The country’s largest debt collection companies will face new oversight starting in January, the federal consumer watchdog agency said Wednesday — a move designed to ensure that businesses play by the rules in their contacts with consumers.
The Consumer Financial Protection Bureau Wednesday published a new federal rule allowing it to supervise the country’s 175 largest debt collectors — those with collection revenue of more than $10 million a year — by routinely examining their operations starting Jan. 2, 2013. The companies under the new scrutiny account for only 4 percent of the nation’s debt collectors, but the money they recover from consumers represents more than 60 percent of all collections.
Millions of consumers are affected by debt collection, and we want to make sure they are treated fairly.
|— Richard Cordray |
The new rules, which the bureau has been formulating for months following input from consumer and industry groups, are the latest expanding oversight into nonbank financial companies. The agency and its ability to make rules stem from the Dodd-Frank financial reform law passed in 2010.
“Millions of consumers are affected by debt collection, and we want to make sure they are treated fairly,” CFPB Director Richard Cordray said in a statement. “… We want all companies to realize that the better business choice is to follow the law — not break it.”
For consumers, the rules could mean that regulators spot and stop potential abuses earlier than they do now. The new regulations allow federal examiners to inspect a wide array of materials from the large debt-collection companies, including organizational charts, telephone recordings, compensation policies, consumer files, employee scripts and training procedures. Previously, regulators reacted only to consumer complaints.
Several different federal laws regulate debt collection and spell out how collection companies identify themselves and make contact with consumers, in order to guard against harassment and deceptive practices. For instance, the 1977 Fair Debt Collection Practices Act says collectors in many circumstances cannot call a subject’s workplace or other relatives in an attempt to collect a debt.
ACA International, a debt-collectors trade group, said it was disappointed with the rule, saying it cast too wide a net. “ACA members embrace consumer protection, but it has to be balanced with the industry’s ability to do their jobs in recovering rightfully owed consumer debt,” CEO Pat Morris said. “Repayment of consumer debt is the lifeblood of America’s credit based system and helps ensure that affordable credit is available and goods and services remain affordable, sustains jobs, and supports keeping taxes low.”
Debt collectors are just the latest companies to receive greater scrutiny. Since the CFPB opened up shop more than a year ago, it has used its authority to expand supervision of consumer reporting agencies, mortgage originators, mortgage servicers and payday lenders.