CFPB Commences Regulation of Debt Collectors

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The Consumer Financial Protection Bureau, or CFPB, has published a rule that will allow the agency to federally supervise the larger consumer debt collectors for the first time. The CFPB also released the field guide that examiners will use to ensure that companies and banks engaging in debt collection are following the law.

The consumer debt collection market covered by the rule includes three main types of debt collection:

• firms that may buy defaulted debt and collect the proceeds for themselves;

• firms that may collect defaulted debt owned by another company in return for a fee; and

• debt collection attorneys that collect through litigation.

The CFPB’s supervision authority over these entities will begin when the rule takes effect on January 2, 2013. Under the rule, any firm that has more than $10 million in annual receipts from consumer debt collection activities will be subject to the CFPB’s supervisory authority.

Pursuant to the CFPB’s supervision authority, examiners will be assessing potential risks to consumers and whether debt collectors are complying with requirements of federal consumer financial law. Among other things, examiners will be evaluating whether debt collectors:

Provide Required Disclosures: Examiners will evaluate whether debt collectors are properly identifying themselves and properly disclosing the amount of debt owed.

Provide Accurate Information: Examiners will assess whether debt collectors are using accurate data in their pursuit of debt.

Have a Consumer Complaint and Dispute Resolution Process: As part of the CFPB’s compliance management review, examiners will assess whether complaints are resolved adequately and in a timely manner, whether the complaints highlight violations of federal consumer financial law, and whether the debt collector has a process in place to address consumer disputes.

Communicate Civilly and Honestly with Consumers: Examiners will be assessing whether debt collectors have harassed or deceived consumers in pursuit of debt.

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