Federal Agency to Crack Down on Nation’s Big Debt Collectors

The Consumer Financial Protection Bureau (CFPB) is going to keep an eye on the nation's largest debt collection companies, which are those that bring in more than $10 million every year from collecting debts.

"Millions of consumers are affected by debt collection," said CFPB director Richard Cordray, "and we want to make sure they are treated fairly. We want all companies to realize that the better business choice is to follow the law."

The law Cordrey referred to is the federal Fair Debt Collection Practices Act, which prohibits debt collectors from engaging in abusive, unfair and misleading tactics perpetrated against consumers who owe debts.

According to the CFPB, supervision will involve the following:

  • Requiring debt collectors to identify themselves (many collectors often mislead consumers, for example, by pretending as though they were law firms when they really aren't - although many law firms do function as debt collection firms)
  • Requiring debt collectors to document how much consumers owe (many collectors will misstate the amount of debt owed and/or tack on illegal fees and other charges)
  • Investigating whether debt collectors "harassed or deceived" consumers, which seems to be a sort of catch-all for the wide range of other abusive behavior (swearing, calling by phone over and over, leaving threatening voicemail messages, etc.) perpetrated by some debt collectors

As expected, the debt collection industry has opposed the CFPB's move. One industry representative said that collectors "embrace consumer protection but it has to be balanced with the industry's ability to do their jobs in recovering rightfully-owed consumer debt."

The Dodd-Frank Wall Street Reform and Consumer Protection Act

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB is free to supervise any banks with more than $10 billion in assets. In doing so, the CFPB is empowered to make sure these banks are following federal consumer protectionlaw.

But, as Carter Dougherty reports for Bloomberg Businessweek, the CFPB does not have carte blanche authority to ensure that non-banks are compliant with the law.

This is why the CFPB has announced its plans to supervise large debt collection companies - and has published its intentions, which will be made into full-blown governmental regulations.

The CFPB was created under the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was passed in the wake of the Great Recession, and began to operate in the summer of 2011.

One major function of the CFPB is to enforce consumer protection law, "like a neighborhood cop on the beat," according to the CFPB's website, through supervision of banks and other entities.

Source: U.S. Consumer Bureau to Supervise Biggest Debt Collectors