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Consumers who are fed up with aggressive debt collection activities and error-ridden credit reports might be cheered to learn the federal government is set to supervise a number of so-called nonbank financial companies that offer such services.
Specifically, the Consumer Financial Protection Bureau, or CFPB, has announced a proposed rule that would bring the biggest debt collection and credit reporting companies within the agency's new program to supervise nonbank financial companies. That program began last July.
CFPB Director Richard Cordray noted in a statement that consumer financial products and services have become more complex and expanded well beyond traditional banks.
"Our proposed rule would mean that those debt collectors and credit reporting agencies that qualify as larger participants will be subject to the same supervision process that we apply to the banks," Cordray said. "This oversight would help restore confidence that the federal government is standing beside the American consumer."
The proposed rule would subject debt collectors with more than $10 million in annual receipts from debt collection activities to federal supervision. The CFPB estimated this threshold would include approximately 175 debt collection firms, representing only 4 percent of the industry, but 63 percent of annual receipts from such activities.
About 30 million people in the U.S. have debt under collection with an average amount of $1,400, according to a CFPB estimate.
The rule would subject consumer reporting agencies with more than $7 million in annual receipts from such activities to supervision. The CFPB estimated this threshold would include about 30 consumer credit reporting agencies, accounting for an estimated 94 percent of annual receipts from such activities.
The three largest consumer credit reporting agencies track the payment histories of about 200 million people in the U.S. Lenders use this information in the form of credit reports to make decisions about credit cards, home loans, automobile loans and other types of credit.
A "nonbank" is defined as a company that offers consumer financial products or services, but doesn't have a bank, thrift or credit union charter. Examples include mortgage lenders, mortgage servicers, payday lenders, credit reporting agencies, debt collectors and money services companies.
The proposed rule is open for public comment.
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