On February 16, 2012, the Consumer Financial Protection Bureau (“CFPB”) proposed a new regulation, pursuant to Section 1024 of the Consumer Financial Protection Act of 2010 (Title X of the Dodd-Frank Act) (the “Act”), intended to establish “the scope of coverage of the Bureau’s supervision authority for nonbank covered persons,” in particular as pertains to credit reporting and debt collection organizations. The proposed regulation first recognizes the authority of the CFPB, under Section 1024 of the Act, to supervise certain “nonbank covered persons” that offer or provide to consumers (1) home mortgage loan brokerage, origination, modification, or foreclosure relief; (2) private education loans; (3) payday loans; and, most relevant, (4) “any ‘larger participant of a market for other consumer financial products or services’ as defined by rule by the” CFPB. Such supervision under the Act includes (i) compliance assessment with Federal consumer financial laws; (ii) obtaining information regarding such “persons’” activities and compliance; (iii) detection and assessment of risks to consumers. The proposed regulation is limited to defining “larger participants” subject to nonbank supervision and does not contain any new substantive requirements for regulated entities.
The proposed regulations would define “larger participants” based on their annual receipts resulting from activities relating to “the market in question.” The threshold proposed for consumer debt collection organizations to be characterized as a “larger participant” is any entity with annual receipts of $10 million. For consumer reporting market, the threshold is $7 million. According to the proposed regulation, the classification of a business as a “larger participant” would last for a period not less than two years but also sets forth a procedure by which a person can challenge that classification.