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Federal Register / Vol. 86, No. 118 / Wednesday, June 23, 2021 / Rules and Regulations
longer finds persuasive. Part IV
addresses the parallel issue in the context of very large banks and credit unions. Part V concludes with some regulatory matters.
II. Background
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A. Consumer Financial Protection Act of 2010
The CFPA establishes the Bureau as an independent bureau in the Federal Reserve System and assigns the Bureau a range of rulemaking, enforcement, supervision, and other authorities.2
Many of these authorities relate to the body of Federal consumer financial law, which the CFPA defines to include the CFPA itself, TILA, and a number of other statutes, rules, and orders, but it does not include the MLA.3 For example, one of the Bureaus authorities is to prescribe rules . . . as may be necessary or appropriate to enable the Bureau to administer and carry out the purposes and objectives of the Federal consumer financial laws, and to prevent evasions thereof. 4 A
notable substantive provision of the CFPA is its prohibition on unfair, deceptive, or abusive acts or practices.5
The CFPA also requires the Director of the Bureau to establish several offices, including an Office of Service Member Affairs.6
The key CFPA provisions that are relevant to this interpretive rule are sections 1024 and 1025. Section 1024
addresses Bureau supervision of specified categories of nonbanksfor example, any covered person who offers or provides to a consumer a payday loanwhile section 1025
addresses Bureau supervision of very large depository institutions and credit unions, which are generally those with more than $10 billion in total assets and their affiliates.7
Section 1024b1 provides that the Bureau shall require reports and conduct examinations on a periodic basis of a supervised nonbank 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 person; and C detecting and assessing risks to consumers and to 2 CFPA section 1011a, 12 U.S.C. 5491a; see generally Public Law 111203, tit. X, 124 Stat. 1376, 19552113 2010.
3 CFPA section 100214, 12 U.S.C. 548114.
4 CFPA section 1022b1, 12 U.S.C. 5512b1.
5 CFPA sections 1031, 1035, 12 U.S.C. 5531, 5535.
6 CFPA section 1013e, 12 U.S.C. 5493e.
7 12 U.S.C. 5514, 5515. As explained in note 1, this interpretive rule uses the terms supervised nonbank and very large bank or credit union for convenience.

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markets for consumer financial products and services. 8
Section 1025b1 contains parallel but slightly different language. It provides that the Bureau shall have exclusive authority to require reports and conduct examinations on a periodic basis of very large banks and credit unions for purposes of: A assessing compliance with the requirements of Federal consumer financial laws; B
obtaining information about the activities subject to such laws and the associated compliance systems or procedures of such persons; and C
detecting and assessing associated risks to consumers and to markets for consumer financial products and services. 9
These differences in wording between section 1024b1 and section 1025b1 are explained by the structure of the statute. Very large banks and credit unions have long been subject to supervisory examinations by the prudential regulators, who continue to examine these institutions for a broad range of purposes.10 By contrast, the supervised nonbanks that are covered by section 1024b1 were generally not subject to examination by the Federal government before the creation of the Bureau.11 The purposes of Bureau examinations under sections 1024b1
and 1025b1 are both broad. But it was natural, to ensure thorough Federal examination of supervised nonbanks, for Bureau examinations of those nonbanks to cover an even broader range of subject matters than the Bureaus examinations of very large banks and credit unions. For example, 8 12

U.S.C. 5514b1.
U.S.C. 5515b1 emphasis added.
10 Under the CFPA, the prudential regulators are the Board of Governors of the Federal Reserve System Federal Reserve, the Office of the Comptroller of the Currency OCC, the Federal Deposit Insurance Corporation FDIC, and the National Credit Union Administration NCUA. See CFPA section 100224, 12 U.S.C. 548124. For convenience, this interpretive rule also uses that term anachronistically to refer to the Federal Home Loan Bank Board, which existed until 1989, and the Office of Thrift Supervision, which existed from 1989 until 2011.
11 As the legislative history of the CFPA explains, the Bureaus new authority with respect to these nonbanks remedied the previous situation, where the lack of any effective supervision on nondepositories led to a race to the bottom in which the institutions with the least effective consumer regulation and enforcement attracted more business . . . . S. Rept. 111176, at 10
2010. At the same time, the Bureaus authorities are not limited to addressing the specific problems that existed prior to the CFPA. See id. at 11 The CFPB will have enough flexibility to address future problems as they arise. Creating an agency that only had the authority to address the problems of the past, such as mortgages, would be too short-sighted.
Experience has shown that consumer protections must adapt to new practices and new industries..
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the Bureau can obtain information about all of a supervised nonbanks compliance systems or procedures, not only those that are associated with activities subject to Federal consumer financial laws.
Accordingly, with respect to supervised nonbanks that are covered by section 1024b1, the relevant question here is whether there are risks to consumers arising from conduct that violates the MLA that the Bureau may detect and assess. In the case of very large banks and credit unions that are covered by section 1025b1, there is the additional question of whether such risks to consumers are associated with activities subject to Federal consumer financial laws, such as TILA
or the CFPA.12
B. Military Lending Act The MLA, also known as the Talent Amendment, was bipartisan legislation first enacted in 2006.13 As Senator Talent explained during the passage of the MLA: The fact is, predatory payday lenders are targeting American troops and are trying to make a buck off of their service to our country. . . . This is a national problem. Predatory payday lenders set up shop near our military bases throughout the country and prey on our servicemembers. . . . Our troops deserve uniform, national protection against abusive financial practices that target them. 14
The MLA establishes safeguards when creditors extend consumer credit to certain active-duty members of the armed forces or their covered dependents. The statute is implemented through regulations issued by the Department of Defense, in consultation with other specified agencies including the Bureau.15 The Department of 12 Note that the term associated in section 1025b1C is best read as meaning associated with the activities subject to such laws in section 1025b1B, where such laws refers back to Federal consumer financial laws in section 1025b1A. This reading flows naturally from the order in which the provisions appear. However, as discussed below, this interpretive rule would reach the same conclusion if associated in section 1025b1C were read to mean associated with violations of Federal consumer financial laws. MLA
violations are both associated with activities subject to Federal consumer financial law and associated with violations of Federal consumer financial law.
Also note that, since the Bureau concludes that the above standards are satisfied, this interpretive rule does not need to consider whether there are also other statutory bases for the Bureaus authority to conduct examinations of supervised nonbanks and very large banks and credit unions related to the MLA.
13 10 U.S.C. 987.
14 152 Cong. Rec. S6406 June 22, 2006
statement of Sen. Talent.
15 10 U.S.C. 987h. Congress added the Bureau to the list of agencies that the Department of Defense consults in 2013.

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