Federal agency to oversee ‘nonbanks’ for the first time

The Consumer Financial Protection Bureau (CFPB) launched the nation’s first federal nonbank supervision program, one that will ensure that companies providing consumer financial products and services follow federal laws.

“This is an important step forward for protecting consumers,” said Richard Cordray, director of the CFPB. “Holding both banks and nonbanks accountable to consumer financial laws will help create a fairer, more transparent market for consumers. It will create a better environment for the honest businesses that serve them. And it will help the overall economic stability of our country.”

A “nonbank” – or non-depository business – is a company that offers or provides consumer financial products or services but does not have a bank, thrift, or credit union charter. Nonbanks include companies such as mortgage lenders, mortgage servicers, payday lenders, consumer reporting agencies, debt collectors, and money services companies.

There are thousands of nonbanks, with products that form a significant portion of the consumer financial marketplace and affect millions of Americans each year. The size and scope of nonbanks vary based on products.

For example, according to studies and industry sources, nearly 20 million consumers use payday loans, roughly 200 million Americans rely on credit reporting agencies to report their credit histories accurately, 14 percent of consumers have one or more debts in collections, and nonbank lenders originated almost 2 million new mortgages in 2010.