Debt Collectors and Credit Reporting Firms May See Increased Regulation

In the wake of the worst financial crisis the U.S. has seen in decades, the Consumer Financial Protection Bureau, or CFPB, has recently announced a proposal to increase its oversight if two industries that often have a major impact on people struggling to make ends meet: debt collectors and credit reporting agencies.

The two industries would be the first to be included in the CFPB's new nonbank supervision program, which was launched in January. Commentators have observed that the CFPB's initial focus on debt collection and consumer reporting is a likely indicator of its efforts to make changes in areas that have widespread effects on consumers.

With 30 million Americans currently dealing with delinquent debts, formal complaints about creditor harassment are on the rise. At the same time, record numbers of people are struggling with financial challenges like bankruptcy or foreclosure that could affect their credit scores for years to come. As the national economy continues its slow recovery, improved oversight of these two industries could have a major impact on people across the country.

Which Companies Would Be Affected?

Under the current proposal, only "large participants" in the debt collection and credit reporting industries would be subject to the new regulations. For debt collectors, that would include firms with more than $10 million in annual debt collection receipts, about 175 in all. While this makes up only 4 percent of all debt collection firms, those firms control about 63 percent of the debt collection market nationwide.

Similarly, the new regulations would apply to consumer reporting agencies with annual receipts of over $7 million, affecting about 30 agencies or just 7 percent of all credit reporting firms - but those 30 firms do about 94 percent of the business in the industry.

The proposed regulations would require larger firms to grant the CFPB complete access to their books and other records. Smaller firms, while not subject to the same supervision, would still be required to comply with consumer financial laws and regulations. In addition to debt collection and consumer reporting, the CFPB stated in a February press release that it intends to add other industries on a rolling basis.

People struggling with creditor harassment and unmanageable debts should consult with an experienced bankruptcy attorney to discuss the available options and find out if bankruptcy is right for them.