The CFPB issued a final rule on June 10, 2015 allowing it to supervise nonbank companies that qualify as “larger participants of a market for automobile financing.” Relatedly, it adopted simultaneously a separate rule defining certain automobile leases as a “financial product or service.” These rules will be effective 60 days after their publication in the Federal Register.
To enable its examiners to immediately begin to prepare for examinations of qualifying entities, the CFPB concurrently released its auto finance examination procedures. These procedures will be used by CFPB examiners to examine both bank and nonbanks.
The larger participant rule is based on the CFPB’s authority to supervise nonbank entities considered to be “a larger participant of a market for other consumer financial products or services.” Nonbank larger participants can include specialty finance companies, manufacturer “captive” finance companies, and “Buy Here Pay Here” (BHPH) finance companies. Because Dodd-Frank allows the CFPB to supervise all service providers for supervised entities, regardless of size, the rule also allows the CFPB to supervise all service providers to “larger participant” auto finance companies.
The CFPB’s press release states that the CFPB adopted the larger participant rule largely as proposed, with only minor changes. As proposed, the final rule defines a “larger participant” as a nonbank covered entity engaged in “automobile financing” that has at least 10,000 aggregate annual originations. For a detailed summary of the final rule, see our legal alert.