In seeking to extend its jurisdiction over “nonbank” auto lenders -- including captive finance companies and independent finance companies -- the Consumer Financial Protection Bureau is reaching for lenders that are too small, the American Financial Services Association said Monday.
“The threshold the CFPB proposes for larger participants in the automobile finance market is too low,” AFSA, a lenders trade group in Washington that includes many auto lenders, said in a statement sent directly to the CFPB during a public-comment period on the proposed change in the bureau’s rules.
For smaller players, greater regulation by the CFPB would drive up the cost of compliance disproportionately, and that could drive some smaller lenders out of auto finance, the association said. In addition, more regulation would likely raise the retail cost of credit and restrict consumer access to credit, the group said.
The CFPB published a proposed rule in September to define “larger participants” among nonbank auto lenders, giving the bureau oversight over those companies.
The bureau already has jurisdiction over bigger banks and credit unions, defined as those with more than $10 billion in assets. The Federal Reserve supervises smaller lenders. However, the CFPB has lacked jurisdiction over bigger nonbanks in auto finance.
When the CFPB filed the proposed “larger participant” rule for auto lenders with the Federal Register in September, that started the clock ticking on a 60-day deadline for the public and for interested parties to submit comments on the proposed rule. The deadline expired Monday, Dec. 8.
Automotive News obtained a copy of AFSA’s comments. Other groups or companies may have sent comments to the CFPB directly. Eventually, all comments will be posted to the Federal Register.
How large is large
The proposed rule defines larger participants as lenders that originate 10,000 or more total auto loans or leases combined a year. The CFPB estimates that definition would apply to 38 lenders, which together represent 91 percent of loans and leases among nonbank auto lenders.
Instead, AFSA recommends a cutoff of 50,000 loans and leases. AFSA cited a CFPB estimate that the higher cutoff would cover 17 lenders, accounting for 86 percent of the market. That would exclude smaller players, each of which has less than 1 percent of the market, according to AFSA’s calculations.
Said AFSA: “It is clear that the CFPB could adequately detect and assess risks to consumers and consumer financial markets by supervising 86 percent of the market rather than 91 percent.”