The Consumer Financial Protection Bureau, an organization created by the Doddd-Frank Wall Street Reform and Consumer Protection Act, has announced rules to regulate and oversee some of the bigger players in the debt collection and credit reporting industries.
Given the power to regulate non-bank financial entities by the Dodd-Frank, the CFPB has faced opposition since its inception from various lobbying groups and a number of legislators who believe that regulation of such industries should not be part of the government’s realm.
Despite the resistance, however, the CFPB has apparently pushed ahead. The group’s recently announced oversight rules will apply to the following.
- Debt collection firms that earn more than $10 million per year. According to numbers from the CFPB, this will include roughly 175 debt collection firms, or four percent of all debt collectors in the U.S. Don’t be fooled by that seemingly insignificant fraction, however: this four percent are apparently responsible for collecting 63 percent of debts in the U.S.
- Consumer reporting agencies that make more than $7 million per year. About 30 consumer reporting agencies fall into this camp, or seven percent of such agencies nationwide. As with debt collectors, however, this wee percentage wields considerable power in its field: the seven percent of firms affected are responsible for collecting 94 percent of receipts from consumer reporting activities.
How Will You Be Affected?
The CFPB estimates that its newest proposed rules will impact the lives of millions of Americans. At present, the Bureau reports, roughly 30 million Americans have debts under collection.
In complaints filed with the Federal Trade Commission (FTC) and elsewhere, many of those have complained that debt collectors illegally tried to collect on debts. Among those illegal collection attempts were tries to collect so-called “zombie debt” and efforts to recover debts that were legally discharged in bankruptcy court.
Debts discharged by bankruptcy cannot legally be collected.
Once the new rules go into effect, Americans might see better behavior from the non-bank financial institutions they deal with on a daily basis. Some commentators, however, are less than optimistic about the potential impact of the rules.
After all, laws already in effect (including the Fair Debt Collection Practices Act and the Fair Credit Reporting Act) are supposed to protect consumers against many abuses from debt collectors and credit reporting agencies.
While the CFPB has the authority to oversee financial entities, it does not have the power to pass or enforce laws regarding this industry, and so may end up having a limited net effect on the way consumer debt and credit is handled in the U.S.