Proposed rule targets debt collectors, credit agencies

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By Pat Murphy
Dolan Newswires

The new federal consumer protection bureau has proposed a rule that would place large-scale debt collectors and consumer reporting agencies under its “nonbank” supervision program.

“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 Financial Protection Bureau, in a press release.

The rule change would mark the first time that debt collectors and consumer reporting agencies would be subject to federal supervision, according to the Bureau.

“This oversight would help restore confidence that the federal government is standing beside the American consumer,” Cordray said.

Congress created the Consumer Financial Protection Bureau under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The Act authorizes the Bureau to supervise “nonbanks” in the specific markets of residential mortgage, payday lending, and private education lending.

In addition, Dodd-Frank grants the Bureau the authority to supervise “larger participants” in other nonbank markets for consumer financial products or services.

The new regulation proposed by the Bureau is intended to fulfill the Act’s requirement that the term “larger participants” be defined by July 21.

Under the proposed rule, debt collectors with more than $10 million in annual receipts would be subject to supervision. According to the Bureau, under the new rule approximately 175 debt collection firms, which account for 63 percent of the debt collection market, would fall within the scope of the agency’s nonbank supervision program.

The proposed rule also would subject to supervision consumer reporting agencies with more than $7 million in annual receipts. The Consumer Financial Protection Bureau estimates that this would include 7 percent of consumer reporting agencies, specifically the 30 or so companies that account for 94 percent of the annual receipts from consumer reporting.

The Bureau published the proposed rule in the Federal Register on Feb. 17 and will be accepting public comment until April 17.