9592 Federal Register / Vol. 77, No. 33 / Friday, February 17, 2012 / Proposed Rules 

the proposed revisions in a subsequent 

final rule. Absent significant 

modifications to the proposed revisions 

requiring republication, the NRC will 

not initiate a second comment period on 

this action in the event the direct final 

rule is withdrawn. 

A significant adverse comment is a 

comment where the commenter 

explains why the rule would be 

inappropriate, including challenges to 

the rule’s underlying premise or 

approach, or would be ineffective or 

unacceptable without a change. A 

comment is adverse and significant if: 

(1) The comment opposes the rule and 

provides a reason sufficient to require a 

substantive response in a notice-andcomment process. For example, a 

substantive response is required when: 

(a) The comment causes the NRC staff 

to reevaluate (or reconsider) its position 

or conduct additional analysis; 

(b) The comment raises an issue 

serious enough to warrant a substantive 

response to clarify or complete the 

record; or 

(c) The comment raises a relevant 

issue that was not previously addressed 

or considered by the NRC staff. 

(2) The comment proposes a change 

or an addition to the rule, and it is 

apparent that the rule would be 

ineffective or unacceptable without 

incorporation of the change or addition. 

(3) The comment causes the NRC staff 

to make a change (other than editorial) 

to the rule, CoC, or Technical 

Specifications (TSs). 

For additional procedural information 

and the regulatory analysis, see the 

direct final rule published in the Rules 

and Regulations section of this Federal 

Register. 

Background 

On November 28, 2009, and as 

supplemented on November 4 and 

December 14, 2010, and February 25 

and July 8, 2011, Holtec International, 

the holder of CoC No. 1014, submitted 

a certificate amendment request to the 

NRC requesting an amendment to CoC 

No. 1014. Specifically, Holtec 

International requested changes to add a 

new multipurpose canister (MPC)–68M 

to the approved models currently 

included in CoC No. 1014 with two new 

boiling water reactor fuel assembly/ 

array classes, and a new pressurized 

water reactor fuel assembly/class to CoC 

No. 1014 for loading into the MPC–32. 

In addition, the amendment would 

change (1) Condition 5 of CoC No. 1014 

to add ‘‘if applicable’’ after the reference 

to Section 3.5 of Appendix B, ‘‘Cask 

Transfer Facility (CTF)’’ to clarify that 

the CTF is an optional facility; (2) 

Appendix A, TS 1.1, to modify the CTF 

definition to clarify that it could be used 

in lieu of Title 10 of the Code of Federal 

Regulations (10 CFR) part 50 controlled 

structures for cask transfer evolutions; 

and (3) Table 3–1, MPC Cavity Drying 

Limits, to include the previously 

approved, but omitted table to eliminate 

inconsistencies between Table 3–1 and 

TS 3.1.1, Limiting Condition for 

Operation. 

List of Subjects in 10 CFR Part 72 

Administrative practice and 

procedure, Criminal penalties, 

Manpower training programs, Nuclear 

materials, Occupational safety and 

health, Penalties, Radiation protection, 

Reporting and recordkeeping 

requirements, Security measures, Spent 

fuel, Whistleblowing. 

For the reasons set out in the 

preamble and under the authority of the 

Atomic Energy Act of 1954, as amended; 

the Energy Reorganization Act of 1974, 

as amended; the Nuclear Waste Policy 

Act of 1982, as amended, and 5 U.S.C. 

553; the NRC is proposing to adopt the 

following amendments to 10 CFR part 

72. 

PART 72—LICENSING 

REQUIREMENTS FOR THE 

INDEPENDENT STORAGE OF SPENT 

NUCLEAR FUEL, HIGH-LEVEL 

RADIOACTIVE WASTE, AND 

REACTOR-RELATED GREATER THAN 

CLASS C WASTE 

1. The authority citation for part 72 

continues to read as follows: 

Authority: Secs. 51, 53, 57, 62, 63, 65, 69, 

81, 161, 182, 183, 184, 186, 187, 189, 68 Stat. 

929, 930, 932, 933, 934, 935, 948, 953, 954, 

955, as amended, sec. 234, 83 Stat. 444, as 

amended (42 U.S.C. 2071, 2073, 2077, 2092, 

2093, 2095, 2099, 2111, 2201, 2232, 2233, 

2234, 2236, 2237, 2238, 2282); sec. 274, Pub. 

L. 86–373, 73 Stat. 688, as amended (42 

U.S.C. 2021); sec. 201, as amended, 202, 206, 

88 Stat. 1242, as amended, 1244, 1246 (42 

U.S.C. 5841, 5842, 5846); Pub. L. 95–601, sec. 

10, 92 Stat. 2951 as amended by Pub. L. 102– 

486, sec. 7902, 106 Stat. 3123 (42 U.S.C. 

5851); sec. 102, Pub. L. 91–190, 83 Stat. 853 

(42 U.S.C. 4332); secs. 131, 132, 133, 135, 

137, 141, Pub. L. 97–425, 96 Stat. 2229, 2230, 

2232, 2241, sec. 148, Pub. L. 100–203, 101 

Stat. 1330–235 (42 U.S.C. 10151, 10152, 

10153, 10155, 10157, 10161, 10168); sec. 

1704, 112 Stat. 2750 (44 U.S.C. 3504 note); 

Energy Policy Act of 2005, Pub. L. 109–58, 

119 Stat. 549 (2005). 

Section 72.44(g) also issued under secs. 

142(b) and 148(c), (d), Pub. L. 100–203, 101 

Stat. 1330–232, 1330–236 (42 U.S.C. 

10162(b), 10168(c), (d)). Section 72.46 also 

issued under sec. 189, 68 Stat. 955 (42 U.S.C. 

2239); sec. 134, Pub. L. 97–425, 96 Stat. 2230 

(42 U.S.C. 10154). Section 72.96(d) also 

issued under sec. 145(g), Pub. L. 100–203, 

101 Stat. 1330–235 (42 U.S.C. 10165(g)). 

Subpart J also issued under secs. 2(2), 2(15), 

2(19), 117(a), 141(h), Pub. L. 97–425, 96 Stat. 

2202, 2203, 2204, 2222, 2244 (42 U.S.C. 

10101, 10137(a), 10161(h)). Subparts K and L 

are also issued under sec. 133, 98 Stat. 2230 

(42 U.S.C. 10153) and sec. 218(a), 96 Stat. 

2252 (42 U.S.C. 10198). 

2. In § 72.214, Certificate of 

Compliance 1014 is revised to read as 

follows: 

§ 72.214 List of approved spent fuel 

storage casks. 

* * * * * 

Certificate No.: 1014. 

Initial Certificate Effective Date: May 31, 

2000. 

Amendment Number 1 Effective Date: 

July 15, 2002. 

Amendment Number 2 Effective Date: 

June 7, 2005. 

Amendment Number 3 Effective Date: 

May 29, 2007. 

Amendment Number 4 Effective Date: 

January 8, 2008. 

Amendment Number 5 Effective Date: 

July 14, 2008. 

Amendment Number 6 Effective Date: 

August 17, 2009. 

Amendment Number 7 Effective Date: 

December 28, 2009. 

Amendment Number 8 Effective Date: 

May 2, 2012. 

SAR Submitted by: Holtec International. 

SAR Title: Final Safety Analysis Report 

for the HI–STORM 100 Cask System. 

Docket Number: 72–1014. 

Certificate Expiration Date: May 31, 

2020. 

Model Number: HI–STORM 100. 

* * * * * 

Dated at Rockville, Maryland, this 25th day 

of January 2012. 

For the Nuclear Regulatory Commission. 

R.W. Borchardt, 

Executive Director for Operations. 

[FR Doc. 2012–3682 Filed 2–16–12; 8:45 am] 

BILLING CODE 7590–01–P 

BUREAU OF CONSUMER FINANCIAL 

PROTECTION 

12 CFR Part 1090 

[Docket No. CFPB–2012–0005] 

RIN 3170–AA00 

Defining Larger Participants in Certain 

Consumer Financial Product and 

Service Markets 

AGENCY: Bureau of Consumer Financial 

Protection. 

ACTION: Proposed rule; request for 

public comment. 

SUMMARY: The Bureau of Consumer 

Financial Protection (Bureau) is 

proposing a new regulation pursuant to 

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Federal Register / Vol. 77, No. 33 / Friday, February 17, 2012 / Proposed Rules 9593 

1The Act is Title X of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act of 2010, 

Public Law 111–203 (12 U.S.C. 5301). 

2See Act section 1025(a). The Bureau also has 

certain authorities relating to the supervision of 

other banks, thrifts, and credit unions. See Act 

section 1026 (c)(1), (e). 

3Section 1024 of the Act applies to 

nondepository (nonbank) covered persons and 

expressly excludes from coverage persons described 

in sections 1025(a) or 1026(a) of the Act. Under 

section 1002(6) of the Act, a ‘‘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.’’ Act section 1002(6); see also Act section 

1002(5) (defining ‘‘consumer financial product or 

service.’’) Section 1024(d) of the Act provides that, 

subject to certain exceptions, ‘‘to the extent that 

Federal law authorizes the Bureau and another 

Federal agency to * * * conduct examinations, or 

require reports from a [nonbank covered person] 

under such law for purposes of assuring compliance 

with Federal consumer financial law and any 

regulations thereunder, the Bureau shall have 

exclusive authority to * * * conduct examinations 

[and] require reports * * * with regard to a 

[nonbank covered person], subject to those 

provisions of law.’’ 

4The Bureau’s supervision authority also extends 

to service providers of these entities. See Act 

section 1024(e) (establishing the Bureau’s 

supervisory authority relating to service providers); 

see also, Act section 1002(26) (defining ‘‘service 

provider’’). Service providers to consumer debt 

collectors and consumer reporting agencies may 

include firms such as data aggregators, law firms, 

data and record suppliers, account maintenance 

services, call centers, software providers, and 

developers of credit scoring algorithms. 

5Act section 1024(a)(1)(A), (D), and (E). 

6Act section 1024(a)(1)(B), (a)(2). The Bureau also 

has the authority to supervise any nonbank covered 

person that it ‘‘has reasonable cause to determine, 

by order, after notice and a reasonable opportunity 

* * * to respond’’ that such covered person ‘‘is 

engaging, or has engaged, in conduct that poses 

risks to consumers with regard to the offering or 

provision of consumer financial products or 

services.’’ Act section 1024(a)(1)(C). 

7Act section 1024(b)(1). 

section 1024 of the Consumer Financial 

Protection Act of 2010. That provision 

grants the Bureau authority to supervise 

certain nonbank covered persons for 

compliance with Federal consumer 

financial laws and for other purposes. 

The Bureau has the authority to 

supervise nonbank covered persons of 

all sizes in the residential mortgage, 

private education lending, and payday 

lending markets. In addition, the Bureau 

has the authority to supervise nonbank 

‘‘larger participant[s]’’ in markets for 

other consumer financial products or 

services. The Bureau must define such 

‘‘larger participants’’ by rule, and such 

an initial rule must be issued by July 21, 

2012. 

In this proposal, the Bureau proposes 

to define larger participants in the 

markets for consumer debt collection 

and consumer reporting. The Bureau 

intends that this proposal and 

subsequent initial rule will be followed 

by a series of rulemakings covering 

additional markets for consumer 

financial products and services. The 

Bureau also proposes to include 

provisions in this proposal that will 

facilitate the supervision of nonbank 

covered persons. 

DATES: Comments must be received on 

or before April 17, 2012. 

ADDRESSES: Interested parties are 

invited to submit written comments 

electronically or in paper form. Because 

paper mail in the Washington, DC area 

and at the Bureau is subject to delay, 

commenters are encouraged to submit 

comments electronically. You may 

submit comments, identified by Docket 

No. CFPB–2012–0005 or RIN 3170– 

AA00 by any of the following methods: 

• Electronic: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

In general, all comments received will 

be posted without change to their 

content. 

• Mail: Monica Jackson, Office of the 

Executive Secretary, Bureau of 

Consumer Financial Protection, 1700 G 

Street NW., Washington DC 20006. 

• Hand Delivery/Courier: Monica 

Jackson, Office of the Executive 

Secretary, Bureau of Consumer 

Financial Protection, 1700 G Street NW., 

Washington DC 20006. 

In addition, comments will be 

available for public inspection and 

copying at 1700 G Street NW., 

Washington, DC 20006 on official 

business days between the hours of 

10 a.m. and 5 p.m. Eastern Time. You 

can make an appointment to inspect the 

documents by telephoning (202) 435– 

7275. 

All comments, including attachments 

and other supporting materials, will 

become part of the public record and 

will be subject to public disclosure. 

Submit only information that you wish 

to make available publicly. Do not 

include sensitive personal information, 

such as account numbers or Social 

Security numbers. Comments will not 

be edited to remove any identifying or 

contact information, such as name and 

address information, email addresses, or 

telephone numbers. 

FOR FURTHER INFORMATION CONTACT: 

Christopher Young, Senior Counsel, 

(202) 435–7408, or Nicholas Krafft, 

Consumer Financial Protection Analyst, 

(202) 435–7252, Office of Nonbank 

Supervision, Bureau of Consumer 

Financial Protection, 1700 G Street NW., 

Washington, DC 20006. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Consumer Financial Protection 

Act of 2010 (Act) 1 established the 

Bureau of Consumer Financial 

Protection (Bureau) on July 21, 2010. 

One of the Bureau’s key responsibilities 

under the Act is the supervision of very 

large banks, thrifts, and credit unions, 

and their affiliates,2 and certain 

nonbank covered persons.3

This proposal (Proposed Rule or 

proposal) would establish, in part, the 

scope of coverage of the Bureau’s 

supervision authority for nonbank 

covered persons pursuant to section 

1024 of the Act.4 That authority varies 

by consumer financial product or 

service market. Specifically, section 

1024 grants the Bureau authority to 

supervise, regardless of size, nonbank 

covered persons that offer or provide to 

consumers: (1) Origination, brokerage, 

or servicing of residential mortgage 

loans secured by real estate, and related 

mortgage loan modification or 

foreclosure relief services; (2) private 

education loans; and (3) payday loans.5

In addition, the Bureau has the 

authority to supervise any ‘‘larger 

participant of a market for other 

consumer financial products or 

services,’’ as defined by rule by the 

Bureau.6 The Act requires the initial 

larger participant rule to be issued by 

July 21, 2012. This Proposed Rule 

would establish the initial larger 

participant rule for two markets: 

consumer debt collection and consumer 

reporting. The Bureau anticipates 

subsequent rulemakings to define larger 

participants in additional markets. 

The Bureau is authorized to supervise 

nonbank entities subject to section 1024 

of the Act by requiring the submission 

of reports and conducting examinations 

to: (1) Assess compliance with Federal 

consumer financial law; (2) obtain 

information about such persons’ 

activities and compliance systems or 

procedures; and (3) detect and assess 

risks to consumers and to the consumer 

financial markets.7

The Proposed Rule only pertains to 

defining larger participants in certain 

markets for purposes of the Bureau’s 

nonbank supervision authority and 

would not impose new substantive 

consumer protection requirements on 

any nonbank entity. Moreover, nonbank 

entities are subject to the Bureau’s 

regulatory and enforcement authority 

and any applicable Federal consumer 

financial law, regardless of whether they 

are subject to the Bureau’s supervisory 

authority. 

