Bureau takes no position here whether and 

in what circumstances it would be obligated under 

the Fifth Amendment to provide additional 

information to recipients of notices initiating a civil 

investigation or supervisory activity. 

31See also 12 CFR 1070.2(q) (defining 

‘‘supervised financial institution’’ to mean a 

‘‘financial institution that is ‘or may become’ 

subject to the CFPB’s supervisory authority’’). 

32 In some instances, FRCP 4, by reference to 

applicable state law, may allow service by 

Registered Mail, next-day courier, or other means 

not explicitly provided for in FRCP 4. 33 12 CFR 308.11(c). See also 12 CFR 263.11(c)(2) 

(Federal Reserve System, Rules of Practice); 12 CFR 

19.11(c)(2) (Office of the Comptroller of the 

Currency (OCC), Uniform Rules of Practice and 

Procedure); 12 CFR 1081.113(d) (Bureau Rules of 

Practice for Adjudication Proceedings). 

conduct poses to consumers as 

requested by the commenter. However, 

for the reasons discussed in the sectionby-section analysis of § 1091.102 above, 

the Bureau declines to include 

provisions in the final rule requiring the 

Bureau to verify specific harms and 

risks on which a Notice is based, or to 

conclude where past conduct forms the 

basis for a Notice that such conduct is 

likely to recur. 

Notice Regarding Parallel Proceedings 

Another commenter mistook the 

Proposed Rule’s Notices of Reasonable 

Cause for notices that might be given at 

the outset of a civil investigation or 

examination. Accordingly, this 

commenter claimed that the Bureau 

should, in accordance with the 

commenter’s interpretation of the Fifth 

Amendment and understanding of the 

approach taken by the SEC, revise the 

Proposed Rule to require that a Notice 

of Reasonable Cause ‘‘inform civil 

investigative targets of their 

Constitutional rights.’’ Contrary to the 

commenter’s assumption, a Notice 

would not be used to initiate a civil 

investigation or an examination. A 

Notice, rather, would commence a 

proceeding solely to determine whether 

a nonbank covered person would be 

made subject to the Bureau’s 

supervisory authority on the basis of a 

reasonable-cause determination. 

Moreover, a person receiving a Notice 

would not be compelled to respond or 

otherwise act in response to such a 

Notice. Accordingly, the Fifth 

Amendment concerns raised by the 

commenter are not relevant to the 

issuance of Notices of Reasonable Cause 

under the Proposed Rule. In any event, 

nothing in the Proposed Rule would 

preclude the Bureau from providing 

additional information to those persons 

who receive a Notice of Reasonable 

Cause.30 The Bureau therefore declines 

to revise the Proposed Rule as 

recommended by the commenter. 

Revision to Address Confidentiality of 

Proceedings 

As discussed above, after 

consideration of the comments 

regarding confidentiality, the Bureau 

agrees that all aspects of a proceeding 

under the final rule relate to the 

Bureau’s supervisory process and 

therefore qualify as confidential 

supervisory information under 12 CFR 

1070.2(i)(1).31 Consistent with new 

§ 1091.115(c), the Bureau has therefore 

revised proposed § 1091.103(a) to add a 

new subparagraph (vii), which states: 

‘‘In connection with a proceeding under 

this part, including a petition for 

termination under § 1091.113, 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).’’ 

Section 1091.104 Service of Notice 

Section 1091.104 sets forth the 

procedures governing service of a Notice 

of Reasonable Cause. Proposed 

§ 1091.104 provided that a Notice of 

Reasonable Cause 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 § 1091.104 further 

required that the [initiating official] 

submit a copy of a Notice and any 

attached documents, records or other 

items to the [Associate] Director, who 

shall proceed as set forth in the 

Proposed Rule. 

Rule 4 of the Federal Rules of Civil 

Procedure 

The Bureau received several 

comments pertaining to the proposed 

service requirements. One commenter 

recommended that the Bureau use the 

rules for service set forth in Rule 4 of 

the Federal Rules of Civil Procedure 

(FRCP 4). Specifically, this commenter 

objected to service of notice on an 

administrative employee or other person 

at a respondent’s office, or through 

Certified Mail or a third-party 

commercial carrier. This commenter 

also asserted that the Bureau should 

enable entities to designate agents and 

officers to receive service of notice, 

which is allowed under FRCP 4. 

The Bureau believes that service by 

the methods set forth in proposed 

§ 1091.104 is reasonably calculated to 

provide to a respondent the Notice 

commencing a proceeding under the 

Proposed Rule. The manner of service 

proposed incorporates many of the 

provisions of FRCP 4. For example, in 

the case of a corporation or other 

business entity, the Proposed Rule 

incorporates the provision of FRCP 4 

that permits service by delivery to an 

officer, managing or general agent, or 

other agent authorized by appointment 

or law to receive such a notice. In most 

instances this will mean serving an 

entity’s registered agent. 

Where the Proposed Rule differs from 

FRCP 4, such as by permitting service 

by Registered Mail or next-day courier, 

the Proposed Rule is consistent with the 

procedural rules of practice of other 

Federal bank regulators.32 For example, 

the Federal Deposit Insurance 

Corporation (FDIC) Rules of Practice 

and Procedure permit service on a 

person that has not appeared in a 

proceeding by the following methods: 

‘‘(i) By personal service; (ii) If the 

person to be served is an individual, by 

delivery to a person of suitable age and 

discretion at the physical location 

where the individual resides or works; 

(iii) If . . . a corporation or other 

association, by delivery to an officer, 

managing or general agent, or to any 

other agent authorized by appointment 

or by law to receive service . . . and the 

statute so requires, by also mailing a 

copy to the party; (iv) By registered or 

certified mail addressed to the party’s 

last known address; or (v) By any other 

method reasonably calculated to give 

actual notice.’’ 33

Service on Persons Registered With the 

Bureau 

Additionally, two commenters 

requested clarification on what it meant 

to be registered with the Bureau under 

§ 1091.104(a)(3). The Bureau notes that 

the provision in the Proposed Rule 

stating that ‘‘[n]otice may be served on 

a person currently registered with the 

Bureau’’ by using ‘‘the most recent 

business address shown on the person’s 

registration form,’’ was included to 

permit such service if the Bureau adopts 

a rule requiring nonbank covered 

persons to register with the Bureau. The 

Bureau anticipates that to the extent a 

registration rule is adopted, a person 

required to register with the Bureau 

would be required to have its business 

address on file with the Bureau. In such 

a case, the Bureau believes that it 

should be able to rely on the address 

provided by a registrant in serving a 

Notice. Although a registration rule has 

not been adopted, the Bureau is 

including this provision in the final rule 

to avoid the need to revise the final rule 


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34See 12 CFR 308.19(a) (FDIC Rules of Practice 

and Procedure); 12 CFR 263.19(a) (Federal Reserve 

System Rules of Practice for Hearings); 12 CFR 

19.19(a) (OCC Rules of Practice) see also 12 CFR 

1081.201(a) (Bureau’s Rules of Practice for 

Adjudication Proceedings, providing a 14-day 

deadline to submit an answer to a notice of 

charges). 

35The Bureau notes for example that, as 

distinguished from its rules of practice, the Board 

of Governors of the Federal Reserve provides 30 

days for submitting a written response to a 

preliminary ‘‘control’’ determination under the 

Bank Holding Company Act. Control 

determinations often involve complex issues of fact 

and law. See 12 CFR 225.31(b) (providing that if a 

person wishes to contest a preliminary control 

determination the person may file a response 

within 30 days). 

to add such a provision should the 

Bureau adopt a registration rule in the 

future. 

Waiver of Service 

The same two commenters also 

requested clarification on what a waiver 

of service under § 1091.104(a)(6) would 

entail and requested that the Bureau 

require waivers to be in writing and 

given by persons ‘‘upon whom the 

Notice would be served.’’ First, to 

clarify what waiver entails under 

proposed § 1091.104(a)(6), a waiver of 

service would permit the Bureau to 

provide a Notice by ‘‘First Class Mail or 

other reliable means.’’ There may be a 

number of ‘‘other reliable means’’ to 

provide a Notice, but one example 

would be delivering it to a designated 

person not otherwise authorized to 

accept service. Second, the Bureau 

agrees with the commenters’ suggestion 

that service should be waived only in 

writing, and by the person ‘‘upon whom 

the Notice would be served.’’ 

Accordingly, to make this explicit, the 

Bureau has revised proposed 

§ 1091.104(a)(6) to read: ‘‘In lieu of 

service as set forth in paragraph (a)(1) or 

(a)(2) of this section, the person may be 

provided a copy of a Notice by First 

Class Mail or other reliable means if a 

written waiver of service is obtained 

from the person to be served. In the case 

of a respondent that is not a natural 

person, a written waiver may be 

provided by an officer, managing or 

general member, or partner authorized 

to represent the respondent.’’ 

For the reasons discussed above, the 

Bureau adopts § 1091.104 as proposed, 

other than the revisions to subsection 

(a)(6) relating to waiver of service as 

discussed above and other minor 

technical revisions for consistency. 

Section 1091.105 Response 

Section 1091.105 sets forth the 

requirements for responding to a Notice 

of Reasonable Cause, including the time 

limit to respond, content of a response, 

default for failure to respond, and 

waiver of the right to submit items or 

make arguments not included in the 

response. The Bureau received a 

number of comments on proposed 

§ 1091.105. 

Time Limit 

Proposed § 1091.105 provided that 

any response must be filed within 20 

days of service of a Notice. The Bureau 

received several comments requesting a 

longer time period to file a response, 

ranging from a response deadline of 30 

to 120 days. Generally these 

commenters asserted that a 20-day 

response deadline is not sufficient for a 

respondent to respond to a Notice. One 

commenter suggested either using the 

Federal Rules of Civil Procedure as a 

model for setting deadlines, or the 

method prescribed by the Bureau for 

contesting consumer complaints (20 

days to provide notice that the entity 

will challenge a complaint, and 60 days 

to provide a complete response). 

Another commenter stated that 20 days 

is an unreasonably short time limit 

given that there is no limit on the 

content, accuracy, and/or length of a 

Notice of Reasonable Cause. Another 

commenter asserted that responding to 

a Notice of Reasonable Cause would 

require engaging counsel, locating and 

reviewing potentially relevant 

documents, interviewing personnel, 

drafting a written response, compiling 

documents to accompany the response, 

internally approving the response, and 

submitting the response—activities that 

the commenter asserted could not be 

completed in 20 days. One commenter 

proffered that an extended period is 

needed to facilitate collection of data 

and material from remote locations. A 

few commenters implied that it would 

be unfair if the Bureau could review a 

response for longer than a respondent 

had to prepare the response. One 

commenter asserted that 20 days is too 

short given that this period of time 

would include any intermediate 

Saturday, Sunday, and Federal holiday. 

Still other commenters asserted that it 

would be unfair to set a time limit 

shorter than the limits for responding to 

government subpoenas, pre-examination 

audits, civil discovery requests, or 

notices of proposed rulemaking. Finally, 

one commenter asserted that the 20-day 

window did not provide for an 

opportunity to be heard at a meaningful 

time and in a meaningful manner. In a 

related comment, a commenter 

requested a mechanism by which the 

response time could be restarted if the 

Bureau raised a new material issue or 

assertion after issuance of a Notice. 

In proposing a 20-day response time, 

the Bureau attempted to ensure a fair 

process that provides respondents a 

reasonable opportunity to respond, but 

that is also efficient and streamlined. 

