The Consumer Financial Protection Bureau (CFPB) has issued a final rule to implement its authority under section 1024 of Dodd-Frank to subject “larger participants” in the consumer reporting market to CFPB supervision.  The rule will have significant consequences for companies in the consumer reporting industry.  The final rule follows a proposed rule issued in February 2012 indicating that the CFPB intended to supervise the consumer reporting market as part of the CFPB’s authority to supervise nonbank providers of consumer financial products and services.  The final rule is effective September 30, 2012. 

The final rule defines a “larger participant” in the consumer reporting market as a nonbank covered person that offers or provides consumer reporting and has annual receipts from consumer reporting in excess of $7 million.

  • A “nonbank covered person” generally is any person that is not a bank and that is engaged in offering or providing a consumer financial product or service.  The term also includes certain affiliates of such a person. 
  • “Consumer reporting” means “collecting, analyzing, maintaining, or providing consumer reporting information or other account information used or expected to be used in any decision by another person regarding the offering or provision of any consumer financial product or service.”  Notably, this definition is different from the comparable definition in the Fair Credit Reporting Act. 
  • “Annual receipts” generally are total income plus the cost of goods sold, as reported on Internal Revenue Service tax return forms.  Annual receipts are computed over a three-year period by totaling receipts from the covered person’s three most recently completed fiscal years and dividing by three.  The final rule requires a covered person to include in its annual receipts the annual receipts of affiliates from consumer reporting. 

A larger participant in the consumer reporting market will be notified if the CFPB intends to initiate a supervisory activity (e.g., examination) with respect to the participant.  The participant may contest the supervisory activity on the grounds that the participant does not meet the definition of “larger participant” by submitting a response to the CFPB. 

The CFPB’s final rule makes clear that supervision of larger participants will be “probabilistic” in nature.  The CFPB will examine certain larger participants on a periodic basis while other larger participants may be examined less frequently.  The CFPB’s supervisory decisions, including decisions regarding the frequency and extent of examinations, will be informed by statutory factors including the size and transaction volume of individual participants, the risks posed to consumers, and the extent of state consumer protection oversight.

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Photo of Mike Nonaka Mike Nonaka

Michael Nonaka is co-chair of the Financial Services Group and advises banks, financial services providers, fintech companies, and commercial companies on a broad range of compliance, enforcement, transactional, and legislative matters.

He specializes in providing advice relating to federal and state licensing and…

Michael Nonaka is co-chair of the Financial Services Group and advises banks, financial services providers, fintech companies, and commercial companies on a broad range of compliance, enforcement, transactional, and legislative matters.

He specializes in providing advice relating to federal and state licensing and applications matters for banks and other financial institutions, the development of partnerships and platforms to provide innovative financial products and services, and a broad range of compliance areas such as anti-money laundering, financial privacy, cybersecurity, and consumer protection. He also works closely with banks and their directors and senior leadership teams on sensitive supervisory and strategic matters.

Mike plays an active role in the firm’s Fintech Initiative and works with a number of banks, lending companies, money transmitters, payments firms, technology companies, and service providers on innovative technologies such as bitcoin and other cryptocurrencies, blockchain, big data, cloud computing, same day payments, and online lending. He has assisted numerous banks and fintech companies with the launch of innovative deposit and loan products, technology services, and cryptocurrency-related products and services.

Mike has advised a number of clients on compliance with TILA, ECOA, TISA, HMDA, FCRA, EFTA, GLBA, FDCPA, CRA, BSA, USA PATRIOT Act, FTC Act, Reg. K, Reg. O, Reg. W, Reg. Y, state money transmitter laws, state licensed lender laws, state unclaimed property laws, state prepaid access laws, and other federal and state laws and regulations.