CFPB to Supervise Debt Collection Agencies
Receiving a phone call from a debt collector can create anxiety and humiliation for people with unpaid balances. In recent years, however, there have been reports of debt collection agencies relying on intimidation, threats, unethical and, in some cases, illegal practices to bully borrowers into paying up. In an effort to put an end to these actions, the Consumer Financial Protection Bureau announced plans to supervise debt collection companies for the first time.
“Millions of consumers are affected by debt collection, and we want to make sure they are treated fairly,” said CFPB director Richard Cordray. “Today we are announcing that we will be supervising the larger debt collectors in the market for the first time at the federal level. We want all companies to realize that the better business choice is to follow the law – not break it.”
The federal watchdog agency highlighted the three types of companies that would fall under its scope of supervision. First, debt collectors that purchase defaulted debt and collect the profits for themselves will be reviewed. Second, agencies that collect unpaid balances for other companies and return the funds for a fee may also be examined. Lastly, the CFPB will gain authority over debt collection attorneys who obtain defaulted debt through legal means. The federal agency noted that by extending supervision to a variety of debt collection participants, it would be in a position to review the entire process from start to finish.
New guidelines for collections agencies
The CFPB also announced the guidelines on which it would rely to ensure that debt collectors are carrying out their practices in a manner that complies with consumer financial law. For example, agencies will be required to properly identify themselves and provide accurate disclosures on balances owed. In addition, they must have a consumer complaint and resolution process in place. Lastly, the CFPB will review whether they are upholding standards of honesty and transparency in their dealings with consumers. The new rules take effect on January 2, 2013.
People who are currently struggling with debt management should educate themselves on their rights to avoid being bullied or unfairly treated by collection agencies. Improper practices should also be reported to the Federal Trade Commission and the CFPB.