The new Consumer Financial Protection Bureau is planning to crack down on illegal debt collection practices more aggressively than any government watchdog has ever before, according to bureau Director Richard Cordray.
At a conference of state attorneys general on Tuesday, Cordray said that the CFPB is developing a rule that would allow for formal federal supervision of debt collectors, a first in the industry. Under the rule, the bureau would be able to send examiners on-site to debt collection firms to take a look at their operations and determine if the firm is complying with the law. The proposed rule comes on the heels of the CFPBâs February announcement that it plans to supervise all debt collection firms in the U.S. with more than $10 million in annual receipts.
Cordray characterized some debt collectorsâ methods as âjust unconscionableâ and that “the worst practices undermine our basic humanity, turning people into mere account-ledger entries and spawning treatment that flatly disregards all common courtesy on the way to violating the law.” Cordray noted that the supervisory efforts under the new rule would cover more than 60 percent of debt collection market activities.
“We will set forth our expectations through public examination procedures, encourage robust compliance programs, communicate expectations confidentially to the entity throughout the examination and rating process and ensure appropriate corrective action where necessary,” Cordray said. âBy comprehensively assessing large collectors, as well as many of the bank creditors who originate the debt, supervision would allow us to understand and address the systemic problems posing risks to consumersâ (âNew Consumer Watchdog Agency Targets Debt-Collection Practices,â The Wall Street Journal, March 6, 2012).
Debt collection remains a top source of consumer complaints, despite action over the years by the Federal Trade Commission and state officials, as the number of Americans with debt under collection has increased dramatically over the past decade to 30 million. Cordray said that the CFPB would bring a new tool to the fight against illegal activity and fraud in the debt collection industry and that the bureau would rely on cooperation with federal and state agencies, including the FTC and state attorneyâs general, to âtransform this situationâ and affect change in the debt collection industry in a more lasting way.
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