On June 23, 2011, the Consumer Financial Protection Bureau (CFPB) released a Notice and Request for Comment seeking public input on a key element of its non-bank supervision program — the statutory requirement to define who is a “larger participant” in certain consumer financial markets.
Created by the Dodd-Frank Act, the CFPB has been empowered to regulate non-bank financial entities. But exactly what is a “non-bank?” Various literature generally defines “non-bank” as a company that offers consumer financial products or services, but does not have a bank, thrift, or credit union charter and does not take deposits. Products from non-banks have a significant share of the overall consumer financial marketplace. Under Dodd-Frank, many of these non-banks will be subject to a federal supervision program for the first time.
In its Notice and Request for Comment, the CFPB has identified the following markets for potential inclusion in an initial rule: debt collection, consumer reporting, consumer credit and related activities, money transmitting, check cashing and related activities, prepaid cards, and debt relief services. The larger participant rule will not impose substantive consumer protection requirements. Instead, the rule will enable CFPB to begin a supervision program for larger participants in certain markets.
The issues for discussion in the Notice include:
- 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 to use tests designed for specific markets;
- What data is available to use for these purposes;
- What time period to use to measure the size of a market participant;
- How long a participant is to remain subject to supervision after initially meeting the larger participant threshold, and if it subsequently falls below the threshold; and
- What consumer financial markets to include in the initial rule.