WASHINGTON - JULY 21: U.S. President Barack Obama signs the Dodd-Frank Wall Street Reform and... [+]
As expected, the Consumer Financial Protection Bureau (CFPB) has released its Final Rule Defining Larger Participants of the Consumer Debt Collection Market for purposes of who will be "supervised."
Supervised, in this case, means this:
- An initial conference between a CFPB examiner and company management during which documents and records may be requested
- A review by examiners of the company's compliance system
- An on-site investigation of whatever scope is deemed appropriate based on the initial review - which likely includes discussions with management about the company’s processes and procedures; a review of documents and records; and more focus on compliance management systems
- Issuance of confidential examination reports, supervisory letters, and compliance ratings
In plain English, this is the latest in a string of promises made good by the CFPB to enforce the Dodd Frank Wall Street Reform and Consumer Protection Act by increasing oversight of those industries that have the greatest effect on consumers’ finances. These so far include banks, credit cards, credit reporting, residential mortgages, private education loans, and payday loans.
Today, they've added debt collectors to the list – but just the big ones. This means about 175 of 4,500 companies that officially meet the definition of a debt collector (I would put out there a high likelihood of many, many more entities in operation that aren’t “official”).
Well, you've got to start somewhere, and clearly the new government agency doesn't have the resources to do an in-depth investigation of 4,500 companies. Nobody is saying that these firms shouldn't be regulated. However, what you've got here are those companies that are most likely to be following the rules.
By virtue of their size, they tend to work for the largest creditors, which tend to have rigorous vetting and compliance requirements. Because they are big, it’s much harder to “fly under the radar” the way a smaller firm can. And because they are big, they are already an easily identifiable target for both the public and regulators.
Based on research by insideARM.com, the 100 companies complained about most represented only 21% of the total complaints received by the Federal Trade Commission in the first quarter of 2012. And of those companies, on average, the complaint rate is approximately five (5) per one million consumer contacts. That’s a better rate than most industries dealing with consumers.
So this Final Rule by the CFPB is likely an important piece of the pie, but it only addresses a slice or two. The majority of that pie is still out there – and is really hard to identify (these are the “companies” that don’t identify themselves when asked by a consumer, or who call themselves things like “Federal Bureau of Crime and Investigation”) which perhaps explains why the Agency wouldn't start with those other slices.
Stephanie Eidelman is president & publisher of insideARM.com, the leader in providing insightful information and commentary on the accounts receivable management (ARM) - or debt collection - market. Stephanie was the primary author of insideARM's FTC Collection Complaint report for Q1 2012 and has spent many, many hours reviewing consumer complaints against debt collectors, attempting to determine who is actually being complained about. Turns out it's not so easy.
