In a May 23, 2014 blog post by Kelly Cochran, Assistant Director of Regulation, the Consumer Financial Protection Bureau indicated that it is working on a “larger participant” rule for nonbank automobile lenders pursuant to Section 1024 of the Consumer Financial Protection Act of 2010. Section 1024 authorizes the CFPB to designate certain industries and sizes of their participants as subject to its supervision.
Supervision under Section 1024 subjects “larger participants” to on-site examinations by the CFPB. Under Section 1024, the CFPB may also establish registration and reporting systems to which those persons would be subject, though the CFPB has not yet done so. In the long term, therefore, the designation of an industry and its “larger participants” may result in more than just on-site examinations.
Section 1024 allows the CFPB to define “larger participants” in any “market for other consumer financial products or services.” The CFPB does not have to determine the importance of an industry or its impact on consumers. It seems that the CFPB must only determine that the industry deals in consumer financial products and services.
The three industries currently designated as “larger participant” markets – consumer reporting, debt collection and student loan servicing – have not challenged the designations of their markets, but have instead focused on shaping how a “larger participant” is defined. Auto lenders may want to participate in the forthcoming rulemaking in that way. Those auto lenders who, because of size or importance, can assume that they will have “larger participant” status under any definition will want to see an expansive definition so that as many competitors as possible will be subject to the burdens of CFPB regulation. Small firms, by contrast, if they believe they may escape “larger participant” status, will focus on the definition of the market, suggesting that it be as broad as possible to make their own market share outside the “larger” category.