Is The Consumer Finance Bureau Becoming Draconian Like In Its Attempts To Audit And Control Collection Firms?

The Consumer Financial Protection Bureau is in charge of overseeing banking practices so that consumers are protected from abusive tactics.  It was created in 2010 as one of the parts of the 2010 Consumer Protection Act, and while most people will agree that the consumer must be protected against abuses it needs to be asked if the bureau is actually overreaching in an attempt to audit collection agencies.

Last January 2013, CFPB declared that any party with greater than $10 million in annual revenue from consumer debt collection activities will be subject to the Bureau's audit. The 3 major categories of debt collection included under the rule are:  (1) firms that buy defaulted debt and collect the proceeds for themselves; (2) firms that charge fees for collecting defaulted debt owned by another company; and (3) debt collection attorneys that collect through litigation.  This is the first time that the federal government will supervise collection attorneys.  Because of this, the CFPB will start overseeing about 175 debt collection agencies, representing more than half of the debt collection industry's annual receipts.

Why Collection Firms Are Targeted

Collection agencies and firms seem to be targeted a lot more because it is up to consumers to complain about practices.  Since no one likes to be called about a payment (even when they know they owe the money), it is more likely that they will complain to the Consumer Financial Protection Bureau.  That means that the more complaints, even when they are not justified, make it more likely that a firm will be paid closer attention to.

Is It Fair?

While there are some collection agencies which have made mistakes and in some cases even overstep the things they can and cannot do, most firms are responsible in their practices.  Collection firm owners and workers will be happy to see an abusive firm go off the market, but unfortunately a lot of the good players in the industry are also suffering the consequences.  Some will be happy to make the industry look bad which means the firms have to pay a fine plus legal fees even when the complaint seems to be a little unjustified.

What Firms Can Do

The one thing that the best firms have been doing is to ensure that their personnel have the latest in training so that they can stay updated with the latest changes in the industry.  The bureau can propose changes in the laws at any time and if adopted the firm must comply from day one.