If the Consumer Financial Protection Bureau (CFPB) gets its way, debt collectors and consumer credit reporting agencies will be under its thumb soon enough.
If the rule sticks, it would be the first time debt collectors and consumer reporting agencies have ever been subjected to close regulation.
Both agencies effect tens of millions of Americans. About 30 million consumers have an average of $1,400 of debt under collection, according to the CFPB. And consumer reporting agencies – think TransUnion, Experian or any other company that provides credit reports – are crucial for anyone looking to get approved for home, auto or credit loans. (See 9 things that don’t matter about credit scores.)
“Consumer financial products and services have become more complex over the years and they have expanded well beyond traditional banks,” said Richard Cordray, CFPB Director. “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.”
There are three main types of debt collection firms on the market now: those acting on behalf of companies to collect fees; those that buy debt from companies and keep the proceeds for themselves; and debt collection law firms and attorneys acting through litigation.
Under the rule, the CFPB would have jurisdiction over collectors with more than $10 million in annual revenue – about 175 firms. That’s only 4 per cent of all collectors in the country, but they collectively hold nearly two-thirds of all business in debt collection market.
The rule would apply to the 30 largest consumer reporting agencies, which hold 94 per cent of credit reporting business.