Consumer Bureau Shines Spotlight on Debt Collectors, Reporting Agencies

On Feb. 16, the Consumer Financial Protection Bureau (CFPB) proposed a new rule that would subject large debt collectors and consumer reporting agencies to federal scrutiny for the first time. CFPB Director Richard Cordray said that the CFPB is beginning the effort with debt collectors and credit reporting agencies because of their growing importance in the lives of average Americans, who have spent more time dealing with debt collectors since the financial crisis hit and “have their life dictated as much as it can be” by the reporting agencies, now that employers have begun to use the information to evaluate job seekers in addition to those seeking loans. According to Cordray, these industries “have gone unsupervised for too long.”

 

Under the proposed rule, “the CFPB would gain ‘complete access’ to the books and information of large companies” to ensure they are following consumer protection laws. Debt collectors that bring in more than $10 million a year and credit reporting agencies with more than $7 million in receipts would be defined as “larger participants” and qualify for CFPB oversight. According to the Bureau, they control approximately 63 percent and 94 percent of their respective industries. Smaller companies in these industries are still required to follow consumer protection laws and could be subject to CFPB enforcement.

 

The proposed rule is the largest foray into these sections of the consumer financial marketplace and is the first of a series of proposals aimed at determining what other nonbanks will be directly under the CFPB’s purview. The CFPB gained the ability to exert its influence over nonbanks when Cordray became director. The public has 60 days to comment on the proposed rule. The CFPB will then use the input to finalize the rule, which must be issued by July 21, 2012, in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act.