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The Consumer Financial Protection Bureau struck a deal Tuesday with state bank supervisors to coordinate supervision and implementation of consumer protection rules.
January 4 -
The new regulator, brainchild of Elizabeth Warren, has a broad mandate and a big budget, but still no director. How aggressively will it move?
December 27 -
Nonbanks are sending a clear message to the interagency council tasked with identifying systemically important institutions: don't look at us.
November 11 -
While the industry has been largely focused on how the Consumer Financial Protection Bureau will target bankers, the new agency is already busy figuring out how it will supervise the tens of thousands of nondepository financial companies under its purview.
October 14
WASHINGTON — While mainstream lenders are poised to get ample attention from the Consumer Financial Protection Bureau, the new agency made clear Thursday it will not stop there.
The bureau proposed to oversee "larger participants" in six other credit-related sectors as part of its nonbank supervision program: debt collectors; consumer reporting agencies; money transmitters; prepaid-card issuers; debt-relief services; and other consumer lenders.
The move gave an early glimpse of how the CFPB — granted wide-ranging powers under the Dodd-Frank Act — plans to oversee nonbanks, and sent another strong signal that it is moving forward despite signs it may not have a permanent director in place by a mandated July deadline.
"This is a down-payment on the agency's commitment to leveling the playing field for all financial services providers," Elizabeth Warren, the agency's architect and administration official in charge of launching it, said on a conference call with reporters. "Consumers deserve the peace of mind that financial companies — banks and nonbanks — are following the rules."
Yet with the CFPB still under construction and awaiting a formal launch, the proposal stayed clear of hard standards. It released a "notice and request for comment" asking for input on the scope of the nonbank program and how to define "larger participants." The comment period lasts for 45 days.
Still, the proposal could be an indicator of the eventual scope of the agency's nonbank program. While it is unclear exactly how many nonbanks will fall under CFPB's jurisdiction, one senior agency official said the number could reach 100,000.
"The examination of nonbank companies will be a crucial piece of the bureau's work," Warren said. "For the first time, many of these companies will be subject to this oversight."
With neither Warren nor anyone else named by the administration to head the agency, and Republican senators promising an uphill confirmation battle for anyone, officials at the CFPB are still moving quickly to prepare for the launch.
Under Dodd-Frank, the CFPB's nonbank supervision program accompanies its oversight of bank lenders. It has the authority to examine all sizes of nonbank mortgage companies, payday lenders and private education lenders. But it may also supervise "larger participants" in other consumer markets. The law left it to the CFPB to determine which other markets to include and to set the size threshold for participants.
"The statute requires them to define this term, to address it, so they're following their statutory mandate, and I think that's a good thing," said L. Richard Fischer, a partner at Morrison Foerster.
The regulation would not necessarily impose new consumer-protection requirements, but it is required before the agency can begin supervising firms covered by the rule. Under Dodd-Frank, the rule must be finalized by July 21, 2012.
Andrew Sandler, a partner at BuckleySandler LLP, said the notice indicates the CFPB — once the rule is completed — may start regulating the six markets even before it has a permanent chief.
"My expectation is that you will see the agency move forward aggressively in each of these areas without regard to the timing or the appointment of a director, and notwithstanding issues related to jurisdiction in that interim period," Sandler said.
The notice asks questions on a range of issues, including the method for defining larger participants, and whether that test should be tailored to specific markets or be the same across the board.
"For example, a larger participant in a market for consumer credit might be defined using criteria and thresholds different from those used in the market for consumer debt collection," the notice said.
The agency said a threshold test could involve an "absolute approach," where a larger participant, for example, is any firm with a loan volume above a certain amount. Another approach would be to include a firm whose assets are a certain percentage of its whole industry.
According to the senior official, the bureau has not yet decided whether nonbank companies subject to CFPB rules will have to formally register with the agency or whether examiners will be located on site. Dodd-Frank left both of those decisions up to the CFPB's discretion.
