Debt Collection Firms Are Nervous About New Consumer Protection Bureau
Debt collection companies are paying close attention to the newly-created Consumer Financial Protection Bureau (CFPB) because the debt relief and debt collection industries are expected to be targets of the bureau when it officially launches July 21.
The CFPB, which has been under constant attack from Republican lawmakers for everything from the way it’s funded to the choice of consumer advocate Elizabeth Warren as its head, is tasked with cleaning up consumer abuses, enforcing laws over financial institutions, and educating consumers.
“I can promise you that the debt collection agencies and industry are very, very nervous right now,” said Andrew Stoltmann, a Chicago-based securities attorney.
“We, of course, don’t know what will happen in July … and what the bureau will do to curb some of the abuses in the last 10 to 15 years,” Stoltmann said. “But [debt collection is] going to be one of the areas that they attack once the bureau comes into existence.”
Complaints against debt collection companies have exploded in recent years. In Illinois, the state attorney general’s office said that consumer-debt complaints ranked first out of all consumer complaints in 2010. The office said consumer-debt complaints accounted for 1,200 of the 7,035 consumer complaints it received. The Better Business Bureau of Chicago and Northern Illinois said complaints against debt collection companies were up 50 percent, from 19,384 to 29,075, during the previous 12 months (“New Government Bureau to Attack Debt Collection Abuses,” Medill Reports, June 2, 2011).
New Bureau to Fill Holes in Old Debt Collection Law
Debra Speyer, principal of Debra G. Speyer Law Offices, said that debt collection companies have been skirting rules established by the Fair Debt Collection Practices Act of 1977 by using new technologies, like so-called robo-callers, that weren’t in existence with the decades-old law was enacted.
Additionally, the Federal Trade Commission doesn’t have jurisdiction over many industries, including some, like non-profit organizations, that may provide debt collection services, said Mike Croxson, president of CareOne Services Inc., a Maryland-based debt relief company. However, under the CFPB, “everyone providing the service would have to follow the rules,” Croxson said.
Bill Bartmann, chief executive officer of Commercial Financial Services II Inc., a debt collection company in Tulsa, Okla., said that he expects CFPB to act aggressively. “Consumers are going to see and feel the effect very quickly, and changes will take effect immediately,” Bartmann said. “The CFPB has the impact and force of law immediately. Therefore, anybody in violation of the new regulations is going to be prosecuted.”
Republicans in Congress, who have assaulted the CFPB in full force, argue the bureau is an overextension of government power that threatens banks and the financial market. Republicans are attempting to strip funding from the bureau, or have it transferred to Congressional oversight, and have sworn to block the confirmation of Warren as the bureau’s first director.
“I think this is a clear sign how much business interests are fearing what will happen in July,” Stoltmann said.
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