CFPB identifies types of nonbank firms facing regulatory oversight
The Consumer Financial Protection Bureau identified several types of nonbank firms that could eventually be classified as larger participants in the consumer financial markets, allowing the CFBP to supervise the companies at a later date. The consumer agency is seeking comment after suggesting the potential targets of nonbank oversight include debt collectors, consumer reporting agencies, consumer credit and activities, money transmitting providers, check-cashing agencies, prepaid card providers and debt relief services. In a public notice released Thursday, the CFPB said it has not made any definitive decisions, but the agency is asking the public and financial services industry to give input on what nonbank financial firms should be subjected to possible CFPB supervision. The goal is to create a threshold of who will be included, the CFPB said. The agency said it is trying to flesh out the larger participant rule from the Dodd-Frank Act, which said the CFPB should identify what kinds of nonbank firms will be pulled under the CFPB's supervisory umbrella to protect consumers. The larger participant guidelines "will not impose substantive consumer protection requirements," the CFPB said. "Instead, the rule will enable the CFPB to begin a supervision program for larger participants in certain markets." Until passage of the Dodd-Frank Act in 2010, federal oversight of financial firms was limited to banks, thrifts and credit unions, the CFPB said. Dodd-Frank changed that by authorizing the CFPB to examine nonbank mortgage companies, payday lenders and private education lenders as well as larger participants in the consumer financial markets. Before moving forward with an oversight program, the CFPB said it first needs to define what types of agencies will fit the definition of "a larger participant of a market for other consumer financial products or services." Once the public comment period ends , the CFPB will be responsible for drafting a rule that identifies the larger participants. The deadline for the rule is July 21, 2012 — one year after the CFPB officially opens its doors. "Consumers deserve the peace of mind that financial companies — both banks and nonbanks — are following the rules," said Elizabeth Warren, special adviser to the secretary of the Treasury on the CFPB. "The CFPB will be able to examine companies that have never been subject to federal oversight to ensure that no one is gaining an unfair advantage by breaking the law. This will ultimately create fair competition, better product offerings, and more transparent markets for consumers." Write to: Kerri Panchuk.