Defining Larger Participants of the Automobile Financing Market

CONSUMER FINANCIAL PROTECTION BUREAU <CFR>12 CFR Part 1090</CFR> <DEPDOC>[Docket No. CFPB-2025-0029]</DEPDOC> <RIN>RIN 3170-AB50</RIN> <SUBJECT>Defining Larger Participants of the Automobile Financing Market</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Consumer Financial Protection Bureau. <HD SOURCE="HED">ACTION:</HD> Advance notice of proposed rulemaking. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Consumer Financial Protection Bureau (CFPB or Bureau) is seeking information to assist it in considering whether to propose a rule to amend the test to define larger participants in the automobile financing market established by the Bureau's Defining Larger Participants of the Automobile Financing Market and Defining Certain Automobile Leasing Activity as a Financial Product or Service Final Rule published on June 30, 2015 (Automobile Financing Larger Participant Rule). </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> Comments must be received on or before September 22, 2025. </EFFDATE> <HD SOURCE="HED">ADDRESSES:</HD> You may submit responsive information and other comments, identified by Docket No. CFPB-2025-0029, by any of the following methods: • <E T="03">Federal eRulemaking Portal: https://www.regulations.gov.</E> Follow the instructions for submitting comments. • <E T="03">Email: 2025-ANPR-AutomobileFinancing@cfpb.gov.</E> Include Docket No. CFPB-2025-0029 in the subject line of the message. • <E T="03">Mail/Hand Delivery/Courier:</E> Comment Intake—Defining Larger Participants of the Automobile Financing Market 2025, c/o Legal Division Docket Manager, Consumer Financial Protection Bureau, 1700 G Street NW, Washington, DC 20552. <E T="03">Instructions:</E> The CFPB encourages the early submission of comments. All submissions should include the agency name and docket number. Additionally, where the Bureau has asked for specific comment on a topic, commenters should seek to highlight the topic to which their comment is applicable. Because paper mail is subject to delay, commenters are encouraged to submit comments electronically. In general, all comments received will be posted without change to <E T="03">https://www.regulations.gov.</E> All submissions, including attachments and other supporting materials, will become part of the public record and subject to public disclosure. Proprietary information or sensitive personal information, such as account numbers or Social Security numbers, or names of other individuals, should not be included. Submissions will not be edited to remove any identifying or contact information. <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Dave Gettler, Paralegal Specialist, Office of Regulations, at 202-435-7700. If you require this document in an alternative electronic format, please contact <E T="03">CFPB_Accessibility@cfpb.gov.</E> </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> The Bureau is seeking information in order to consider whether to propose a rule to amend the test to define larger participants in the automobile financing market. Currently, a nonbank covered person is a larger participant of the automobile financing market if the nonbank covered person has at least 10,000 aggregate annual originations. The Bureau is concerned that the benefits of the current threshold may not justify the compliance burdens for many of the entities that are currently considered larger participants in this market, and that the current threshold may be diverting limited Bureau resources to determine who among the universe of providers may be subject to the Bureau's supervisory authority and whether these providers should be examined in a particular year. To address this problem, the Bureau could amend the test by raising the threshold. There are a range of thresholds the Bureau could propose. To facilitate comment, the Bureau provides three examples further below. In the example with the largest increase, raising the threshold to 1,050,000 aggregate annual originations would reduce the number of entities estimated to qualify as larger participants by more than 90 percent, from 63 entities (who account for an estimated 94 percent of market activity) to five entities (who account for an estimated 42 percent of market activity). <HD SOURCE="HD1">I. Background</HD> Section 1024 of the CFPA, <SU>1</SU> <FTREF/> codified at 12 U.S.C. 5514, gives the Bureau supervisory authority over all nonbank covered persons  <SU>2</SU> <FTREF/> offering or providing three enumerated types of consumer financial products or services: (1) origination, brokerage, or servicing of consumer loans secured by real estate, and related mortgage loan modification or foreclosure relief services; (2) private education loans; and (3) payday loans. <SU>3</SU> <FTREF/> The Bureau also has supervisory authority over “larger participant[s] of a market for other consumer financial products or services, as defined