CFPB Looks to Regulate Debt Collection
According to a recent article by the Washington Post, American households struggling with debt collection have a new ally in their fight to stay out of legal trouble with debt-collection firms: the United States government. Next year, the Consumer Financial Protection Bureau will begin monitoring the practices of these collection bureaus and will start cracking down on common practices implemented by these collection agencies that violate consumer financial laws. The decision will take effect on January 2, when the CFPB will keep a close eye on 175 debt-collection firms that account 63-percent of the industry’s annual revenue.
The CFPB will be concentrating on regulating the information debt-collection firms provide borrowers with when trying to collect. This decision from the government relates to a report done last year by Consumers Union, which discovered debt collectors were filing more lawsuits against borrowers without proper documentation. In the most extreme cases, these collection agencies were suing for debts already paid.
Officials familiar with this industry claim the problem stems from the larger collection firms. Encore Capital Group, for example, one of the largest publicly-traded debt collectors, issued 245,000 lawsuits in 2009, and Suzanne Martindale, a lawyer with Consumers Union, believes legal action of that magnitude is where regulation is most important. “Larger companies tend to be the ones routinely filing mass cookie-cutter lawsuits, having huge databases of information that might be inaccurate, which is part of what causes all of these problems.”
Mark Schiffman, a spokesperson for the Association of Credit and Collection Professionals, hopes for fairness on both sides of the issue: “There needs to be balance between protecting consumers and the ability to do our job,” Schiffman said. “What our members do is important to the economy; we can’t have a credit-based economy without it.”