II. Overview of Comments Received 

The Bureau solicited public comment 

on developing an initial proposed larger 

participant rule by publishing in the 

Federal Register a Notice and Request 

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8 76 FR 38059. 

9 In July 2011, the Bureau held four roundtable 

discussions on the larger participant Notice. More 

than 70 stakeholders participated, representing a 

diverse mix of nonbank and bank trade associations 

and consumer advocacy and civil rights groups. The 

roundtables focused on key issues regarding criteria 

(what to measure), thresholds (where to set), data 

(available sources), and markets (which to cover 

and how to define). Also in July 2011, the Bureau 

held a multistate regulator and regulatory 

association conference call that had more than 40 

participants. 

10More than 10,300 of these comments were 

nearly identical form letters from individuals asking 

the Bureau to include credit bureaus and credit 

scoring companies in its supervision program. 

for Comment (Notice) on June 29, 2011,8

and holding a series of roundtable 

discussions with industry, consumer 

and civil rights groups, and state 

regulatory agencies and associations.9

The comment period for the Notice 

ended on August 15, 2011. The Bureau 

received more than 10,400 comments 

from individual consumers, consumer 

advocacy groups, industry trade groups, 

individual companies, state and Federal 

regulators, regulatory associations, and 

elected officials.10 Issues addressed in 

the comments included which markets 

should be covered in the initial 

proposed rule, the particular criteria 

and thresholds the initial rule should 

use to measure the size of nonbank 

covered persons, available data sources, 

and measurement dates and supervision 

timeframes. 

Commenters suggested a variety of 

approaches to choosing markets for 

inclusion in the initial larger participant 

rule. Some suggested the inclusion of 

certain specified markets, such as 

consumer reporting. Other commenters, 

both industry and consumer, 

recommended that the Bureau take a 

broad and flexible approach to covering 

markets and defining larger participants, 

in order to bring a large number of 

markets and market participants under 

the Bureau’s supervision program. Still 

other commenters suggested 

consideration of specific factors in 

choosing markets for inclusion, such as 

risk to consumers, costs and benefits, or 

duplication of existing supervision. 

With respect to establishing a test to 

define who is a larger participant in a 

market, comments submitted by both 

consumer groups and industry 

associations recommended that any test 

adopted by the Bureau enable it to adapt 

to evolving markets and be crafted such 

that nonbank covered persons do not 

‘‘slip through the cracks.’’ Several 

commenters suggested that a ‘‘one-sizefits-all’’ approach to establishing a test 

to define who is a larger participant 

would not work. These commenters 

noted that the differences between 

markets call for tests tailored to each 

individual market. In addition, some 

industry and consumer group 

commenters supported using multiple 

tests within a given market to make it 

harder for nonbank covered persons to 

evade supervision under the rule. Other 

industry group commenters, however, 

favored the use of a single test to 

minimize burden on both nonbank 

covered persons and the Bureau. 

The Bureau received comments both 

in favor and opposed to including small 

businesses within the coverage of the 

rulemaking. Trade groups with members 

that are small businesses cautioned 

about unnecessary burden and 

recommended an exemption of small 

businesses from coverage by the larger 

participant rule. Some consumer 

groups, on the other hand, advocated 

coverage of relevant firms even if they 

are small, arguing that in highly 

fragmented industries, almost all 

participants may be small businesses, 

and further, in the context of regional 

markets, small businesses may be large, 

regional players. 

Finally, some commenters responded 

to the Bureau’s request for suitable data 

sources to develop and apply 

definitions of larger participants. 

However, none of the comments 

identified available, comprehensive data 

sources that could be used for this 

purpose. 

Comments are discussed below as 

relevant in the section-by-section 

description of the proposal. 

III. Summary of the Proposal 

This proposal is the first in what the 

Bureau intends to be a series of rules to 

define ‘‘larger participants’’ in specific 

markets for purposes of establishing, in 

part, the scope of coverage of the 

Bureau’s nonbank supervision program. 

In developing the proposal, the Bureau 

considered the comments it received in 

response to the Notice and in the 

roundtables conducted last year. The 

Proposed Rule covers two markets for 

consumer financial products and 

services: consumer debt collection and 

consumer reporting. 

The Proposed Rule sets forth 

definitions for the consumer financial 

products or services comprising the 

markets that it covers, in addition to 

defining other terms. The proposal 

establishes a test for each market to 

determine whether a nonbank entity is 

a larger participant of that market. For 

the debt collection and consumer 

reporting markets, the Bureau is 

proposing a test that measures the 

criterion of ‘‘annual receipts.’’ This 

measurement will use a definition of 

‘‘annual receipts’’ adapted from the 

definition of the term used by the Small 

Business Administration (SBA) for 

purposes of defining small business 

concerns. The proposed threshold for 

the consumer debt collection market is 

more than $10 million in annual 

receipts and, for the consumer reporting 

market, is more than $7 million in 

annual receipts. Under the tests set forth 

in the Proposed Rule, these receipts 

must result from activities related to the 

market in question. Covered persons 

meeting the proposed tests would 

qualify as larger participants and be 

subject to the Bureau’s supervision 

authority under section 1024 of the Act. 

Although annual receipts are proposed 

as the criterion of measurement for both 

markets covered by the Proposed Rule, 

the Bureau has not determined that this 

criterion would be appropriate for any 

other market that may be the subject of 

a future rulemaking. Rather, the Bureau 

will tailor each test to the market to 

which it will be applied. 

The Proposed Rule provides that once 

a nonbank covered person qualifies as a 

larger participant, the person will be 

deemed a larger participant for a period 

not less than two years from the first 

day of the tax year in which the person 

last met the applicable test. The 

proposal also includes a procedure for 

a person to dispute that it qualifies as 

a larger participant. To facilitate the 

Bureau’s supervision of nonbank 

covered persons, to enable the Bureau to 

carry out the purposes and objectives of 

the Act relating to supervision, and to 

prevent evasion, the Proposed Rule 

provides that the Bureau may require 

submission of certain records, 

documents, and other information for 

purposes of determining whether a 

person is a larger participant of a 

covered market. 

IV. Legal Authority and Procedural 

Matters 

A. Rulemaking Authority 

The Bureau is issuing this Proposed 

Rule pursuant to its authority under: (1) 

Sections 1024(a)(1)(B) and (a)(2) of the 

Act which require the Bureau to issue 

an initial rule to define who is a larger 

participant in certain markets for 

consumer financial products or services 

by July 21, 2012, one year after the 

designated transfer date; (2) section 

1024(b)(7) which authorizes the Bureau 

to prescribe rules to facilitate the 

supervision of covered persons under 

section 1024 of the Act; (3) section 

1022(c)(5), which provides the Bureau 

the authority to assess whether a 

nonbank entity is a covered person 

under the Act by requiring such person 

to submit to the Bureau, under oath or 

otherwise, annual reports or answers in 

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Federal Register / Vol. 77, No. 33 / Friday, February 17, 2012 / Proposed Rules 9595 

11 5 U.S.C. 553(d). 

12 12 CFR 1026.1 et seq. 

13 12 CFR 1005.1 et seq. 

14Act section 1002(1). 

15This definition of ‘‘company’’ is guided by the 

definition of that term in Regulation P, 12 CFR 

1016.1 et seq. (Privacy of Consumer Financial 

Information), and Regulation V, 12 CFR 1022.1 et 

seq. (Fair Credit Reporting). 

16Public Law 111–203, 124 Stat. 1390, section 

2(18)(A) (2010). 

17See, e.g., 12 CFR 41.3(i) (OCC rule defining 

‘‘common ownership or common corporate control’’ 

in connection with fair credit reporting); 12 CFR 

336.3(b) (FDIC rule defining ‘‘control’’ in 

connection with minimum standards of fitness for 

employment with the FDIC); 12 CFR 1805.104(q) 

(Department of the Treasury rule defining ‘‘control’’ 

in connection with the Community Development 

Financial Institutions Program). 

18 13 CFR 121.104. 

19A ‘‘completed fiscal year’’ means a ‘‘tax year’’ 

including any ‘‘short tax year.’’ A ‘‘fiscal year’’ is 

12 consecutive months ending on the last day of 

any month except December 31st. A ‘‘tax year’’ is 

an annual accounting period for keeping records 

and reporting income and expenses. An annual 

accounting period does not include a ‘‘short tax 

year.’’ A ‘‘short tax year’’ is a ‘‘tax year’’ of less than 

12 months. IRS Publication 538, 

available at http://www.irs.gov/publications/p538/

ar02.html#d0e237. 

writing to specific questions; and (4) 

section 1022(b)(1), which grants the 

Bureau the authority to prescribe rules 

as may be necessary and appropriate to 

enable the Bureau to administer and 

carry out the purposes and objectives of 

the Federal consumer financial laws, 

and to prevent evasions of these laws. 

B. Proposed Effective Date of Final Rule 

The Administrative Procedure Act 

generally requires that rules be 

published not less than 30 days before 

their effective dates.11 The Bureau 

proposes that, once issued, the final rule 

for this proposal would be effective 30 

days after publication. The Bureau seeks 

comment on whether the proposed 

effective date is appropriate, or whether 

the Bureau should adopt an alternative 

effective date. 

V. Section-by-Section Description of the 

Proposed Rule 

Section 1090.100—Scope and Purpose 

Proposed § 1090.100 sets forth the 

scope and purpose of the Proposed 

Rule. It states that the part defines those 

nonbank covered persons that qualify as 

larger participants of certain markets for 

consumer financial products or services 

pursuant to sections 1024(a)(1)(B) and 

(a)(2) of the Act. Proposed § 1090.100 

further explains that a larger participant 

of a market covered by the part will be 

subject to the supervisory authority of 

the Bureau under section 1024 of the 

Act. Finally, proposed § 1090.100 

provides that the part establishes rules 

to facilitate the Bureau’s supervisory 

authority over larger participants 

pursuant to section 1024(b)(7) of the 

Act. 

Section 1090.101—Definitions 

Proposed § 1090.101 defines terms 

used in the Proposed Rule. If a term is 

defined in the Act, the proposal 

generally incorporates that definition, 

with clarifications and modifications 

where necessary. The Bureau seeks 

comment on each of the definitions set 

forth in the Proposed Rule and any 

suggested clarifications, modifications, 

or alternatives. The Bureau notes that 

certain key terms defined by the Act and 

adopted by the proposal, such as 

‘‘consumer,’’ are defined differently by 

some consumer protection regulations 

such as Regulation Z12 or Regulation 

E.13 The Bureau solicits comment on 

whether the Bureau should conform any 

of these definitions to other regulations 

for consistency and, if so, to which 

definitions it should conform. 

Act. Proposed § 1090.101(a) states that 

the term ‘‘Act’’ means the Consumer 

Financial Protection Act of 2010. 

Affiliated company. Section 

1024(a)(3)(B) of the Act provides that for 

purposes of determining activity levels 

for, among other things, defining who is 

a larger participant of certain markets, 

the activities of affiliated companies 

(other than insured depository 

institutions or insured credit unions) 

shall be aggregated. The term ‘‘affiliated 

company’’ is not defined in the Act. For 

purposes of implementing section 

1024(a)(3)(B)’s aggregation requirement, 

proposed § 1090.101(b) defines the term 

‘‘affiliated company’’ in a manner 

guided by the definition of ‘‘affiliate’’ 

set forth in the Act,14 with 

modifications to track the requirements 

of 1024(a)(3)(B). Thus, proposed 

§ 1090.101(b) states that the term 

‘‘affiliated company’’ means any 

company (other than an insured 

depository institution or insured credit 

union) that controls, is controlled by, or 

is under common control with, a 

person. 

For purposes of the definition of 

‘‘affiliated company,’’ proposed 

§ 1090.101(b) provides that the term 

‘‘company’’ means any corporation, 

limited liability company, business 

trust, general or limited partnership, 

proprietorship, cooperative, association, 

or similar organization.15

Also for purposes of the definition of 

‘‘affiliated company,’’ proposed 

§ 1090.101(b) explains when a person 

shall be considered to have control over 

another person, guided by the 

definitions of the term control provided 

in section 2 of the Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act (Dodd-Frank Act) (12 U.S.C. 

5301),16 section 3 of the Federal Deposit 

Insurance Act (12 U.S.C. 1813), section 

2 of the Bank Holding Company Act (12 

U.S.C. 1841), and the rules of other 

Federal financial regulators.17 Proposed 

§ 1090.101(b) thus provides that a 

person has control over another person 

if: (i) The person directly or indirectly 

or acting through one or more other 

persons owns, controls, or has power to 

vote 25 percent or more of any class of 

voting securities or similar ownership 

interest of the other person; (ii) the 

person controls in any manner the 

election of a majority of the directors, 

trustees, members, or general partners of 

the other person; or (iii) the person 

directly or indirectly exercises a 

controlling influence over the 

management or policies of the other 

person, as determined by the Bureau. 

The Bureau seeks comment on 

whether the definition of ‘‘affiliated 

company’’ is appropriate to implement 

the aggregation requirement under 

section 1024(a)(3)(B) of the Act, and on 

possible alternatives to the proposed 

definition. 

Annual receipts. Proposed 

§ 1090.101(c) is informed by the method 

of calculating ‘‘annual receipts’’ used by 

the SBA 18 in determining whether a 

business is a ‘‘small business concern.’’ 

Under proposed § 1090.101(c), for 

purposes of calculating ‘‘annual 

receipts,’’ the term ‘‘receipts’’ means 

‘‘total income’’ (or in the case of a sole 

proprietorship, ‘‘gross income’’) plus 

‘‘cost of goods sold’’ as these terms are 

defined and reported on Internal 

Revenue Service (IRS) tax return forms. 

The term does not include net capital 

gains or losses. Annual receipts are 

measured as the average of a person’s 

most recently completed three fiscal 

years, or the average receipts for the 

entire period the person has been in 

business if it has less than three 

completed fiscal years.19 The 

calculation of annual receipts also 

implements the aggregation requirement 

in section 1024(a)(3)(B) of the Act by 

providing that the annual receipts of a 

person shall be added to the annual 

receipts of each of its affiliated 

companies. Such aggregation includes 

the receipts of both the acquired and 

acquiring companies in the case of an 

acquisition occurring during any 

relevant measurement period. 

The Bureau considered defining 

‘‘annual receipts’’ as the term is used in 

the U.S. Economic Census, but this term 

includes revenue from all business 

activities, whether or not payment was 

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20See http://factfinder2.census.gov/faces/help/

jsf/pages/metadata.xhtml?lang=en&

type=category&id=category.en./ECN/ECN/2007_US/

56SSSZ4.MEASURE.RCPTOT#main_content. 

21Similarly, section 1692a(6) of the Fair Debt 

Collection Practices Act (15 U.S.C.1692 et seq.), 

defines debt collection to include, among other 

things, collecting or attempting to collect, directly 

or indirectly, any debt owed or due or asserted to 

be owed or due to another. 

