Consumer Financial Protection Bureau Proposes Definition of "Larger Participants" Subject to Oversight

As previously noted in Gardere's Jan. 18 Corporate Alert, the Consumer Financial Protection Bureau recently expanded its supervisory authority over traditional banking institutions to also encompass nonbanks that offer consumer financial products and services. The CFPB broadly defines nonbanks as those offering or providing consumer financial products or services without a bank, thrift or credit union charter. The CFPB is currently overseeing the following nonbank businesses, regardless of size: mortgage companies (originators, brokers and servicers, and loan modification or foreclosure relief services); payday lenders; and private education lenders. However, for other markets – such as debt collection, consumer reporting, auto financing and money services businesses – the CFPB only has the authority to supervise "larger participants." Based on recent rulemaking, it appears that the CFPB will define "larger participant" differently depending on the specific market.

In the first of an anticipated series of proposed rules regarding larger participants, the CFPB announced a proposed rule applying to debt collectors and consumer reporting agencies on Feb. 16, 2012. According to the proposed rule, debt collectors with more than $10 million in annual receipts from debt collection activities would be subject to CFPB supervision. The CFPB estimates that this would account for approximately 4 percent of all debt collection firms, but which account for 63 percent of annual receipts from the debt collection market. In addition, under the proposed rule, consumer reporting agencies with more than $7 million in annual receipts from consumer reporting activities would be subject to supervision, which according to CFPB estimates, would account for approximately 30 consumer reporting agencies and 94 percent of annual receipts from consumer reporting.

The CFPB must issue a final definition of "larger participants" by July 21, 2012. Comments must be received on or before April 17, 2012. The CFPB's proposed rule may be viewed here.

Gardere Attorneys Chris Converse ([email protected] or 214.999.4903) and Glenn T. Singleton ([email protected] or 214.999.4646), authors of this alert, are available to discuss any questions you might have regarding the CFPB. Please also feel free to contact any members of Gardere's Corporate Team.