Debt Collectors Get More U.S. Consumer Bureau Oversight

The debt-collection business faces greater U.S. oversight as the Consumer Financial Protection Bureau begins writing the first regulations under a federal law governing the industry and probes for violations.

“We will be looking to write some new rules as well as continue to pursue a lot of enforcement work we’ve been doing,” Richard Cordray, the CFPB’s director, said in an interview yesterday.

The 2010 Dodd-Frank Act that created the bureau also authorized it to write regulations under the Fair Debt Collection Practices Act of 1977. It can oversee debt collection from when credit is extended -- such as via credit cards issued by JPMorgan Chase & Co. or Capital One Financial Corp. -- through the purchase of charged-off debt by companies including Portfolio Recovery Associates Inc. and Encore Capital Group Inc.

Mark Schiffman, a spokesman for ACA International, a collectors’ trade group, said the industry supports efforts to have “less gray and more black and white” in how to comply with the debt-collection law.

“We’ve anticipated they’d look at how they oversee the industry,” Schiffman said in an interview. “And we’re not necessarily opposed to new rules.”

The debt-collection business has become part of the lives of the roughly 1 in 10 Americans being pursued by debt collectors, Cordray said.

‘Really Matter’

The agency’s work “will really matter to Americans who often feel harassed and oppressed, or are being chased over debts they don’t think they owe,” Cordray said.

Earlier this year, the agency commenced the first direct federal supervision of debt-collection companies, assigning examiners to scrutinize every aspect of the business.

On July 18, CFPB announced it would open its consumer response system to complaints about debt collection, and is allowing submissions to be directed at both collectors and the original lender. The same day, it announced that banks, exempt from the requirements of the 1977 law, would also have to take steps to avoid mistreating consumers in debt collection.

The bureau yesterday directed companies that furnish information to credit bureaus such as Experian Plc, TransUnion Corp. and Equifax Inc., to respond to consumer inquiries disputing the data. Debt collectors sometimes provide information to the credit bureaus on whether consumers pay debts.

Rules Outdated

When Congress passed the debt-collection law, it didn’t give the agency responsible for its enforcement, the Federal Trade Commission, streamlined authority to write regulations that would ensure the act kept pace with time. As a result, Cordray said, provisions on how debt collectors are allowed to contact consumers reflect the use of mail and the telephone at a time when e-mail and social media use are widespread.

Cordray said that one goal of the agency is to clarify the rules and break a trend in which debt-collection practices are controlled by the outcomes of lawsuits “in courtrooms across the country.”

“Debt collection has become a litigation-heavy industry,” Cordray said. “That’s not very good for consumers and it’s been quite problematic for a lot of consumers who end up having their wages garnished and other things without any real effective ability to contest these lawsuits because they don’t have legal representation.”