The Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR) (jointly, the organizations) have issued a joint comment letter to the Consumer Financial Protection Bureau (CFPB, or the Bureau) in response to their request for comment on defining “larger participants” of a market for other consumer financial products or services.
In the letter, CSBS and AARMR propose recommendations in three primary areas for the Bureau to consider. As the CFPB determines which markets should be subject to the Bureau’s larger participant jurisdiction, the organizations strongly encourage the Bureau to be mindful of state legal definitions of the market, state jurisdictional coverage, and the overall consumer protection priority of the market. CSBS and AARMR also recommended that, when determining what entities are “larger,” the criteria and thresholds should be flexible, determined on an industry-by-industry basis, and based on aggregated institutional ownership. Lastly, if the CFPB were to utilize a registration system to track consumer financial markets, the CFPB should require the applicable covered persons to be registered in each state, accept a covered person as registered if they are licensed through the Nationwide Mortgage Licensing System & Registry (NMLS), and consider using NMLS as its system of registration for each covered person in a state.
“State regulators welcome a non-depository supervision partner in the CFPB, and they appreciate the robust dialogue the CFPB has had with them regarding various aspects of the Bureau’s functions,” said Neil Milner, President and CEO of CSBS. “Because of the impact the Bureau’s definitions will likely have on state law, state regulation, and state-regulated entities, it will be even more crucial that the CFPB works with state regulators as it develops these new definitions.”
The Dodd-Frank Act gives the CFPB authority to regulate payday lenders, mortgage companies, and private student lenders. For all other non-depository consumer financial products or services, the CFPB has authority over those entities it deems to be “larger participants” in the greater market. Accordingly, before the CFPB can regulate these entities, it must first define “larger participant of a market for other consumer financial products or services.”
“CSBS and AARMR have several resources the CFPB can use to help determine what a ‘larger participant’ is,” said Darin Domingue, president of AARMR. “State regulators have a wealth of experience regulating non-depository financial institutions and we look forward to working with the CFPB both on an individual and multi-state basis to promote more consistent, comprehensive, and efficient regulation in a manner that manages the burden on regulated entities.”
The CSBS and AARMR comment letter can be viewed here.