The Bureau notes that a 20-day response 

period is consistent with the rules of 

practice of other Federal banking 

regulators for certain administrative 

actions that impose similar burdens on 

the respondent in terms of consultation 

with counsel, review and compilation of 

documents, and preparation of a written 

response.34 The Bureau, however, 

understands the commenters’ concerns 

that 20 days to respond to a Notice may 

not be sufficient in some instances and 

believes that the response time can be 

moderately increased without 

undermining the goal that the process 

be streamlined and efficient. Thus, the 

Bureau is adopting a revision to the 

Proposed Rule extending the response 

time from 20 to 30 days. The Bureau 

believes that 30 days should generally 

provide a respondent sufficient time to 

respond.35 Moreover, the final rule 

provides certain flexibility in response 

time. Section 1091.115(a) of the final 

rule adopts the proposed provision 

stating that an extension of a time limit 

may be granted at the discretion of the 

Associate Director or Director, as 

applicable, for good cause shown, and 

the Bureau has deleted a provision in 

the Proposed Rule that directed the 

Associate Director or Director to 

strongly disfavor extension requests. 

The Bureau believes that the increase in 

the response deadline from 20 to 30 

days, coupled with the increased 

flexibility for the Associate Director or 

Director to grant an extension for good 

cause shown, should address the 

commenters’ concerns and provide 

respondents sufficient time to respond 

to a Notice without undermining the 

goal of establishing a streamlined and 

efficient process for making 

determinations under 12 U.S.C. 

5514(a)(1)(C). Finally, the Bureau agrees 

with the comment that additional time 

would be warranted were the Bureau to 

raise a new material basis for issuing a 

Notice that was not fairly within the 

scope of the initial Notice. The Bureau 

believes, however, this result was 

evident under the Proposed Rule, which 

contemplates that a response be 

responsive to the Notice. Thus, the 

Bureau does not believe that a revision 

to the Proposed Rule is necessary to 

address this comment. 

Content of Response 

Section 1091.105(b) sets forth the 

requirements relating to the content of 

a response. Proposed § 1091.105(b) 

provided that a respondent could 


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respond to a Notice of Reasonable Cause 

either by contending that it 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 

(proposed § 1091.105(b)(1)–(2)), or by 

voluntarily consenting to the Bureau’s 

supervisory authority under 12 U.S.C. 

5514 (proposed § 1091.105(b)(5)). Where 

a respondent wished to contest the 

assertions in a Notice, proposed 

§ 1091.105(b) required 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; (3) include 

any request for a supplemental oral 

response to present oral arguments; and 

(4) 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. 

One commenter requested that the 

Bureau permit entities to request a 

supplemental oral response after 

submitting the written response but 

within 14 days of that submission. The 

Bureau believes that the extension of the 

written response period from 20 to 30 

days sufficiently satisfies the 

commenter’s request for an extension of 

time to request a supplemental oral 

response. Under the commenter’s 

requested time frame, a respondent 

would have 34 days to determine 

whether it wanted a supplemental oral 

response, while under the final rule, the 

respondent will have 30 days to make 

this determination. Therefore the 

Bureau declines to revise the final rule 

to allow respondents to submit a request 

for a supplemental oral response after 

submitting a written response. 

Additionally, in response to 

comments relating to the confidentiality 

of the overall process established by the 

final rule, as discussed in the sectionby-section analysis of § 1091.103(a), the 

Bureau has added § 1091.115(c), which 

addresses the issue of confidentiality for 

the entire rule. Consequently, the 

Bureau has deleted from the final rule 

the second sentence of proposed 

§ 1091.105(b)(2) relating to confidential 

supervisory information, which has 

been rendered superfluous by the 

addition of § 1091.115(c) to the final 

rule. 

Further, the Bureau notes that it is 

revising proposed § 1091.105(b)(3) to 

permit respondents to request either an 

in-person or telephonic supplemental 

oral response in the written response. 

The Proposed Rule had provided only 

for a telephonic supplemental oral 

response unless the [Associate] Director 

directed that it be conducted in some 

other manner. The Bureau is making 

this revision to address comments 

received regarding proposed § 1091.106 

discussed below. 

Waiver of Right To File Response 

Proposed § 1091.105(c) provided that 

the failure of a respondent to file a 

response within the required time 

period would constitute a waiver of the 

respondent’s right to file a response and 

would authorize the Director to issue a 

decision and order. 

One commenter asserted that the 

compressed 20-day time frame to 

respond and the provision for default 

for failing to respond could unduly 

disadvantage persons or entities that 

least expect to be subject to federal 

financial services regulation. This 

commenter urged the Bureau to give 

appropriate regard to procedural 

fairness. The Bureau has carefully 

considered procedural fairness and 

believes that the waiver provision is 

appropriate. A key purpose of 

establishing procedures to implement 

12 U.S.C. 5534(a)(1)(C) is to set 

appropriate deadlines to allow for an 

efficient resolution of a matter. The 

Bureau believes that a reasonable and 

fair way to enforce the Notice-response 

deadline is to make the consequence of 

failing to respond within the allotted 

time the waiver of the right to respond. 

Moreover, the removal of the waiver 

provision from the final rule could 

undermine the process established by 

the rule by effectively rendering the 

timing requirements unenforceable. The 

Bureau further believes that the increase 

in the response time period under the 

final rule from 20 to 30 days, as well as 

the revision to the final rule to give the 

Associate Director or Director increased 

flexibility to grant an extension for good 

cause shown, as discussed above, 

should alleviate the commenter’s 

concern. 

Waiver of Right To Raise an Issue or 

Submit Items 

Proposed § 1091.105(d) stated that the 

failure to raise timely 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 of the matter and 

in any petition for judicial review. 

Several commenters objected to this 

waiver provision; one stated that the 

provision ‘‘violates fundamental 

fairness,’’ another stated that it is ‘‘not 

equitable.’’ A few commenters 

expressed concern that this provision, 

coupled with the 20-day response time 

limit, was too onerous and could have 

serious consequences for respondents. 

One commenter, while generally 

agreeing with the need for a waiver 

provision, stated that it is possible that 

information relevant to the Bureau’s 

evaluation may come to the 

respondent’s attention subsequent to 

submitting the initial response even 

when the respondent has, for example, 

conducted appropriate due diligence in 

compiling documents, searching 

electronic databases, and conducting 

interviews. This commenter urged the 

Bureau to revise § 1091.105(d) by 

including a provision stating that ‘‘a 

respondent shall not be deemed to have 

waived its right to submit relevant 

information when a respondent can 

demonstrate to the satisfaction of the 

[Associate] Director or the Director that 

such information could not have 

reasonably been discovered at the time 

that petitioner submitted its [response to 

a Notice].’’ Another commenter asked 

the Bureau to extend the time period for 

responding and/or permit extensions of 

time or allow respondents to submit 

supplemental materials within a 

reasonable time after a supplemental 

oral response, if requested. Similarly, 

one commenter expressed the concern 

that a respondent failing to raise an 

issue within the proposed 20-day 

response deadline would risk waiving 

the ability to defend itself on the issue. 

This commenter requested a longer 

process that would require four, instead 

of two, steps: the Notice of Reasonable 

Cause, the response, a Bureau answer 

setting forth its analysis of the response, 

and a respondent’s reply to that 

subsequent Bureau answer—together 

with an additional 20 or 30 days added 

to the deadline. 

As stated earlier, the final rule sets 

forth a process only for determining 

whether the Bureau has supervisory 

authority over a person pursuant to 12 

U.S.C. 5514(a)(1)(C). A determination 

resulting in an order for supervision 

under the final rule does not constitute 

a finding of a violation of Federal 

consumer financial law. As such, the 

ramifications of the waiver provision are 

limited. By failing to raise an issue or 

argument in a response, covered persons 

do not waive under the final rule any 

right to use arguments or evidence to 

rebut a claim of a violation of law 

during the supervision process or any 

potential collateral enforcement action. 

As stated in the supplementary 

information to the Proposed Rule, the 

Bureau continues to believe that the 

proposed waiver provision is necessary 


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36 77 FR 31230 (May 25, 2012). 

37 33 Charles Alan Wright & Charles H. Koch, Jr., 

Federal Practice and Procedure § 8398 (2d ed.). 

38 33 Charles Alan Wright & Charles H. Koch, Jr., 

Federal Practice and Procedure § 8398 (2d ed.). 

39The Bureau notes that the procedures set forth 

in the final rule do not provide for an 

administrative appeal process, and that such a 

process is neither required under the APA nor 

necessary to provide respondents a reasonable 

opportunity to respond. 

40 12 CFR 308.142(b)(2). 

41 12 U.S.C. 5514(a)(1)(C). 

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. 

The waiver is intended to 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.36 Including 

the waiver provision is within the 

Bureau’s broad discretion in formulating 

the informal procedures set forth in the 

final rule. Consequently, the Bureau 

declines to delete the waiver provision. 

The Bureau believes, however, that by 

increasing the response time limit under 

the final rule from 20 to 30 days and by 

revising the final rule to provide 

increased flexibility for the Associate 

Director or Director to grant an 

extension for good cause shown, it has 

reasonably addressed the commenters’ 

core concerns. Nor is the Bureau 

persuaded by the commenters’ 

contention that an exception to the 

waiver provision is necessary where 

information relevant to the Bureau’s 

evaluation purportedly could not have 

reasonably been discovered until after 

the initial response is provided. The 

documents, records, or other items that 

respondents may wish to rely on are 

types that should reasonably be 

available to respondents, such as 

product or service information, 

promotional materials, transactional, 

account, or financial information, and 

policies or procedures. Additionally, the 

Bureau believes that the recommended 

additional layers of procedure requested 

by commenters (i.e., a Bureau answer to 

a response and a respondent’s reply to 

such answer) is not necessary to reduce 

the risk of waiver and would needlessly 

complicate and lengthen the informal 

process set forth in the final rule. 

Expressing a different concern, a 

commenter stated that the waiver 

provision incentivizes respondents to 

submit more information than is 

necessary to preserve arguments, 

frustrating efficiency. The Bureau 

believes that the commenter overstates 

the risks that the waiver provision will 

cause respondents to submit extraneous 

or unnecessary information in response 

to a Notice. The Bureau believes that 

respondents generally will include with 

their responses such records, 

documents, or other items that they 

believe relevant to supporting their 

substantive positions; the Bureau 

believes that documents pertaining to 

arguments a respondent wishes to 

preserve will generally be relevant to a 

determination under the final rule. Also, 

the Bureau notes that respondents that 

wish to frustrate the process under the 

final rule by supplying unnecessary or 

extraneous information in response to a 

Notice may do so even in the absence 

of a waiver provision. Moreover, the 

Bureau believes that on balance the 

waiver provision will enhance, rather 

than frustrate, the efficiency of the 

process established by the final rule. It 

would be highly inefficient and 

disruptive to the process to permit the 

introduction of additional evidence or 

arguments at any point during a 

proceeding. 

Another commenter asserted that the 

waiver provision conflicts with the 

exhaustion of administrative remedies 

doctrine because, according to that 

doctrine, courts deem arguments waived 

on judicial review that have not first 

been raised before an administrative 

agency on ‘‘administrative appeal,’’ and 

the waiver provision under 

§ 1091.105(d) might result in waiver of 

an argument ‘‘prior to an administrative 

review of the underlying merits of the 

claim, well before appeal.’’ 

