WASHINGTON, DC (September 18, 2025) |
Today, the Defense Credit Union Council (DCUC) provided comments to the Consumer Financial Protection Bureau (CFPB) and expressed concerns about the Bureau’s proposed rule on the legal standard for designating nonbank entities for supervision. See DCUC’s letter here.
While DCUC supports the CFPB’s broader goals of consistency, transparency, and streamlined oversight, DCUC warned that the proposal, as written, would weaken supervisory authority over nonbank financial firms and create an imbalanced regulatory landscape.
“The CFPB’s proposal narrows its own ability to oversee nonbanks at a time when their number and complexity are growing,” says Jason Stverak, DCUC Chief Advocacy Officer. “This not only increases risks to consumers but also places regulated credit unions—already subject to rigorous federal and state examinations—at a competitive disadvantage.”
DCUC’s Key Concerns with the Proposed Rule:
Requiring a “high likelihood of significant harm” would exclude many harmful practices that often only surface during examinations. Minor but widespread abuses, such as deceptive fees, could escape supervision despite their collective impact on consumers.
Limiting supervision to conduct “directly connected” to financial products ignores vital ancillary activities like cybersecurity, data protection, loan servicing, and debt collection— functions that directly affect consumers’ financial well-being.
At a time when the CFPB already examines few nonbank entities and faces staff reductions, narrowing the standard would further reduce scrutiny of high-risk actors while increasing pressure on credit unions that comply with higher regulatory expectations.
DCUC noted that as the financial services industry evolves, the CFPB must maintain strong and adaptable oversight—especially of nonbank firms that lack the same supervisory rigor as depository institutions.
“Removing nonbank financial companies from the scope of supervision creates immeasurable risks for consumers and the broader industry,” Stverak added. “CFPB must keep its authority strong to ensure fair competition and consumer protection.”