The Withering CFPB Seeks to Reduce Auto Lender Oversight

Proposes Reducing From 63 Regulated Auto Lenders

to as Few as 11

We’ve already discussed the reductions in staff that have diminished the capacity of the Consumer Financial Protection Bureau (CFPB) under the Trump administration. As further evidence of this strain is a proposed rule change to the auto loan originations threshold limits, the CFPB has requested dramatic reductions in the number of regulated lenders that they would supervise.

Unnoticed by most, on August 8^th, the CFPB posted a proposed rule titled “Defining Larger Participants of the Automobile Financing Market.” At the heart of the proposal is 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.

The Proposal

To address this problem, the Bureau proposes amending the test by raising the threshold with a range of thresholds offered.

To facilitate comment, the Bureau provides three examples below.

If the Bureau raises the threshold from 10,000 to 550,000 aggregate annual originations, the Bureau preliminarily estimates that 11 nonbank entities would qualify as larger participants and that the updated rule would cover approximately 66 percent of originations.

At present, this would include nine non-bank entities that focus on prime lending and two entities that engage in at least some subprime lending.

Another option would be to raise the threshold to 300,000 aggregate annual originations. Under this threshold, the Bureau preliminarily estimates that 17 nonbanks would qualify as larger participants, and the updated rule would cover approximately 79 percent of originations.

At present, this would include 12 entities that primarily engage in prime lending and five entities that engage in at least some subprime lending.

As a third option, if the Bureau raises the threshold to 1,050,000 aggregate annual originations, the Bureau preliminarily estimates that five nonbank entities would qualify as larger participants, and the updated rule would cover approximately 42 percent of originations.

At present, the five nonbank entities with the highest number of originations are captives, which focus on prime lending.

The Bureau notes that it has not evaluated whether changes in the automobile financing market call for updating the test to define larger participants since it published the Automobile Financing Larger Participant Rule ten years ago. The Bureau therefore seeks comment on the topics and questions listed below in light of the Bureau’s intent to propose amending the test to define larger participants in the automobile financing market.

Before such measures may be overtaken, the CFPB had opened this proposal for comments either directly through themselves or through the Federal eRulemaking Portal.

The deadline for comments expired on September 22, 2025. The final decision has yet to be announced.

This was only one of four new rule proposal from the CFPB published in August and all had similar comment expiration dates. While numerous comments were made on the other proposals, reactions to this rule change proposal are of course divided by interests.

Opinions

The American Bankers Association (ABA) opposes this. Since the issue surrounds nonbank covered persons who the members of the ABA compete with, they would like to see this rule maintained.

Another obvious opponent was the National Consumer Law Center (NCLC) who felt quite the opposite. “Instead of reducing the number of entities it can supervise, the Bureau should consider expanding the rule to ensure it is able to supervise larger participants in different categories of auto finance entities that operate very differently from each other such as subprime finance companies and Buy Here Pay Here Dealers.”

Fully supporting this was the National Independent Auto Dealers Association and also made two key recommendations:

Explicit Exemptions: The final rule should exempt entities like independent automobile dealers that are already subject to comprehensive and overlapping federal and state oversight.
Complaint Standards: The CFPB should limit consideration of consumer complaints to those alleging concrete, actionable harm, not merely dissatisfaction with a customer experience or speculative claims lacking evidence of misconduct.

Summary

With staffing cutbacks from about 1,700 when Trump took office to a now estimated 200, the CFPB is clearly not staffed sufficiently to supervise and manage all of their former activities.

These cutbacks in staffing has the Trump administration mired in litigation with a CFPB labor union and consumer advocates over whether the White House has the authority to fire most CFPB staff or dismantle an agency created by Congress.

Regardless, White House budget director Russell Vought said in October that he wants to close the Bureau even though President Donald Trump’s administration has argued in court that there is no such plan.

With the bureau’s downsizing and mixed messaging on the CFPB’s future, it is clear it is on the ropes. Just how extreme the CFPB will be cut back seems to be the only real question. Also in question is just how much longer will lenders continue to answer to this unnecessary additional layer of supervision?

Kevin Armstrong

Publisher