Contrary to the commenter’s 

contention, the proposed waiver 

provision is fully consistent with the 

doctrine of exhaustion of administrative 

remedies. This doctrine generally 

requires that ‘‘[o]ne challenging an 

agency decision must exhaust all 

administrative remedies before seeking 

judicial review.’’ 37 Moreover, ‘‘[r]elated 

is the requirement, often included under 

the exhaustion doctrine, that one must 

raise issues with the agency or lose the 

right to challenge those issues on 

review.’’ 38 The doctrine of exhaustion 

of administrative remedies does not 

preclude an agency from specifying the 

time and manner in which issues must 

be raised before the agency, including 

prior to any administrative appeal, or 

from deeming arguments waived that 

are not raised consistent with such 

rules, even if this waiver precludes 

consideration of the issue in any 

administrative or subsequent judicial 

review process.39 Rather, the doctrine 

provides that any administrative remedy 

that is available must be exhausted in 

the manner specified by the agency— 

and consistent with any rules of that 

agency—before a litigant resorts to the 

courts. 

The Bureau therefore declines the 

commenter’s request that the waiver 

provision be deleted or revised. 

No Discovery 

Proposed § 1091.105(e) stated that 

there shall be no discovery in 

connection with the response. A few 

commenters requested that the Bureau 

provide for discovery at this point in the 

process. The Bureau notes that neither 

the Dodd-Frank Act nor the APA 

requires discovery as part of the 

informal process established by the final 

rule. There are many informal agency 

procedures that do not allow for 

discovery. For example, the FDIC’s 

informal exemption hearings under 

Section 12(H) of the Securities and 

Exchange Act of 1934 do not permit 

discovery.40 Indeed, the final rule 

provides greater procedural rights to 

respondents than required by the DoddFrank Act, which mandates only that 

the Bureau provide respondents with 

notice and a reasonable opportunity to 

respond.41 Among other procedural 

enhancements, the final rule permits a 

respondent to request a supplemental 

oral response in addition to filing a 

written response. The final rule also 

permits a respondent to petition for 

termination of supervision after two 

years, whereas 12 U.S.C. 5514(a)(1)(C) 

does not expressly provide for 

termination. 

The Bureau believes that permitting 

discovery would unnecessarily protract 

the process established by the final rule 

and increase its costs to the Bureau. A 

longer process would be contrary to the 

Bureau’s goal of establishing efficient 

and streamlined procedures. Instead, a 

Notice under the final rule must contain 

a description of the basis for the 

assertions giving rise to the Notice. As 

revised, under the final rule, a Notice 

will also include a summary of the 

consumer complaints and information 

from other sources relied on by the 

Bureau in issuing the Notice, as 

described in the section-by-section 

analysis of § 1091.103. The Bureau 

believes that this process will afford a 

respondent a reasonable opportunity to 

evaluate the assertions in a Notice and 

formulate an appropriate response. 

For the reasons discussed above, the 

Bureau adopts § 1091.105 as proposed, 

other than revisions to: subsection (a), 

which increases the response time limit 

from 20 to 30 days, and subsection 

(b)(3), which provides that a respondent 

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person or telephonic supplemental oral 

response. Additionally, the Bureau 

deletes the second sentence of proposed 

§ 1091.105(b)(2) relating to confidential 

supervisory information because this 

sentence is redundant in light of new 

§ 1091.115(c) of the final rule. 

Section 1091.106 Supplemental Oral 

Response 

Section 1091.106 sets forth the 

procedures relating to a supplemental 

oral response. Proposed § 1091.106 

provided that a respondent may request 

in its written response under § 1091.105 

to present a supplemental oral response 

in support of its assertion that it 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. 

Proposed § 1091.106 also set forth 

procedures for the conduct of a 

supplemental oral response. 

Option for In-Person Supplemental Oral 

Response 

Proposed § 1091.106(b)(1) provided 

that a supplemental oral response 

would be conducted by telephone 

unless the [Associate] Director directed 

that it be conducted in some other 

manner. The Bureau received several 

comments requesting that the Bureau 

also grant respondents an option for an 

in-person supplemental oral response. 

These commenters asserted that 

respondents should have the option to 

take on any level of burden that they 

wish, and that in-person responses 

facilitate better communication. 

The Bureau proposed that a 

supplemental oral response generally be 

held by telephone to minimize burdens 

on both respondents and the Bureau. 

The Bureau provided some flexibility in 

the Proposed Rule to allow for the 

conduct of supplemental oral responses 

by other means if directed by the 

[Associate] Director. In light of the 

comments received and on further 

consideration, however, the Bureau 

agrees that it would be reasonable to 

provide a respondent with an 

opportunity for an in-person 

supplemental oral response where the 

respondent wishes to take on the 

additional burden of traveling to the 

Bureau’s headquarters. Thus, the Bureau 

revises proposed § 1091.106(b)(1) to 

allow a respondent to request an inperson supplemental oral response to be 

held at the Bureau’s headquarters in 

Washington, DC. Under the final rule, if 

a respondent requests in its written 

response a supplemental oral response 

but does not specify whether such 

response shall be conducted via 

telephone or in person, the 

supplemental oral response will be 

conducted by telephone unless 

otherwise directed by the Associate 

Director. 

Alternatives to Supplemental Oral 

Response 

Raising a different issue, a commenter 

asserted that it is unclear whether, as 

proposed, a supplemental oral response 

would provide any material benefit to a 

respondent because no discovery is 

allowed in connection with the 

response and respondents cannot raise 

issues in the supplemental response that 

were not raised in the written response. 

This commenter recommended that the 

Proposed Rule be revised either to: (1) 

permit limited discovery, or (2) replace 

a supplemental oral response with a 

supplemental written response that 

would allow a respondent to present 

additional relevant issues or 

documentation related to a matter. 

The Bureau notes that a supplemental 

oral response is optional under the final 

rule. A respondent that does not believe 

a supplemental oral response would be 

beneficial need not request such a 

response. Contrary to the commenter’s 

contention, however, the Bureau 

believes that in many instances a 

supplemental oral response would 

benefit a respondent by, for example, 

providing a respondent with the 

opportunity to present arguments orally 

directly to the Associate Director and to 

highlight particular aspects of its 

written response. Moreover, as 

discussed above, the Bureau believes 

that it would unnecessarily lengthen 

and complicate the final rule to allow 

for discovery or provide a respondent 

the opportunity to submit a 

supplemental written response, and that 

such measures are not necessary to 

ensure that respondents have a 

reasonable opportunity to respond to a 

Notice. Accordingly, the Bureau 

declines the commenter’s suggestion to 

replace a supplemental oral response 

with discovery or a supplemental 

written response. 

Limitations on Conduct of 

Supplemental Oral Response 

Proposed § 1091.106(b)(2) provided 

that the [Associate] Director may impose 

limitations on the conduct of a 

supplemental oral response and set 

forth a non-exhaustive set of such 

limitations. The Bureau received several 

comments pertaining to the [Associate] 

Director’s discretion to set restrictions 

on the supplemental oral response. Two 

commenters argued that the [Associate] 

Director should not be able to set a time 

limit on the presentation of a 

supplemental oral response. One of 

these commenters stated that no time 

limit was necessary given the Bureau’s 

proposed limitation on subjects that 

may be addressed. The other stated that 

there should be no limitation on the 

submission of additional records, 

documents, or other items, in addition 

to no limitation on presentation time. 

Another commenter requested that the 

respondent be provided an opportunity 

to file a written dissent when it believes 

that the [Associate] Director is imposing 

unreasonable limitations on the 

supplemental oral response. Two 

commenters proffered that the Bureau 

should set uniform guidelines, similar 

to the guidelines for a written response 

that all respondents must follow. One of 

these commenters asserted that if the 

previous recommendation is not 

adopted, limitations should be 

developed on a case-by-case basis in 

consultation with the respondent. 

The Bureau believes that permitting 

the Associate Director to impose 

limitations on the conduct of a 

supplemental oral response is 

appropriate in an informal proceeding 

of the type established by the final rule 

and will help ensure that a 

supplemental oral response focuses on a 

respondent’s and initiating official’s 

arguments supporting their respective 

assertions in the matter. It is important, 

for example, that the Associate Director 

have the flexibility to set time limits for 

these proceedings so that they do not 

become unwieldy or cumbersome and 

are appropriate in relation to the issues 

presented. 

At the same time, it would not be 

consistent with the informal nature of 

the proceedings under the final rule, or 

the Bureau’s objective to establish an 

efficient and streamlined process, to 

permit written dissents or objections on 

limitations imposed by the Associate 

Director in connection with a 

supplemental oral response, or in 

connection with any other issue relating 

to the proceedings. The informal 

procedures under the final rule do not 

contemplate motions practice or 

objections, and such motions and 

objections would undermine the 

efficiency of the procedures under the 

final rule. 

The Bureau also believes that it would 

not best serve the interests of the Bureau 

or respondents to establish uniform 

guidelines governing the supplemental 

oral response because the facts and 

circumstances relating to proceedings— 

such as the size of the respondents or 

the complexity of matters under 

consideration—may vary significantly 

between matters. The Bureau is 

concerned that a single approach to 


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supplemental oral responses would not 

permit the flexibility needed to 

efficiently and fairly accommodate the 

particular circumstances of a matter. 

The Bureau, however, recognizes the 

need to ensure that respondents 

understand what the process of a 

supplemental oral response will entail. 

Thus, the Bureau included in proposed 

§ 1091.106(d) a requirement that a 

notice for a supplemental oral response 

include ‘‘general information relating to 

the conduct of an oral response.’’ Such 

information would include, for 

example, time limitations for presenting 

a supplemental oral response. 

No Discovery or Witnesses 

Proposed § 1091.106(b)(3) stated that 

no discovery will be permitted, and no 

witnesses will be called, in connection 

with a supplemental oral response. 

Several commenters objected to these 

restrictions. However, as discussed 

above, the Bureau believes that this 

limitation is appropriate given the 

informal nature of the procedures set 

forth in this Proposed Rule and the 

Bureau’s objective to establish an 

efficient and streamlined process for 

making determinations under 12 U.S.C. 

5514(a)(1)(C). The prohibition on 

discovery in this section is consistent 

with, and supported by, the same 

considerations as those underlying the 

prohibition on discovery in connection 

with the response under § 1091.105, 

which is discussed in detail in the 

section-by-section analysis above. The 

prohibition on the calling of witnesses 

in connection with a supplemental oral 

response is consistent with the overall 

prohibition on submitting additional 

evidence in connection with a 

supplemental oral response. If a 

respondent wishes to submit testimony, 

it may submit written testimony under 

affidavit as part of its response under 

§ 1091.105. 

Timing and Waiver for Failure To 

Participate 

Proposed § 1091.106(d) prescribed the 

timing of a supplemental oral response. 

Under this proposed section, within 14 

days of receiving a respondent’s request 

for a supplemental oral response, the 

[Associate] Director shall serve on a 

respondent a notice advising the 

respondent of the date, time, and 

general information relating to the 

conduct of a supplemental oral 

response, with a copy to the [initiating 

official]. To allow a respondent and the 

[initiating official] sufficient time to 

prepare for a supplemental oral 

response, and to make arrangements to 

participate, proposed § 1091.106(d) 

provided that a supplemental oral 

response shall be scheduled not less 

than ten days after the date of such 

service. Finally, proposed § 1091.106(g) 

stated that if a respondent fails to 

participate in a scheduled supplemental 

oral response, such a failure would 

constitute a respondent’s waiver of the 

opportunity to present a supplemental 

oral response. 

