CFPB's Large Collection Agency
Supervision Rule

In October 2012, the Consumer Financial Protection Bureau (CFPB) announced that it had finalized a rule allowing the bureau to supervise large debt collection agencies, as well as write future regulations for the industry and enforce them as necessary.

The Dodd-Frank Act requires the CFPB to identify nonbank financial firms that should be supervised by the agency. Although the law explicitly states that banks with more than $10 billion in assets, payday lenders, as well as nonbank mortgage and student lenders would be regulated by the CFPB, the bureau must  define other “larger participants” in consumer financial markets that should be brought under the regulation of the new agency. 

Under the rule, any firm that has more than $10 million in annual receipts from consumer debt collection activities will be subject to the CFPB’s supervisory authority.  The rule will become effective on January 2, 2013, and it is expected that the CFPB will begin on-site examinations and monitoring shortly thereafter.

Under the CFPB’s supervision authority, examiners will be looking for potential risks to consumers and whether entities are complying with requirements of federal consumer financial laws.  In particular, examiners will be reviewing the practices of collection agencies to ensure that they:

• Provide Required Disclosures: Evaluate whether entities are properly identifying themselves and properly disclosing the amount of debt owed.
• Provide Accurate Information: Assess whether debt collectors are using accurate data in their pursuit of debt.
• Have a Consumer Complaint and Dispute Resolution Process: As part of the CFPB’s compliance management review, examiners will assess whether complaints are resolved adequately and in a timely manner, whether the complaints highlight violations of federal consumer financial law, and whether the debt collector has a process in place to address consumer disputes.
• Communicate Civilly and Honestly with Consumers: Examiners will be assessing whether debt collectors have harassed or deceived consumers in pursuit of debt. For example, debt collectors should not be using obscene or profane language with consumers. Nor should they be engaging the consumer in telephone conversations repeatedly or continuously with intent to annoy, abuse or harass. Debt collectors cannot threaten to imprison consumers who do not pay their debt or threaten to tell the consumer’s employer about the debt.

Entities that have more than $10 million in annual receipts from consumer debt collection activities.  This includes third-party debt collectors, debt buyers and collections attorneys.  The CFPB has estimated that it will cover about 175 debt collectors, which accounts for over 60 percent of the debt collection industry’s receipts.