Debt collectors and credit reporting agencies will face new federal scrutiny under a proposal from the Consumer Financial Protection Bureau, officials announced this month. After signing a pledge with the Federal Trade Commission to avoid doubling up on bank investigations, CFPB Director Richard Cordray issued a statement to reporters about his agency's goal to bring more "nonbank" financial companies under federal oversight.
According to Cordray, the Dodd-Frank Wall Street Reform and Consumer Protection Act gives the CFPB a July 21 deadline to define the kinds of companies and businesses it intends to regulate. With 30 million Americans facing collections activity on defaulted credit cards, mortgages, and auto loans, Cordray said that many collections agencies fit the definition of the "larger participants" in the financial marketplace that his agency was designed to investigate.
CFPB data show that just 4 percent of collection agencies control 63 percent of the industry's annual revenues. Cordray's proposal would apply new federal rules and oversight to the 175 companies that exceed a $10-million annual revenue threshold. The agency's release did not specify how it intends to regulate companies that use many small subsidiary firms because of variations in state licensing rules.
Credit reporting agencies face government scrutiny
The three major consumer credit reporting agencies, Equifax, TransUnion, and Experian, maintain more than 200 million consumer credit files, according to the CFPB, while a total of 30 agencies provide 94 percent of the consumer credit reports used by major lenders. Errors in consumer files can result in rejected credit card applications, increased loan interest rates, and even rejected employment offers.
Under the CFPB proposal, the agency would begin oversight of any consumer reporting agency with more than $7 million in annual receipts. The CFPB invited Americans to participate in a 60-day public comment period that began with the publication of the proposed rule in in the Federal Register on Feb. 16.