22Under these clauses, the term ‘‘financial 

product or service’’ is generally defined to include, 

subject to certain exclusions: (1) Extending credit 

and servicing loans, Act section 1002(15)(A)(i); (2) 

providing real estate settlement services or 

performing appraisals of real estate or personal 

property, Act section 1002(15)(A)(iii); (3) collecting, 

analyzing, maintaining, or providing consumer 

report information or other account information 

used or expected to be used in connection with any 

decision regarding the offering or provision of a 

consumer financial product or service, Act section 

1002(15)(A)(ix); and (4) collecting debt related to 

any consumer financial product or service, Act 

section 1002(15)(A)(x). 

23As noted above, section 1024 of the Act grants 

the Bureau authority to supervise, regardless of size, 

nonbank covered persons that offer or provide to 

consumers: (1) Origination, brokerage, or servicing 

of residential mortgage loans secured by real estate, 

and related mortgage loan modification or 

foreclosure relief services; (2) private education 

loans; and (3) payday loans. Section 1025 of the Act 

grants the Bureau authority to supervise very large 

banks, thrifts, and credit unions, and their affiliates. 

24This definition may also include entities such 

as credit scoring companies. Whether such an entity 

is covered under this definition would depend 

upon its particular activities. To the extent that a 

credit scoring company is engaged in collecting, 

analyzing, maintaining, or providing consumer 

report or other account information for the purposes 

described above, it would be covered by the 

definition. 

received in the census year, including 

net investment income, interest, and 

dividends.20 The Bureau believes that 

the SBA’s definition of ‘‘annual 

receipts’’ is more appropriate as a guide 

for this proposal because, by excluding 

net capital gains and losses, it does not 

capture this investment income, which 

is not generated from market activities 

in a given year. 

Assistant Director. Proposed 

§ 1090.101(d) states that the term 

‘‘Assistant Director’’ means the Bureau’s 

Assistant Director for Nonbank 

Supervision or her or his designee. 

Under proposed § 1090.101(d), the 

Director of the Bureau may perform the 

functions of the Assistant Director as set 

forth in the Proposed Rule. Proposed 

§ 1090.101(d) further provides that, in 

the event there is no Assistant Director, 

the Director of the Bureau may 

designate an alternative Bureau 

employee to perform the functions of 

the Assistant Director. 

Bureau. Proposed § 1090.101(e) states 

that the term ‘‘Bureau’’ means the 

Bureau of Consumer Financial 

Protection. 

Consumer. Proposed § 1090.101(f) 

incorporates the definition of 

‘‘consumer’’ set forth in section 1002(4) 

of the Act. Thus, proposed § 1090.101(f) 

states that the term ‘‘consumer’’ means 

an individual or an agent, trustee, or 

representative acting on behalf of an 

individual. 

Consumer debt collection. Under 

section 1002(15)(A)(x) of the Act, the 

term ‘‘financial product or service’’ 

includes ‘‘collecting debt related to any 

consumer financial product or service.’’ 

Section 1002(5)(B) of the Act, in turn, 

provides that this activity is a 

‘‘consumer financial product or service’’ 

when ‘‘delivered, offered, or provided in 

connection with a consumer financial 

product or service.’’ 

Proposed § 1090.101(g) defines the 

consumer financial product or service of 

‘‘consumer debt collection’’ to ensure 

that it captures a range of consumer debt 

collection activities, including 

consumer debt collection activities 

undertaken by third-party collectors, 

law firms, attorneys, and debt buyers. 

The proposed definition describes 

consumer debt collection as collecting 

or attempting to collect, directly or 

indirectly, any debt owed or due or 

asserted to be owed or due to another 

and related to any consumer financial 

product or service.21 It also indicates the 

debt may either be collected on behalf 

of another person or on the person’s 

own behalf if the debt was obtained 

while in default, to ensure consumer 

debt collection activities of debt buyers 

are covered. The Bureau invites 

comments on all aspects of the 

definition of the term ‘‘consumer debt 

collection,’’ including possible 

alternatives to the proposed definition. 

Consumer financial product or 

service. Proposed § 1090.101(h) 

incorporates the definition of the term 

‘‘consumer financial product or service’’ 

set forth in section 1002(5) of the Act. 

Proposed § 1090.101(h) provides that 

the term ‘‘consumer financial product or 

service’’ means any financial product or 

service as defined in section 1002(15) of 

the Act that is described in one or more 

categories under: (a) section 1002(15) of 

the Act and is offered or provided for 

use by consumers primarily for 

personal, family, or household 

purposes; or (b) clause (i), (iii), (ix), or 

(x) of section 1002(15)(A) of the Act 22

and is delivered, offered, or provided in 

connection with a consumer financial 

product or service referred to in the 

immediately preceding subparagraph 

(a). 

Consumer reporting. Under section 

1002(15)(A)(ix) of the Act, the term 

‘‘financial product or service’’ includes, 

subject to certain exceptions, 

‘‘collecting, analyzing, maintaining, or 

providing consumer report information 

or other account information, including 

information relating to the credit history 

of consumers, used or expected to be 

used in connection with any decision 

regarding the offering or provision of a 

consumer financial product or service.’’ 

Section 1002(5)(B) of the Act, in turn, 

provides that this activity is a 

‘‘consumer financial product or service’’ 

when ‘‘delivered, offered, or provided in 

connection with a consumer financial 

product or service.’’ 

The definition of the consumer 

financial product or service of 

‘‘consumer reporting’’ proposed in 

§ 1090.101(i) is guided by the activity 

described in sections 1002(5)(B) and 

(15)(A)(ix) of the Act. The Bureau is 

proposing to modify this definition for 

the purposes of this Proposed Rule 

generally to exclude the activities of 

persons that furnish information about 

their own experiences or transactions 

with consumers and persons that use 

consumer report or other account 

information for their own purposes. 

While these activities do not typically 

result in annual receipts, the Bureau 

believes expressly excluding these 

activities will provide greater certainty 

for nonbank entities that do engage in 

these activities. Moreover, many large 

furnishers of information to consumer 

reporting entities are already subject to 

the Bureau’s supervisory authority 

under the Act.23

Proposed § 1090.101(i) states that the 

term ‘‘consumer reporting’’ means 

collecting, analyzing, maintaining, or 

providing consumer report information 

or other account information, used or 

expected to be used in any decision by 

another person regarding the offering or 

provision of any consumer financial 

product or service. The language ‘‘by 

another person’’ revises the language of 

the Act to prevent the possibility of a 

person’s own use of consumer report 

information being included in the 

definition. The definition also provides 

exceptions for the activities of a person 

providing information related to their 

(or their affiliate’s) transactions and 

experiences with a consumer to an 

affiliate or to a consumer reporting 

entity, as well as the exception detailed 

in the Act for information used solely in 

a decision regarding employment, 

government licensing, and residential 

leasing. This definition covers different 

types of consumer reporting agencies 

such as credit bureaus, consumer report 

resellers, and specialty consumer 

reporting agencies such as those 

specializing in consumer check 

verification and payday lending 

transactions.24 The Bureau invites 

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25ACA International, 2010 Agency Benchmarking 

Survey, at 19 (2010). According to the ACA 

International’s 2010 Benchmarking Survey, 

collection agency commission rates averaged 27% 

in 2009, with a median of 25.6%. 

26For example, the Federal Financial Institutions 

Examination Council, in its Uniform Retail Credit 

Classification and Account Management Policy, 

establishes a charge-off policy for open-end credit 

at 180 days delinquency and closed-end credit at 

120 days delinquency. See 65 FR 36903, June 12, 

2000. 

27Federal Trade Commission, Collecting 

Consumer Debts: The Challenges of Change, at 4 

(Feb. 2009), available athttp://www.ftc.gov/bcp/ 

workshops/debtcollection/dcwr.pdf) (citing, 

Kaulkin Ginsberg, The Kaulkin Report: The Future 

of Receivables Management at 50 (7th ed. 2007)). 

28Although attorneys are generally excluded from 

the Act’s coverage, see Act section 1027(e)(1), this 

exclusion does not preclude the exercise of the 

Bureau’s supervisory authority over collection 

attorneys. Section 1027(e)(2) of the Act provides 

that the general exclusion for attorneys does not 

limit the Bureau’s supervisory, enforcement, or 

other authority with respect to an attorney who 

offers or provides a consumer financial product or 

service with respect to any consumer who is not 

receiving legal advice or services from the attorney 

in connection with that product or service. Further, 

section 1027(e)(3) of the Act provides that the 

Bureau shall have authority over attorneys who are 

otherwise subject to any ‘‘enumerated consumer 

law’’ within the meaning of the Act. Collection 

attorneys are subject to the Fair Debt Collection 

Practices Act, which is included among the 

enumerated consumer laws listed in section 

1002(23) of the Act. See Heintz v. Jenkins, 514 U.S. 

291 (1995). 

29National Consumer Law Center, The Debt 

Machine: How the Collection Industry Hounds 

Consumers and Overwhelms Courts at 11 (July 

2010). 

30Federal Reserve Bank of New York, Quarterly 

Report on Household Debt and Credit (November 

2011), available athttp://www.newyorkfed.org/ 

research/national_economy/householdcredit/ 

DistrictReport_Q32011.pdf. 

comments on all aspects of the 

definition of the term ‘‘consumer 

reporting,’’ including possible 

alternatives to the proposed definition. 

Larger participant. Proposed 

§ 1090.101(j) defines the term ‘‘larger 

participant’’ to mean a nonbank covered 

person that meets a test under 

§ 1090.102, and which remains a larger 

participant for the period provided in 

§ 1090.103 of this part. 

Nonbank covered person. Section 

1024 of the Act relates to ‘‘covered 

persons’’ as defined in section 1002(6) 

of the Act that are not insured 

depository institutions or credit unions, 

or, in the case of such entities with 

assets of more than $10 billion, their 

affiliates, as set forth in sections 1025(a) 

and 1026(a) of the Act. Proposed 

§ 1090.101(k) therefore excludes from 

the definition of ‘‘nonbank covered 

persons’’ persons described in sections 

1025(a) and 1026(a) of the Act and 

provides that the term ‘‘nonbank 

covered person’’ means, except for 

persons described in sections 1025(a) 

and 1026(a) of the Act: (a) Any person 

that engages in offering or providing a 

consumer financial product or service; 

and (b) any affiliate of a person 

described in subparagraph (a) of this 

paragraph if such affiliate acts as a 

service provider to such person. 

Person. Proposed § 1090.101(l) 

incorporates the definition of ‘‘person’’ 

set forth in section 1002(19) of the Act. 

Proposed § 1090.101(l) states that the 

term ‘‘person’’ means an individual, 

partnership, company, corporation, 

association (incorporated or 

unincorporated), trust, estate, 

cooperative organization, or other 

entity. 

Supervision or supervisory activity. 

Proposed § 1090.101(m) defines the 

terms ‘‘supervision’’ or ‘‘supervisory 

activity’’ to mean the Bureau’s exercise, 

or intended exercise, of supervisory 

authority by initiating or undertaking an 

examination, or requiring a report, of a 

person pursuant to section 1024 of the 

Act. 

Section 1090.102—Covered Markets and 

Tests for Determining Larger 

Participants of Those Markets 

Section 1090.102(a)—Consumer Debt 

Collection 

Market Overview 

Proposed § 1090.102(a) relates to the 

market for consumer debt collection. As 

explained in the section-by-section 

description of proposed § 1090.101(g), 

this market encompasses the collection, 

or attempted collection, of debt related 

to the consumer financial products or 

services described in sections 1002(5) 

and (15)(A) of the Act. Such activity 

includes the collection of debt related to 

consumer credit, certain consumer 

leases, and a variety of other consumer 

financial products or services, but 

generally not other debt incurred by 

individuals, such as medical debt. 

Participants in the debt collection 

market generally include third-party 

debt collectors, debt buyers, and 

collection attorneys and law firms. 

Third-party collectors primarily collect 

debt on behalf of a debt owner, the 

person that originated the debt or 

purchased it. Third-party collectors 

typically are compensated through 

contingency fees calculated as a 

percentage of the debt they collect.25

Creditors’ practices vary in how they 

use outside collection agencies; in some 

cases creditors use collection agencies 

in the early stages of delinquency prior 

to charge off (charge off usually occurs 

120 or 180 days after delinquency, 

depending on the type of debt).26 In 

other cases, creditors use third-party 

debt collectors after a debt has been 

written off by the creditor. 

Debt buying is another important 

component of the consumer debt 

collection market. As the name 

indicates, debt buyers purchase debt, 

either from the original creditor or from 

another debt buyer, usually for a 

fraction of the balance owed.27 They 

profit when their recoveries exceed the 

combined costs of debt acquisition and 

of collecting from debtors, including 

overhead (or direct and indirect costs of 

collection). Debt buyers sometimes use 

third-party collection agencies or 

collection law firms to collect their debt, 

but many also undertake their own 

collection efforts. Finally, debt buyers 

also may decide to sell purchased debt 

to another debt buyer. 

Collection attorneys and law firms 

also play a key role in the consumer 

debt collection market.28 They 

sometimes are the primary (or only) 

debt collector with which a consumer 

will interact. Collection attorneys and 

law firms may collect through litigation 

(i.e., filing suit against consumers to 

collect debt). They also may collect in 

the same manner as other debt 

collectors, such as by sending dunning 

letters and making phone calls. By one 

estimate, approximately one in 20 

delinquent accounts gets referred to a 

law firm that specializes in debt 

collection.29

Consumer debt collection is a market 

for ‘‘consumer financial products or 

services’’ under section 1024(a)(1)(B) of 

the Act and is thus appropriate for 

inclusion in a larger participant 

rulemaking. Moreover, consumer debt 

collection is critical to the functioning 

of the consumer credit market and has 

a significant impact on consumers. By 

collecting delinquent debt, collectors 

reduce creditors’ losses from nonrepayment and thereby help to keep 

consumer credit available and 

potentially more affordable to 

consumers. Available and affordable 

credit is vital to millions of consumers 

because it makes it possible for them to 

purchase goods and services that they 

could not afford if they had to pay the 

entire cost at the time of purchase. 

Further, debt collection is a large, multibillion dollar industry that directly 

affects a large number of consumers. In 

2011, approximately 30 million 

individuals, or 14 percent of American 

adults had debt that was subject to the 

collections process (averaging 

approximately $1,400).30 Although 

these figures include not only consumer 

debt covered by the Act and the 

Proposed Rule, but also other types of 

debt such as medical debt, they indicate 

the importance and central role of 

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31Federal Trade Commission, Collecting 

Consumer Debts: The Challenges of Change, at 3 

(Feb. 2009), available athttp://www.ftc.gov/bcp/ 

workshops/debtcollection/dcwr.pdf (citing, Kaulkin 

Ginsberg, The Kaulkin Report: The Future of 

Receivables Management at 74 (7th ed. 2007)). 

32See ‘‘SBA Size Standards Methodology’’ at 4, 

available athttp://www.sba.gov/sites/default/files/

size_standards_methodology.pdf. 

33U.S. Census Bureau 2007 Economic Census, 

available at http://www.census.gov/econ/ 

census07/. 

34As noted in the section-by-section discussion of 

the definition of ‘‘annual receipts’’ (proposed 

§ 1090.101(c)), the SBA and the Economic Census 

use the term ‘‘annual receipts’’ somewhat 

differently. As used by the Economic Census, the 

term includes receipts from all business activities, 

including net investment income, interest, and 

dividends, whether or not payment was received in 

the census year. The SBA, by contrast, defines the 

term to exclude net capital gains and losses and 

thus does not capture investment income. 

