Proposed CFPB Plan Could Ease Compliance for Mid-Sized Lenders

The Consumer Financial Protection Bureau has opened a period of public comment to reevaluate the thresholds used to decide which of the nonbank financial companies are subject to its direct supervision.

The proposal, announced Aug. 8, may reduce its supervisory role over smaller players and turn the Bureau’s attention to the dominant players in debt collections, money transmittal, automobile lending, and consumer reporting.

In automobile financing, for instance, the Bureau considers increasing its supervision threshold from 10,000 to 1 million annual originations — which would reduce the number of supervised firms from 63 —covering 94% of originations in the market — to just five, which account for 42% of the market.

The CFPB said the move is a response to changing market forces and recent Congressional appropriations cuts, which drastically cut its operating revenue.

In sync with Small Business Administration thresholds, the agency signaled a desire to avoid unnecessary burdening of mid-sized lenders and to redistribute resources to entities it perceives as greater risk.

Subprime lenders and credit scoring firms operating just above today’s oversight cutoff could benefit if regulators raise the threshold.

Firms near the $10 million revenue threshold in debt collections or the $7 million threshold in consumer reports could fall outside the Bureau’s direct oversight under the rule.

That transition may lead to lower compliance burden, freeing up capital to innovate and expand — particularly in underserved credit markets. Small players may experiment with new underwriting strategies or adopt alternative data inputs for credit decisions without the same regulatory drag.

Nonetheless, reduced scrutiny may be linked to instability.

In the absence of standardized regulation, consumer safeguards may vary widely. For credit score analysts who are used to dependable, consistent information, the shift may cause unpredictability in model inputs and model performance expectations.

By calling attention to the largest companies, the CFPB could create an uneven playing field. Other Bureau-supervised institutions would continue to face exams, exposure to regulatory enforcement, and high compliance costs, but their more agile competitors could move more freely.

Such disparity could warp competition. Big players may become less agile in responding to market changes or new products, while mid-sized lenders take advantage of regulatory gaps to be more aggressive in their pricing or have larger risk profiles.

Consumer safeguards may differ vastly depending on the lender or credit bureau they come into contact with.

Certain regulatory experts caution that these differences could introduce broader systemic risks over time. Without standardized rules, discrepancies in product terms, data quality, and customer treatment may erode clarity throughout the subprime credit system.

The Bureau’s proposal is open for comment through Sept. 22, 2025, with separate notices filed for each market segment under review. Stakeholders have a narrow window to shape the future of federal oversight.

As scarce assets compel the CFPB to narrow its caseload, the federal system of oversight may come to lean more decisively in the direction of the biggest nonbanks.

For new nonbank startups, the window of opportunity to influence these choices is narrow, but the stakes may be very high. The next few months may determine not only who gets scrutinized but who gets to compete under which constraints.