New Debt Collection Rules Restrict Collection Firms, Help Consumers
November 27, 2012
The ARM (News - Alert) sector is impacted by the new debt collection rule from the Consumer Financial Protection Bureau (CFPB). It will redefine who is considered to be a “larger participant” in the debt collection market.
The new rule comes as debt buyers, third party debt collection agencies, and law firms doing commercial collection with revenue over $10 million a year find themselves under supervision by the CFPB beginning Jan. 2, 2013.
About 175 ARM companies out of some possible 4,500 companies may be impacted by the agency’s final rule. The 175 firms represent over 60 percent of the industry’s annual receipts in the consumer debt collection market.
Also, the CFPB may supervise smaller collection agencies, especially if they do work for larger companies. The agency could also supervise a company if it suspects the firm “poses a risk of harm to consumers,” according to Inside ARM.
The number of consumer complaints filed about a firm will lead to determining which firms are “risky.” The new law/regulation requires debt collectors to be more transparent and honest. It also will help ensure a firm has the right data on consumers. Also, it requires that there is a dispute resolution process. It will restrict any harassment of consumers.
About 10 percent of Americans are dealing with debt collectors, according to data from the CFPB. “Approximately 30 million Americans have, on average, $1,500 of debt subject to collection,” the agency said in a recent statement. “Debt collectors often report consumers’ collection status to the credit bureaus. If they get the information wrong, this can be the difference between getting approved or denied for such financial products as a mortgage or a car loan.”
The bureau monitors banks, credit cards, credit reporting, debt collectors, payday loans, private education loans, and residential mortgages, according to TMCnet.
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Edited by Brooke Neuman