Debt collectors might rank up there with tax auditors in the list least favorite professions, but those who give the profession a bad name will now have to answer to the Consumer Financial Protection Bureau.
As of Jan. 2, 2013, the CFPB will oversee the practices of about 63% of the nation’s debt collection firms.
According to the CFPB, about 30 million Americans have been on the receiving end of a collection call or letter, and the average debt collected is about $1,500 There are approximately 4,500 debt collection firms in the United States that collect an estimated $12.2 billion in annual receipts. Only those that make more than $10 million in annual receipts from consumer debt collection will fall under the CFPB’s purview.
“Millions of consumers are affected by debt collection, and we want to make sure they are treated fairly,” CFPB Director Richard Cordray, said in a press release. “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.”
This shift in authority is relevant to consumers because debt collectors can have a significant impact on your credit report, credit score and ability to finance life’s major purchases.
“Debt collectors often report consumers’ collection status to the credit bureaus. If they get the information wrong, this can be the difference between getting approved or denied for such financial products as a mortgage or a car loan,” CFPB reports.
Once the rule goes into effect in January, CFPB examiners will supervise debt collectors to ensure they:
- Properly identify themselves and properly disclosing the amount of debt owed. The CFPB intends to ensure that debt collectors are upfront and clear with consumers.
- Provide accurate information. Inaccurate information can lead to collectors attempting to collect debt that consumers do not owe or have already paid.
- 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: Debt collectors are prohibited from deceiving consumers to secure debt payment. They are also prohibited from using profane languages with consumers, or repeatedly call, harass, abusing, threaten imprisonment, or threaten to tell the consumer’s employer about the debt.