The Bureau received a few comments 

pertaining to the timing of a 

supplemental oral response. Several 

commenters requested that the time and 

date of the supplemental oral response 

be scheduled at a time that is 

convenient for both the Bureau and the 

respondent. One commenter stated that 

a respondent that fails to participate in 

a scheduled supplemental oral response 

due to extenuating circumstances 

should not be deemed to have waived 

the opportunity to participate in a 

supplemental oral response. 

The Bureau believes that it is 

important that the final rule grant the 

Associate Director discretion to make 

final decisions pertaining to the 

scheduling of a supplemental oral 

response. To provide otherwise might 

necessitate burdensome and unwieldy 

negotiations and would infringe 

unnecessarily on Bureau prioritization. 

However, the Bureau notes that under 

the final rule, in exercising his or her 

discretion to schedule a supplemental 

oral response, the Associate Director 

will take into consideration the 

availability and convenience of a 

respondent. A respondent that is unable 

to participate in a scheduled 

supplemental oral response for good 

cause may request an extension. The 

Associate Director may, at his or her 

discretion, grant an extension ‘‘for good 

cause shown.’’ 

Recording of Supplemental Oral 

Response 

Proposed § 1091.106(b)(6) provided 

that a recording of the supplemental 

oral response will be made, and that a 

respondent may purchase a copy or 

transcript of the recording. The Bureau 

received a few comments regarding 

recordings and transcripts of the 

supplemental oral response. One 

commenter asked the Bureau to use a 

court stenographer to reduce the 

supplemental oral response to writing. 

Another commenter suggested that the 

Bureau afford respondents the 

opportunity to record the supplemental 

oral response themselves. Additionally, 

a commenter requested confirmation 

that the recording of the supplemental 

oral response would be treated as 

confidential supervisory information. 

In response to the comments received, 

the Bureau notes that it intends to use 

court reporters to record supplemental 

oral responses and has revised 

§ 1091.106(b)(6) of the Proposed Rule to 

make this explicit. The Bureau does not, 

however, anticipate that it will have 

these recordings transcribed in each 

instance. Under the final rule, if a 

respondent wishes to purchase a copy of 

the recording or a transcript from the 

court reporter, it may do so at its own 

expense. The Bureau believes that it is 

important to have only one official 

recording (and, if produced, transcript) 

of a supplemental oral response. Thus 

the Bureau declines to revise the 

Proposed Rule to permit a respondent to 

create its own recording of a 

supplemental oral response. Finally, the 

Bureau notes that under new 

§ 1091.115(c), transcripts and recordings 

of supplemental oral responses are 

deemed confidential supervisory 

information. 

Other Issues 

The Bureau also received comments 

requesting clarification on whether the 

supplemental oral response will include 

a question and answer period, or 

whether the oral responses will simply 

be a monologue performed by the 

respondent. The Bureau considers a 

supplemental oral response an 

opportunity for a respondent to present 

oral arguments in support of the 

respondent’s written response. The 

initiating official may also participate in 

a supplemental oral response to present 

oral arguments supporting the assertions 

set forth in the Notice of Reasonable 

Cause. The Associate Director may, at 

his or her discretion, ask questions of 

the respondent and/or initiating official 

during the proceeding. 

Finally, the Bureau received a 

comment from a consumer group 

expressing its concern that, unlike in 

the written response, there would be no 

requirement of truthfulness with respect 

to the supplemental oral response. The 

Bureau notes that an affidavit or 

declaration of truthfulness as required 

under § 1091.105(b)(4) is not warranted 

in connection with a supplemental oral 

response because no new evidence or 

witnesses are permitted as part of such 

response. Rather, during a supplemental 

oral response, a respondent is limited to 

making oral arguments in support of the 

respondent’s written response. Thus, it 

is sufficient that, under the final rule, 

only the written response must be 

submitted pursuant to § 1091.105(b)(4), 

under affidavit or declaration that it is 

true and accurate and does not contain 

any omissions that would cause the 

response to be materially misleading. 

For the reasons discussed above, the 

Bureau adopts § 1091.106 as proposed, 


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other than the revisions to 1091(b)(1) 

and (6) as described above and other 

minor technical revisions for 

consistency. 

Section 1091.107 Manner of Filing 

Papers 

Proposed 1091.107 provided for filing 

of papers other than a Notice in a 

proceeding under the Proposed Rule by 

electronic transmission under such 

conditions as specified by the 

[Associate] Director or Director. 

Proposed 1091.107 also authorized 

other methods of filing and service if a 

respondent demonstrated electronic 

filing was not practicable and the 

[Associate] Director or Director 

permitted an alternative method of 

filing or service. 

The Bureau did not receive any 

substantive comments on this proposed 

provision and adopts § 1091.107 as 

proposed with minor technical revisions 

for consistency. 

Section 1091.108 Recommended 

Determination 

Section 1091.108 sets forth the 

procedures relating to the issuance of a 

recommended determination by the 

[Associate] Director. Proposed 

§ 1091.108 provided that the [Associate] 

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 a 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 § 1091.108(a), if a 

respondent had not voluntarily 

consented to the Bureau’s supervisory 

authority, and had not requested the 

opportunity to present a supplemental 

oral response, a recommended 

determination would be required to 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 failed to file a timely 

response. If a respondent requested the 

opportunity to present a supplemental 

oral response, a recommended 

determination would be required to be 

made not later than 90 days after the 

service of a Notice of Reasonable Cause. 

Proposed § 1091.108(c)–(e) further set 

forth the required content of the 

[Associate] Director’s recommended 

determination, and the records, 

documents, and other items that were 

required to accompany the 

recommended determination sent to the 

Director by the [Associate] Director. 

Proposed § 1091.108 also provided that 

if the [Associate] Director recommended 

that the respondent should not be 

subjected to the Bureau’s supervisory 

authority based on the proceedings, 

such recommendation would not have 

precedential effect and would not 

prevent the issuance of another Notice 

of Reasonable Cause or a determination 

subjecting the respondent to the 

Bureau’s supervisory authority. 

Provision of Recommended 

Determination to Respondent 

Several commenters requested that 

the Bureau provide the respondent with 

an exact copy of the recommended 

determination and all accompanying 

documentation. Some of these 

commenters recommended that the 

Bureau allow respondents to file 

objections to a recommended 

determination before the Director makes 

a final determination. Commenters 

stated that allowing for objections 

would provide a fairer process, provide 

the Director with the respondent’s 

position before he or she makes a final 

determination, resolve claims in 

advance of judicial review, and 

correspond with common practice in 

other informal adjudicatory processes. 

The Bureau believes that the 

procedures for issuing a recommended 

determination set forth in the proposed 

rule strike the appropriate balance 

between fairness and efficiency. In the 

Bureau’s view, if the final rule were to 

allow a respondent to submit a written 

objection to a recommended 

determination for the Director’s 

consideration, as requested by 

commenters, then to ensure a fair 

process, the final rule would also need 

to afford the initiating official the 

opportunity to rebut the objection. The 

Bureau believes that such a procedure 

would be unwieldy and unnecessarily 

lengthen and increase the costs of the 

process set forth in the Proposed Rule. 

The Bureau therefore declines to revise 

the Proposed Rule to require such a 

procedure. In addition, given the 

limited purpose of the Associate 

Director’s recommended determinations 

under the final rule to guide the final 

determination of the Director, the 

Bureau believes that it would serve no 

purpose to require the Associate 

Director to provide a respondent with 

an exact copy of a recommended 

determination together with all 

accompanying documents at the time 

these items are submitted to the 

Director, or to allow respondents to 

object to a recommended determination 

on the record. Accordingly, the Bureau 

declines to revise the Proposed Rule to 

include such requirements. However, 

the Bureau believes that a respondent 

should receive a copy of the 

recommended determination (excluding 

other documents or items transmitted to 

the Director) at the end of the 

determination process. Therefore, as 

discussed in the section-by-section 

analysis of § 1091.109(b) below, the 

Bureau is revising that section to add a 

new subparagraph (5) stating that the 

Director will send to the respondent a 

copy of the recommended 

determination issued by the Associate 

Director. 

Bureau Deadlines 

One commenter requested 

clarification regarding the consequences 

of a failure by the Bureau to meet the 

deadlines set forth in proposed 

§ 1091.108. The Bureau addressed this 

issue in § 1091.112(c) of the Proposed 

Rule (§ 1091.115 in the final rule), 

which states that ‘‘[d]eadlines for action 

by the [initiating official], [Associate] 

Director, or the Director established in 

this part confer no substantive rights on 

respondents.’’ This provision reflects 

the Bureau’s desire to balance its 

commitment to establish an efficient 

and streamlined process, with the need 

to maintain flexibility in meeting 

internal prioritization goals. 

Findings of Fact and Conclusions of 

Law 

A commenter stated that the Proposed 

Rule should be revised to require that 

recommended determinations set forth 

specific findings of fact and conclusions 

of law. Although the Proposed Rule did 

not mandate the inclusion of findings of 

fact and conclusions of law in the 

[Associate] Director’s recommended 

determination, proposed 

§ 1091.108(d)(2) would have required 

that a recommended determination 

provide the ‘‘basis’’ for a 

recommendation that the Director issue 

a final determination that there is 

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. The Bureau believes that this 

proposed requirement is sufficient to 

achieve a fair process and ensure that 

the recommended determination 

contains sufficient information to 

facilitate a final determination of the 

Director. On the other hand, the Bureau 

does not believe that revising the 

Proposed Rule to impose a requirement 

that a recommended determination 

include proposed findings of fact and 

conclusions of law would be consistent 

with the informal nature of the 


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procedures set forth in the final rule, or 

with the limited purpose of the 

Associate Director’s recommended 

determinations under the rule to 

facilitate the final determination of the 

Director. Such a requirement also is not 

warranted in light of the limited 

purposes of a determination of 

reasonable cause by the Director under 

the final rule. A proceeding under the 

final rule would not result in a 

determination that a person violated the 

law or is subject to penalty, but would 

merely subject such person to the 

Bureau’s supervisory authority. 

For the reasons discussed above, the 

Bureau adopts § 1091.108 as proposed 

with minor technical revisions for 

consistency. 

Section 1091.109 Determination by the 

Director 

Section 1091.109 governs the 

procedures relating to the Director’s 

issuance of a final determination. 

Proposed § 1091.109(a) provided that, 

not later than 45 days after receipt of the 

[Associate] Director’s recommended 

determination, the Director shall make a 

final determination by either adopting 

without revision, modifying, or rejecting 

the [Associate] Director’s recommended 

determination. Under the proposed 

subsection, the Director shall issue to a 

respondent, with copies to the 

[Associate] Director and [initiating 

official], a decision and 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 

§ 1091.109(b) described what a decision 

and order must set forth. Proposed 

§ 1091.109(c) provided that the Director 

may rely on the assistance and advice 

only of decisional employees in 

reaching a final determination. 

Written Analysis Relating to Decision 

One commenter requested that 

proposed § 1091.109 be modified to 

require the Director to include a written 

and detailed analysis of the reasons 

supporting his or her final 

determination, and that the Director’s 

determinations should include a 

description of how the risky product or 

practice can be changed in order to 

conform with Bureau requirements. 

