The Consumer Bankers Association has sent a letter to Rohit Chopra, the incoming CFPB Director, in which it urges the CFPB to adopt a larger participant rule for fintech consumer lenders.
Under the Dodd-Frank Act, in addition to authority to supervise nonbank entities in the residential mortgage, private student lending, and payday lending markets, the CFPB has authority to supervise nonbank entities considered to be “a larger participant of a market for other consumer financial products or services.” The CFPB has used its larger participant authority to issue rules for consumer reporting, consumer debt collection, student loan servicing, and international money transfers.
In its letter, CBA asserts that a rule for the unsecured consumer lending market is appropriate because “non-supervised fintechs offer financial products and services to consumers in numbers that rival some of the country’s largest supervised banks, but operate outside of the supervisory framework that allows the Bureau to monitor their activities and consumer harm.” CBA contends that non-supervised fintech lenders pose a “threat to consumers.”
However, if the CFPB were to adopt a larger participant rule for nonbank unsecured consumer lenders, such a rule is unlikely to single out fintechs or online lenders. Such a rule would likely cover all unsecured consumer lenders regardless of whether they operate online, through brick and mortar stores, or both.
Indeed, the CFPB has previously indicated in its semi-annual rulemaking agendas that it was considering larger participant rules “in markets for consumer installment loans and vehicle title loans for purposes of supervision.” In the CFPB’s Spring 2018 rulemaking agenda issued under the leadership of former Acting Director Mulvaney, the CFPB’s larger participant rulemaking was designated “inactive.” The agenda stated that the change in designation was “not intended to signal a substantive decision on the merits of the projects.” The CFPB’s Fall 2021 rulemaking agenda could shed light on the whether the “new CFPB” under the Biden Administration plans to return this initiative to active status and if so, what its timetable is for moving forward.