The CFPB will have regulatory authority over debt collectors who collect money from consumers for personal, household, or student loan debt issued by the federal government. In a way, the CFPB will regulate the government that created it, given that the Department of Education holds nearly $1 trillion in student loan debt.
The agency will require that all debt collectors properly identify themselves, prove and disclose the debs outstanding and due to the collector or the party the collector works for, and create a process through which consumers can settle any disputes. Historically, debt collection has been one of the most controversial parts of the financial industry, as a tangled web of ownership disputes mean that some people pay bills that were never theirs in the first place. On top of that concern, payments towards debts owed to a collector extend the reporting period of the debt on a credit report.
Some 63 percent of debt collectors will have to follow the new rules. The CFPB will not be responsible for regulating the smaller portion of the industry that has less than $10 million in annual revenues. Smaller agents are less nimble, and may work on behalf of small businesses, which would incur an undue burden from new and costly legislation.
This newest move will be the biggest by the bureau, as the number of debt collectors in the United States soared after the 2008 financial crisis, a time when many American families fell behind on payments owed on products ranging from credit cards to home mortgages.
Source:
creditcardflyers.com
