Debt collectors, credit agencies get new scrutiny

@CNNMoney February 16, 2012: 2:19 PM ET
Richard Cordray, the new director of the Consumer Financial Protection Bureau, is targeting debt collectors and credit reporting agencies.

Richard Cordray, the new director of the Consumer Financial Protection Bureau, is targeting debt collectors and credit reporting agencies.

WASHINGTON (CNNMoney) -- For the first time in history, debt collectors -- the guys who hound you over unpaid bills -- are about to get a tough federal regulator scouring their own books.

The Consumer Financial Protection Bureau on Thursday released a new proposal to regulate the largest debt collection agencies and consumer reporting agencies, which includes credit bureaus that sell consumer credit reports.

"Our proposed rule would mean that those debt collectors and credit reporting agencies that qualify as larger participants are subject to the same supervision process that we apply to the banks," said Richard Cordray, director of the consumer bureau. "This oversight would help restore confidence that the federal government is standing beside the American consumer."

The move could impact consumers nationwide. Some 30 million Americans have debt under collection, and the average unpaid debt was around $1,400, according to the bureau.

6 new tools to help you get out of debt

With so many consumers struggling with unemployment and debt, Cordray said that more Americans are at the mercy of debt collectors and credit reporting companies, which employers are increasingly consulting before making hires.

Cordray said that employers' use of credit reports in hiring decisions "may not always be fair for consumers, but it reflects the reach and scope and importance of the consumer reporting field."

The end of paid credit report monitoring?

And that's why the bureau has decided to target those who gather and crunch consumer financial data, as well as those who chase unpaid bills. The consumer bureau will also be announcing what other kinds of nonbanking financial firms it plans to scrutinize in coming months, Cordray said.

With Obama's recess appointment of Cordray to director of the consumer bureau, new powers kicked in for the bureau regulating the largest nonbanking financial firms, including payday lenders and for-profit student lenders.

Extreme debtors

While the bureau generally has the ability to create and enforce rules for all debt collectors and credit reporting agencies, it has special oversight powers over the largest participants, thanks to the Dodd-Frank financial reform act. The bureau can march into the offices of the largest nonbanking entities and look at their books to make sure they're giving consumers a fair shake.

Cordray called the bureau's supervision power "more effective" when it comes to helping consumers, as opposed to the "blunt instrument" of filing lawsuits -- a recourse against firms that don't abide by the bureau's enforcement powers.

The new proposed rule lays out which debt collectors and credit reporting firms are subject to closer scrutiny. The consumer bureau will gather comment and finalize the rule by July 21.

For debt collectors, it's a smaller piece of the market, since so many debt collectors are small companies.

The rule released Thursday would put about 175 debt collectors with more $10 million in receipts under the consumer bureau's closely watched list. The bureau says that would cover roughly 4% of about 4,500 debt collection companies in the United States. However, that 4% makes up 63% of the outstanding debt these firms are after.

For credit reporting firms, the bureau will have a broader reach. They will be able to regulate and scour the books of firms with more than $7 million in receipts --some 94% of the outstanding debt covered by the firms, including Equifax, Experian and TransUnion. To top of page

Overnight Avg Rate Latest Change Last Week
30 yr fixed3.80%3.88%
15 yr fixed3.20%3.23%
5/1 ARM3.84%3.88%
30 yr refi3.82%3.93%
15 yr refi3.20%3.23%
Rate data provided
View rates in your area
Find personalized rates:
Economic Calendar
Latest ReportNext Update
Home pricesAug 28
Consumer confidenceAug 28
GDPAug 29
Manufacturing (ISM)Sept 4
JobsSept 7
Inflation (CPI)Sept 14
Retail sales Sept 14
  • -->

    Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.