The Consumer Financial Protection Bureau unveiled a sweeping set of proposed rules on Thursday to regulate credit bureaus and debt collectors.
Both industries have come under increased scrutiny in recent years. Credit reporting agencies play a fundamental role in consumers’ ability to obtain loans and other forms of credit, yet remain almost entirely unregulated. And complaints concerning allegedly unfair or illegal practices by debt collectors continue to rise, according to the Federal Trade Commission.
“Debt collectors and credit reporting agencies have gone unsupervised by the federal government for too long,” Richard Cordray, the bureau’s director, said in a press conference on Thursday. “It is time to provide the kind of oversight of these markets that will help ensure that federal laws protecting consumers in these financial markets are being followed.”
Under the Dodd-Frank financial reform law, the bureau has the power to regulate “larger participants” in the financial markets. By that definition, the new rules would apply to debt collectors with revenues higher than $10 million. That would mean about 175 firms would be regulated, or four percent of all debt collectors in the country, according to the CFPB.
In the credit reporting industry, the three largest bureaus—Equifax, TransUnion and Experian—continuously gather spending and credit data information on 200 million Americans. About 30 of the biggest agencies earn more than $7 million annually, and they would be subject to the proposed rules, according to the bureau.
“Consumer financial products and services have become more complex over the years and they have expanded well beyond traditional banks,” Cordray said in a press release. “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.”
When the bureau was first created, many of the nation’s banks unleashed an all-out lobbying war to either repeal the section of the Dodd-Frank act that created the agency, or make changes to the bureau’s structure and budget to blunt its power. For over a year, the banking industry spent tens of millions of dollars every quarter on the lobbying battle.
The collections industry plans no such effort, says Mark Schiffman, spokesman for ACA International, a trade association for collections companies.
“In no way are we suggesting all-out war,” Schiffman says. “We knew this day was coming. Obviously, we want to make sure it isn’t overly burdensome or interfere with the ability of our members to do their work.”
The Consumer Data Industry Association, which represents some credit reporting agencies, did not immediately respond to calls seeking comment.
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