Notwithstanding this difference in the meaning of 

the term, the Economic Census data regarding 

annual receipts remain useful for purposes of 

developing a general understanding of the market 

for consumer debt collection and establishing a test 

for defining larger participants in that market. 

35Response is required by law. No firm-level data 

is released; rather, the data are aggregated by sector 

according to North American Industry 

Classification System (NAICS) codes. For annual 

receipts, the Economic Census categorizes a 

business’s annual receipts into one of 11 tiers to 

indicate different sizes, beginning at the highest 

level with firms having annual receipts in excess of 

$100 million, with each lower tier approximately 

half the size of the one above it (e.g., $50 million, 

$25 million, $10 million). When categorizing the 

data by sector, both the SBA and the Economic 

Census use the NAICS codes. This furthers the 

purpose of having a standard set of classification 

codes used across the Federal government. This 

joint use of NAICS codes enables the Bureau to 

make direct comparisons between the two data sets 

for purposes of market classification. 

36Entities whose activities fall within this NAICS 

code are described as: ‘‘establishments primarily 

engaged in collecting payments for claims and 

remitting payments collected to their clients’’ and 

include, among others, collection agencies, debt 

collection services, and account collection services. 

NAICS code 56144 (collection agencies) through 

2007, available at http://www.naicscode.com/ 

search/MoreNAICSDetail.asp?N=561440. 

consumer debt collection as a market for 

consumer financial products or services. 

The Bureau received comments from 

consumer groups recommending that 

the Bureau define each of the various 

debt collection activities described 

above as separate markets. Although the 

collection of consumer debt 

encompasses these different business 

models and it may be reasonable to 

define them as separate markets, it is 

difficult based on current market 

practices to draw a bright line 

separating them. Some third partycollectors also buy debt, and debt 

buyers may utilize in-house or thirdparty collectors. Similarly, collection 

attorneys and law firms may, in 

addition to representing debt owners, 

buy debt and collect on their own 

behalf.31 The Bureau is also not aware 

of any currently available data that 

would be useable to devise separate 

tests for these nonbank covered persons. 

Thus, the Proposed Rule provides for a 

single-market approach to consumer 

debt collection. 

Test to define larger participants in 

the debt collection market. 

Criteria. The Bureau has broad 

discretion in choosing criteria for 

determining whether a nonbank covered 

person is a larger participant of a 

covered market. For any specific market 

there could be several criteria, used 

alone or in combination, that could be 

viewed as reasonable alternatives. For 

the consumer debt collection market, 

the Bureau considered a variety of 

criteria, including criteria used by other 

agencies in different contexts. Among 

other possible criteria, the Bureau 

considered annual receipts; annual 

recoveries; number of employees; and 

new business (debt purchased by or 

placed with a collector). 

The Bureau proposes in § 1090.102(a) 

to use annual receipts as the criterion 

for defining larger participants in the 

market for consumer debt collection. As 

noted above, the Proposed Rule is 

guided by and adapts the SBA’s 

definition of ‘‘annual receipts.’’ The 

Bureau believes that annual receipts are 

a reasonable criterion because, among 

other things, they are a meaningful 

measure of the level of participation of 

an entity in a market and the entity’s 

impact on consumers. For example, 

third-party collectors, debt buyers, and 

collection law firms earn income from 

recovering delinquent consumer debt. 

Those recoveries are the result of market 

participation, either through traditional 

collection means or litigation. Thus, the 

level of a person’s market participation 

is reflected by the amount of that 

person’s annual receipts. Moreover, by 

adapting the SBA’s definition of 

‘‘annual receipts,’’ which has been used 

by the SBA for purposes of measuring 

small business concerns since soon after 

the inception of its program,32 the 

Proposed Rule uses a criterion that 

should be familiar to nonbank covered 

persons, thereby reducing regulatory 

burden. Further, the calculation for 

annual receipts is based on IRS tax 

forms and, as a result, generally can be 

determined by using business records 

created in the ordinary course of 

business. 

In addition, the U.S. Census Bureau’s 

2007 Economic Census (Economic 

Census) 33 provides an available data 

source for determining the general 

contours of the market for consumer 

debt collection based on the criterion of 

annual receipts and thereby for defining 

the larger participants of that market. 

The Economic Census undertakes a 

direct survey of domestic business 

establishments and releases 

comprehensive statistics about key 

features and activity levels of these 

businesses, including total annual 

receipts.34 To conduct an Economic 

Census, the Census Bureau mails out 

data collection forms for all 

establishments of multi-unit companies, 

large single-unit employers, and a 

sample of small employers (generally 

defined as three or fewer employees).35

There are limitations to the use of the 

Economic Census data on annual 

receipts in the debt collection market for 

purposes of the Proposed Rule. Most 

importantly, the Economic Census data 

are not limited to the collection of 

consumer financial debt, but rather 

include both business and non-financial 

consumer debt, such as medical debt.36

They may also be under-inclusive 

because entities that fall within the 

NAICS code may not correctly identify 

themselves or may otherwise fail to 

respond to the Census; moreover, the 

NAICS code may not include all persons 

engaged in activities that meet the 

definition of consumer debt collection 

under this proposal. However, although 

over-inclusive and possibly underinclusive, the Economic Census data are 

nevertheless useful in showing the 

general contours of the consumer debt 

collection market, the relative size of 

participants within it on an aggregated 

basis, and how the participants are 

clustered by size. This information is 

thus helpful for purposes of developing 

a test to determine which participants in 

the market for consumer debt collection 

are larger participants based on the 

criterion of annual receipts. 

By contrast, neither annual recoveries 

nor new business were considered by 

the Bureau as viable criteria at this time, 

in large part, because there are not 

sufficient data to allow the Bureau to 

ascertain the general contours of the 

market based on these criteria. Further, 

the Bureau believes that the number of 

employees is not a suitable alternative 

criterion for this market because it may 

be difficult for a multi-line company to 

apportion employee time between 

relevant market-related and other 

activities. In addition, the number of 

employees may be an inaccurate 

measure if a company with wide market 

reach performs much of its work 

through contractors. 

The Bureau anticipates considering 

alternative or additional criteria for 

measuring larger participants of the 

market for consumer debt collection in 

the future if additional data for the debt 

collection market become available to 

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37The Bureau is contemplating a future 

rulemaking to establish a nonbank registration 

program, which could be used to gather data to 

support subsequent larger participant rulemakings 

and their implementation. The Bureau has authority 

to issue such a registration rule under sections 

1022(c)(7) and 1024(b)(7) of the Act. 

38The Bureau believes that a lower threshold 

might bring under the Proposed Rule entities that 

could reasonably be described as larger 

participants. The Bureau therefore seeks comment 

on whether in this proposal or in a future 

rulemaking the Bureau should set a lower 

threshold. For example, a threshold of $5 million 

in annual receipts would cover approximately 361 

firms out of 4,500, and would comprise 

approximately 73% of the industry’s annual 

receipts. 

39Because firms collecting commercial and other 

debt that would not fall under the definition of 

consumer debt collection would not qualify as 

larger participants, the number of nonbank covered 

persons that would be larger participants under the 

Proposed Rule may be less than 175. 

40Estimated from 2007 U.S. Economic Census— 

available at http://factfinder2.census.gov/faces/ 

tableservices/jsf/pages/productview.xhtml?pid=

ECN_2007_US_56SSSZ4&prodType=table, scroll to 

NAICS code 56144. 

41Estimated from 2007 U.S. Economic Census— 

available at http://factfinder2.census.gov/faces/ 

tableservices/jsf/pages/productview.xhtml

?pid=ECN_2007_US_56SSSZ4&prodType=table, 

scroll to NAICS code 56144. 

42Estimated from 2007 U.S. Economic Census— 

available athttp://factfinder2.census.gov/faces/ 

tableservices/jsf/pages/productview.

xhtml?pid=ECN_2007_US_56SSSZ4&prod

Type=table, scroll to NAICS code 56144. 

43Estimated from 2007 U.S. Economic Census— 

available athttp://factfinder2.census.gov/faces/

tableservices/jsf/pages/productview.xhtml

?pid=ECN_2007_US_56SSSZ6&prodType=table, 

scroll to NAICS code 56144. 

44Act section 1024(a)(1)(B). 

45U.S. Small Business Administration Table of 

Small Business Size Standards Matched to NAICS 

Codes, http://www.sba.gov/sites/default/files/Size

_Standards_Table.pdf at 32. 

the Bureau, whether through 

registration of nonbank covered persons 

by the Bureau or otherwise.37 In that 

event, the Bureau may also consider 

potential amendments to the annual 

receipts criterion used in the Proposed 

Rule. The Bureau seeks comment on the 

proposed criterion and any additional or 

alternative criteria that might be used 

for measuring larger participants in the 

consumer debt collection market, as 

well as on any data sources available for 

such criteria. 

Threshold. Under the Proposed Rule, 

a nonbank covered person is a larger 

participant in the market for consumer 

debt collection if its annual receipts 

meet a specified threshold. As with 

regard to the selection of the criterion 

itself, the Bureau has broad discretion in 

setting the threshold above which an 

entity would qualify as a larger 

participant. The Bureau proposes more 

than $10 million in annual receipts as 

the threshold to define larger 

participants in the consumer debt 

collection market. Using this threshold, 

proposed § 1090.102(a) states that if a 

nonbank covered person offers or 

provides consumer debt collection, and 

has annual receipts of more than $10 

million resulting from that activity, it 

will be a larger participant of the 

consumer debt collection market. 

The Bureau believes that this 

threshold is a reasonable means of 

defining larger participants in this 

market.38 Based on the Economic 

Census, the proposed threshold would 

likely bring within the Bureau’s scope of 

supervision approximately 175 

entities 39 out of approximately 4,500 

firms engaged in debt collection under 

NAICS code 56144. Thus, 

approximately 4 percent of all collection 

firms would be covered by the proposed 

threshold.40 For comparison, based on 

the Economic Census data, the median 

for annual receipts among collection 

firms is roughly $500,000, significantly 

below the proposed threshold.41

The Bureau believes that the proposed 

definition would result in sufficient 

coverage of the debt collection market to 

enable the Bureau effectively to identify 

and assess risks to consumers in that 

market and assess nonbank covered 

persons’ compliance with Federal 

consumer financial laws. The firms that 

would be covered by the proposed 

threshold generate approximately 63 

percent of collections receipts.42 Thus, 

although covering only a small 

percentage of firms in the market, under 

the proposed threshold, the Bureau’s 

supervision program would cover 

nonbank entities interacting with a 

significant portion of consumers with 

debt under collection. 

Two trade associations for the debt 

collection industry each suggested that 

the Bureau set a threshold that would 

cover third-party collection firms and 

debt buyers with annual revenues of 

more than $250 million. Based on 

available data, however, the Bureau 

estimates that $250 million in annual 

receipts would cover, at most, 

approximately seven or fewer firms 

comprising only approximately 20 

percent of overall collection industry 

receipts.43 The Bureau does not believe 

that this recommended threshold would 

result in sufficient market coverage to 

allow it effectively to assess compliance 

with Federal consumer financial laws 

and detect and assess risks to 

consumers. Further, by covering only a 

handful of actors in a market of 

approximately 4,500 firms, the 

recommended threshold would omit 

many firms that would fairly be 

described as larger market participants. 

Indeed, the Act provides that the 

Bureau’s supervision authority extends 

to the ‘‘larger,’’ not merely the ‘‘largest,’’ 

participants in a market.44 The 

threshold set forth in the Proposed Rule 

would provide the Bureau with the 

ability to supervise a broader range of 

market participants than only the very 

largest and identify and evaluate risks to 

consumers in different segments of the 

market. 

The Bureau notes that one of the 

largest debt buyers commented that the 

Bureau should not limit its supervisory 

authority to the very largest market 

participants. This commenter indicated 

that some of the most significant risks 

to consumers come from smaller debt 

collection companies that do not file 

disclosures and financial statements 

with the Securities and Exchange 

Commission and may not be properly 

licensed. Another industry commenter 

noted that smaller debt collection firms 

own or service tens of millions of 

consumer collection accounts, but often 

lack the sophisticated quality control 

mechanisms, training programs, and 

technological safeguards of the largest 

debt collectors. 

Finally, the threshold set forth in the 

Proposed Rule is substantially above the 

SBA’s size standard for defining small 

business concerns. Under the SBA’s 

rules, a debt collection firm with annual 

receipts of $7 million or less is a small 

business concern.45 Consequently, the 

Bureau believes that small business 

concerns under the SBA’s rules 

generally should not meet the Proposed 

Rule’s threshold for the consumer debt 

collection market. 

The proposed threshold is tailored for 

consumer debt collection, and the 

Bureau recognizes that it may not be 

suitable for other markets. The Bureau 

anticipates that other thresholds may be 

appropriate for purposes of defining 

larger participants in other markets. 

Moreover, just as with its choice of 

criteria, the Bureau anticipates 

considering alternative thresholds to 

define larger participants of the market 

for consumer debt collection in the 

future if additional data for the 

consumer debt collection market 

become available to the Bureau. 

The Bureau seeks comment, including 

any possible alternatives on the 

threshold it proposes for defining larger 

participants in the consumer debt 

collection market. 

Apportionment. The Bureau 

recognizes that there are multi-line 

companies that derive only a portion of 

their annual receipts from activities 

related to the consumer debt collection 

market. The Bureau further recognizes 

that in determining whether a person 

qualifies as a larger participant, the 

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9600 Federal Register / Vol. 77, No. 33 / Friday, February 17, 2012 / Proposed Rules 

46Such an agency does not provide a ‘‘consumer 

financial product or service’’ if it provides only 

information ‘‘that is used or expected to be used 

solely in any decision regarding the offering or 

provision of a product or service that is not a 

consumer financial product or service, including a 

decision for employment, government licensing, or 

a residential lease or tenancy involving a 

consumer.’’ Act section 1002(15)(A)(ix)(I)(cc). The 

Bureau received a number of comments from 

consumer groups suggesting that the larger 

participant rule include within its scope of coverage 

firms that engage in providing background 

screening for employment purposes. However, as 

noted above, such activities do not constitute a 

‘‘consumer financial product or service’’ within the 

meaning of the Act. 

47Stuart Pratt, President, Consumer Data Industry 

Association (CDIA), Statement before House 

Committee on Financial Institutions and Consumer 

Credit, ‘‘Keeping Score on Credit Scores: An 

Overview of Credit Scores, Credit Reports, and 

Their Impact on Consumers,’’ at 7 (March 24, 2010), 

available athttp://www.house.gov/apps/list/ 

hearing/financialsvcs_dem/pratt_testimony.pdf). 

See also Federal Trade Commission, Report to 

Congress Under Sections 318 and 319 of the Fair 

and Accurate Credit Transactions Act of 2003 at 

8–9 (2004). 48See Stuart Pratt, President, Consumer Data 

Industry Association (CDIA), Statement before 

House Committee on Financial Services, ‘‘Credit 

Reports: Consumers’ Ability to Dispute and Change 

Inaccurate Information,’’ at 23 (June 19, 2007), 

available athttp://archives.financialservices.

house.gov/hearing110/ospratt061907.pdf. 

