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CFPB Proposes New Fed Oversight of Nonbank Auto Finance Companies
Friday, September 19, 2014 6:10 AM

The Consumer Financial Protection Bureau is proposing to oversee larger nonbank auto finance companies for the first time at the federal level.

In an article released on CFPB's website, CFPB Director Richard Cordray said, "Nonbank auto finance companies extend hundreds of billions of dollars in credit to American consumers, yet they have never been supervised at the federal level. We took action after we uncovered auto-lending discrimination at banks we supervise. Today's proposal would extend our oversight, allowing us to root out discrimination and ensure consumers are being treated fairly across this market."

At present, the Bureau supervises large banks that make auto loans, but does not have the same supervisory authority over nonbank entities. The proposed rule would extend that authority over nonbank entities. The rule would cover all nonbank auto finance companies that make, acquire, or refinance 10,000 or more loans or leases in a year and ensure they are complying with federal consumer financial law. The Bureau estimates that about 38 auto finance companies would be subject to this new oversight.

The CFPB has the authority, under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), to supervise certain nonbanks the Bureau defines through rulemaking as "larger participants" in a market.

The new proposed rule is open for comment for 60 days after the rule is published in the Federal Register. You can read more about this proposal here.

The CFPB also released information detailing auto-lending discrimination that the Bureau uncovered at banks. The report notes that the CFPB's supervisory actions against banks will result in about $56 million in redress for up to 190,000 consumers harmed by discriminatory practices.