First, the Bureau notes that proposed 

§ 1091.109(b)(3) already requires the 

Director to provide the basis for the 

Director’s decision in his or her final 

determination. The Bureau does not 

believe that it is necessary to revise the 

Proposed Rule to further require the 

Director to include in a final 

determination a written and detailed 

analysis of the reasons supporting his or 

her decision as requested by the 

commenter. To the extent the 

commenter is suggesting that the final 

rule should be revised to mandate that 

the Director include in a final 

determination findings of facts and 

conclusions of law, the Bureau declines 

the recommendation for the reasons 

discussed above with respect to the 

Associate Director’s recommended 

determination. For the foregoing 

reasons, the Bureau declines to revise 

the Proposed Rule to require a final 

determination to include the level of 

detail requested by the commenter. 

Second, the Bureau notes that, as 

stated above, the purpose of the final 

rule is to provide transparency and 

ensure consistency regarding the 

procedures the Bureau intends to follow 

in determining whether to subject a 

nonbank covered person to supervision 

under 12 U.S.C. 5514(a)(1)(C). As 

discussed above, it is beyond the scope 

of this procedural rule to define ‘‘risks 

to consumers’’ or to establish conduct 

standards. For similar reasons, it would 

exceed the scope of the final rule to 

require the Director to include in a final 

determination a description of how a 

risky product or practice can be changed 

in order to conform to the Bureau’s 

requirements. Moreover, to the extent 

that the Bureau were to provide 

guidance to a particular nonbank 

covered person regarding its activities, it 

would do so in the context of 

supervision, not in an order issued by 

the Director bringing a nonbank covered 

person under the Bureau’s supervisory 

authority. The Bureau therefore declines 

to revise the Proposed Rule to require 

the Director to provide in a final 

determination a description of how a 

risky product or practice should be 

changed. 

Deferring to State or Other Federal 

Determinations 

The same commenter also 

recommended that the final rule allow 

the Director to defer to State or other 

official determinations on the same 

issue addressed by a Notice of 

Reasonable Cause, or require the 

Director to explain how the Bureau’s 

position is consistent or inconsistent 

with such outside determinations. 

The Bureau does not believe that 

requiring the Director to justify a final 

determination in relation to State or 

other official determinations on the 

same issue is in accord with 12 U.S.C. 

5514(a)(1)(C), which confers on the 

Bureau the sole authority to make 

reasonable-cause determinations. The 

Bureau notes, however, that under 12 

U.S.C. 5514(a)(1)(C), the Bureau may 

base a final determination on 

complaints, as well as on ‘‘information 

from other sources.’’ Such information 

may include, among other things, State 

or other Federal administrative, civil, or 

criminal actions taken in connection 

with a nonbank covered person. The 

Bureau further observes that in 

exercising its supervisory authority 

under 12 U.S.C. 5514(a)(1)(C), it will 

coordinate with State and other Federal 

agencies as set forth in 12 U.S.C. 

5514(b)(3) and will consider the extent 

to which the nonbank covered person is 

subject to oversight by State authorities 

for consumer protection pursuant to 12 

U.S.C. 5514(b)(2). 

Final Agency Action and Judicial 

Review 

Another commenter recommended 

that the Bureau expand on proposed 

§ 1091.109(d), which stated that a 

determination by the Director is final 

agency action under 5 U.S.C. 704, and 

add a separate section to the final rule 

delineating a respondent’s opportunities 

for review of an order and decision 

issued by the Director. The commenter 

further asserted that deeming the final 

determination of the Director final 

agency action under proposed 

§ 1091.109(d) was in tension with the 

Bureau’s assertion that the action was 

informal. 

The Bureau included proposed 

§ 1091.109(d) to make clear that a 

decision and order issued by the 

Director pursuant to the informal 

process described in the rule is a final 

agency action for purposes of judicial 

review. The Bureau does not believe 

that the informal nature of the 

proceedings conflicts in any way with 

deeming a final determination of the 

Director final agency action under 

§ 1091.109(d). Also, in the Bureau’s 

view, inclusion of a section in the final 

rule of procedures relating to judicial 

review, as requested by the commenter, 

is unnecessary and beyond the scope of 

the final rule. 

Precedential Effect 

Two commenters argued that 

proposed § 1091.109(a)(2), which 

provided that the issuance of a 

notification that the respondent will not 

be made subject to the Bureau’s 

supervisory authority ‘‘shall have no 

precedential effect and shall not prevent 

the issuance of another Notice of 

Reasonable Cause,’’ appears to 

constitute ‘‘double jeopardy.’’ The 

Bureau disagrees with the commenters’ 

characterization of § 1091.109(a)(2). 

First, the double jeopardy clause is 


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40370 Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Rules and Regulations 

42Proposed § 1091.113 has been renumbered 

§ 1091.110 in the final rule. All references to 

proposed § 1091.113 in this analysis correspond to 

§ 1091.110 of the final rule. 

wholly inapplicable to the proceedings 

under the final rule, which are informal 

administrative proceedings rather than 

criminal in nature, and do not result in 

a punitive action against the 

respondent, but rather merely subject 

the respondent to Bureau supervision. 

Second, the Bureau believes that there 

are good reasons to allow an initiating 

official to issue a Notice of Reasonable 

Cause to a respondent even after the 

Director has issued a final 

determination not to subject it to 

supervision under 12 U.S.C. 

5514(a)(1)(C) on the basis of a prior 

Notice. For example, the second Notice 

may be based on new complaints or 

sources of information, or while the 

conduct at issue in the second Notice 

might be similar to that in the first, the 

severity of risk to consumers may have 

significantly increased because of the 

number of consumers alleged to be 

affected. Although such circumstances 

may be rare, the Bureau believes, 

consistent with the Dodd-Frank Act, 

that it is necessary and appropriate to 

preserve the possibility of invoking the 

procedures under 12 U.S.C. 

5514(a)(1)(C) should such circumstances 

arise. The Bureau therefore declines to 

revise the Proposed Rule to delete the 

no precedential effect provision. 

Making Information Regarding a 

Proceeding Publicly Available 

The Bureau received one comment 

requesting that the Bureau publicly 

release information on the entities that 

receive a Notice of Reasonable Cause, 

the entities under the Bureau’s 

supervision, and the reasoning 

underlying the Bureau’s final 

determinations. The commenter argued 

that such publicity would mitigate the 

risk that a future Director could neglect 

the obligations of the Bureau. As set 

forth in § 1091.115(c), information 

relating to a proceeding shall be deemed 

confidential supervisory information 

under 12 CFR 1070.2(i)(1), and the 

Bureau declines to depart from the 

limitations on public disclosure set 

forth in that provision of the final rule. 

For the reasons discussed above, the 

Bureau adopts § 1091.109 as proposed 

with a revision to specify that the 

Director will provide the Associate 

Director’s recommended determination 

along with the Director’s final 

determination to a respondent, as 

explained in the section-by-section 

analysis of § 1091.108 above, and with 

minor technical revisions for 

consistency. 

Section 1091.110 Voluntary Consent to 

Bureau’s Authority 42

Proposed § 1091.113(a) provided 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. As proposed, voluntary consent 

under this provision would be an 

alternative to consenting voluntarily to 

the Bureau’s supervision under 

proposed § 1091.103(b), which provided 

that a respondent could execute and file 

a consent-agreement form in lieu of 

filing a written response to a Notice. 

The Bureau did not receive any 

substantive comments on proposed 

§ 1091.113(a) and therefore adopts 

§ 1091.113(a) as proposed with minor 

technical revisions for consistency, 

including renumbering this section as 

§ 1091.110(a). 

Length of Supervision Period Under 

Consent Agreement; Waiver of Judicial 

Review 

Proposed § 1091.113(b) provided that 

a person entering into a consent 

agreement waives any right to judicial 

review of that agreement. Additionally, 

proposed § 1091.113(b) provided 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 

consent order during the agreed-to 

supervisory period. The Bureau 

received several comments regarding 

proposed § 1091.113(b). A few 

commenters addressed the appropriate 

length of the supervision period 

required under a voluntary consent, or 

similarly, how much time should pass 

before a consenting nonbank may 

petition to terminate supervision. One 

commenter stated that consent 

agreements should require a supervision 

period lasting at least two examination 

cycles. Another commenter asserted that 

respondents entering into consent 

agreements should have the right to 

petition for termination of supervision 

after two years. A commenter asked that 

nonbanks be able to reconsider and void 

consent agreements upon discovering 

additional evidence. The Bureau 

received one comment stating that 

requiring respondents to waive their 

right to judicial review of a voluntary 

consent agreement is not equitable or 

reasonable. Finally, two commenters 

suggested that proposed § 1091.113 be 

revised to require the inclusion of a 

confidentiality provision and correctiveaction plans that, if adhered to, would 

allow for early termination of 

supervision. 

First, the Bureau notes that a consent 

agreement is voluntary and that, under 

proposed § 1091.113, most terms of such 

agreements are negotiable. Respondents 

do not have to enter into a consent 

agreement if they do not wish to accept 

its terms. Benefits of consent agreements 

include, among others, providing 

certainty of outcome to the parties and 

reducing the potential burden of going 

through the full informal process 

established by the final rule. 

Second, proposed § 1091.113 is 

intended to provide flexibility to allow 

the parties to establish terms acceptable 

to each. One of the negotiable terms 

under proposed § 1091.113 is the length 

of the supervision period to which a 

respondent will be subject. This differs 

from the consent agreement form 

described in § 1091.103(b), which 

automatically establishes a two-year 

supervision period. The Bureau does 

not believe that it is appropriate to limit 

this flexibility by mandating under 

proposed § 1091.113 a minimum 

supervision period, such as requiring 

two examination cycles, or by 

mandating that a respondent be 

permitted to petition for termination of 

supervision earlier than agreed. For the 

same reason, the Bureau declines to 

revise proposed § 1091.113 to require 

correction action plans that, if adhered 

to, would allow for early termination of 

supervision. 

Third, as discussed above, the Bureau 

has added § 1091.115(c) to the final rule, 

which provides that information 

relating to a proceeding shall be deemed 

confidential supervisory information 

under 12 CFR 1070.2(i)(1). The Bureau 

believes that this provision adequately 

addresses the issue of confidentiality 

and therefore declines to revise the 

Proposed Rule to require the inclusion 

of a confidentiality provision in a 

consent agreement. 

Fourth, since one of the purposes of 

entering into a consent agreement is to 

provide certainty to the parties and 

reduce potential burden, the Bureau 

believes that it is reasonable to require 

that the respondent waive the right to 

judicial review of the terms of a consent 

agreement, thereby ensuring that the 

parties do not litigate an agreement after 

it is executed. A respondent that does 

not want to relinquish any possible 

opportunity for judicial review need not 

enter into a consent agreement. For 

clarity, the Bureau revises proposed 

§ 1091.113(b) to add that a consent 

agreement ‘‘shall state’’ that a 


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43Proposed § 1091.114 has been renumbered 

§ 1091.111 in the final rule. All references to 

proposed § 1091.114 in this analysis correspond to 

§ 1091.111 of the final rule. 

44 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. 

45 77 FR 31231. 46Proposed § 1091.115 has been renumbered 

§ 1091.112 in the final rule. All references to 

proposed § 1091.115 in this analysis correspond to 

§ 1091.112 of the final rule. 

