Consumer watchdog bureau proposes rule to supervise debt collectors, consumer reporting agencies

President Obama shakes hands with Richard Cordray before speaking about the economy, Wednesday, Jan. 4, 2012, at Shaker Heights High School in Shaker Heights, Ohio.

/ AP Photo/Haraz N. Ghanbari

The new consumer financial watchdog agency wants to be able to supervise the firms that issue credit scores and those that collect debt as it seeks to establish itself as the nation's top consumer watchdog.

The Consumer Financial Protection Bureau (CFPB) today announced the proposed rule, which would put debt collectors and consumer credit reporting agencies under the same supervision process as banks for the first time.

"Consumer financial products and services have become more complex over the years and they have expanded well beyond traditional banks," CFPB Director Richard Cordray said in a statement. "Our proposed rule would mean that those debt collectors and credit reporting agencies that qualify as larger participants are subject to the same supervision process that we apply to the banks. This oversight would help restore confidence that the federal government is standing beside the American consumer."

The agency estimates about 30 million U.S. consumers have at least some debt under collection and pegged the average amount under collection at about $1,400.

The Federal Trade Commission has the power to enforce existing laws on debt collectors, but the CFPB would have broader powers than the FTC, which says debt collectors get more consumer complaints than any other industry.

The proposal would still have to be approved before coming an agency rule and industry representatives are expected to push to make changes as it goes the process of becoming a rule by the July deadline.

The CFPB is tasked with writing some of the new rules dictated by the Wall Street legislation, as well as supervising and enforcing the rules that guide non-bank financial firms, including payday lenders. Mr. Obama appointed Cordray to lead the bureau in January, circumventing Republican opposition.

In an interview on CBS' 60 Minutes in December, Mr. Obama said the CFPB's "sole job is to look out for ordinary folks, when they're dealing with mortgage brokers or payday lenders or debt collectors, so that they're not paying 400 percent interest or they're not signing a mortgage that they don't understand and lose their home after having paid for a year, because they were in over their heads."

The proposed rule would cover debt collectors with more than $10 million in annual receipts from debt collection activities -- covering just 4 percent of debt collection firms but 63 percent of the market.

The proposed rule would also cover consumer reporting agencies with more than $7 million in annual receipts. That would put about 30 firms -- including the largest three,Experian, Equifax and TransUnion -- under supervision. The CFPB estimates that those 30 firms account for about 94 percent of the market. The consumer reporting industry issues three billion reports a year, according to industry data, which are used when consumers apply for credit cards, home mortgages and other types of credit.

[Sam2011]

It is NO secret democrats use government as a cruel "weapon" with regulation and oversight against anyone who is not beholden to their political agenda. This is tyranny in the strictest sense and the very reason our founding fathers rebelled against Britain. Civil war and revolution is the downfall of every great nation. Tyranny creates the environment. "Want war? Create Tyranny in the governmen!".....James Madison

[occupy_cbs]

rayward73446: "My thanks to the Government for trying to protect consumers.."



Yes, no matter how many deranged and delusional conservitards keep attacking the CFPB, Americans need to be protected from the abuses by debt collectors and consumer credit reporting agencies!

[tsigili]

More government takeover of everything in this country. Freedom in America is dying, being destroyed by Obama's dictatorship!

[rayward73446]

My thanks to the Government for trying to protect consumers from the consumer reporting agencies who act as the final say on credit scores, and are not consumer friendly. Abusive collection agencies need to be fined for unlawful actions.
While many debt collectors follow the laws, many do not. While I support the collections of debts, there needs to be regulations that are enforced against companies that refuse to operate fairly.
Fair, impartial credit monitoring and reporting has a huge impact on the economy and each and every one of us. For someone that has had an error on my record the resolutions offered by the existing agencies is far too time consuming and redundant to be fair. The business that was involved had so much clout with the agency that my efforts were repeatedly rebuffed, but eventually resolved when a bookkeeping error was finally admitted and my record corrected. Federal oversight is the only solution to the power exerted by consumer reporting agencies on our lives. For example, when someone's identity is stolen it takes over a year to correct the problem at consumer reporting agencies. This is unacceptable and ridiculous. It should be much simpler, and more fair.

[franknkissy]

God knows I am sick from credit-card debts trying to collect in one case from 1981 a debt of which i am only partially responsible for ! The old Discover Card now a part of the HSBC Bank Portfolio - affectionately called by those in the industry - The Shanghai - Hong Kong Bank for its connections there !

[sandiegopete]

I don't think there is much of a chance of serious regulations being imposed. Lobbyists have convinced most elected officials and their staffs in Washington, D.C. that it is impossible for a company to do anything wrong. If there is any wrongdoing it has to be the fault of the customer. Just read the first two comments under this story. I have read many comments from those posters and one thing they have in common is that they belive companies are perfect and the customers are scoundrels. They think debt collectors never make mistakes and always act with professionalism. It is that type of naivete that creates so many problems in our country.

[credibility2]

When is the government finally going to admit that there are too many imbeciles who get themselves into their own sticky situation. Ruthless loan entities is one thing, but stupid borrowers is the other side of the coin and must be dealt with. I don't feel sorry for any individual dumb enough to get themselves into a loan situation and then taken advantage of, especially since there is plenty of information and agencies they can go to for assistance in understanding the loan contract. And, basic individual ignorance isn't an excuse.