Debt Collectors Face New Supervision by Consumer Watchdog Agency

consumer protection against debt collectors

consumer protection against debt collectorsBeginning January 2013, the nation’s largest debt collection companies will face new oversight by the Consumer Financial Protection Bureau (CFPB).

Richard Cordray, CFPB Director said “Millions of consumers are affected by debt collection, and we want to make sure they are treated fairly.”  This is great news for the millions of consumers adversely affected by debt collectors who routinely ignore fair debt collection practices rules and regulations.

Other than complaining to the Federal Trade Commission (FTC); and your state’s Attorney General, consumers had little recourse in dealing with deceptive debt collectors. Of course you can bring about a lawsuit for violations of the Fair Debt Collection Practices Act, but that involves hiring an attorney which can be costly.

Now consumers have a watchdog federal authority that will aid in protecting consumers against abusive debt collectors.

Starting January 2, 2013, any debt collection company with more than $10 million in annual receipts from consumer debt collection activities will be subject to supervision by the CFPB.

This means approximately 175 debt collectors nationwide will be under scrutiny. Even though this is only 4% of the debt collectors; it accounts for over 60% of the industry’s annual receipts in the consumer debt collection market.

The authority to create new rules stems from the Dodd-Frank financial reform legislation passed in 2010. Input was sought from consumer and industry groups.

Federal examiners will be able to inspect a wide array of materials from the large debt-collection companies, including organizational charts, telephone recordings, compensation policies, consumer files, employee scripts and training procedures.

CFPB Director Richard Cordray said in a statement. “… We want all companies to realize that the better business choice is to follow the law — not break it.”

Prior to the new rules, regulators reacted only to consumer complaints. Now, they will be taking a proactive stance with debt collectors.

While a major debt collector trade organization, ACA International, is disappointed with the new rules, consumers facing debt collection should be rejoicing. Finally, consumers have some much needed extra enforcement when dealing with debt collectors.

The new law will help ensure consumers are dealt with fairly and respectfully. Federal examiners will be evaluating whether debt collectors treat consumers fairly and humanely in a manner consistent with the law.

The FTC is inundated with debt collection complaints. In fact, in 2011, consumers filed a record 180,000 complaints with the FTC related to debt collection. Consumers have cited harassing profanity laced phone calls, unauthorized electronic withdrawals from bank accounts, attempts to collect debts never incurred and court judgments entered without proper notification.

There was even a case this year involving calls about phantom payday loan debt where consumers who never even took out a payday loan were getting debt collection calls. Somehow the bottom-feeder debt collector obtained contact information for consumers who had applied online for a payday loan but never received the loan. The characters then posed as law enforcement or government officials while calling consumers threatening arrest if they did not pay up.

After enough consumer complaints, the FTC got involved and shut the fraudulent operation down. But this is only after a large amount of consumer complaints. That’s how the Federal Trade Commission works when it comes to debt collectors. As stated earlier, they react to complaints.

The new laws and supervisorial authority of the CFPB will now be able to proactively examine the nation’s largest debt collectors before they can pull off fraud operations, engage in unlawful practices and take money from consumers.

 

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