
On January 8, the Consumer Financial Protection Bureau (CFPB) announced plans to start rulemaking aimed at overseeing nonbank personal loan lenders.
This development comes in response to a September 2022 petition from the Consumer Bankers Association and the Center for Responsible Lending.
They urged the CFPB to act under section 1024(a)(2) of the Consumer Financial Protection Act, advocating for the inclusion of larger nonbank personal loan providers in the Bureau’s supervisory framework.
Regulatory Oversight Gap
The petition pointed out a significant gap in regulatory oversight.
While the CFPB currently manages the supervision of major banks and various nonbank lenders in most lending areas, it has only applied its oversight to short-term payday lenders within the personal loan market.
The petitioners raised alarms about this uneven regulatory landscape, arguing that it poses risks for consumers, particularly those who are vulnerable and may not receive adequate protections.
CFPB’s Response
In a follow-up, the CFPB’s general counsel acknowledged this oversight gap regarding nonbank personal loan companies.
Notably, this sector comprises around 85 million accounts and has over $125 billion in outstanding loans.
Recognizing the inequities resulting from insufficient regulation, the Bureau confirmed it would work on a proposed rule in alignment with the petitioners’ concerns, even as it already supervises some nonbank lenders under different legal statutes.
Future Developments
Looking ahead, the CFPB has expressed interest in developing regulations for what it refers to as “large participants” within the nonbank personal loan space.
However, it remains uncertain how swiftly these reforms will take shape, especially considering potential shifts in policy that may accompany a new administration.
Such changes could influence the Bureau’s priorities and delay any progression in this rulemaking process.
Nonetheless, the petitioners have shown their readiness to collaborate with the CFPB, striving for a fairer regulatory framework in the nonbank personal loan market.
Source: Natlawreview.com