49Stuart Pratt, Comments of CDIA to National 

Telecommunications and Information 

Administration, ‘‘Information Privacy and 

Innovation in the Internet Economy,’’ at 2 (June 13, 

2010), available athttp://ntia.doc.gov/files/ntia/

comments/100402174-0175-01/attachments/

Consumer%20Data%20Industry%20

Association%20Comments.pdf. 

annual receipts that are relevant are 

those that derive from a market covered 

by the Proposed Rule. Thus, the 

proposal provides that the only annual 

receipts to be considered are those 

‘‘resulting from’’ activities related to the 

covered market. For example, a single 

entity might engage in both consumer 

debt collection and the collection of 

commercial debt. Similarly, in certain 

cases, the consumer debt it collects may 

be debt unrelated to consumer financial 

products or services, such as medical 

debt. In these circumstances, only the 

annual receipts resulting from the 

entity’s collection of debt related to 

consumer financial products or services 

would be considered for purposes of 

determining whether the person is a 

larger participant of the consumer debt 

collection market. 

The Bureau recognizes that this 

apportionment adds an additional step 

in determining whether an entity is a 

larger participant for multi-line nonbank 

covered persons, and of nonbank 

covered persons that are part of a 

corporate family that files its tax returns 

on a consolidated basis. The Bureau also 

understands that the burden of 

determining annual receipts, and 

performing this additional calculation 

where necessary, will vary among 

businesses. The Bureau seeks comment 

on the way apportionment is treated in 

the Proposed Rule and any suggested 

alternative method for determining 

whether multi-line entities qualify as 

larger participants in a given market. 

Section 1090.102(b)—Consumer 

Reporting 

Market Overview 

Proposed § 1090.102(b) relates to the 

market for consumer reporting. As 

explained in the section-by-section 

description of proposed § 1090.101(i) 

above, the consumer reporting market 

includes the largest consumer reporting 

agencies selling comprehensive 

consumer reports, consumer report 

resellers, and specialty consumer 

reporting agencies. The largest 

consumer reporting agencies collect, 

among other information, credit account 

information, items sent for collection, 

and public records such as judgments 

and bankruptcies. Resellers purchase 

consumer information from one or more 

of the largest agencies, typically provide 

further input to the consumer report 

(including by merging files from 

multiple agencies or adding information 

from other data sources), and then resell 

the report to lenders and other users. 

Specialty consumer reporting agencies 

primarily collect and provide specific 

types of information that may be used 

to make eligibility decisions for 

particular consumer financial products 

or services, such as payday loans or 

checking accounts, or for other 

determinations, such as eligibility for 

employment or rental housing. 

However, certain types of specialty 

consumer reporting agencies, depending 

on their activities, may not be engaged 

in offering consumer financial products 

or services within the meaning of the 

Act, and for that reason would not be 

‘‘covered persons’’ subject to the 

Bureau’s supervisory authority.46 These 

effective exclusions are implemented in 

the definition of consumer reporting in 

proposed § 1090.101(i). 

The consumer reporting market is 

appropriate for inclusion in the 

Proposed Rule because it is a market for 

a consumer financial product or service 

under section 1024(a)(1)(B) of the Act. 

Additionally, consumer reporting is of 

fundamental importance to the broader 

market for consumer financial products 

and services. Consumer reports 

(commonly referred to as ‘‘credit 

reports’’), which contain information 

about consumers’ credit histories and 

other transactions, and the credit scores 

derived from these reports, affect many 

aspects of consumers’ lives. Consumer 

reports are important tools that lenders 

use to assess borrower risk when 

evaluating applications for credit cards, 

home mortgage loans, automobile loans, 

and other types of credit. Consumer 

reports may also be used to determine 

eligibility and pricing for other types of 

products and services and other 

relationships, such as checking 

accounts. The consumer reporting 

market affects hundreds of millions of 

consumers. The Consumer Data 

Industry Association estimates that each 

year there are more than 36 billion 

updates made to consumer files at 

consumer reporting agencies,47 and 

three billion reports issued.48 It also 

estimates that each of the three largest 

consumer reporting agencies maintains 

credit files on more than 200 million 

consumers.49

In response to the Notice, the Bureau 

received more than 10,400 comments, 

approximately 10,300 of which were 

nearly identical letters sent from 

individuals asking the Bureau to 

exercise supervisory authority over 

different types of consumer reporting 

agencies and over credit scoring 

companies. On the other hand, one 

industry trade association commented 

that the Bureau should give careful 

consideration to the costs and burdens 

of including the consumer reporting 

market within the larger participant 

rule. 

In addition, a number of commenters 

recommended that the Bureau divide 

the consumer reporting market into 

separate markets for the largest 

consumer reporting agencies, 

specialized consumer reporting 

agencies, and credit scoring companies 

to ensure that consumer reporting 

agencies other than the three largest are 

deemed larger participants. The Bureau 

recognizes the importance of covering 

different types of consumer reporting 

agencies in its supervision program and 

believes that it may be reasonable to 

identify separate markets. At this time, 

however, despite its request for public 

comment on the best data sources, the 

Bureau is not currently aware of 

adequate data to devise separate tests for 

distinct markets in the consumer 

reporting industry. Although the Bureau 

is treating the consumer reporting 

market as a single market, as discussed 

in further detail below, it has chosen a 

test that would bring within the scope 

of the Bureau’s supervision program 

certain consumer reporting agencies 

other than the very largest, including 

some larger specialty consumer 

reporting agencies. 

Test to define larger participant in the 

consumer reporting market. 

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50A description of the Economic Census and its 

methodologies may be found in the debt collection 

market section (proposed § 1090.102(a)) above. 

51http://factfinder2.census.gov/faces/help/jsf/ 

pages/metadata.xhtml?lang=en&

type=category&id=category.en./ECN/ECN/2007_US/

56SSSZ4.MEASURE.RCPTOT#main_content. 

52Available at http://factfinder2.census.gov/

faces/tableservices/jsf/pages/

productview.xhtml?pid=ECN_2007_US

_56SSSZ4&prodType=table, scroll to NAICS code 

56145. Many Census tiers have flags in the receipts 

category, which read ‘‘withheld’’ to avoid 

disclosing data for individual companies; data are 

included in higher level totals. Other aggregated 

revenue data are available in a table showing the 

concentration of revenues among the largest firms, 

which extend through the top 50. See also http:// 

factfinder2.census.gov/faces/tableservices/jsf/ 

pages/productview.xhtml?pid=ECN_2007_

US_56SSSZ6&prodType=table, scroll to NAICS 

code 56145. 

53The Bureau believes that a lower threshold 

might bring under the Proposed Rule entities that 

could reasonably be described as larger 

participants. The Bureau therefore seeks comment 

on whether in this proposal or in a future 

rulemaking the Bureau should set a lower 

threshold. For example, a threshold of $5 million 

in annual receipts would cover approximately 36 

firms out of 401, and would comprise 

approximately 95% of the industry’s annual 

receipts. 

54This calculation assumes that firms in the 

Census-defined tier between $5 million and $10 

million are evenly distributed throughout the tier. 

55The Bureau extrapolated the number of entities 

from the proportion of establishments that are part 

of consumer reporting agencies rather than part of 

mercantile reporting agencies. According to the 

Continued 

Criteria. As noted in the section-bysection description of the consumer 

debt collection market above (proposed 

§ 1090.102(a)), the Bureau has broad 

discretion in choosing criteria for 

measuring whether a nonbank entity is 

a larger participant of a covered market. 

The Bureau considered several criteria 

to measure participants in the consumer 

reporting market. These include, among 

others, annual receipts; number of 

unique consumer reports sold or 

otherwise provided to a third party 

annually; number of individual 

consumers a nonbank covered person 

collects, analyzes, and maintains data 

about, or provides consumer reports on, 

annually; and number of employees. 

The Bureau proposes in § 1090.102(b) 

to use annual receipts as the criterion 

for defining larger participants in the 

consumer reporting market. As in the 

consumer debt collection market, the 

Bureau proposes to use as a guide the 

SBA’s definition of ‘‘annual receipts.’’ 

The Bureau believes that annual 

receipts resulting from consumer 

reporting activities provide a reasonable 

indication of the level of market 

participation by a person and its impact 

on consumers. Consumer reporting 

agencies earn income from selling 

consumer reports and other marketrelated activities that directly affect 

consumers. As a result, the greater the 

annual receipts of a consumer reporting 

agency, the greater its market 

participation and the greater its impact 

on consumers. In addition, as with the 

consumer debt collection market, by 

adapting the SBA’s definition of 

‘‘annual receipts,’’ which has been used 

by the SBA since soon after the 

inception of its program, the proposed 

test is intended to be sufficiently 

straightforward so as not to put undue 

burden on nonbank covered persons in 

determining or disputing whether they 

are subject to the Bureau’s nonbank 

supervision program. 

There are limited data available to 

develop a test for defining larger 

participants in the consumer reporting 

market. Although several of the largest 

participants in this market are public 

companies, the majority of firms are 

private and do not publicly disclose 

data. However, as with the consumer 

debt collection market, for the criterion 

of annual receipts, the 2007 Economic 

Census data provides an available data 

source.50

The Bureau analyzed the Economic 

Census data for annual receipts for 

NAICS code 561450 (credit bureaus). 

Encompassed within this code are both 

‘‘consumer reporting agencies’’ and 

‘‘mercantile (business-to-business) 

reporting agencies.’’ Consequently, as 

with the consumer debt collection 

market, a limitation of the Economic 

Census data is that they are overinclusive.51 They are also underinclusive because entities that fall 

within the NAICS code may not 

correctly identify themselves or may 

otherwise fail to respond to the Census; 

moreover, the NAICS code may not 

include all persons engaged in activities 

that meet the definition of consumer 

reporting under this proposal. An 

additional limitation of the Economic 

Census data for this particular NAICS 

code is that for certain census tiers, the 

aggregated annual receipts data are kept 

confidential.52 The data are nonetheless 

useful in showing the general 

distribution of the size of participants in 

the consumer reporting market. 

By contrast, the Bureau does not 

believe that other potential criteria, such 

as the total number of unique consumer 

reports sold or the number of individual 

consumers an entity provides consumer 

reports on, are appropriate alternatives 

because the available data do not permit 

the Bureau meaningfully to measure the 

general contours of the market based on 

these criteria and thus to devise a test 

for defining larger participants in the 

market on the basis of them. Further, the 

Bureau believes that the number of 

employees is not a suitable alternative 

criterion because it could be very 

difficult for a multi-line company to 

apportion employee time between 

market-related and other activities, and 

many positions could be filled by 

contractors rather than employees. 

As additional data for the consumer 

reporting market become available to 

the Bureau, through future registration 

of nonbank covered persons or by other 

means, the Bureau may consider other 

criteria and potential revisions to the 

annual receipts criterion used in the 

Proposed Rule. The Bureau seeks 

comment on the proposed criterion and 

any additional or alternative criteria that 

might be used for measuring larger 

participants in the consumer reporting 

market, as well as on any data sources 

available for such criteria. 

Threshold. As noted above with 

regard to the consumer debt collection 

market, the Bureau has broad discretion 

in setting the threshold above which a 

nonbank covered person will qualify as 

a larger participant in the consumer 

reporting market. 

The Bureau proposes adopting more 

than $7 million in annual receipts as the 

threshold to define larger participants in 

the consumer reporting market. 

Applying this threshold, proposed 

§ 1090.102(b) states that if a nonbank 

covered person offers or provides 

consumer reporting and has annual 

receipts of more than $7 million 

resulting from this activity, it will be a 

larger participant of the consumer 

reporting market. 

The Bureau believes that this 

threshold is reasonable, in part, because 

available data indicate that it would 

enable the Bureau to cover in its 

nonbank supervision program the 

largest consumer reporting agencies as 

well as a number of larger specialty 

consumer reporting agencies.53 The 

Bureau believes that this threshold 

would cover a sufficient number of 

market participants to enable the Bureau 

effectively to assess compliance and 

identify and assess risks to consumers, 

but at the same time cover only the 

‘‘larger’’ participants of the market. 

While there are hundreds of consumer 

reporting agencies, according to the 

2007 Economic Census, a threshold of 

more than $7 million in annual receipts 

would cover no more than 39 credit 

bureaus, or 7 percent of credit reporting 

agencies (including both mercantile 

credit reporting agencies and consumer 

reporting agencies).54 Because the 

Economic Census indicates that 75 

percent of these credit bureaus are 

consumer reporting agencies,55 this 

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9602 Federal Register / Vol. 77, No. 33 / Friday, February 17, 2012 / Proposed Rules 

Economic Census, consumer reporting agencies 

account for almost 75 percent of all credit bureau 

entities (401 out of 535 in total). The Economic 

Census also indicates that the consumer reporting 

industry is highly concentrated. The 50 largest 

firms generate 96 percent of industry revenues. 

Conversely, the smallest 50 percent of firms 

generate approximately 1 percent of revenues. 

56See Act section 1002(15)(A)(ix)(I)(cc). This 

provision defines the term ‘‘financial product or 

service’’ to exclude the provision of information 

‘‘that is used or expected to be used solely in any 

decision regarding the offering or provision of a 

product or service that is not a consumer financial 

product or service, including a decision for 

employment, government licensing, or a residential 

lease or tenancy involving a consumer.’’ 

57The median is estimated from data available at 

http://factfinder2.census.gov/faces/tableservices/

jsf/pages/productview.xhtml?pid=ECN_2007_

US_56SSSZ4&prodType=table, scroll to NAICS 

code 56145. 

58Based on an analysis of General Services 

Administration schedules and other publicly 

available price quotes for several consumer 

reporting firms. 

59Estimated from 2007 Economic Census— 

available at http://factfinder2.census.gov/faces/ 

tableservices/jsf/pages/productview.xhtml

?pid=ECN_2007_US_56SSSZ4&prodType=table, 

scroll to NAICS code 56145. See also http:// 

factfinder2.census.gov/faces/tableservices/jsf/ 

pages/productview.xhtml?pid=ECN_2007_US_

56SSSZ6&prodType=table, scroll to NAICS code 

56145. 

60U.S. Small Business Administration Table of 

Small Business Size Standards Matched to NAICS 

Codes, http://www.sba.gov/sites/default/files/ 

Size_Standards_Table.pdf at 32. 

61For example, assume a nonbank consumer 

reporting agency’s tax year were to run from July 

1 to June 30. Assume the entity had $8 million in 

receipts in each of the tax years of 2010, 2011, and 

2012 (July 1, 2010 to June 30, 2011; July 1, 2011 

to June 30, 2012; and July 1, 2012 to June 30, 2013, 

respectively). That entity would have $8 million in 

annual receipts for the 2012 tax year (July 1, 2012 

to June 30, 2013), as annual receipts are generally 

calculated as a three-year average. If the entity then 

had only $2 million in receipts for the 2013 tax year 

(July 1, 2013 to June 30, 2014), its annual receipts 

for the 2013 tax year would be $6 million. With the 

two-year supervision period, it would nevertheless 

remain a larger participant through June 30, 2014 

because of its annual receipts in the 2012 tax year. 

