[author: John L. Culhane, Jr.]

In February, the CFPB published its proposed rule defining larger participants in the debt collection and credit reporting industries. In general, the proposal advised that the CFPB would be guided by and would use a definition of annual receipts adapted from that used by the Small Business Administration in identifying small business concerns. In particular, as discussed in our legal alert, the CFPB proposed to define as larger participants credit reporting companies with more than $7 million in annual receipts and debt collection companies with more than $10 million in annual receipts.

Remarkably, in doing so, the CFPB made no reference whatsoever to the fact that on October 12, 2011 the Small Business Administration published a proposal to revise its size standards for small business concerns in the debt collection and credit reporting industries to $14 million. Nor did it mention that in considering such changes, the SBA specifically assesses competition within an industry to determine whether most of an industry’s activity is attributable to larger or smaller firms. Fortunately, ACA International (“ACA”) has submitted a supplemental comment letter calling these discrepancies to the attention of the CFPB.

As the ACA has observed, unless the CFPB increases the larger participant threshold for the debt collection industry, “it will create a regulatory scheme in which debt collectors with $10 million in annual receipts will be small business concerns under the SBA’s rules, while being subject to the CFPB’s burdensome supervisory authority as larger participants.” We would add that, likewise, unless the CFPB increases the larger participant threshold for the consumer reporting industry, the same result would hold true for credit reporting agencies as well.

The ACA’s letter also points out that the SBA makes periodic inflation adjustments to its monetary-based small business size standards and conducts a detailed review of at least one-third of all size standards every 18 months and a complete review of all size standards at least once every 5 years. The ACA urges the CFPB to also incorporate periodic inflation adjustments into its larger participant thresholds and to provide a mechanism, for conducting comprehensive reviews and modifications to such thresholds. We agree and would encourage the CFPB to include such provisions in its final rule.