The Consumer Financial Protection Bureau, or CFPB, has issued a Notice and Request for Comment seeking public input on a key element of the agency’s nonbank supervision program: the statutory requirement to define who is a “larger participant” in certain consumer financial markets.

The Dodd-Frank Wall Street Reform and Consumer Protection Act charged the CFPB with ensuring that both banks and nonbanks comply with federal consumer financial laws.  Historically, banks, thrifts, and credit unions have been subject to examinations by federal regulators, but other types of companies providing consumer financial services generally have not.

The Dodd-Frank Act authorizes the CFPB to examine all sizes of nonbank mortgage companies, payday lenders, and private education lenders. Generally, before CFPB begins its nonbank supervision program in other markets, the Dodd-Frank Act requires that the agency first define by rule who is “a larger participant of a market for other consumer financial products or services.” The CFPB must issue an initial “larger participant” rule no later than July 21, 2012.

To prepare for this eventual rulemaking, the CFPB is seeking public input through a Notice and Request for Comment, which identifies six 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.

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