On the other hand, assume the same facts but that 

the entity’s tax year were to run from April 1 to 

March 31. In that case, the entity would remain a 

threshold would likely cover 

approximately 30 out of approximately 

401 consumer reporting agencies. 

However, some of those consumer 

reporting agencies may be specialty 

consumer reporting agencies providing, 

for example, consumer reports only for 

employment background screening or 

rental decisions. As noted above, such 

agencies do not offer consumer financial 

products or services within the meaning 

of the Act, and are effectively excluded 

from the Bureau’s supervisory 

jurisdiction.56 As a result, the Bureau 

believes that this threshold will cover 

fewer than 30 consumer reporting 

agencies. Again for comparison, the 

Bureau estimates that the median for 

annual receipts in this industry is less 

than $500,000, significantly below the 

proposed threshold.57

The threshold of more than $7 million 

in annual receipts is consistent with the 

objective of supervising market 

participants that have a significant 

impact on consumers, in terms of the 

number of consumers affected by their 

operations. In the consumer reporting 

industry, prices range from two to three 

cents for prescreening products, from 

seven cents to sixty two cents for credit 

scores, and from one to two dollars for 

consumer reports, while some specialty 

reports may cost several dollars.58 Thus, 

a company with more than $7 million 

in annual receipts would likely impact 

several million consumers. Further, the 

entities meeting the proposed threshold 

generate approximately 94 percent of 

industry receipts.59 Although this 

market share coverage is higher than 

that resulting from the threshold 

proposed for the consumer debt 

collection market, the Bureau believes 

that this difference is appropriate in 

light of the different structures of the 

two markets, particularly the highly 

concentrated nature of the consumer 

reporting market and the different types 

of firms encompassed in the market. 

Pending better and more complete 

data sources, the Bureau tentatively 

concludes that setting the threshold 

higher than that proposed amount likely 

would not result in sufficient coverage 

of consumer reporting agencies 

effectively to identify and assess risks to 

consumers in the consumer reporting 

market and to assess compliance with 

the Federal consumer financial laws. It 

is particularly important to reach larger 

participants of the consumer reporting 

market that may not be the largest firms, 

as some consumers may not have files 

at the largest consumer reporting 

agencies. Many consumers may not 

utilize a credit card or checking 

account, or otherwise participate in 

mainstream financial activities. As a 

result, the largest consumer reporting 

agencies may receive little, if any, data 

with which to maintain files on these 

consumers. However, these consumers 

may utilize alternative financial 

products such as payday loans or check 

cashing services, which in some 

instances may be reported to specialty 

consumer reporting agencies. Setting the 

threshold too high would fail to capture 

the larger specialty consumer reporting 

agencies that compile information about 

consumers in alternative financial 

markets. 

Finally, the proposed threshold is 

consistent with the SBA’s size standard 

for defining small business concerns. 

Under the SBA’s rules, a consumer 

reporting firm with annual receipts of 

$7 million or less is a small business 

concern.60 Thus, the Bureau believes 

that small business concerns under the 

SBA’s rules generally should not meet 

the Proposed Rule’s threshold for the 

consumer reporting market. 

In tailoring the thresholds for this 

market, the Bureau considered several 

comments from both industry and 

consumer groups that suggested the 

Bureau use tests involving multiple 

criteria and thresholds for each market 

segment. Although the Bureau 

recognizes the advantages of this 

approach, in light of the limited data for 

the consumer reporting market, the 

Bureau tentatively concludes that in the 

case of consumer reporting a test using 

a single criterion and threshold would 

be most effective for the nonbank 

supervision program at this time. 

The Bureau seeks comment, including 

any possible alternatives, on the 

proposed threshold for defining larger 

participants in the consumer reporting 

market. 

Apportionment. As with the 

consumer debt collection market, the 

Bureau recognizes that in developing a 

test for determining whether a person 

qualifies as a larger participant, the 

annual receipts that are relevant are 

those that derive from a market covered 

by the Proposed Rule. Thus, the 

proposal provides that the only annual 

receipts to be considered are those 

‘‘resulting from’’ activities related to the 

covered market. As with the consumer 

debt collection market, the need to 

apportion revenues would add an 

additional step in determining whether 

an entity is a larger participant both for 

multi-line nonbank covered persons and 

for nonbank covered persons that are 

part of a corporate family that files its 

tax returns on a consolidated basis. The 

Bureau seeks comment on the way 

apportionment is treated in the 

Proposed Rule and any suggested 

alternative method for determining 

whether multi-line entities qualify as 

larger participants in a given market. 

Section 1090.103—Status as Larger 

Participant Subject to Supervision 

The Bureau believes that it is 

important that the Bureau have 

sufficient time to undertake and 

complete supervisory activities relating 

to a larger participant. Thus, proposed 

§ 1090.103 states that a person 

qualifying as a larger participant under 

§ 1090.102 shall not cease to be a larger 

participant under this part until two 

years from the first day of the tax year 

in which the person last met the 

applicable test under § 1090.102.61

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Federal Register / Vol. 77, No. 33 / Friday, February 17, 2012 / Proposed Rules 9603 

larger participant through March 31, 2014. If the 

entity were to continue to have $7 million or less 

in annual receipts for the 2014 tax year (April 1, 

2014 to March 31, 2015), it would not be a larger 

participant for that year. However, if it were to have 

more than $7 million in annual receipts for the 

2014 tax year, it would again qualify as a larger 

participant for that year and would remain a larger 

participant through March 31, 2016, even if its 

annual receipts again fell below $7 million for the 

2015 tax year (April 1, 2015 to March 31, 2016). 

62Act section 1024(b)(2). The factors to be 

considered in making this assessment include asset 

size, volume of transactions involving consumer 

financial products or services, risks to consumers, 

the extent to which institutions are subject to state 

oversight, and any other factor that the Bureau 

determines to be relevant. 

63The Bureau believes that while it would have 

this authority under section 1024 of the Act even 

absent a regulation, a regulation is useful to provide 

clarity on the issue. 

64Section 1024(b)(7) of the Act provides that in 

developing requirements or systems under that 

provision, where appropriate the Bureau shall 

consult with State agencies regarding requirements 

or systems (including coordinated or combined 

systems for registration). Given the focus of these 

provisions of the Proposed Rule on obtaining 

information to determine larger participant status, 

the Bureau does not believe that such consultation 

is appropriate in connection with this proposal. The 

Bureau, however, requests comments from relevant 

State agencies on this proposal. 

65The Bureau also proposes § 1090.104 in part 

pursuant to section 1022(c)(5) of the Act, which 

permits the Bureau to require that a nonbank person 

file with the Bureau, under oath or otherwise, 

annual or special reports or written answers to 

specific questions, to determine whether such 

person is a covered person. 

66Specifically, the Bureau is to consider the 

potential benefits and costs of a regulation to 

consumers and covered persons, including the 

potential reduction of access by consumers to 

consumer financial products or services; the impact 

on depository institutions and credit unions with 

$10 billion or less in total assets as described in 

section 1026 of the Act; and the impact on 

consumers in rural areas. The manner and extent 

to which the provisions of section 1022(b)(2) apply 

to a rulemaking of this kind that does not establish 

standards of conduct is unclear. Nevertheless, to 

inform this rulemaking more fully, the Bureau 

performed the described analyses. 

For the above reasons, the Bureau 

believes that establishing this minimum 

two-year supervision period is 

appropriate for the administration of the 

Bureau’s supervisory authority and will 

avoid the inefficiency of more frequent 

determinations of an entity’s status. The 

Bureau seeks comment on all aspects of 

proposed § 1090.103, and in particular 

on whether a longer or shorter 

supervision period might be 

appropriate. 

Section 1090.104—Determination of 

Status as a Larger Participant 

Prior to its implementation of a 

registration program, the Bureau expects 

to use various data sources, including 

publicly available data, to identify 

which nonbank covered persons appear 

to qualify as larger participants. If the 

Bureau determines that an entity 

qualifies as a larger participant and, 

after assessing applicable criteria as set 

forth in the Act, including risk to 

consumers,62 decides to undertake 

supervisory action in connection with 

that entity, the Bureau will send the 

entity a letter apprising it that it plans 

to undertake supervisory action on the 

basis of the entity’s status as a larger 

participant. The Bureau recognizes that 

there may be instances when a person 

will dispute that it is a larger participant 

after receiving such a letter. Proposed 

§ 1090.104 sets forth a procedure for 

such a person to dispute its 

classification as a larger participant by 

providing to the Assistant Director for 

Nonbank Supervision of the Bureau an 

affidavit setting forth an explanation of 

the basis for the person’s assertion that 

it does not meet the definition of larger 

participant. Proposed § 1090.104 further 

permits a person to include with the 

response copies of any records, 

documents, or other information on 

which the person relied to make the 

assertion. Proposed § 1090.104 further 

provides that a person waives the right, 

at any time that it may dispute that it 

qualifies as a larger participant, to rely 

on any argument, records, documents, 

or other information that it fails to 

submit to the Assistant Director under 

this section. Moreover, proposed 

§ 1090.104 states that a person who fails 

to respond to the Bureau’s written 

communication within 30 days will be 

deemed to have acknowledged that it is 

a larger participant. Under proposed 

§ 1090.104, after reviewing the affidavit 

and any other information submitted by 

the person disputing its status as a 

larger participant or deemed relevant by 

the Assistant Director, the Assistant 

Director must send the person a 

statement setting forth the Bureau’s 

conclusion as to whether the person 

meets the definition of a larger 

participant. Additionally, the Proposed 

Rule provides that the Assistant Director 

may require that a person provide to the 

Bureau such records, documents, and 

information as the Assistant Director 

may deem appropriate to determine 

whether a person is a larger 

participant.63

These provisions are proposed 

pursuant to the Bureau’s authority 

under section 1024(b)(7) of the Act to 

facilitate the Bureau’s supervision of 

larger participants of the markets 

covered by this Proposed Rule by 

permitting the Bureau to determine 

whether a person meets the test for 

being a larger participant.64 The Bureau 

also proposes § 1090.104 pursuant to 

section 1022(b)(1) of the Act, which 

grants the Director the authority to 

prescribe such rules as may be 

necessary and appropriate to enable the 

Bureau to administer and carry out the 

purposes and objectives of the Federal 

consumer financial laws, such as its 

supervision of larger participants, and to 

prevent evasions of these laws. 

Providing a process whereby entities 

must come forward with information if 

they wish to dispute their status as 

larger participants, and providing the 

Bureau the ability to require such 

information, is necessary and 

appropriate for the Bureau to implement 

and efficiently exercise its supervision 

authority and to prevent evasion of 

section 1024 of the Act.65

The Bureau seeks comment on this 

proposed process for allowing a person 

to submit to the Bureau documents and 

information supporting its assertion that 

it is not a larger participant. The Bureau 

also seeks comment on all other aspects 

of these proposed provisions. 

VI. Request for Comments 

The Bureau invites comment on all 

aspects of this notice of proposed 

rulemaking and on the specific issues 

on which comment is solicited 

elsewhere herein, including on any 

appropriate modifications or exceptions 

to the Proposed Rule. The Bureau also 

seeks comment on which other markets 

for consumer financial products or 

services should be covered by future 

proposed rules to define larger 

participants. 

VII. Section 1022(b)(2)(A) of the Act 

A. Overview 

Section 1022(b)(2)(A) of the Act calls 

for the Bureau to consider the potential 

benefits, costs, and impacts of its 

regulations.66 The proposal, if adopted, 

would authorize the Bureau to exercise 

its supervisory authority with respect to 

certain nonbank covered persons 

defined as larger participants of the 

consumer debt collection and consumer 

reporting markets. Nonbank covered 

persons in the consumer debt collection 

market with more than $10 million in 

annual receipts and nonbank covered 

persons in the consumer reporting 

market with more than $7 million in 

annual receipts, as calculated in the 

manner set forth in the proposal, would 

qualify as larger participants and thus 

be subject to the Bureau’s supervision 

authority. As noted, the Bureau 

estimates that these thresholds would 

encompass approximately 175 

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67Act section 1024(b)(2). The Bureau is required 

to exercise its authority under its nonbank 

supervision program in a manner that is ‘‘based on 

the assessment by the Bureau of the risks posed to 

consumers in the relevant product markets and 

geographic markets, and taking into consideration, 

as applicable—(A) the asset size of the covered 

person; (B) the volume of transactions involving 

consumer financial products or services in which 

the covered person engages; (C) the risks to 

consumers created by the provision of such 

consumer financial products or services; (D) the 

extent to which such institutions are subject to 

oversight by State authorities for consumer 

protection; and (E) any other factors that the Bureau 

determines to be relevant to a class of covered 

persons.’’ 

68Where benefits or costs are not readily 

quantifiable or where data is not reasonably 

available, the Bureau will conduct qualitative 

analyses relying on information from available 

sources. 

69Sections 1024(a)(1)(B) and 1024(b) of the Act. 

70The Bureau has discretion in any rulemaking 

to choose an appropriate scope of analysis with 

respect to potential benefits and costs and an 

appropriate baseline. For the current proposal, 

another approach would be focus almost entirely on 

the supervision-related costs for larger participants 

and would omit a broader consideration of the 

benefits and costs of increased compliance. The 

Bureau, as a matter of discretion, has chosen to 

describe a broader range of potential effects to more 

fully inform the rulemaking. 

71The Bureau also views the increased detection 

and assessment of risks to consumers and to the 

consumer financial markets as a critical mission of 

the supervision program. The extent to which the 

Bureau is better informed and that further policy 

actions yield tangible benefits to consumers, 

covered persons, and the markets in general could 

also be viewed as a longer term benefit. 

72 15 U.S.C. 1692 et seq. 

73 15 U.S.C. 1681 et seq. 

74For those larger participants as to which the 

Bureau does not initiate supervisory activity, it is 

expected that the prospect of potential supervisory 

activity may create an incentive to increase 

compliance where it is lacking. 

consumer debt collectors and 30 

consumer reporting agencies. 

That the Bureau is authorized to 

undertake supervisory activities with 

respect to a nonbank covered person 

that qualifies as a larger participant does 

not necessarily mean that the Bureau 

would in fact undertake such activities. 

Rather, the Bureau would decide 

whether to use its limited resources to 

examine or otherwise exercise its 

supervisory authority over a larger 

participant based on criteria set by 

Congress, which focus on risks to 

consumers.67 Conversely, nonbank 

covered persons in the consumer debt 

collection market with $10 million or 

less in annual receipts and nonbank 

covered persons in the consumer 

reporting market with $7 million or less 

in annual receipts, as calculated in the 

manner set forth in the proposal, 

generally would not be subject to the 

Bureau’s supervision authority as larger 

participants of a covered market. They 

would, however, be subject to the 

Bureau’s rulemaking and enforcement 

authority and subject to potential 

Bureau supervision pursuant to section 

1024(a)(1)(C) of the Act. 

