CFPB Finalizes Oversight of Large Debt Collectors

October 24, 2012 at 7:15 am 1 comment

The CFPB will announce today that it will start regulating debt collectors with $10 million or more in assets as part of its authority under the Dodd-Frank Act to regulate non-bank financial actors.  The regulation will have no direct impact on credit unions, which are not debt collectors under federal law.  In addition, since many debt collectors do not reach the regulatory threshold, the majority of them will not be subject to direct examination by the CFPB.  Nevertheless, this is a proposal that will impact the industry.  Here’s why:

  • The standards promulgated by the CFPB become the de facto legal standards for appropriate conduct on the part of debt collectors.  So, even if a debt collector doesn’t meet the CFPB threshold, it would be foolish not to follow whatever practices the CFPB says large debt collectors should.
  • