CFPB Rolling Back Auto Loan, Credit Reporting Supervision

The Consumer Financial Protection Bureau is considering whether to dramatically slash the number of nonbank companies it supervises in the auto finance, international money transfer, debt collection, and consumer credit reporting markets.

The cash-strapped federal consumer finance watchdog is kicking off a process to revise “larger participant” rules it had finalized as far back as 2012, potentially dropping the number of covered companies to fewer than 10 in some markets, according to advance notices posted in the Federal Register’s public inspection file Thursday.

The rulemaking is at a preliminary stage—essentially a series of questions for commenters outlining the agency’s initial views ahead of a formal proposal.

Lawmakers gave the CFPB the authority to subject the biggest players in nonbank financial markets to direct supervision by agency examiners. To do so, the CFPB is required to issue rules showing how it determines the largest market players.

The latest proposals, set to be formally published Friday in the Federal Register, mark the latest rollback of the agency’s work under acting Director Russell Vought.

CFPB examination teams have been largely mothballed since President Donald Trump fired former Director Rohit Chopra, a Biden appointee, in late January. Vought in April ordered the CFPB’s examination unit to cut the number of superivsion “events” by half and to shift attention toward traditional banks.

Trump and Republicans in Congress joined in May to repeal a Biden-era CFPB larger participant rule for digital payment apps that would’ve allowed supervision of Apple Inc.’s Apple Pay service and Alphabet Inc.’s Google Pay, among others.

Major Rollbacks

The consumer credit reporting industry—led by Equifax Inc., Experian Plc, and TransUnion—was the first to be subject to a CFPB larger participant rule. The 2012 rule, issued under Obama-era Director Richard Cordray, subjected all companies with more than $7 million in annual receipts from consumer reporting activities to supervision.

The CFPB is now considering moving the threshold to cover consumer credit reporting companies with $41 million or more in annual revenue, matching a size standard set by the Small Business Administration for the industry, according to the notice. Of about 250 companies in the relevant market, roughly 30 had annual revenue falling between the $7 million and $41 million thresholds in 2022, the CFPB said.

Increasing the annual receipts threshold would leave at least six companies, including the three dominant players, meeting the criteria for larger participants in the market, the CFPB estimated.

The CFPB released its final debt collection larger participant rule later in 2012, subjecting collectors with $10 million or more in annual receipts to supervision. At the time, that accounted for 175 of the 4,500 entities engaged in debt collection.

There has since been significant consolidation in the market, and a larger percentage of debt collectors falls above the $10 million cutoff, the CFPB’s notice said.

Moving the threshold up to $100 million in annual receipts would leave roughly 11 to 64 companies subject to CFPB supervision, the agency estimated, posing questions to commenters about the appropriate cutoff moving forward.

For the international remittance market, the CFPB in 2014 set a threshold of 1 million annual money transfers to qualify for supervision. That currently amounts to about 28 nonbank companies, the CFPB said.

One option the CFPB is considering would set the threshold at 50 million transactions, covering only four companies accounting for around 61% of all remittance payments, according to its notice.

Meanwhile, the CFPB’s 2015 nonbank auto lending larger participant rule covered nonbank indirect lenders, such as captive financing companies owned by automakers, issuing 10,000 loans per year. That currently covers 63 companies issuing around 94% of nonbank auto loans.

One idea the CFPB is looking at would raise the threshold to more than 1 million auto loan originations, covering only five companies and 42% of the market, the notice said.

Other CFPB larger participant rules, such as one for the private student loan market, weren’t included in the latest round of revisions.