US: Consumer agency wants oversight of debt collectors, credit bureaus

Director of the Consumer Financial Protection Bureau Richard Cordray spoke at the Brookings Institution on Thursday, his first public speech since being named director. (Jan. 5)

Πηγή: Washington Post
By Ylan Q. Mui

Feb 16 2012

The Consumer Financial Protection Bureau on Thursday sought to bring debt collectors and credit bureaus under its purview, marking the first time the often controversial industries would be subject to federal supervision.

Under its proposed rule, the CFPB would oversee the nation’s largest debt collectors and consumer reporting agencies such as Experian, Equifax and TransUnion. It is the first attempt by the watchdog agency to define which businesses in the vast swath of nontraditional financial institutions will be subject to the same examination process as banks.

“This oversight would help restore confidence that the federal government is standing beside the American consumer,” CFPB Director Richard Cordray said in a statement.

The watchdog agency became the first federal agency to oversee so-called “nonbanks” after President Obama appointed Cordray as director late last year. But before it can use its power, the CFPB must set standards for which companies make the cut.

The proposed rule sets the bar for debt collection agencies at $10 million in annual receipts. The CFPB estimated that would encompass about 175 firms that account for about 63 percent of the debt collected from consumers each year.

For consumer reporting agencies, the CFPB proposed a standard of $7 million in annual receipts. That includes not only the three major credit bureaus but also roughly 30 smaller firms that compile a broader range of personal information on consumers’ financial lives. The rule would give the CFPB authority over about 94 percent of the industry by receipts.

The power to oversee nonbanks was a key component of the new agency’s design, and the CFPB has quickly flexed its muscle. It has already convened hearings on payday lending and plans to propose new rules for mortgage servicers.

The agency said it will continue to roll out guidelines employing a variety of criteria to define businesses that will be subject to supervision.

“This is going to be a very important way for us to interact with industry participants to know exactly what they’re doing,” Cordray said. He added that the power could be more efficient than using the “blunt instrument of lawsuits.”