47Proposed § 1091.110 has been renumbered 

§ 1091.113 in the final rule. All references to 

proposed § 1091.110 in this analysis correspond to 

§ 1091.113 of the final rule. 

respondent entering into a consent 

agreement waives any right to judicial 

review of such consent agreement. 

For the reasons discussed above, the 

Bureau adopts § 1091.113 as proposed 

with the revision to proposed 

§ 1091.113(b) to clarify the waiver 

provision described in the preceding 

paragraph and with other minor 

technical revisions for consistency, 

including renumbering this section as 

§ 1091.110(b). 

Section 1091.111 Notice and Response 

Included in Adjudication Proceeding 

Otherwise Brought by the Bureau 43

Proposed § 1091.114 provided that if 

the Bureau issues a notice of charges 

against a person under 12 CFR 

1081.200,44 the Bureau may, in its 

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 § 1091.102– 

§ 1091.110 would not apply to the 

proceedings. Under the Proposed Rule, 

the Bureau could 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 on respondents and 

the Bureau by allowing a determination 

under 12 U.S.C. 5514(a)(1)(C) and an 

adjudicative proceeding to be handled 

in a single forum. The Bureau received 

two comments suggesting that 

supervision authority should be 

established before bringing an 

enforcement action. One commenter 

asserted that simultaneous riskdetermination proceedings and 

enforcement actions could penalize a 

company for conduct that it previously 

had no reason to know was illegal. This 

commenter recommended that the risk 

determinations set forth in this rule be 

used to put a company on notice that 

certain activities are deemed to pose 

risks to consumers before any 

enforcement action is initiated. The 

other commenter asserted that 

simultaneous risk determinations and 

enforcement actions would give rise to 

enforcement actions regarding otherwise 

lawful conduct that poses risks to 

consumers, which the commenter 

believed would be an expansion of 

Bureau authority. 

The Bureau believes that the 

commenters may have misconstrued the 

purpose of proposed § 1091.114. Under 

this provision, the Bureau would 

provide the notice required under 12 

U.S.C. 5514(a)(1)(C) in a notice of 

charges only when the Bureau has 

‘‘otherwise’’ brought an administrative 

action against a respondent.45 The 

Bureau further notes that, under the 

Dodd-Frank Act, supervision is not a 

necessary precursor to an enforcement 

action. The Bureau may, however, wish 

to bring a person subject to an 

enforcement action under the Bureau’s 

supervisory authority, in addition to 

seeking other relief through an 

administrative action. Proposed 

§ 1091.114 is intended to provide 

administrative convenience and 

efficiency both for respondents and the 

Bureau by handling what would 

otherwise be two separate processes in 

a single administrative forum. 

For the reasons discussed above, the 

Bureau adopts proposed § 1091.114 

substantially as proposed with minor 

technical revisions for consistency, 

including renumbering this section as 

§ 1091.111. The Bureau has also made 

one change to proposed § 1091.114 to 

clarify that a person may submit to the 

Bureau’s supervisory authority under 12 

U.S.C. 5514(a)(1)(C) by agreeing to a 

consent order in connection with an 

adjudication proceeding or civil action. 

Section 1091.112 No Limitation on 

Relief Sought in Civil Action or 

Administrative Adjudication 46

Proposed § 1091.115 clarified that 

nothing in proposed part 1091 shall be 

construed to limit the relief the Bureau 

may seek in any civil action or 

administrative adjudication, including 

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. Two 

commenters discussing this proposed 

section recommended that the Bureau 

provide respondents the option to 

proceed using a formal adjudication, 

instead of the informal hearing process 

prescribed in this part. In response, the 

Bureau notes that proposed § 1091.115 

does not relate to the procedures 

established by the final rule, but rather 

merely makes clear that the final rule 

does not limit the relief the Bureau 

might seek in another forum. The 

Bureau’s authority to adopt informal 

procedures rather than formal 

adjudication procedures, as requested 

by the commenter, and its rationale for 

so doing is discussed in the 

introductory paragraphs to subsection B 

above. The Bureau therefore adopts 

proposed § 1091.115 as proposed with 

minor technical revisions for 

consistency, including renumbering to 

§ 1091.112. 

Subpart C—Post-Determination 

Procedures 

Section 1091.113 Petition for 

Termination of Order 47

Proposed § 1091.110 provided 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 set forth the required contents 

of such a petition. Under proposed 

§ 1091.110, a respondent could petition 

for termination 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 could 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 subjecting the 

entity to supervision under 12 U.S.C. 

5514(a)(1)(C). Under proposed 

§ 1091.110(b), a petition was required to 

set forth the reasons supporting a 

termination of an order, including any 

actions taken by a respondent since 

issuance of an order to address the 

conduct that led to the order. Under 

proposed § 1091.110(d), the [initiating 

official] would be permitted to file a 

response to a petition for termination 

setting forth the [initiating official’s] 

recommendation to terminate or modify 

the order, or to deny the petition, and 

the reasons supporting such a 

recommendation, within 30 days of his 

or her receipt of a copy of a petition. 

Proposed § 1091.110(e) further provided 

that within 90 days of a respondent’s 

submission of a petition for termination, 

the Director could either terminate or 

modify the order, or deny the petition. 

This proposed section also specified the 


tkelley on DSK3SPTVN1PROD with RULES3
40372 Federal Register / Vol. 78, No. 128 / Wednesday, July 3, 2013 / Rules and Regulations 

48Proposed § 1091.111 has been renumbered 

§ 1091.114 in the final rule. All references to 

proposed § 1091.111 in this analysis correspond to 

§ 1091.114 of the final rule. 

manner in which a petition for 

termination must be filed. 

Time Periods Related to Petitions To 

Terminate 

The Bureau received a number of 

comments discussing the terminationpetition process generally and the 

prohibition on filing a petition prior to 

two years after an order establishing 

supervisory authority under 12 U.S.C. 

5514(a)(1)(C) has been issued. Several 

commenters believe that allowing 

petitions to terminate an order only after 

two years is excessively harsh, and that 

respondents should either be allowed to 

petition for termination of the order 

immediately after the respondent has 

remedied the behavior that the Bureau 

deemed risky, or respondents should be 

allowed to petition after one year. One 

commenter asserted that orders should 

automatically terminate after one year 

unless the Bureau can show good cause 

for continuation, eliminating the need to 

petition for termination of an order. 

Many of these commenters argued that 

supervision would be unfair or 

unnecessary if the respondent 

terminated the practice for which the 

Bureau established supervisory 

authority. Taking a different view, one 

commenter asserted that the two-year 

period was not long enough because the 

Bureau might only finish one 

examination cycle within the two-year 

period. This commenter suggested 

setting a time limit for the first petition 

to terminate an order after two 

examination cycles. 

After consideration of the comments, 

the Bureau continues to believe that 

allowing a respondent to petition for 

termination of supervision no sooner 

than two years after the issuance of a 

decision and order by the Director 

subjecting an entity to supervision 

under 12 U.S.C. 5514(a)(1)(C) is 

appropriate. This period is intended to 

provide the Bureau with sufficient time 

to conduct an initial set of supervision 

activities, such as requesting reports 

and/or undertaking an examination, and 

to conduct follow-up supervision 

activities so the Bureau can assess 

whether a nonbank covered person 

corrected any deficiencies identified by 

the Bureau and maintained any required 

corrective actions. A minimum two-year 

supervision period reflects the reality 

that after supervisory jurisdiction is 

established, it will take two years to 

meaningfully examine, and possibly reexamine, an entity. In essence, the 

Bureau believes that the proposed 

supervision period will permit two 

examination cycles as one commenter 

asserted was necessary. Allowing 

termination after one year or 

immediately after a nonbank covered 

person purportedly remediated any 

deficiencies would not permit enough 

time for the needed follow-up 

supervision activity. Permitting 

termination on an ad hoc basis at any 

time would engender a disorderly 

supervision program where a supervised 

person could demand an evaluation of 

its activities at any time, regardless of 

Bureau resource constraints or 

supervision priorities. 

For all of the foregoing reasons the 

Bureau declines to revise the Proposed 

Rule to alter the process for petitioning 

for termination of supervision. 

Administrative Appeal 

A few commenters suggested that the 

Bureau adopt an administrative appeals 

process instead of the petition process. 

The Bureau believes that an 

administrative appeals process is not 

necessary and would significantly add 

to the complexity and length of the 

process established by the final rule. 

Require Initiating Official To File a 

Recommendation Regarding a Petition 

To Terminate 

A commenter argued that the Bureau 

should revise proposed § 1091.110(d)(1) 

to require the [initiating official] to file 

a response to a petition to terminate. 

The Bureau made the filing of a 

recommendation regarding a petition by 

the initiating official permissive rather 

than mandatory because the Bureau 

recognized that the initiating official 

may not feel the need to provide a 

recommendation in all instances. If the 

initiating official were to choose not to 

file a response to a petition to terminate, 

the result would be that the petition 

would be unopposed. The Bureau does 

not believe that this result would 

prejudice a petitioner. Moreover, the 

Bureau believes that it is important that 

under the final rule the initiating official 

have flexibility in determining how to 

expend Bureau resources. The Bureau 

does not believe that it would be 

appropriate to require the initiating 

official to prepare and file a 

recommendation where the initiating 

official has determined that this is not 

a necessary or useful allocation of 

Bureau resources. The Bureau therefore 

declines to revise the Proposed Rule to 

require the initiating official to file a 

response to a petition to terminate. 

Add Requirement That the Director 

Terminate Supervision Under Certain 

Circumstances 

Another commenter requested that 

the Bureau include a requirement that 

the Director approve petitions to 

terminate where the respondent 

provides clear and convincing evidence 

that the respondent has eliminated any 

reasonable prospect of consumer risk. 

The purpose of proposed § 1091.110 

was to permit the Director to grant a 

petition and terminate supervision if the 

Director believed that it was appropriate 

to do so. The Bureau believes that 

adding to the final rule a requirement 

that the Director grant a petition as 

recommended by the commenter would 

impose a standard not consistent with 

12 U.S.C. 5514(a)(1)(C), which does not 

require that the Bureau consider 

petitions to terminate. Therefore the 

Bureau declines to revise the Proposed 

Rule as suggested by the commenter. 

Clarification on Whether Petitions To 

Terminate Are Public Information 

Another commenter urged the Bureau 

to make the Bureau’s response to a 

petition for termination publicly 

available. 

The Bureau has added to the final rule 

§ 1091.115(c), which provides that ‘‘[i]n 

connection with a proceeding under this 

part, including a petition for 

termination under § 1091.113, 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).’’ 

In light of this provision, a petition to 

terminate supervision is confidential 

supervisory information, subject to the 

confidentiality requirements of 12 CFR 

part 1070. 

For the reasons discussed above, the 

Bureau is adopting § 1091.110 as 

proposed with minor technical revisions 

for consistency, including renumbering 

that section as § 1091.113. 

Subpart D—Time Limits and 

Confidentiality 

Section 1091.114 Construction of Time 

Limits 48

Proposed § 1091.111(a) provided 

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. Proposed § 1091.111(b) 

established when papers are deemed to 

be served. With regard to time limits for 

responsive papers, proposed 

§ 1091.111(c) incorporated a three-day 

extension for mail service, and a oneVerDate Mar<15>2010 19:30 Jul 02, 2013 Jkt 229001 PO 00000 Frm 00022 Fmt 4701 Sfmt 4700 E:\FR\FM\03JYR3.SGM 03JYR3

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49 77 FR 39058, 39065 (June 29, 2012). 

