The Consumer Financial Protection Bureau is about to take another step forward in its efforts to write a series of rules to define “larger participants” in specific markets, including those in the consumer credit reporting business.
The comment period on its latest proposal in this area is ending on April 17. The initial rule must be issued by July 21.
The proposal as laid out in the Federal Register covers to two markets for consumer financial products and services: consumer debt collection and consumer reporting.
The proposed rule refers to consumer reporting entities as those that are “primarily an input into ultimate credit decisions by mortgage lenders” and other financial services providers.
“Consumer reports are important tools that lenders use to assess borrower risk when evaluating applications for…home mortgage loans…and other types of credit,” the proposal noted.
For both consumer credit reporting and consumer debt collection, the CFPB is proposing a test to determine if an entity is a “larger participant” in a market based on the definition of “annual receipts” adapted from the definition the Small Business Administration uses.
The proposal sets more than $10 million in annual receipts related to the market in question as the threshold for consumer debt collection and more than $7 million in annual receipts related to the market in question as the threshold for consumer reporting.
Using the 2007 economic census as a basis, the bureau believes that applying these criteria to the credit reporting industry would put it in a position where it would supervise 7% of agencies in this category and no more than 39 credit bureaus, including both mercantile credit reporting agencies and consumer reporting agencies. It noted that the census indicated 75% of credit bureaus are consumer reporting agencies.
Based on the census, the bureau believes about 4% of all debt collection firms or about 175 entities would be defined as larger participants under the proposed rule.
Those designated as larger participants in either category would be placed in this category “for a period not less than two years from the first day in the tax year in which the person last met the applicable,” according to the proposed rule.
The proposal also includes a procedure for contesting the categorization after it is made. It also notes that “the bureau may require submission of certain records, documents and other information of covered persons for purposes of determining whether a person is a larger participant in a covered market.”
