The nation’s largest debt collection firms will be under federal scrutiny for the first time, as the federal Consumer Financial Protection Bureau (CFPB) swings the full force of a federal financial protection law at bill collectors in 2013.
As of Jan. 2, the first business day of 2013, 175 debt collection companies, each of them accounting for $10 million a year in receipts, will face new regulations designed to keep bill collectors from unnecessarily hounding debtors.
“Millions of consumers are affected by debt collection, and we want to make sure they are treated fairly,” said Richard Cordray, director of the CFPB, in an Oct. 23 statement. “We want all companies to realize that the better business choice is to follow the law- not break it.”
Bureau examiners will determine whether debt collectors are complying with requirements of federal consumer financial law, including providing consumers with disclosures and accurate information.
are also set to investigate whether consumers are being harassed or deceived in the pursuit of unpaid debt.
complaints and requests for financial documents from and by debt collection agencies will be overseen by the CFPB, meaning that debt agencies will answer directly to the federal organization.
It will also mean that the firms under contract with the Department of Education to collect an estimated $850 million in outstanding federal student loans will have to play fair, too.
Stepped up enforcement of rules that, until now, consumers have had to rely on courts to enforce, will put more pressure on the collection firms which, according to the Federal Trade Commission, were the targets of more than 180,000 complaints in 2011, compared to 13,000 in 2000.
umbrella organization for debt collection firms, ACA International, says their members are unfairly targeted. The rules are arbitrary and consumers can easily file complaints online, the group says.
The CFPB will require that when debt collectors approach debtors, they must disclose their identity and accurate data on the true amount of debt owed in clear language. Debt collectors will be forced to conduct business honestly and civilly under clear instruction to refrain from “engaging the consumer in telephone conversations repeatedly or continuously with intent to annoy, abuse, or harass.”
Roughly 30 million Americans have an average debt of $1,500 that could be sent to a collection agency. This debt can lower credit scores and makes it harder to acquire necessities such as a home, education, or a vehicle.