The Bureau notes at the outset that 

there is little publicly available data 

with which to effectively measure or 

quantify the benefits, costs, and impacts 

of supervision for compliance with 

Federal consumer financial law 

generally; as applied to the consumer 

debt collection or consumer reporting 

markets, more specifically; or, even 

more particularly, to covered persons in 

these markets with annual receipts 

above the thresholds set by the 

Proposed Rule. The Bureau has sought 

information from State regulators and 

regulatory associations to help quantify 

the costs incurred by nonbank covered 

persons from supervision, but, to date, 

the Bureau has been unable to locate 

useful information. As a result, the 

analysis that follows qualitatively 

examines the benefits, costs, and 

impacts of the key provisions of the 

proposal.68 The Bureau seeks comment 

on additional sources of data to evaluate 

the proposal. The Bureau will further 

consider the benefits, costs, and impacts 

of the Proposed Rule and any 

modifications the Bureau might make to 

the Proposed Rule prior to adopting a 

final rule. 

B. Potential Benefits and Costs to 

Consumers and Covered Persons 

The analysis considers the benefits, 

costs, and impacts of the key provisions 

of the proposal against a pre-statutory 

baseline, i.e., the benefits, costs, and 

impacts of the statute 69 and the 

regulation combined. Together, the Act 

and the Proposed Rule initiate a Federal 

supervision program for certain 

nonbank entities in the markets for 

consumer debt collection and consumer 

reporting. The benefits, costs, and 

impacts therefore are considered 

relative to a baseline where such a 

Federal supervisory regime does not 

exist for nonbank institutions in these 

markets.70 In the following discussion, 

references to the proposal or the 

supervision program should be read to 

include the relevant provisions of the 

Act and the Proposed Rule regarding 

larger participants. 

The potential benefit to consumers 

from the proposal is the increased 

consumer protection that should result 

from larger participants’ likely increased 

compliance with Federal consumer 

financial law.71 The potential costs 

derive from the resources that larger 

participants will use to respond to any 

supervisory activity by the Bureau and 

to improve their compliance where 

necessary. 

The Bureau expects that the initiation 

of the supervision program in these 

markets will likely increase larger 

participants’ compliance with Federal 

consumer financial law, and that such 

additional compliance will yield certain 

benefits for consumers that are affected 

by consumer debt collectors or 

consumer reporting agencies. For 

example, supervisory activity by the 

Bureau may lead to increased 

compliance with various statutes and 

regulations governing consumer debt 

collection and consumer reporting 

activities, such as the Fair Debt 

Collection Practices Act 72 and the Fair 

Credit Reporting Act,73 respectively.74

Increased compliance with existing 

laws may lead the affected entities to 

incur additional costs. Expenditures on 

systems and personnel may be required 

to revise existing products or processes 

to the extent they do not comply with 

Federal consumer financial law. At 

present, the Bureau does not have 

specific information on the magnitude 

of such changes, but expects that such 

costs will be larger at firms where major 

changes are necessary. 

Additional costs of the Proposed Rule 

are related to instances in which the 

Bureau decides to undertake 

supervisory activity, including an 

examination, with respect to a larger 

participant. The nature and extent of the 

supervisory activity will depend on the 

circumstances, and the costs incurred 

by an entity may derive from the 

gathering and reporting of information; 

the staff time, space and resources 

necessary to support on site exams; or 

other costs of interacting with the 

supervisor. Importantly, the proposal, if 

adopted, would not in itself impose any 

supervision-related costs. The rule 

would only authorize the Bureau to 

undertake certain supervisory activities. 

In deciding whether to undertake a 

supervisory activity with respect to any 

particular larger participant, the Bureau 

would have to take account of its 

limited supervisory resources, and 

apply the statutory criteria, which focus 

on risks to consumers. Therefore, these 

potential costs related to responding to 

supervisory activity, and any potential 

costs or benefits derived from increased 

compliance that would result from such 

supervisory activity, are probabilistic in 

nature. 

Consumer debt collectors and 

consumer reporting agencies may also 

incur some minor costs in determining 

if they qualify as larger participants 

under the rule, specifically if they 

believe their annual receipts are near 

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75Larger firms may have more comprehensive or 

complex systems to monitor internal compliance 

limiting potential failures to comply with relevant 

regulations. However, the increased difficulty in 

coordination and communication in larger firms, 

and the fact that any compliance failures that do 

occur may impact a greater number of consumers, 

suggests that the benefits of supervision are still 

substantial. 

76 Debt collectors and consumer reporting 

agencies below the larger participant thresholds 

may change their behavior in response to the 

actions of larger participants. Specific reactions will 

depend on various factors, including the extent to 

which larger participants change their services or 

pricing, and are therefore difficult to predict. 

77For example, increased accuracy of credit 

reports may yield a higher credit score for some 

borrowers and lower score for others. This former 

group could see the cost of credit decrease and 

access increase. The opposite may happen for the 

latter. Overall, the increased accuracy of the 

information should improve the pricing and 

allocation of credit. 

78Pursuant to section 1024(e) of the Act, the 

Bureau also has supervision authority over service 

providers to nonbank covered persons encompassed 

by section 1024(a)(1), which includes larger 

participants, and some of these service providers 

may qualify as covered persons. The service 

providers to consumer debt collection and 

consumer reporting larger participants may include 

data aggregators, law firms, account maintenance 

services, call centers, data and record suppliers, and 

software providers. The Bureau does not have data 

on the number and characteristics of these service 

providers. The Bureau’s discussion of potential 

costs, benefits, and impacts that may result from 

this proposal generally applies to service providers 

to larger participants. 

79As noted above, as potential users of some of 

the services covered by the proposal, depository 

institutions and credit unions might see changes in 

the quality and prices of such services. 

80 5 U.S.C. 601 et seq. The Bureau is not aware 

of any governmental units or not-for-profit 

organizations to which the proposal would apply. 

81 5 U.S.C. 601(3). The Bureau may establish an 

alternative definition after consultation with the 

Small Business Administration and an opportunity 

for public comment. 

82 5 U.S.C. 609. 

the applicable thresholds and they wish 

to dispute the Bureau’s decision to 

commence a supervisory activity based 

on their status as larger participants. 

The Bureau’s choice to use annual 

receipts, a well-defined criterion that is 

likely available to these entities, should 

help to minimize the costs of this 

calculation relative to other possible 

criteria. This is true even though 

apportionment may be necessary for 

certain firms that engage in activities 

not covered by this rule. 

As noted earlier, the Bureau may 

decide to undertake supervisory activity 

with regard to a larger participant only 

after considering the applicable 

statutory criteria including factors such 

as the size of the entity and risks to 

consumers. For larger firms or firms 

where there is evidence of risk to 

consumers, the benefits of the proposal 

should be highest. The largest firms are 

expected to impact the most customers; 

therefore, any lapses in compliance by 

such firms may have the largest negative 

impacts.75 Any increase in compliance 

would therefore benefit a large number 

of customers or transactions. At the 

same time, these firms should be best 

able to bear any fixed supervisory costs 

given their size and their potential 

ability to spread these costs over the 

large number of consumers and 

transactions. Where there is evidence of 

risks to consumers, the benefits of 

supervisory activity are also expected to 

be high. As a result, the statutory 

criteria regarding supervision should 

ensure that those larger participants that 

are supervised and that incur the costs 

of that supervision are the same firms 

where the benefits are likely to be 

highest. 

The proposal, if adopted, may have 

impacts on consumers’ access to 

consumer financial products or services. 

Predicting the nature and extent of any 

potential impacts is difficult, 

particularly given that consumers are 

not generally the end customers in these 

two markets. For most consumers, 

consumer credit reports and the 

information contained therein, are 

primarily an input into ultimate credit 

decisions by mortgage lenders, credit 

card issuers, and other financial services 

providers. Similarly, terms in the 

consumer debt collection market are set 

between debt collectors and the 

creditors for whom they collect or from 

whom they purchase debts, in part, 

based on the debt collectors’ ability to 

recover from consumers. 

Under the proposal, larger 

participants, and in particular those 

with respect to whom the Bureau 

chooses to conduct supervisory activity, 

are expected to incur the majority of the 

resource costs of increased compliance 

and increases in the quality of the 

services provided (e.g. credit reports 

may become more accurate, or 

consumers in collection may be treated 

more fairly).76 However, providers may 

pass on those costs to their customers 

(as noted, consumers do not generally 

purchase these types of services) who 

then may pass them on to consumers, in 

part through changes in prices for 

credit. The extent to which these costs 

are eventually reflected, on average, in 

higher prices for consumers or lower 

profits for the affected firms depends on 

the competitive conditions in the 

relevant markets. Some consumers 

could see higher costs of credit and less 

access, while for others the opposite 

could be true.77

In developing the proposal the Bureau 

considered selecting different 

thresholds for each market. One 

alternative would be to set the 

thresholds substantially higher and 

cover only the very largest firms in each 

market. For example, a threshold of 

$100 million in annual receipts in the 

market for consumer reporting would 

cover only about 10 firms. Under such 

an alternative, the benefits of 

supervision to both consumers and 

covered persons would likely be 

substantially reduced, since firms 

impacting a large number of consumers 

and/or consumers in important market 

segments would be omitted. On the 

other hand, the potential costs to 

covered persons would of course be 

reduced if fewer firms were defined as 

larger participants and thus fewer were 

subject to the Bureau’s supervision 

authority on that basis.78

C. Impact on Depository Institutions and 

Credit Unions With Total Assets of $10 

Billion or Less as Described in Section 

1026 of the Act, and the Impact on 

Consumers in Rural Areas 

The proposal does not apply to 

depository institutions or credit unions 

of any size.79 In addition, there is no 

additional or unique impact from the 

proposal on rural consumers. 

VIII. Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA), 

as amended by the Small Business 

Regulatory Enforcement Fairness Act of 

1996, requires each agency to consider 

the potential impact of its regulations on 

small entities, including small 

businesses, small governmental units, 

and small not-for-profit organizations.80

The RFA defines a ‘‘small business’’ as 

a business that meets the size standard 

developed by the Small Business 

Administration pursuant to the Small 

Business Act.81

The RFA generally requires an agency 

to conduct an initial regulatory 

flexibility analysis (IRFA) and a final 

regulatory flexibility analysis (FRFA) of 

any rule subject to notice-and-comment 

rulemaking requirements, unless the 

agency certifies that the rule will not 

have a significant economic impact on 

a substantial number of small entities. 

The Bureau also is subject to certain 

additional procedures under the RFA 

involving the convening of a panel to 

consult with small business 

representatives prior to proposing a rule 

for which an IRFA is required.82

An initial regulatory flexibility 

analysis is not required for this proposal 

because the proposal, if adopted, would 

not have a significant economic impact 

on a substantial number of small 

entities. If adopted, the rule would 

define a class of firms as larger 

participants and thereby authorize the 

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9606 Federal Register / Vol. 77, No. 33 / Friday, February 17, 2012 / Proposed Rules 

83The Proposed Rule, if adopted, might authorize 

the Bureau to supervise a small business as a larger 

participant in two rare instances. First, a nonbank 

covered person that was not a small business when 

it met the larger participant definition might 

become a small business during the second year of 

the supervision period. The Bureau expects that 

this would be rare given that relatively few nonbank 

covered persons appear to have annual receipts 

near the relevant threshold. Moreover, the Bureau’s 

choice to average the nonbank covered person’s 

receipts over the previous three years (absent 

special circumstances) reduces the probability that 

a firm would fall below the $7 million threshold 

because this average is less sensitive to fluctuations 

from a single year. Second, the Proposed Rule 

defines the term ‘‘control’’ somewhat more 

expansively than the Small Business 

Administration for purposes of aggregating the 

activities of a nonbank covered person’s affiliated 

companies for purposes of classification as a larger 

participant. A nonbank covered person that was not 

considered affiliated under the Small Business 

Administration standards but was classified as 

affiliated under the Proposed Rule might therefore 

be classified as a small entity under the RFA and 

a larger participant under the Proposed Rule. The 

Bureau anticipates that very few such cases would 

exist in either of the markets covered by the 

Proposed Rule. 

84The Bureau reaches this judgment in light of 

the number of relevant small firms in the relevant 

NAICS codes. For example, based on the examples 

in footnote 4, many of these service providers 

would be considered to be in industry 522390, 

‘‘Other activities related to credit intermediation,’’ 

or 518210, ‘‘Data Processing, Hosting, and Related 

Services.’’ According to the 2007 Economics 

Census, there are more than 5000 small firms in the 

first industry group and nearly 8,000 in the second. 

Moreover, the limited number of expected cases in 

which an examination of a larger participant may 

indicate the need to examine a small service 

provider further limits any impact on these entities. 

And, were the Bureau to choose to undertake some 

supervisory activity with respect to a service 

provider, the burden imposed would likely be small 

compared to the overall activities of the firm. For 

example, using a conservative estimate of an exam 

that lasts ten business days (the Bureau expects any 

exam of a small service provider to be considerably 

shorter), the Bureau conservatively estimates that 

the supervised small entity would require a 

maximum of four person-weeks of time to support 

that exam (one full-time person for the two weeks 

prior to the exam and for the duration of the exam). 

For the two industries described above, such an 

exam at the median-sized firm below the SBA size 

threshold (approximately three or eight employees, 

respectively) is estimated to cost a fraction of a 

percent of annual receipts. Because the Bureau 

finds it very unlikely that it would supervise such 

entities except in rare circumstances, a substantial 

number of entities could not be involved. For larger 

small entities, the potential costs as a fraction of 

revenue are even smaller. For these reasons, the 

Bureau believes that any supervision of service 

providers would not result in a substantial 

economic impact on a significant number of small 

entities. 

85Section 1022(b)(2)(B) of the Act requires the 

Bureau to consult with appropriate prudential 

regulators or other Federal agencies regarding 

consistency with any prudential, market, or 

systemic objectives administered by such agencies 

prior to proposing a rule and during the comment 

process. Additionally, section 1024(a)(2) 

specifically requires the Bureau to consult with the 

Federal Trade Commission prior to issuing a rule 

defining larger participants under section 

1024(a)(1)(B) of the Act. 

Bureau to undertake supervisory 

activities with respect to those firms. 

The rule would not itself impose any 

obligations or standards of conduct on 

larger participants for purposes of RFA 

analysis. Moreover, even if the rule were 

considered to impose regulatory 

obligations for purposes of RFA 

analysis, the rule would impose such 

obligations only on nonbank covered 

persons in the consumer debt collection 

market with more than $10 million in 

annual receipts and nonbank covered 

persons in the consumer reporting 

market with more than $7 million in 

annual receipts, as calculated as set 

forth in the rule. As a result, a nonbank 

entity that would qualify as a larger 

participant would generally not meet 

the SBA standard for a small business, 

which in these markets has annual 

receipts at or below $7 million.83

Additionally, the Bureau believes that 

the Proposed Rule would not result in 

a ‘‘significant impact’’ on any small 

entities that may be affected. As noted, 

the proposal, if adopted, would 

authorize the Bureau to undertake 

supervisory activities with respect to 

larger participants. Whether the Bureau 

would in fact engage in supervisory 

activity, such as an examination, with 

respect to a larger participant (and, if so, 

the frequency and extent of such 

activity) would depend on a number of 

considerations, including the 

availability of Bureau resources and the 

application of the applicable statutory 

factors set forth in section 1024(b)(2). 

Given the Bureau’s finite supervisory 

resources, and the range of industries 

over which it has supervisory 

responsibility for consumer financial 

protection, whether and when an entity 

in the consumer debt collection and 

consumer reporting markets would be 

supervised is probabilistic. Moreover, in 

cases where supervisory activity were to 

occur, the costs that would result from 

such activity are expected to be minimal 

in relation to the overall activities of the 

firm. 

