The rule applies to three types of debt collection firms, including firms that buy defaulted debt and collect the proceeds for profit, firms that collect defaulted debt owned by another company in return for a collection fee, and debt collection attorneys that collect through court proceedings.
Under the rule, consumer debt collection firms with more than $10 million in annual receipts are subject to enhanced supervision by the CFPB. The CFPB noted that this oversight will extend to approximately 175 debt collection firms, which account for more than 60 percent of the industry’s annual receipts.
Data from the CFPB revealed that 30 million American consumers, on average, have $1,500 of debt subject to collection. The CFPB now has the ability to oversee every phase of the consumer debt collection process, from the origination of credit to the collection of debt.
Additionally, the CFPB has released a field guide that will be used by examiners to determine whether firms that engage in debt collection are following federal laws.
According to the field guide, examinations will cover one or more of the following areas: entity business model; communications in connection with debt collection; information sharing, privacy and interactions with consumer reporting agencies; consumer complaints, dispute resolution and debt validation; payment processing and account maintenance; the Equal Credit Opportunity Act; and litigation practices, repossession and time-barred debt.
The CFPB rule is set to take effect January 2.