The Consumer Financial Protection Bureau Tames Debt Collectors

Hello and welcome to Your Money 2.0. I’m Thomas Fox, community outreach director
at Cambridge Credit Counseling. Although relatively new, the Consumer Financial
Protection Bureau, or CFPB, has received a lot of attention from the financial industry,
regulators, and legislators. The bureau’s directive is simple; create a
level playing field for consumers. As stipulated in the Dodd-Frank act, which
was passed by Congress in response to the recession, the CFPB has been granted the authority
to supervise non-bank entities and their compliance with federal consumer financial laws. The authority extends throughout the financial
spectrum, covering industries such as residential mortgages, private education lending, payday
lending, and over certain other larger participants and markets for other financial products and
services. One of the bureau’s first actions will be
to supervise the debt collection industry, which isn’t sitting well with them as you
might imagine. We’ll tell you what it means for you. Debt collection agencies whose aggressive
tactics have drawn the attention of consumer protection advocates and legislators will
come under federal supervision beginning January 2nd 2013. It’s no secret why debt collectors are high
in the CFPB’s list, the industry accounts for a large portion of consumer complaints
of the Federal Trade Commission which enforces restrictions against abusive practices. The FTC received more than 180,000 complaints
about debt collectors in 2011, up from 13,950 in 2000. The complaints are centered on items that
are expressly prohibited in the Fair Debt Collection Practices Act, the federal law
that protects consumers from collectors. Among the infractions reported are harassment
and baseless threats of lawsuits. One thing to note is that not every debt collector
will be subject to the new rules. There are about 4,500 debt collection companies
in the United States, but the rules will only apply to collectors with annual receipts of
more than 10 million dollars; this represents about 175 companies which may not sound like
a lot. However, these agencies account for 63% or
7.7 billion of the industry’s 12.2 billion in collections. Also, these rules will only apply to certain
types of collectors. According to the CFPB the businesses within
the consumer debt market covered by the rule include firms that, by defaulted debt and
collect the proceeds for themselves, firms that collect defaulted debt owned by another
company in return for a fee, and debt collection attorneys that collect through litigation. The CFPB stated purpose is to ensure that
consumers are treated fairly by financial service providers and there are many examples
of why this is necessary. A report last year by consumers union, found
debt collectors filing an increasing number of lawsuits without holding proper documentation
of the debts involved. In some cases, companies were suing consumers
over debts that were already paid or securing court judgments without proof that they own
the debt. Beginning in January the CFPB, will require
debt collectors to supply reports and be subject to examination of their compliance with relevant
regulations. In recently released bulletin, the CFPB put
collection agencies and law firms on notice that the bureau’s examiners will be accessing
every aspect of their practices and procedures. As Steve Rhode, owner of the Get out of Debt
website, put it “The basic tenets of this new supervision certainly seem logical and
fair to both consumers and debt collection companies. It’s hard to argue that it’s burdensome
on collection agencies to treat consumers with civility and honesty, that they must
provide accurate information, and that they should provide required disclosures.” Regulation is a bitter pill for many industries
as well and in some instances increased oversight initially causes problems for consumers. For example, most banks reacted to the cost
of abiding by the card act by eliminating free checking accounts. Banking is a competitive industry, when one
bank offers a new product the others soon follow. In the same way debt collectors are on the
business to make money and good companies can still do so under CFPB oversight. While it may be challenging for some smaller
agencies, the good that will come from the CFPB far outweighs the bad. I’ve heard heartbreaking stories of how collection
agents’ abuses have torn families apart and even lead to suicide. I’m sure we can all agree that no amount of
unpaid debt is worth the pain and suffering people have experienced after been dealing
with disreputable collectors, protecting those consumers in the CFPB’s mission and that’s
something we should all support. Until next time, I’m Thomas Fox for Cambridge
Credit Counseling.

One comment on “The Consumer Financial Protection Bureau Tames Debt Collectors”

  1. Cynthia Shelton says:

    For Real

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