CFPB Proposes Narrow Definition of “Risks to Consumers” Under its Ability to Make Nonbanks That Pose Such Risk Subject to its Examination Authority: Big Implications for Nonbanks?

On August 26, 2025, the CFPB published a proposed rule that would adopt a standard definition of “risks to consumers with regard to the offering or provision of consumer financial products or services” as used in the Dodd-Frank Act provision that enables the CFPB to bring nonbank companies that pose such consumer risks under the agency’s supervision.  This would be a new regulatory definition, as the CFPB has not previously defined this term, even though it has promulgated regulatory procedures for such designations. 

This proposal follows a proposed rule issued by the CFPB in May of this year that would rescind the parts of the CFPB’s procedures for such designations that provided for public release of the CFPB’s final decisions and orders when companies contest the designation. 

The CFPB’s supervisory authority under the Dodd-Frank Act (which I wrote about here in relation to the CFPB’s recent proposal to narrow the definition of “larger participants” in certain markets) allows for the CFPB to make (or “designate”) specific nonbank companies as subject to CFPB supervision (i.e., examinations) if the CFPB has reasonable cause to determine, after notice and a reasonable opportunity for a response, that the company “poses risks to consumers with regard to the offering or provision of consumer financial products or services.”  The CFPB noted in the proposal that it has issued such designations before without having defined the phrase “risks to consumers with regard to the offering or provision of consumer financial products or services” (this year, the CFPB’s acting leadership withdrew the agency’s only two supervisory designations of authority over Google and World Acceptance). 

In its proposal, the CFPB stated that it has concerns with the ad hoc nature of individual orders resulting in inconsistency, the unclear applicability of precedents in past orders, uncertainty for institutions about the standard the CFPB will apply.  The CFPB is also concerned that the agency “may not conform to the best reading” of the statutory phrase in individual cases, which appears to be an allusion to the Supreme Court’s 2024 opinion in Loper Bright (which I wrote about here) in which the Court overruled the Chevron doctrine and essentially held that courts will no longer defer to agency interpretations of ambiguous statutes and instead conduct their own analysis to find the best meaning of the statute.

The CFPB stated that earlier agency orders interpreted the aforementioned statutory phrase broadly to include “speculative” or “trivial” risks, but instead believes Congress intended the phrase to be focused on “serious conduct.”  The CFPB also proposed to interpret the latter part of the phrase “with regard to the offering or provision of consumer financial products or services” to require a direct connection to the product or service.  The CFPB proposed the statutory phrase to mean conduct that:

• Presents a high likelihood of significant harm to consumers; and

• Is directly connected to the offering or provision of a “consumer financial product or service” as defined in the Dodd-Frank Act.

Comments are due September 25, 2005.  

Although this supervisory authority may not directly impact companies already expressly subject to CFPB supervision, like mortgage lenders or larger participants in certain markets, but there is still a takeaway for such companies. This proposal provides yet another indication that the CFPB’s current acting leadership is moving to narrow the CFPB’s scope and reduce its workload. All of the agency’s recent steps in this regard could be used to justify a future reduction in force (my latest post on this topic is here). If your company may be subject to this potential designation in the future, or if you merely wish to a see smaller CFPB, you may want to submit a comment letter. This is a unique moment in time, in which an agency is attempting to limit its ability to expand its own jurisdiction, and it would be prudent to support it.

If you would like assistance with a comment letter, or to discuss the issues in this post or any other regulatory issues, please email me at rich@garrishorn.com.