Client Alert

CFPB Maps Out Larger Participant Nonbank Supervision Program

June 30, 2011

Kevin L. Petrasic

On June 23, the Consumer Financial Protection Bureau (CFPB) issued a notice and request for comment (Notice) on defining which entities should be included as larger participants in its nonbank supervision program. Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA), the CFPB is required by July 21, 2012, to define who is a larger participant of a market for other consumer financial products or services. This provision, included within the CFPBs nonbank supervision authority, in effect requires the CFPB to identify the markets for other consumer financial products or services that will be part of its nonbank supervisory program, as well as the larger participants of such identified markets that will be subject to the CFPB program. Pursuant to this authority, the CFPB can supervise persons/entities covered by the program, including requiring reports and conducting examinations, to monitor and oversee compliance with existing federal consumer financial law.

While the DFA specifically authorizes the CFPB to examine all nonbank mortgage companies, payday lenders, and private education lenders, its supervision of other markets providing consumer financial products and services generally must be conducted via its supervision of larger participants in such markets. Thus, the larger participant rulemaking is a critical component of the CFPBs overall nonbank supervision program.

In preparation for the required rulemaking, the Notice seeks public comment on the following six markets the CFPB is considering including in the initial rule: (i) debt collection; (ii) consumer reporting; (iii) consumer credit and related activities; (iv) money transmitting, check cashing, and related activities; (v) prepaid cards; and (vi) debt relief services.

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