Consumer Law

Large Debt Collectors under the Microscope

The debt-collection industry continues to boom as many well-meaning people struggle to pay what they owe. Debt collection was a $13 billion business in 2012. Some 30 million Americans have debt that has entered the debt-collection process.

Increasingly, debt collectors come under fire for illegally hounding debtors with tactics like late-night phone calls, harassment of family and friends, and threats of jail. In 2011, the Federal Trade Commission registered 180,000 complaints about debt collectors - a record high.

New CFPB Rule

To address this problem, the Consumer Financial Protection Bureau (CFPB) will begin to oversee and regulate the nation’s largest debt collection agencies. In an effort to counter rampant abuses, starting in January 2013 examiners will be investigating large debt collectors to assess potential risks to consumers and ensure that they are complying with all the requirements of federal financial laws.

The new rule applies to debt collection companies with more than $10 million in receipts. This includes about 175 companies, which together handle about 63 percent of the total consumer debt currently under collection.

The rule does not yet apply to thousands of additional companies that handle the remaining debt. Although these smaller companies are exempt from oversight, they are not exempt from compliance with federal financial laws. Complaints can be filed against debt collectors of any size.

Scrutiny of Debt Collectors

Under the new rule, the CFPB will look closely at the disclosures that debt collectors provide to debtors (to properly identify themselves and the amount of debt owed); the accuracy of the information they use; whether or not they have a process for handling borrower disputes; and whether debt collectors have harassed or deceived consumers when attempting to collect a debt.

In particular, the CFPB plans to examine three problematic categories of debt collection: when a company buys debt other companies have given up on collecting; when a company goes after outstanding debt on behalf of the creditor for a commission; and when a company engages in litigation to collect a debt.

Government officials and consumer advocates hope that this intensified level of scrutiny will convey a strong message and lead to better practices across the debt-collection industry.

Consumer Financial Protection Bureau

This new rule is the latest effort by the CFPB (launched in 2011) to enforce the Dodd Frank Wall Street Reform and Consumer Protection Act by increasing oversight of those industries with the greatest effect on consumers’ finances. Among these industries are banks, credit cards, credit reporting agencies, residential mortgages, private education loans and payday loans.

A Consumer Lawyer Can Help

The law surrounding consumer debt collection practices is complicated. Plus, the facts of each case are unique. This article provides a brief, general introduction to the topic. For more detailed, specific information, please contract a consumer law attorney.

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