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