CFPB seeks input on how to define a nonbank

The Consumer Financial Protection Bureau issued a Notice and Request for Comment on how to define the term “larger participant” in certain financial markets the newly-formed bureau intends to regulate. The CFPB considers that definition to be a “key element” of the agency’s nonbank supervision program.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 mandated the CFPB to determine that both banks and nonbanks comply with federal consumer financial protection laws. Thousands of financial services companies can be classified as nonbanks today, the CFPB said.

The bureau stated that before it begins its nonbank supervision program, Dodd-Frank requires that the agency first define what entity is a “larger participant of a market for other consumer financial products or services.” The CFPB must issue an initial “larger participant” rule no later than July 21, 2012.

To prepare for this future rulemaking, the CFPB seeks public input to define that category of service provider in six potential markets: debt collection: consumer reporting: consumer credit and related activities; money transmitting, check cashing, and related activities; prepaid cards; and debt relief services.

Among the general issues discussed in the notice are:

• What criteria to use to measure a market participant
• Where to set the thresholds for inclusion
• Whether to adopt a single test to define larger participants in all markets (measure the same criteria and use the same thresholds), or instead use tests tailored for specific markets
• What data are available to be used for these purposes
• What time period to use to measure the size of a market participant
• How long a participant should remain subject to supervision after initially meeting the larger participant threshold, even if subsequently falling below the threshold
• What consumer financial markets to include in the initial rule

The notice and additional information are available online at www.consumerfinance.gov/notice-and-comment/defining-larger-participants-in-certain-consumer-financial-products-and-services-markets/ .

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