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Experts call for flexible definition of “larger particpants” by CFPB

The Consumer Financial Protection Bureau has received a joint comment letter from two large financial institutions recommending that the agency’s definition of “larger participants” in the market for consumer financial products or services be flexible.

The Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators wrote in response to the CFPB’s request for comments on their task to determine what markets should be subject to its larger participant jurisdiction, NationalMortgageProfessional.com reports.

The letter made recommendations in three primary areas for the bureau to consider, including to be cautious of state legal definitions of the market and to be mindful of state jurisdictional coverage and of the consumer protection priority of the market as a whole.

The letter also recommended that the criteria for determining what entities are “larger” be flexible and determined on an industry-by-industry basis, NationalMortgageProfessional.com reports.

The organizations wrote that if the bureau were to implement a registration system to track consumer financial markets, they should require registration of applicable covered persons in each state and accept a covered person as registered if they are licensed through the Nationwide Mortgage Licensing System & Registry.

“State regulators welcome a non-depository supervision partner in the CFPB, and they appreciate the robust dialogue the CFPB has had with them regarding various aspects of the Bureau’s functions,” Neil Milner, the president and chief executive officer of CSBS, said, according to NationalMortgageProfessional.com. “Because of the impact the Bureau’s definitions will likely have on state law, state regulation, and state-regulated entities, it will be even more crucial that the CFPB works with state regulators as it develops these new definitions.”

The Dodd-Frank Act gives the CFPB the authority to require the registration of covered persons and requires the bureau to consult with state agencies for any registration requirements or systems. The important data collected during registration can inform the identification of larger market participants and can serve as an important element of the CFPB’s supervisory regime for larger nondepository market participants.

"CSBS and AARMR have several resources the CFPB can use to help determine what a ‘larger participant’ is,” Darin Domingue, the president of AARMR, said, NationalMortgageProfessional.com reports. “State regulators have a wealth of experience regulating non-depository financial institutions and we look forward to working with the CFPB both on an individual and multi-state basis to promote more consistent, comprehensive, and efficient regulation in a manner that manages the burden on regulated entities.”

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