Beginning in January, larger debt collectors will come under the regulatory supervision of the Consumer Financial Protection Bureau. The Bureau published a rule Oct. 24 giving it authority over firms that derive more than $10 million per year from debt collection services. This is the first time that debt collectors will be subject to federal regulatory scrutiny.
The CFPB said that the nation’s 4,500 debt collection firms generate about $12.2 billion in annual revenue. Approximately 30 million Americans are subject to debt collection, typically on debts averaging $1,500. The CFPB will supervise firms collecting 63 percent of the debt collecting industry revenue, or about 175 of the industry’s largest companies.
In addition to publishing a rule outlining its authority, which takes effect Jan. 3, 2013, the CFPB published its examiners field guide. Examiners will generally be looking at a debt collection company’s disclosures, at the accuracy of the information it provides to people from whom it is collecting debt, and at its complaint resolution process. It will also assess how civilly and honestly the debt collectors interact with those owing debt.
“Millions of consumers are affected by debt collection, and we want to make sure they are treated fairly,” said CFPB Director Richard Cordray in this press release. “We want all companies to realize that the better business choice is to follow the law, not break it.”
The CFPB will supervise debt collection firms that operate in one or more of three methods: firms that buy defaulted debt and collect proceeds for themselves; firms that collect debt for another company for a fee, and companies that pursue litigation to recover debt.