Consumer bureau to unveil rules overseeing debt-collection firms
WASHINGTON — The nation’s largest debt-collection companies will face federal regulatory exams for the first time, starting in January, to determine if they are complying with consumer protection laws.
Among the laws that the Consumer Financial Protection Bureau would enforce would be ones that require employees to identify themselves properly and that prohibit the use of “obscene or profane language” in collecting overdue bills.
The new oversight comes as the bureau, which was created by the 2010 financial reform law, continues to expand its authority beyond banks. Last month large credit-reporting companies became subject to the bureau’s oversight.
Consumer advocates have pushed for a crackdown on debt collectors, whose business has expanded as more people have fallen into debt because of the Great Recession.
“Millions of consumers are affected by debt collection, and we want to make sure they are treated fairly,” said Richard Cordray, the bureau’s director, who will hold a public hearing Wednesday in Seattle on debt-collection practices.
About 30 million Americans have debt subject to collection, with an average amount overdue of $1,500, the bureau said. The figure is up nearly 50% since 2003.
Under the financial reform law, the consumer bureau has the ability to regulate large companies outside the banking system. But first it must set rules delineating which companies would be covered.
In February, the bureau proposed that companies with more than $10 million in annual receipts from consumer debt collection would be subject to oversight. That would cover about 175 companies, which account for more than 60% of the industry’s annual receipts.
The rules that determine what companies are subject to oversight become final Wednesday and would take effect Jan. 2.
The bureau also released details about what its examiners will focus on when overseeing debt-collection companies, which are governed by the Fair Debt Collection Practices Act.
Examiners will determine whether debt collectors are properly identifying themselves to consumers and are providing accurate information about how much money is owed. Consumer advocates have complained that some debt collectors try to trick people into repaying debt after the statute of limitations for collecting it has expired.
The bureau also will evaluate whether companies are resolving complaints from consumers in a timely manner. And examiners will make sure that debt collectors “communicate civilly and honestly with consumers,” the bureau said.
Federal law prohibits debt collectors from using obscenity or profanity and engaging in other unseemly practices, such as repeated phone calls, which are designed to “annoy, abuse or harass” a consumer, the bureau said.
