Download Bureau Of Consumer Financial Protection

Bureau of Consumer Financial Protection
Nondepository Supervision
1801 L Street NW, Room 513-H
Washington, DC 20036
VIA EMAIL
RE: Defining Larger Participants in Certain Markets for Consumer Financial Products
and Services Markets [Docket N. CFPB-HQ-2011-2]
We are writing to associate ourselves with the more detailed comments on the “Larger
Participants” docket that are being sent in by Americans for Financial Reform, the National
Consumer Law Center, the Consumer Federation of America, U.S. PIRG and other AFR
members. The rule is critical in determining which “non-banks” -- in addition to the statutory
authority already granted over residential mortgage, private education, and payday lenders -- will
be subject to the Bureau’s full supervisory authority under the Dodd-Frank Act.
The statute provides a flexible framework for the Bureau to define its supervisory
authority: The initial “larger participant” rule resulting from this proceeding will not impose
new substantive requirements on non-banks. Rather, using a flexible set of tools in the act, it will
allow CFPB to do two things: (1) define the criteria the CFPB will use to determine who is a
“larger participant” in a given market; and (2) outline the specific markets for which the larger
participants will fall under the scope of the Bureau’s supervisory authority. We believe that the
Bureau can assess which non-banks pose potential risks to consumers in a variety of ways.
The best way to protect consumers over time -- and ensure even-handed regulation -- is to
define “larger” non-bank participants in a way that is flexible and not overly prescriptive:
We believe that it is crucial that the Bureau employ a flexible, broad standard that can respond to
changes in the marketplace and ensure that risky actors do not evade supervision. The Bureau
does not need to examine every participant who falls within the definition of “larger participant”
under the rule; it can assess risk when determining who to actually supervise and how often.
As just one example of the kinds of markets that contain important larger participants, we
strongly suggest that the CFPB separate markets for credit reports into at least three categories—
a market for full-service credit reports as dominated by the so-called Big Three, a market for
specialized credit reports and a market for credit scores.
Our organizations regularly hear from consumers about their disputes with credit bureaus.
Consumers also are concerned with the regulation of credit scores, which are largely derived
from these often-mistaken credit reports. Finally, consumers also are affected by decisions of
specialized credit bureaus that determine whether you can open a bank account or obtain medical
insurance, for example.
Decisions by all of these firms affect consumers in their daily lives. The larger participant firms
in credit reporting should not be limited to the Big Three. It should be obvious that these socalled Big Three credit bureaus are multi-billion dollar, multi-national firms operating in nearly
every state and affecting nearly every consumer. Yet the so-called specialty credit reporting
agencies (perhaps further divided into several sub-markets) and credit scoring firms also function
as national gatekeepers in their own markets. Further, some of these firms may be “larger” than
they appear as they are often part of massive multi-state or multinational conglomerates.
Our organizations also regularly hear from consumers regarding the other markets proposed in
the Advance Notice: Markets identified in this Notice for possible inclusion are: debt collection,
consumer credit and related activities, money transmitting, check cashing and related activities,
prepaid cards, and debt relief services.
We urge the Bureau to reserve the right to supervise all types of larger participants in all of the
markets identified in the Notice. Serious consumer abuses that violate federal law have occurred
in each of these markets. The initial rule should cover not just non-banks that sell products or
services in these sectors, but those that market, arrange, package, and develop these services and
products, provide important technology that affects the terms or risks of products or provide
credit screening profiles of consumers to other businesses, whether or not the non-bank in
question has direct contact with consumers.
To be as inclusive as possible and to ensure coverage of all areas that may pose risk to
consumers, the rule should break down the categories of activity further to reflect the diverse
players within each field, just as proposed above for credit bureaus For example, in debt
collection, actors may include debt collection law firms, collection agencies, bulk debt buyers,
etc., which are different in size, practices and impact on the consumer. “Consumer credit and
related activities” is also a very broad category, including car title lenders, pawn shops and other
non-bank consumer lenders. “Debt relief” services include debt settlement companies, for-profit
debt management companies and not-for-profit credit counselors, as well as entities that perform
both debt management and debt settlement.
Thank you for the opportunity to provide these comments urging a broad, flexible application of
the “Larger Participants” rule as the most effective way to protect consumers. Again, we write to
associate ourselves with the more detailed comments on the “Larger Participants” docket that are
being sent in by affiliated and colleague national organizations led by Americans for Financial
Reform, the National Consumer Law Center, the Consumer Federation of America, U.S. PIRG
and other AFR members.
The problems detailed comments address are problems that our staff deal with in their daily
interactions with members, clients and other consumers. These problems well warrant the CFPB
taking care to ensure that it has all the regulatory tools in its toolbox possible, so it can flexibly
and responsively protect consumers from current, future and as yet unanticipated problems in the
financial marketplace.
Sincerely,
Jon Fox, California Public Interest Research Group (CalPIRG), [email protected]