Starting in Jan, debt collection agencies will be under the supervision of the Consumer Financial Protection Bureau. Many have been waiting for the Consumer Financial Protection Bureau to bring that industry in, but time will tell if it is important.
Taking care of good guys with CFPB
There is a ton of hatred in the debt collectors business, which they most likely deserve considering some of the things collectors do. Though there are good debt collectors out there, there are a ton of bad apples that give the industry a bad name.
In 2011, over 180,000 grievances were made about debt collectors to the Federal Trade Commission, according to the New York Times. That is a ton of growth from 2000 when it was only 13,950 grievances. Much of the bad activity is definitely with smaller firms since only 21 percent of grievances to the FTC were from the top 100 debt collectors.
Many have been waiting for the Consumer Financial Protection Bureau to bring in the industry’s practices and curb abuses and the agency has informed debt collectors that there is a brand new sheriff in town.
Getting guidelines in January
The Consumer Financial Protection Bureau will be in charge of debt collectors officially on January 2, 2013 and will make sure debt collectors are honest and civil in their communications with people. People should always pay their personal loans and other debt, but they also should not be abused when they neglect to. Agencies will have to reconsider their debt practices.
The CFPB is authorized under the Dodd-Frank Act, which created the bureau and its mandate, to regulate “non-bank financial institutions” which deal with consumers.
The only problem with it all is that small businesses are off the hook since only businesses with $10 million or more in annual receipts are being viewed, according to the Washington Post. The New York Times points out that it is still going to be $12.2 billion a year viewed and about 63 percent of business, which is great. However, only 175 of the 4,500 debt collectors are represented in that number.
Get the industry taken care of
It is unknown if this will actually help the customers. Though the top 100 accounted for 21 percent of grievances, that is also a lower rate of complaint; roughly 5 per 1 million people, than for other industries, according to Forbes.
The Consumer Financial Protection Bureau is working on further rules to regulate the industry, but as Forbes points out, regulating the top players is not as pressing as it might seem. By virtue of being the largest firms, they work with the largest creditors, which mean much tighter scrutiny over practices.
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