The Consumer Financial Protection Bureau, in its effort to extend its jurisdiction over “nonbank” auto lenders such as captive and independent finance companies, is reaching for lenders that are too small, the American Financial Services Association said.
“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 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 likely would 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, 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 on Monday, Dec. 8.
Besides AFSA, other organizations that submitted comments included Harley-Davidson Financial Services Inc.; the American Association of Responsible Lenders, a group of lenders offering auto title loans; and the National Recreational Vehicle Dealers Association. In addition, a group of lenders noted that they are individually so small as to be under the jurisdiction of the Small Business Administration, but nonetheless worry that they may be considered “larger participants” by the CFPB.
Automotive News obtained a copy of AFSA’s comments. Comments from the other groups and companies were 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, and the group of smaller lenders, recommended 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.”