Now that the CFPB has a director, it can officially begin to exercise the full authorities granted to it under the Dodd-Frank Act. The agency issued a press release on Thursday announcing the formal launch of its nonbank supervision program.
According to remarks delivered by Richard Cordray in a speech at the Brookings Institution, the CFPB will start supervising nonbanks that until now “have largely escaped any meaningful federal oversight,” including:
• residential mortgage brokers, lenders, and servicers,
• payday lenders, and
• private student lenders.
The Dodd-Frank Act gave the CFPB the authority to supervise those nonbank covered persons regardless of their size.
CFPB also can now supervise other nonbank covered persons that are considered to be “larger participants” of markets for other consumer financial products or services. We should expect to see a proposed rule defining “larger participants” very soon. The CFPB has had six months to consider the comments it received from its June 2011 notice in which it asked for help deciding whom to supervise as larger participants of nonbank markets. See our client alert on that notice. Those markets are likely to include:
• debt collection,
• consumer reporting,
• consumer lending and related activities,
• money transmitting, check cashing, and related activities,
• prepaid cards, and
• debt relief services.
In addition, CFPB will supervise any other nonbank covered person that it determines is posing risks to consumers with regard to the offering or provision of consumer financial products or services. CFPB indicates in its press release that it will be publishing procedural rules for supervising a nonbank company where the CFPB has reasonable cause to believe it poses risks to consumers.
The agency has waited a long time to officially have a director in place and start using its full powers, so these rules are already in the pipeline along with examination procedures tailored to nonbanks.