The Consumer Financial Protection Bureau announced today that it will pursue rulemaking to allow it to regulate large nonbanks that provide personal loans. The proposed rulemaking is in response to a petition filed by the Consumer Bankers Association and Center for Responsible Lending.
In a letter to the petitioners, the CFPB’s general counsel noted the agency has supervisory authority over nonbanks and large banks in most segments of consumer lending, but not the entirety of the personal loan market, “where the CFPB generally only has supervisory authority over large banks and nonbank payday lenders.” The nonbank segment of the personal loan market consists of 85 million accounts and more than $125 billion in outstanding balances, according to the bureau.
“Your concerns about the existence of an unlevel playing field in the market for personal loans have merit,” the CFPB said. “In particular, banks that offer credit cards and nonbanks that offer payday loans (including traditional payday loans or online or app-based payday loans that are sometimes marketed as ‘earned wage’ products) are subject to CFPB supervision, while other nonbanks in the personal loan market (e.g., buy-now-pay-later and installment lenders) generally are not.”
The CFPB said it plans rulemaking in response to the petition. However, while CFPB Director Rohit Chopra has not announced plans to step down, President-elect Trump is expected to appoint a new bureau director with policy priorities different from those of the current administration. It is uncertain whether the next CFPB director will pursue the rulemaking.
