CFPB Finalizes Rule to Supervise “Larger Participant” Consumer Reporting Agencies

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On July 16, the CFPB finalized a rule that will allow it to begin supervising certain consumer reporting agencies (CRAs). Under the Dodd-Frank Act, the CFPB has authority to supervise, regardless of size, nonbanks offering (i) certain mortgage-related products and services, (ii) private education loans, and (iii) payday loans. The CFPB also has the power to supervise “larger participants” in any other market for consumer financial products or services, provided that it first conducts a rulemaking to define “larger participants.” Under this first “larger participant” rule, the CFPB will have supervisory authority over CRAs with more than $7 million in annual receipts from consumer reporting activities, effective September 30, 2012. The CFPB believes that the $7 million threshold will cover 30 companies that account for 94% of total industry receipts. The final rule is divided into two parts: (i) Subpart A sets the definitions and other terms applicable to the CFPB’s supervision of “larger participants” in general, and (ii) Subpart B identifies the market, terms, and “larger participant” test for the CRA industry. This latter part will be expanded for each new market the CFPB opts to supervise under its “larger participant” authority. While the rule as proposed also included a threshold for use in identifying “larger participants” in the debt collection market, the CFPB has postponed issuance of the final debt collection “larger participant” rule until the fall. The CFPB described the final rule as “the first in a series of rules to define larger participants of other markets.”