by rule[s]” the CFPB issues. <SU>4</SU> <FTREF/> To date, the Bureau has issued six rules defining larger participants of markets for consumer financial products and services for purposes of CFPA section 1024(a)(1)(B). <SU>5</SU> <FTREF/> <FTNT> <SU>1</SU>  Consumer Financial Protection Act of 2010, title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law 111-203, 124 Stat. 1376, 1955 (2010) (hereinafter CFPA). </FTNT> <FTNT> <SU>2</SU>  The provisions of 12 U.S.C. 5514 apply to certain categories of covered persons, described in section (a)(1), and expressly excludes from coverage persons described in 12 U.S.C. 5515(a) (very large insured depository institutions and credit unions and their affiliates) or 5516(a) (other insured depository institutions and credit unions). The term “covered person” means “(A) any person that engages in offering or providing a consumer financial product or service; and (B) any affiliate of a person described [in (A)] if such affiliate acts as a service provider to such person.” 12 U.S.C. 5481(6). </FTNT> <FTNT> <SU>3</SU>  12 U.S.C. 5514(a)(1)(A), (D), (E). </FTNT> <FTNT> <SU>4</SU>  12 U.S.C. 5514(a)(1)(B), (a)(2); <E T="03">see also</E> 12 U.S.C. 5481(5) (defining “consumer financial product or service”). </FTNT> <FTNT> <SU>5</SU>  These six rules defined larger participants of markets for consumer reporting, 77 FR 42874 (July 20, 2012) (Consumer Reporting Rule), consumer debt collection, 77 FR 65775 (Oct. 31, 2012) (Consumer Debt Collection Rule), student loan servicing, 78 FR 73383 (Dec. 6, 2013) (Student Loan Servicing Rule), international money transfers, 79 FR 56631 (Sept. 23, 2014) (International Money Transfer Rule), automobile financing, 80 FR 37496 (June 30, 2015) (Automobile Financing Rule), and general-use digital consumer payment applications, 89 FR 99582 (Dec. 10, 2024) (General-Use Digital Payment Applications Rule). The Bureau is issuing advance notices of proposed rulemakings to reconsider the test for defining larger participants in the consumer reporting, consumer debt collection, international money transfer, and automobile financing markets. The Bureau will continue to assess whether it is appropriate to reconsider the test for the student loan servicing market. The General-Use Digital Payment Applications Rule was made ineffective by a joint resolution of disapproval by Congress under the Congressional Review Act. S.J. Res. 28—119th Congress (2025-2026), Public Law 119-11; <E T="03">see also</E> 5 U.S.C. 801 <E T="03">et seq.</E> </FTNT> The Bureau published the Automobile Financing Larger Participant Rule on June 30, 2015. The final rule defined a market for automobile financing and established that nonbank covered persons with at least 10,000 aggregate annual originations would be considered larger participants in this market. The final rule defined “annual originations” to mean the sum of the following transactions for the preceding calendar year: credit granted for the purchase of an automobile; refinancings of such obligations (and any subsequent refinancings thereof) that are secured by an automobile; automobile leases; and purchases or acquisitions of any of the foregoing obligations. <HD SOURCE="HD1">II. Background on the Automobile Financing Market</HD> Autos have become indispensable for most working individuals. Autos are commonly used to commute to work, or for other purposes that are important to consumers, such as transportation to school or healthcare providers, travel, and recreation. Americans owed more than $1.6 trillion on auto loans through the first quarter of 2025, with more than 100 million active auto finance accounts outstanding. <SU>6</SU> <FTREF/> <FTNT> <SU>6</SU>   <E T="03">See</E> Federal Reserve Bank of New York, Household Debt and Credit Report, <E T="03">https://www.newyorkfed.org/microeconomics/hhdc</E> / (last visited May 22, 2025). </FTNT> Auto credit is provided through both direct and indirect channels, creating different dynamics for consumers and industry participants. In the direct lending channel, a consumer seeks credit directly from the nonbank or depository institution financing source, whereas in the indirect lending channel, the dealer typically enters into a retail installment sales contract that it then sells to a third-party nonbank finance company, or a depository institution engaged in indirect lending. Most consumers who finance the purchase of a vehicle use the indirect channel. Depository institutions and credit unions have an advantage in the direct lending space because these entities often have a pre-existing relationship with consumers and a lower cost of funds, which enables them to offer competitive rates, but these entities also operate heavily in the indirect lending space. Nonbanks, other than Buy Here Pay Here entities (discussed below), are also active in the ind ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 24k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━