Today, the CFPB issued its final rule defining larger participants of the consumer debt collection market. The final rule becomes effective on January 2, 2013. The CFPB acted pursuant to Section 1024 of Dodd-Frank which grants the CFPB the authority to supervise non-bank covered persons for compliance with Federal consumer financial laws. Dodd-Frank automatically gave the CFPB the authority to supervise non-bank covered persons in the residential mortgage, private education lending and payday lending industries. In addition, and relevant to the final rule issued today, Dodd-Frank authorizes the CFPB to supervise non-bank “larger participants” of markets for other consumer financial products and services. (In July, the CFPB issued its final rule defining larger participants of a market for consumer reporting.)
Consistent with the proposed rule, the final rule defines larger participants to mean third-party debt collectors, debt buyers and collection attorneys with more than $10 million in annual receipts resulting from consumer debt collection. When the final rule takes effect on January 2, the CFPB will begin examining entities that qualify as larger participants. To enable its examiners to immediately begin scheduling those examinations, the CFPB released its debt collection examination procedures concurrently with its release of the final rule.
It is important to note that the CFPB claims it also has the authority to examine members of the debt collection industry regardless of their size who act as service providers to banks and companies who are subject to CFPB supervision (i.e., banks, thrifts and credit unions with more than $10 billion in assets, residential mortgage companies and companies that make payday loans and private student loans).
Our Consumer Financial Services Group has created a team of lawyers who have already been assisting debt collectors and debt buyers get ready for their first CFPB contact, be it an exam or the receipt of a civil investigative demand. We are reviewing compliance programs (including relevant policies and procedures) of several debt collectors and debt buyers. On November 6, members of this team will be conducting a webinar on “What Debt Collectors, Debt Buyers, and Collection Lawyers Need to Know About the CFPB Larger Participant Rule and CFPB Exams.” More information on the webinar and a link to register is available here. We will also be issuing a legal alert to provide more details on the final rule.