The federal agency in charge of helping consumers to protect their finances and credit recently issued its final regulations for how it will oversee the debt collection industry, which will take effect early next year.
The federal Consumer Financial Protection Bureau’s final rules for debt collections agencies will take effect on Jan. 2, when it gains full regulatory control over the industry, the agency recently announced. Included in these new rules are provisions that allow it to examine not only companies that attempt to collect on balances related to personal household debt, but also those that work with the U.S. Department of Education to collect overdue student loan payments.
[Free Resource: Check your credit score and report card for free with Credit.com]
Mostly, it will attempt to crack down on companies that pursue delinquent or defaulted consumer debts too aggressively and will attempt to ensure that these entities properly identify themselves when contacting consumers, the report said. It will further require that collections agencies tell the borrowers they contact only the correct and exact amount owed on the outstanding balance.
Part of the more rigorous examination process involves CFPB employees making on-site inspections of debt collections firms, in an effort to make sure all efforts are in compliance with the new rules, the report said.
“While on-site, examiners spend a period of time holding discussions with management about the company’s processes and procedures; reviewing documents, records, and accounts for compliance; and evaluating the entity’s compliance management systems,” the rule stated. “As with the Bureau’s bank examinations, examinations of nonbanks involve issuing confidential examination reports, supervisory letters, and compliance ratings.”
Overall, the agency now has authority over what it considers to be nonbank “larger participants” in the debt collection industry, according to a report on the new oversight efforts from the New York Times. This includes those that have $10 million or more in annual receipts, and within the debt collections industry, about 175 companies fit that bill. Overall, these 175 firms make up about 63 percent of all debt collections receipts nationwide – $7.7 billion of the industry’s overall $12.2 billion in collections annually. The remaining 37 percent is collected by roughly 4,300 smaller companies.
Many consumers have had difficulties in dealing with debt collections agencies in the past, due to a number of factors that could make it difficult for borrowers to understand what they owe, to whom, and why.
Image: Alan Cleaver, via Flickr