The Bureau of Consumer Financial Protection (CFPB) has issued a Notice and Request for Comment identifying six markets for consumer financial products and services being considered as markets in which "larger participants" will be subject to CFPB supervision.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has authority to supervise, regardless of size, providers of residential mortgage loans and certain related services, payday loans, and private education loans. The Dodd-Frank Act also gave the CFPB supervisory authority over providers considered to be "a larger participant of a market for other consumer financial products or services." The CFPB must issue a final rule identifying such larger participants no later than one year from the "designated transfer date," which is currently scheduled for July 21, 2011.
The six markets identified by the CFPB are (1) debt collection; (2) consumer reporting; (3) consumer credit and related activities; (4) money transmitting, check cashing, and related activities; (5) prepaid cards; and (6) debt relief services. Consumer credit market participants and products relevant to that market are described as including, respectively, "finance companies, consumer lenders, loan servicers and brokers" and "secured credit such as automobile loans and unsecured consumer installment loans." The Notice states that, in addition to the six markets the CFPB has identified for potential inclusion in an initial "larger participant" rule, the CFPB may add other markets through subsequent rulemaking.
The CFPB seeks comment on which markets the initial rule should cover, how those markets should be defined, what a market's geographic scope should be, and what specific criteria and threshold levels should be used to define a "larger participant." Comments are also requested on what data should be used in determining who is a "larger participant," including whether the CFPB should use data collected through the registration system it may establish in a separate rulemaking. Under the Dodd-Frank Act, the CFPB is authorized to create such a system for nondepository institutions it supervises.
Comments must be submitted within 45 days after publication of the Notice in the Federal Register. To obtain additional input, the CFPB will hold roundtables with consumer, community, and industry groups. We understand that invitations have been issued for a roundtable scheduled for July 7, 2011.
In the Notice, the CFPB observes that "[o]nce it has the requisite authority," it may exercise its supervisory authority in the mortgage, payday, and private education lending markets "immediately." Such "requisite authority" is presumably a reference to the need for a CFPB Director to be appointed before the CFPB can supervise or examine nondepository institutions. (Click here to read a prior legal alert on the report sent by the Inspectors General of the Department of the Treasury and Federal Reserve Board to members of Congress responding to questions about establishment of the CFPB.)
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