50Proposed § 1091.112 has been renumbered 

§ 1091.115 in the final rule. All references to 

proposed § 1091.112 in this analysis correspond to 

§ 1091.115 of the final rule. 

51Specifically, 12 U.S.C. 5512(b)(2)(A) calls for 

the Bureau to consider the potential benefits and 

costs of a 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. In addition, 12 U.S.C. 

5512(b)(2)(B) directs the Bureau to consult, before 

and during the rulemaking, with appropriate 

prudential regulators or other Federal agencies, 

regarding consistency with objectives those 

agencies administer. The manner and extent to 

which the provisions of 12 U.S.C. 5512(b)(2) apply 

to a procedural rule of this kind, 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 analysis and 

consultations described in those provisions of the 

Dodd-Frank Act. 

52 12 U.S.C. 5514(a)(1)(C). 

53The 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. 

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 received two comments 

pertaining to the construction of time 

limits. Both of these comments 

requested the Bureau to provide clear 

deadline dates in the Notice of 

Reasonable Cause, asserting that the 

time limit framework provided may be 

confusing to respondents. The Bureau 

adopted the language used in § 1091.111 

from the Bureau’s rules for adjudication 

proceedings in 12 CFR 1081.114, which 

in turn incorporates rules similar to the 

Federal Rules of Civil Procedure and 

some agencies’ existing rules.49

The Bureau understands the 

commenters’ desire for exact dates on 

which filings are required, but is 

concerned that providing specific dates 

as requested would be difficult in many 

circumstances and might result in 

increased operational costs or 

inaccuracy. For example, the Bureau 

may need to put Notices into production 

sometime in advance of when they will 

be served and might not know the exact 

date that a Notice will be served. The 

Bureau believes that it is important to 

specify dates in the Notice in relation to 

the date of service to ensure the 

accuracy of the time periods disclosed. 

For the reasons discussed above, the 

Bureau adopts § 1091.111 as proposed 

with minor technical revisions for 

consistency, including renumbering this 

section as § 1091.114. 

Section 1091.115 Change of Time 

Limits and Confidentiality of 

Proceedings 50

Proposed § 1091.112(a) provided that 

requests for an extension of time may be 

granted where good cause is shown. 

Proposed § 1091.112(b) provided that 

requests for extensions of time are 

strongly disfavored and may be granted 

only when a party makes a strong 

showing that the denial of the request 

would substantially prejudice the party. 

Finally, proposed § 1091.112(c) stated 

that deadlines for action by the 

[Associate] Director or Director 

established in this Proposed Rule confer 

no substantive rights on respondents. 

The Bureau received several 

comments requesting a more flexible 

extension policy. One commenter 

suggested allowing time extensions 

where it would prevent prejudice and 

do substantial justice. Another 

commenter asserted that providing 

Bureau staff the discretion to grant 

extensions would alleviate its concerns 

regarding the abbreviated response time 

of 20 days provided in the Proposed 

Rule. A few commenters objected to the 

language used in proposed 

§ 1091.112(b), which stated that 

extensions are ‘‘strongly disfavor[ed].’’ 

Additionally, one commenter asserted 

that granting extensions only to prevent 

substantial prejudice was excessively 

stringent and requested instead that the 

Bureau decide requests for extensions 

based on the ‘‘good cause shown’’ 

standard set forth in proposed 

§ 1091.112(a). 

Although many of the concerns 

regarding time limits should be 

alleviated with the extension of the 

written-response deadline in 

§ 1091.105(a) from 20 to 30 days, the 

Bureau agrees that the [Associate] 

Director and Director should have 

reasonable flexibility to permit 

extensions of time limits at their 

discretion and for good cause shown. 

The Proposed Rule granted some 

flexibility in this regard—permitting 

extensions for good cause shown—but, 

as noted above, it also stated a policy of 

strongly disfavoring requests for 

extensions and permitting them only 

where a denial would substantially 

prejudice a requesting party’s case. The 

Bureau is concerned that the language 

in the Proposed Rule stating that 

extensions are strongly disfavored and 

should be permitted only where there 

would be substantial prejudice may 

result in less flexibility to allow 

extensions than the Bureau intended. 

The Bureau therefore revises the 

Proposed Rule by deleting proposed 

§ 1091.112(b). The Bureau believes that 

this will provide the Associate Director 

and Director with greater flexibility to 

permit, at their discretion, extensions of 

time limits where good cause is shown. 

One commenter requested that the 

Bureau provide an automatic extension 

where a respondent did not receive a 

Notice. Such a revision to the Proposed 

Rule is unnecessary, however, because 

the 30-day time limit begins upon 

service of a Notice. 

The Bureau adopts § 1091.112 with 

the revision deleting proposed 

§ 1091.112(b), and adding a new 

paragraph (c) on confidentiality of 

proceedings (for the reasons discussed 

in the section-by-section analysis of 

subpart B above) and with other minor 

technical revisions for consistency, 

including renumbering this section as 

§ 1091.115. 

V. Section 1022(b)(2) of the Dodd-Frank 

Act 

A. Overview 

In developing the final 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.51

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 . . . 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 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.52 The final rule is intended to 

provide an efficient, streamlined, and 

fair process to implement 12 U.S.C. 

5514(a)(1)(C).53 Although a rule is not 

necessary to implement this statutory 

provision, the final rule establishes a 

consistent procedure applicable to all 

affected entities, and provides 

transparency regarding the applicable 

procedures prior to commencement of a 

proceeding. 


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54The Bureau has discretion in any rulemaking 

to choose an appropriate scope of analysis with 

respect to potential benefits and costs and the 

appropriate baseline. 

55 5 U.S.C. 601 et seq. The term ‘‘ ‘small 

organization’ means any not-for-profit enterprise 

which is independently owned and operated and is 

not dominant in its field, unless an agency 

establishes [an alternative definition after notice 

and comment].’’ 5 U.S.C. 601(4). The term ‘‘ ‘small 

governmental jurisdiction’ means governments of 

cities, counties, towns, townships, villages, school 

districts, or special districts, with a population of 

less than fifty thousand, unless an agency 

establishes [an alternative definition after notice 

and comment].’’ 5 U.S.C. 601(5). 

56 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. 

57 5 U.S.C. 609. 

58 5 U.S.C. 603(a), 604(a). 

B. Potential Benefits and Costs to 

Consumers and Covered Persons 

The analysis considers the benefits, 

costs, and impacts of the final rule 

against a statutory baseline. That is, the 

analysis evaluates the benefits, costs, 

and impacts of the final rule as 

compared to the statute without an 

implementing rule.54 Absent the final 

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 final 

rule, but these costs would generally 

exist in the absence of the rule. 

For major provisions of the final rule, 

the Bureau considered the benefits and 

costs of certain alternatives. For 

example, the final rule provides 

respondents an opportunity to 

participate in a supplementary oral 

response, which would generally be 

conducted via telephone, but permits 

respondents to request an in-person 

supplemental oral response at the 

Bureau’s headquarters in Washington, 

DC. The Bureau believes that this 

approach will 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 this approach will 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 final rule permits, but 

does 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 final rule also permits 

respondents to consent to the Bureau’s 

supervisory authority under standard 

terms in lieu of filing a response to a 

Notice of Reasonable Cause, or to enter 

into a negotiated agreement at any time 

consenting to the Bureau’s supervisory 

authority. The Bureau believes that this 

approach provides a streamlined 

resolution process that will reduce the 

costs to the Bureau and those 

respondents that wish to consent to the 

Bureau’s supervisory authority, 

compared to the alternative of 

permitting only negotiated consent 

agreements. 

Several industry commenters 

discussed the potential costs of the rule; 

however, only one directly commented 

on the Bureau’s consideration of 

benefits, costs and impacts under 

Section 1022. Commenters argued that 

the rule may subject firms to new 

regulations or that they may bear the 

burden of increased compliance with 

existing Federal consumer laws. 

However, as discussed above, the final 

rule only establishes procedures the 

Bureau intends to use to implement 12 

U.S.C. 5514(a)(1)(C) to bring a nonbank 

covered person under the Bureau’s 

supervisory authority when the Bureau 

has made a reasonable-cause 

determination; it does not subject any 

entities to new substantive regulation or 

require increased compliance with 

existing law; nor is the final rule 

necessary for the Bureau to exercise its 

supervisory authority under 12 U.S.C. 

5514(a)(1)(C). 

Commenters also asserted that the 

possibility of supervision and/or the 

actual initiation of supervision would 

prove costly to firms. Regarding the 

costs of changing business practices in 

preparing for possible supervision, the 

Bureau notes that nonbank covered 

persons are required to comply with 

existing law and with any current 

record-retention requirements to 

document such compliance even in the 

absence of this final rule. The Bureau 

recognizes, as the commenters do, that 

entities will incur some costs in 

responding to Notices and participating 

in examinations; however, those costs 

would also exist in the absence of the 

final rule since a rule is not necessary 

to implement 12 U.S.C. 5514(a)(1)(C). 

Going even further, one commenter 

asserted that the Bureau must also 

gather more data and quantify the costs 

related to the rule. This commenter 

noted the Bureau’s claim that data are 

quite limited, but then offered several 

citations to studies about the costs of 

regulation. As noted however, the costs 

of regulation writ large are not relevant 

here. Rather the relevant data must 

describe the costs of adhering to 

particular informal administrative 

procedural frameworks in establishing 

reasonable cause. The studies 

mentioned include estimates of all 

regulation, including environmental 

regulations, and from the Bureau’s 

reading, do not discuss or mention the 

costs to financial institutions of 

adherence with informal administrative 

procedural frameworks. 

The final rule will have no 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 will the final rule 

have a unique impact on rural 

consumers. 

VI. 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.55

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.56

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.57

As discussed above in section V, a 

notice of proposed rulemaking was not 

required for this rulemaking. Because no 

notice of proposed rulemaking was 

required, the Regulatory Flexibility Act 

does not require an initial or final 

regulatory flexibility analysis.58

In the alternative, a FRFA would not 

otherwise be required because the final 

rule would not have a significant 

economic impact on any small entities. 

The final 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 final rule 

establishes a transparent and 

streamlined process by which the 

Bureau would exercise its existing legal 

authority and would not impose new 

substantive requirements. 


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As noted, the Bureau opted to issue a 

notice of proposed rulemaking to 

receive public comment including 

comment on the analysis under the 

RFA. One commenter argued that 

smaller institutions could bear 

substantial costs in responding to a 

Bureau notice, but did not provide any 

specific data regarding those costs. The 

Bureau had noted in its proposal that 

such responses will require firm 

resources: however, the Bureau 

maintains that those costs will not be 

substantial nor, given any reasonable 

expectation of the scope of supervision 

under this provision, will they be borne 

by a significant number of small 

entities. 

Accordingly, the undersigned certifies 

that this final rule will not have a 

significant impact on a substantial 

number of small entities. 

VII. Paperwork Reduction Act 

The Bureau has determined that the 

final 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 the Paperwork 

Reduction Act, 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 in the 

preamble, the Bureau adds part 1091 to 

Chapter X in Title 12 of the Code of 

Federal Regulations to read as set forth 

below. 

PART 1091—PROCEDURAL RULE TO 

ESTABLISH SUPERVISORY 

AUTHORITY OVER CERTAIN 

NONBANK COVERED PERSONS 

BASED ON RISK DETERMINATION 

Subpart A—General 

Sec. 

