By MB Snow at February 16, 2012 | 9:37 am | Print
Debt collectors and credit-reporting bureaus stand poised to be pulled out of the shadows for the first time, in a move that promises more transparency to the surging number of consumers affected by the two industries.
The Consumer Financial Protection Bureau on Thursday proposed a rule that would allow the agency to examine roughly 200 firms, including large debt collectors such as Encore Capital, Asset Acceptance, NCO Group and Portfolio Recovery Associations. In addition, the agency plans to police credit bureaus such as Equifax Inc., Trans Union LLC and Experian Information Solutions Inc. and CoreLogic, which provide consumer information to businesses.
The proposal suggests these two segments of the consumer-finance world will be a priority for the CFPB as it seeks to scrutinize the inner-workings of not just banks, but also thousands of firms that aren?t banks but still offer a wide range of financial services to consumers. The bureau is also planning to police payday lenders as well as nonbank firms that offer home loans and student loans.
?This oversight would help restore confidence that the federal government is standing beside the American consumer,? said CFPB Director Richard Cordray. Congress created the agency through the 2010 Dodd-Frank financial overhaul to curb deceptive financial practices and to examine corners of the financial marketplace that had largely escaped federal scrutiny.
The number of Americans with debt under collection has surged over the past decade to about 30 million Americans, according to data from the New York Federal Reserve. The average amount under collection has also steadily grown over the years to $1,400, based on that data.
The CFPB noted that the market is dominated by three kinds of firms: firms that collect debt owned by another company in return for a fee; firms that buy debt and collect the proceeds for themselves; and debt-collection attorneys and law firms that collect through litigation.
The federal agency is proposing to supervise debt collectors with more than $10 million in annual receipts from debt-collection activities, a group that would cover about 175 firms.
The agency noted that the credit-reporting market also plays a critical role in the consumer-finance world by providing credit reports that banks use to decide whether to extend a loan or that employers may use when deciding who to hire.
via Debt Collectors, Credit Bureaus Face the Spotlight ? WSJ.com.
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