CFPB to Monitor Debt Collectors
Beginning January 2, 2013, the Consumer Financial Protection Bureau will be
supervising large debt collectors.
Any firm with more than $10 million in annual receipts from consumer debt collection will be subject to CFPB supervision. This includes 175 debt collectors who account for over 60 percent of the industry’s annual receipts.
About 30 million Americans have an average of $1,500 of debt that could be collected. But the effect of debt collection goes beyond the debt. Debt collectors report a consumer’s collection status to the credit bureaus. If this information is incorrect, this can penalize the consumer and can cause much higher interest rates or even denial of a loan.
“Millions of consumers are affected by debt collection, and we want to make sure they are treated fairly,” said CFPB Director Richard Cordray in a statement. “We will be supervising the larger debt collectors in the market for the first time at the federal level. We want all companies to realize that the better business choice is to follow the law–not break it.”
Three main types of debt collection are covered by the rule: firms that may buy defaulted debt and collect the debt for themselves, firms that may earn a fee for collecting defaulted debt owned by another company, and debt collection attorneys that collect through litigation. A single company may be involved in any or all of these activities. Supervising the nonbanks that are major players in debt collection gives the CFPB a window into every stage of the process from the origination of credit to debt collection.
Examiners will be assessing potential risks to consumers and whether debt collectors are following the requirements of federal consumer financial law. This includes providing rate disclosures, providing accurate information, providing a consumer complaint and dispute resolution process, and communicating civilly and honestly with consumers.