What the Consumer Financial Protection Bureau Means for Small Collections Firms

Due to recent changes that the Obama administration made in creating the Consumer Financial Protection Bureau, beginning January 2, 2013, there will be a federal agency that will oversee the country’s largest debt collection firms.  Under the new regulations, the Consumer Financial Protection Bureau (CFPB) will oversee any debt collection firm that brings in annual profits of more than $10 million.  Companies that do not meet this $10 million minimum will not be included in the CFPB’s crosshairs for increased regulation and oversight. 

The CFPB’s aim is to ensure that debt collectors follow the regulations and consumer protection practices that the Consumer Protection Act requires, including civil communication with debtors and maintaining fair debt collection practices.  However, although there are approximately 4,500 debt collection firms in the country, approximately 175 of these collections firms will be under the scrutiny of the Consumer Financial Protection Bureau.  The remainder will continue to be under the general regulations of the Federal Trade Commission but will not be under such close scrutiny. 

This recent push is due to the Federal Trade Commission’s attempt to crack down on unfair debt collection practices such as calling more than a certain number of times a day, harassing debtors at their place of employment, and calling outside of the hours of 8 a.m. to 9 p.m. in the debtor’s local time zone.  According to an FTC spokesman, the agency received 180,000 complaints in 2011 due to actions initiated by debt collectors in the attempt to collect upon unpaid debts that violated these restrictions, among others. 

While the FTC will continue to focus on collections firms of all sizes, the CFPB will regulate and enforce consumer protection law on the 175 firms that turn the biggest profits from collections.  This means that the smaller collections firms can breathe a sigh of relief that their own debt collections practices won’t be under such close scrutiny, although they must still follow the restrictions set forth in the Fair Debt Collection Practices Act.