The Consumer Financial Protection Bureau (CFPB), an organization created by the Dodd-Frank Wall Street Reform and Consumer Protection Act, has recently announced new rules to regulate and oversee some of the bigger agencies in the debt collection and credit reporting industries.
The CFPB was given the power to regulate non-bank financial entities by the Dodd-Frank Act, but has faced opposition since its inception. This resistance comes from various lobbying groups and a number of legislators who believe that regulation of such industries should not be part of the government’s jurisdiction.
Despite the opposition, the CFPB has pushed ahead to announced oversight rules that will apply to debt collection firms that earn more than $10 million per year and to consumer reporting agencies that make more than $7 million per year.
According to numbers from the CFPB, this will include about 175 debt collection firms, or four percent of all debt collectors in the U.S. Four percent may seem like a small margin, but they are responsible for collecting 63 percent of all debts in the U.S.
Along with the 175 debt collection firms, about 30 consumer reporting agencies will also be affected by the new rules. That is about seven percent of such agencies nationwide. Once again, seven percent is not a huge amount, but these consumer reporting agencies are responsible for collecting 94 percent of receipts from consumer reporting activities.
The CFPB estimates that its newest proposed rules will impact the lives of millions of Americans. At present, the CFPB reports roughly 30 million Americans have debts under collection.
In complaints filed with the Federal Trade Commission (FTC) and elsewhere, many of those have complained that debt collectors illegally tried to collect on debts. Among those illegal collection attempts were efforts to recover debts that were legally discharged in bankruptcy court.
It is important to note that debts discharged by bankruptcy cannot legally be collected.
Once the new rules go into effect, Americans might see better behavior from the non-bank financial institutions that they deal with on a daily basis. Some commentators, however, are less than optimistic about the potential impact of the rules.
After all, laws already in effect (including the Fair Debt Collection Practices Act and the Fair Credit Reporting Act) are supposed to protect consumers against many abuses from debt collectors and credit reporting agencies.
While the CFPB has the authority to oversee financial entities, it does not have the power to pass or enforce laws regarding this industry, and so may end up having a limited net effect on the way consumer debt and credit is handled in the U.S.
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