The Consumer Financial Protection Bureau has debt-collection firms and credit-reporting agencies on its radar with a new proposal to oversee these entities.
The consumer watchdog agency Thursday laid out its plan to regulate large nonbank financial companies. The proposal marks the first attempt by federal regulators to govern these nonbank companies.
“Our proposed rule would mean that those debt collectors and credit reporting agencies that qualify as large participants are subject to the same supervision process that we apply to the banks,” Richard Cordray, director of the CFPB, said in prepared remarks.
The rule means that debt collection firms and credit bureaus would be monitored for practices that are deemed unfair and harmful to consumers.
Watching “larger” participants”
Under the rule, the CFPB will provide oversight on debt collection agencies with $10 million or more in annual receipts and credit reporting agencies with $7 million or more in annual receipts.
According to the CFPB, the rule will impact about 175 firms (4 percent of all firms) that account for 63 percent of the annual debt collected from consumers. These firms include agencies that collect debt for other companies, agencies that buy outstanding debt and agencies the collect debt through legal channels.
The CFPB also estimates that 30 credit reporting agencies, including the three major credit bureaus (i.e., Equifax, Experian and TransUnion), will be affected by the proposed rule. Encompassing 94 percent of the industry, these agencies track consumers’ financial history and behavior and sell consumer reports.
The consumer watchdog agency is responsible, under the Dodd-Frank Act that created it last summer, for supervising “larger participants” in nonbank financial markets. To be issued by July 21, 2012, the rule defines these participants.
“This oversight would help restore confidence that the federal government is standing beside the American consumer,” said Cordray.