Finally, section 1024(e) of the Act 

authorizes the Bureau to supervise 

service providers to nonbank covered 

persons encompassed by section 

1024(a)(1), which includes larger 

participants. Because the Proposed Rule 

does not address service providers, 

effects on service providers need not be 

addressed for purposes of this RFA 

analysis. Even were such effects 

relevant, the Bureau believes that it is 

very unlikely that any supervisory 

activities with respect to the service 

providers to the approximately 200 

larger participants covered by this 

proposal would result in a significant 

economic impact on a substantial 

number of small entities.84

Accordingly, the undersigned certifies 

that this Proposed Rule, if adopted, 

would not have a significant economic 

impact on a substantial number of small 

entities. 

IX. Paperwork Reduction Act 

The Bureau has determined that this 

Proposed Rule does not impose any new 

recordkeeping or reporting requirements 

on covered entities or members of the 

public that would be collections of 

information requiring approval under 44 

U.S.C. 3501, et seq. 

X. Consultation With Federal Agencies 

In developing the Proposed Rule, the 

Bureau consulted or offered to consult 

with the Federal Trade Commission, as 

well as with the Board of Governors of 

the Federal Reserve System, the Federal 

Deposit Insurance Corporation, the 

Office of the Comptroller of the 

Currency, and the National Credit 

Union Administration, including 

regarding consistency with any 

prudential, market, or systemic 

objectives administered by such 

agencies.85

List of Subjects in 12 CFR Part 1090 

Consumer protection and credit. 

Authority and Issuance 

For the reasons set forth above, the 

Bureau of Consumer Financial 

Protection proposes to add part 1090 to 

Chapter X in Title 12 of the Code of 

Federal Regulations to read as follows: 

PART 1090—DEFINING LARGER 

PARTICIPANTS IN CERTAIN 

CONSUMER FINANCIAL PRODUCT 

AND SERVICE MARKETS 

Sec. 

1090.100 Scope and purpose. 

1090.101 Definitions. 

1090.102 Covered markets and tests for 

determining larger participants of those 

markets. 

1090.103 Status as larger participant subject 

to supervision. 

1090.104 Determination of status as a larger 

participant. 

Authority: 12 U.S.C. 5514(a)(1)(B); 12 

U.S.C. 5514(b)(7)(A); 12 U.S.C. 5512(b)(1); 

and 12 U.S.C. 5512(c)(5). 

§ 1090.100 Scope and purpose. 

This part defines those nonbank 

covered persons that qualify as larger 

participants of certain markets for 

consumer financial products or services 

pursuant to sections 1024(a)(1)(B) and 

(a)(2) of the Act. A larger participant of 

a market covered by this part is subject 

to the supervisory authority of the 

Bureau under section 1024 of the Act. 

This part also establishes rules to 

facilitate the Bureau’s supervisory 

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authority over such larger participants 

pursuant to section 1024(b)(7) of the 

Act. 

§ 1090.101 Definitions. 

For the purposes of this part, the 

following definitions apply: 

(a) Act means the Consumer Financial 

Protection Act of 2010. 

(b) Affiliated company means any 

company (other than an insured 

depository institution or insured credit 

union) that controls, is controlled by, or 

is under common control with, a 

person. For purposes of this definition: 

(1) Company means any corporation, 

limited liability company, business 

trust, general or limited partnership, 

proprietorship, cooperative, association, 

or similar organization. 

(2) A person has control over another 

person if: 

(i) The person directly or indirectly or 

acting through one or more other 

persons owns, controls, or has power to 

vote 25 percent or more of any class of 

voting securities or similar ownership 

interest of the other person; 

(ii) The person controls in any 

manner the election of a majority of the 

directors, trustees, members, or general 

partners of the other person; or 

(iii) The person directly or indirectly 

exercises a controlling influence over 

the management or policies of the other 

person, as determined by the Bureau. 

(c) Annual receipts means receipts 

calculated as follows: 

(1) Receipts means ‘‘total income’’ (or 

in the case of a sole proprietorship, 

‘‘gross income’’) plus ‘‘cost of goods 

sold’’ as these terms are defined and 

reported on Internal Revenue Service 

(IRS) tax return forms (such as Form 

1120 for corporations; Form 1120S and 

Schedule K for S corporations; Form 

1120, Form 1065 or Form 1040 for LLCs; 

Form 1065 and Schedule K for 

partnerships; Form 1040, Schedule C for 

other sole proprietorships). Receipts do 

not include net capital gains or losses; 

taxes collected for and remitted to a 

taxing authority if included in gross or 

total income, such as sales or other taxes 

collected from customers and excluding 

taxes levied on the entity or its 

employees; and amounts collected for 

another (but fees earned in connection 

with such collections are receipts). 

Items such as subcontractor costs, 

reimbursements for purchases a 

contractor makes at a customer’s 

request, and employee-based costs such 

as payroll taxes, are included in 

receipts. 

(2) Completed fiscal year means a tax 

year including any short tax year. 

‘‘Fiscal year,’’ ‘‘tax year,’’ and ‘‘short tax 

year’’ have the meanings attributed to 

them by the IRS as set forth in IRS 

Publication 538, which provides that: 

(i) A ‘‘fiscal year’’ is 12 consecutive 

months ending on the last day of any 

month except December 31st. 

(ii) A ‘‘tax year’’ is an annual 

accounting period for keeping records 

and reporting income and expenses. An 

annual accounting period does not 

include a short tax year. 

(iii) A ‘‘short tax year’’ is a tax year 

of less than 12 months. 

(3) Period of measurement. (i) Annual 

receipts of a person that has been in 

business for three or more complete 

fiscal years means the total receipts of 

the person over its most recently 

completed three fiscal years divided by 

three. 

(ii) Annual receipts of a person that 

has been in business for less than three 

complete fiscal years means the total 

receipts of the person for the period the 

person has been in business divided by 

the number of weeks in business, 

multiplied by 52. 

(iii) Where a person has been in 

business for three or more complete 

fiscal years, but one of the years within 

its period of measurement is a short tax 

year, annual receipts means the total 

receipts for the short year and the two 

full fiscal years divided by the total 

number of weeks in the short year and 

the two full fiscal years, multiplied by 

52. 

(4) Annual receipts of affiliated 

companies. (i) The annual receipts of a 

person are calculated by adding the 

annual receipts of the person with the 

annual receipts of each of its affiliated 

companies. 

(ii) If a person has acquired an 

affiliated company or been acquired by 

an affiliated company during the 

applicable period of measurement, the 

annual receipts used in determining size 

status include the receipts of such 

affiliated company for the entire period 

of measurement (not just the period 

after the affiliation arose). 

(iii) Receipts are calculated separately 

for the person and each of its affiliated 

companies in accordance with 

paragraph (c)(3) of this section even 

though this may result in using a 

different period of measurement to 

calculate an affiliated company’s annual 

receipts. Thus, for example, if an 

affiliated company has been in business 

for a period of less than three years, the 

affiliated company’s receipts are to be 

annualized in accordance with 

paragraph (c)(3)(ii) of this section even 

if the person has been in business for 

three or more complete fiscal years. 

(iv) The annual receipts of a former 

affiliated company are not included if 

affiliation ceased before the applicable 

period of measurement as set forth in 

paragraph (c)(3) of this section. This 

exclusion of annual receipts of former 

affiliated companies applies during the 

entire period of measurement, rather 

than only for the period after which 

affiliation ceased. 

(d) Assistant Director means the 

Bureau’s Assistant Director for Nonbank 

Supervision or her or his designee. The 

Director of the Bureau may perform the 

functions of the Assistant Director 

under this proposal. In the event there 

is no such Assistant Director, the 

Director of the Bureau may designate an 

alternative Bureau employee to fulfill 

the duties of the Assistant Director 

under this part. 

(e) Bureau means the Bureau of 

Consumer Financial Protection. 

(f) Consumer means an individual or 

an agent, trustee, or representative 

acting on behalf of an individual. 

(g) Consumer debt collection means 

collecting or attempting to collect, 

directly or indirectly, any debt owed or 

due or asserted to be owed or due to 

another and related to any consumer 

financial product or service. A person 

offers or provides consumer debt 

collection where the relevant debt is 

either: 

(1) Collected on behalf of another 

person; or 

(2) Collected on the person’s own 

behalf, if the person purchased or 

otherwise obtained the debt while the 

debt was in default under the terms of 

the contract or other instrument 

governing the debt. 

(h) Consumer financial product or 

service means any financial product or 

service, as defined in section 1002(15) 

of the Act that is described in one or 

more categories under: 

(1) Section 1002(15) of the Act and is 

offered or provided for use by 

consumers primarily for personal, 

family, or household purposes; or 

(2) Clauses (i), (iii), (ix), or (x) of 

section 1002(15)(A) of the Act and is 

delivered, offered, or provided in 

connection with a consumer financial 

product or service referred to in 

paragraph (h)(1) of this section. 

(i) Consumer reporting means: 

(1) In general. Consumer reporting 

means collecting, analyzing, 

maintaining, or providing consumer 

report information or other account 

information used or expected to be used 

in any decision by another person 

regarding the offering or provision of 

any consumer financial product or 

service. 

(2) Exception for furnishing to an 

affiliated person. Consumer reporting 

does not include the activities of a 

person to the extent that a person— 

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9608 Federal Register / Vol. 77, No. 33 / Friday, February 17, 2012 / Proposed Rules 

(i) Collects, analyzes, or maintains 

information that solely relates to 

transactions or experiences between the 

person and a consumer; and 

(ii) Provides the information 

described in paragraph (i)(2)(i) of this 

section to an affiliate. 

(3) Exception for furnishing 

information to a consumer reporting 

entity. Consumer reporting does not 

include the activities of a person to the 

extent that a person provides 

information that solely relates to 

transactions or experiences between a 

consumer and the person, or the affiliate 

of such person, to another person that 

is engaged in consumer reporting. 

(4) Exception for providing 

information to be used solely in a 

decision regarding employment, 

government licensing, or residential 

leasing or tenancy. Consumer reporting 

does not include the activities of a 

person to the extent that a person 

provides consumer report or other 

account information that is used or 

expected to be used solely in any 

decision regarding the offering or 

provision of a product or service that is 

not a consumer financial product or 

service, including a decision for 

employment, government licensing, or a 

residential lease or tenancy involving a 

consumer. 

(j) Larger participant means a 

nonbank covered person that meets a 

test under § 1090.102, and for the period 

provided in § 1090.103 of this part. 

(k) Nonbank covered person means, 

except for persons described in sections 

1025(a) and 1026(a) of the Act: 

(1) Any person that engages in 

offering or providing a consumer 

financial product or service; and 

(2) Any affiliate of a person described 

in paragraph (k)(1) of this section if such 

affiliate acts as a service provider to 

such person. 

(l) Person means an individual, 

partnership, company, corporation, 

association (incorporated or 

unincorporated), trust, estate, 

cooperative organization, or other 

entity. 

(m) Supervision or supervisory 

activity means the Bureau’s exercise, or 

intended exercise, of supervisory 

authority by initiating or undertaking an 

examination, or requiring a report of a 

person pursuant to section 1024 of the 

Act. 

§ 1090.102 Covered markets and tests for 

determining larger participants of those 

markets. 

(a) Consumer debt collection. A 

nonbank covered person that offers or 

provides consumer debt collection is a 

larger participant of the consumer debt 

collection market if the person’s annual 

receipts resulting from consumer debt 

collection are more than $10 million. 

(b) Consumer reporting. A nonbank 

covered person that offers or provides 

consumer reporting is a larger 

participant of the consumer reporting 

market if the person’s annual receipts 

resulting from consumer reporting are 

more than $7 million. 

§ 1090.103 Status as larger participant 

subject to supervision. 

A person qualifying as a larger 

participant under § 1090.102 shall not 

cease to be a larger participant under 

this part until two years from the first 

day of the tax year in which the person 

last met the applicable test under 

§ 1090.102. 

§ 1090.104 Determination of status as a 

larger participant. 

(a) If a nonbank covered person 

receives a written communication from 

the Bureau initiating a supervisory 

activity, such person may respond by 

asserting that the person does not meet 

the definition of a larger participant of 

a market covered by this part within 30 

days of the date of the communication. 

Such response must be sent to the 

Assistant Director by electronic 

transmission at the address included in 

the communication and must include an 

affidavit setting forth an explanation of 

the basis for the person’s assertion that 

it does not meet the definition of larger 

participant of a market covered by this 

part and therefore is not subject to the 

Bureau’s supervisory authority under 

section 1024 of the Act. In addition, a 

person may include with the response 

copies of any records, documents, or 

other information on which the person 

relied to make the assertion. 

(b) A person shall be deemed to have 

waived the right, at any time that it may 

dispute that it qualifies as a larger 

participant, to rely on any argument, 

records, documents, or other 

information that it fails to submit to the 

Assistant Director under paragraph (a) 

of this section. A person who fails to 

respond to the Bureau’s written 

communication within 30 days will be 

deemed to have acknowledged that it is 

a larger participant. 

(c) The Assistant Director shall review 

the affidavit, any attached records, 

documents, or other information 

submitted pursuant to paragraph (a) of 

this section, and any other information 

the Assistant Director deems relevant, 

and thereafter send by electronic 

transmission to the person a statement 

setting forth the Bureau’s conclusion as 

to whether the person meets the 

definition of a larger participant of a 

market covered by this part. 

(d) At any time, including prior to 

issuing the written communication 

referred to in paragraph (a) of this 

section, the Assistant Director may 

require that a person provide to the 

Bureau such records, documents, and 

information as the Assistant Director 

may deem appropriate to determine 

whether a person qualifies as a larger 

participant. Persons must provide the 

requisite records, documents, and other 

information to the Bureau within the 

time period specified in the request. 

(e) The Assistant Director, in her or 

his discretion, may modify any 

timeframe prescribed by this section on 

his or her own initiative or for good 

cause shown. 

Dated: February 8, 2012. 

Richard Cordray, 

Director, Consumer Financial Protection 

Bureau. 

[FR Doc. 2012–3775 Filed 2–16–12; 8:45 am] 

BILLING CODE 4810–AM–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Food and Drug Administration 

21 CFR Part 177 

[Docket No. FDA–2012–F–0031] 

American Chemistry Council; Filing of 

Food Additive Petition 

AGENCY: Food and Drug Administration, 

HHS. 

ACTION: Notice of petition. 

SUMMARY: The Food and Drug 

Administration (FDA) is announcing 

that the American Chemistry Council 

(ACC) has filed a petition proposing that 

the food additive regulations be 

amended to no longer provide for the 

use of polycarbonate (PC) resins in 

infant feeding bottles and spill-proof 

cups designed to help train babies to 

drink from cups because these uses have 

been abandoned. PC resins are formed 

by the condensation of 4,4′- 

isopropylenediphenol (i.e., Bisphenol A 

(BPA)), and carbonyl chloride or 

diphenyl carbonate. 

DATES: Submit either electronic or 

written comments by April 17, 2012. 

ADDRESSES: You may submit comments, 

identified by Docket No. FDA–2012–F– 

0031 by any of the following methods: 

Electronic Submissions 

Submit electronic comments in the 

following way: 

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