1091.100 Scope and purpose. 

1091.101 Definitions. 

Subpart B—Determination and Voluntary 

Consent Procedures 

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 Voluntary consent to Bureau’s 

authority. 

1091.111 Notice and response included in 

adjudication proceeding otherwise 

brought by the Bureau. 

1091.112 No limitation on relief sought in 

civil action or administrative 

adjudication. 

Subpart C—Post-Determination Procedures 

1091.113 Petition for termination of order. 

Subpart D—Time Limits and Deadlines 

1091.114 Construction of time limits. 

1091.115 Change of time limits and 

confidentiality of proceedings. 

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

5514(a)(1)(C), 5514(b)(7). 

Subpart A—General 

§ 1091.100 Scope and purpose. 

This part sets forth procedures to 

implement section 1024(a)(1)(C) 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 supervisory authority over 

certain nonbank covered persons 

pursuant to section 1024(b)(7) of the 

Dodd-Frank Act (12 U.S.C. 5514(b)(7)). 

§ 1091.101 Definitions. 

For the purposes of this part, the 

following definitions apply: 

Assistant Director means an Assistant 

Director for Supervision. If there is no 

Assistant Director, the Associate 

Director may designate an alternative 

Bureau employee to perform the 

functions of an Assistant Director under 

this part. 

Associate Director means the 

Associate Director of the Bureau’s 

Division of Supervision, Enforcement, 

and Fair Lending, or his or her designee. 

If there is no Associate Director, the 

Director may designate an alternative 

Bureau employee to perform the 

functions of the Associate 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 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 

Associate Director; or 

(2) Assisting the Associate Director in 

the preparation of a recommended 

determination. 

Director means the Director of the 

Bureau or his or her designee. If there 

is no Director, the term shall mean a 

person authorized to perform the 

functions of the Director under this part, 

or his or her designee. 

Executive Secretary means the 

Executive Secretary of the Bureau. 

Initiating official means an Assistant 

Director or a Bureau employee 

designated to act as an ‘‘initiating 

official’’ by an Assistant Director. If 

there is not an Assistant Director, the 

Associate Director may designate a 

Bureau employee to perform the 

functions of an initiating official under 

this part. 

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 

§ 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 § 1091.102. 

Response means the response to a 

Notice of Reasonable Cause filed by a 

respondent with the Associate Director 

under § 1091.105. 

Subpart B—Determination and 

Voluntary Consent Procedures 

§ 1091.102 Issuance of Notice of 

Reasonable Cause. 

(a) An 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, 


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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 § 1091.111, 

a Notice of Reasonable Cause shall 

contain the information set forth in 

§ 1091.103, and be served on respondent 

as described in § 1091.104. 

§ 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 

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; and 

(2) A statement informing a 

respondent that: 

(i) A respondent may file with the 

Associate Director a written response to 

a Notice of Reasonable Cause no later 

than 30 days after the Notice is served 

on the respondent; 

(ii) The written response shall include 

the elements addressed in § 1091.105(b); 

(iii) A respondent may request in its 

written response to a Notice an 

opportunity to present an in-person or 

telephonic supplemental oral response 

to the Associate Director as set forth in 

§ 1091.106; 

(iv) A failure timely to 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 Associate 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 Associate Director’s receipt 

of a timely-filed response; 

(vi) If a respondent has not requested 

the opportunity to present a 

supplemental oral response, the 

Associate Director shall, not later than 

45 days after 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 § 1091.108; and 

(vii) In connection with a proceeding 

under this part, including a petition for 

termination under § 1091.113, 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). 

(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 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) 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 other 

information to a respondent other than 

as set forth in this section. 

§ 1091.104 Service of Notice. 

(a) A Notice of Reasonable Cause shall 

be served on a respondent as follows: 

(1) To individuals. A Notice shall be 

served on a respondent that is a natural 

person 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 (2) of this section, Notice may be 

served on a person 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 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 (2) of 

this section, a person may be provided 

a copy of a Notice by First Class Mail 

or other reliable means if a written 

waiver of service is obtained from the 

person to be served. In the case of a 

respondent that is not a natural person, 


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a written waiver may be provided by an 

officer, managing or general member, or 

partner authorized to represent the 

respondent. 

(b) The initiating official shall 

promptly submit a copy of a Notice and 

a copy of the certificate of service to the 

Associate Director. 

§ 1091.105 Response. 

(a) Timing. Within 30 days of service 

of a Notice, a respondent shall file any 

response with the Associate 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. 

(3) Any request to present a 

supplemental oral response, including 

the respondent’s preference for a 

telephonic or in-person supplemental 

oral response, must be included in the 

response. 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) 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 to a Notice of 

Reasonable Cause 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 § 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 

Associate Director, without further 

notice to the respondent, to issue a 

proposed decision and order as 

provided in § 1091.108(c)(1) and the 

Director to issue a decision and order as 

provided in § 1091.109(a)(1). 

(d) Waiver. A respondent shall be 

deemed to have waived the right, at any 

future stage of an Associate Director’s or 

the Director’s consideration of a matter, 

and in any petition for judicial review 

of an order issued pursuant to 

§ 1091.109(a)(1), 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. 

§ 1091.106 Supplemental oral response. 

(a) A respondent may request in a 

response under § 1091.105 the 

opportunity to present to the Associate 

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, at the respondent’s preference, 

by telephone or in person at the 

Bureau’s headquarters in Washington, 

DC. If a respondent requests in its 

written response a supplemental oral 

response but does not specify whether 

such response shall be conducted via 

telephone or in person, the 

supplemental oral response will be 

conducted by telephone unless 

otherwise directed by the Associate 

Director; 

(2) The Associate 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) Himself or herself; or 

(ii) An attorney in good standing of 

the bar of the highest court of any State. 

(6) The Associate Director shall cause 

an audio recording of a supplemental 

oral response to be made by a court 

reporter. A respondent may purchase a 

copy or transcript of the recording at the 

respondent’s own expense. 

(c) The initiating official may 

participate in any supplemental oral 

response conducted under this section. 

(d) The Associate Director shall serve 

on a respondent, within 14 days after 

the Associate 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 § 1091.107. 

(f) The Associate Director shall send 

a copy of the notice of supplemental 

oral response to the initiating official. 

(g) A respondent’s failure to 

participate in a supplemental oral 

response scheduled by the Associate 

Director shall constitute the 

respondent’s waiver of the opportunity 

to present a supplemental oral response. 

§ 1091.107 Manner of filing and serving 

papers. 

Unless otherwise specified by the 

Associate 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 

Associate Director and Director shall 

serve any paper, other than a Notice as 

set forth in § 1091.104, on a respondent, 

by: 

(a) Electronic transmission upon any 

condition specified by the Associate 

Director or Director; or 

(b) Any of the following methods if a 

respondent demonstrates electronic 

filing is not practicable and the 

Associate 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 U.S. Postal 

Service First Class, Registered, Certified, 

or Express Mail. 


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§ 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 Associate 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 Associate 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) or (b) of this section, the Associate 

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 

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 § 1091.102, or the procedures set 

forth in § 1091.111, at any time, or from 

issuance of a decision and order based 

on another Notice recommending that a 

respondent be subject to the Bureau’s 

authority pursuant to either of those 

sections. 

(d) Any proposed decision and order 

issued by the Associate Director 

pursuant to paragraph (c)(1) of this 

section shall set forth: 

(1) A statement that the Associate 

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 Associate 

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) The Associate Director shall 

include with the recommended 

determination submitted to the Director 

copies of the following: 

(1) The Notice of Reasonable Cause; 

(2) The record of service of a Notice 

of Reasonable Cause; 

(3) A respondent’s response and any 

documents, records, or other items filed 

with the written response; 

(4) Any document, record, or other 

item considered by the Associate 

Director to be material in making a 

recommended determination; and 

(5) An audio 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. 

(f) The requirement that the Associate 

Director provide to the Director the 

items described in paragraph (e) of this 

section shall confer no substantive 

rights on a respondent and any omission 

of an item may be cured by the 

Associate Director to the extent 

applicable. 

§ 1091.109 Determination by the Director. 

(a) Not later than 45 days after receipt 

of the Associate Director’s 

recommended determination, the 

Director shall, after considering the 

recommended determination and all 

documents, records, and other items 

submitted therewith by the Associate 

Director, make a determination either 

adopting without revision, modifying, 

or rejecting the Associate Director’s 

recommended determination, and shall 

issue to respondent, with copies to the 

Associate Director and the initiating 

official: 

(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 § 1091.102, or the 

procedures set forth in § 1091.111, at 

any time, or the issuance of an order 

based on another Notice 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 include: 

(1) A statement that the Director 

adopts the Associate Director’s 

proposed decision and order without 

revision as the Director’s decision and 

order, or that the Director rejects or 

modifies the Associate 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 the 

Associate Director’s proposed decision; 

(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 the respondent may petition for 

termination of the Bureau’s supervisory 

authority no sooner than two years from 

the date of the order, and no more than 

annually thereafter; and 

(5) A copy of the recommended 

determination issued by the Associate 

Director. 

(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 § 1091.107. 

§ 1091.110 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 of judicial review. 


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(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 

§ 1091.113, and a consent agreement 

shall state that a respondent entering 

into a consent agreement waives any 

right to judicial review of such consent 

agreement. 

§ 1091.111 Notice and response included 

in adjudication proceeding otherwise 

brought by the Bureau. 

(a) Notwithstanding §§ 1091.102 

through 1091.106, 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 §§ 1091.101 through 

1091.110, and 1091.113 through 

1091.115 will be inapplicable to such 

proceeding. 

§ 1091.112 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). 

Subpart C—Post-Determination 

Procedures 

§ 1091.113 Petition for termination of 

order. 

(a) Any person subject to an order 

issued pursuant to § 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 the same to the initiating 

official. 

(1) The initiating official may, within 

30 days of his or her receipt of a copy 

of a petition for termination, file with 

the Director a response to the petition 

stating 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. 

(2) The initiating official shall serve a 

copy of the response to a petition for 

termination on the petitioner pursuant 

to § 1091.107 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 

initiating official. 

(1) The Director shall serve the 

written decision on a petition for 

termination of order on a respondent 

pursuant to § 1091.107. 

(2) The Director shall send a copy of 

the written decision on a petition for 

termination of order to the Associate 

Director and initiating official promptly 

upon issuing the written decision. 

(3) The decision of the Director made 

pursuant to paragraph (e) of this section 

shall constitute final agency action 

under 5 U.S.C. 704. 

Subpart D—Time Limits and Deadlines 

§ 1091.114 Construction of time limits. 

(a) General rule. In computing any 

period of time prescribed by this part, 

or by order of the Associate 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. Postal 

Service 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 U.S. Postal 

Service 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. 

§ 1091.115 Change of time limits and 

confidentiality of proceedings. 

(a) Except as otherwise provided by 

law, the Associate Director until the 

issuance of a recommended 

determination, or the Director at any 

time thereafter, at their respective 

discretion, 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 Associate 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) Deadlines for action by the 

initiating official, Associate Director, or 

the Director established in this part 

confer no substantive rights on 

respondents. 


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(c) In connection with a proceeding 

under this part, including a petition for 

termination under § 1091.113, 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). 

Dated: June 17, 2013. 

Richard Cordray, 

Director, Bureau of Consumer Financial 

Protection. 

[FR Doc. 2013–15485 Filed 7–2–13; 8:45 am] 

BILLING CODE 4810–AM–P 


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