The CFPB Nonbank Supervision Program was launched on January 5, 2012 for the purpose of auditing nonbank entities that deal with loans. This includes mortgage brokers, loan originators, mortgage brokers and servicers, foreclosure relief and loan modification services, private education lenders, and payday lenders.

To be covered under the nonbank supervision program, a company must be a financial institution that does not accept deposits. This type of business is not operated under a bank charter, hence the term “nonbank.”

The purpose of the CFPB nonbank supervision program is to ensure that consumers are being treated fairly by the businesses they deal with in financial matters. There is a separate program to oversee banks.

Before determining whether a specific nonbank entity needs to be audited, reviewers go over public information and records on file with state and federal regulators. Then examiners will interview selected employees and observe how the company operates on a day-to-day basis. If violations are found, the CFPB will work with the company to develop corrective programs and actions to ensure that the problem is resolved.

The review process allows the CFPB to assess the degree of risk that certain businesses pose to consumers as a result of noncompliance with financial regulations.

State regulators are being asked to cooperate with the CFPB by entering into a Memorandum of Understanding (MOU), stating that they will share information with the CFPB. Forty-two states have already joined the initiative.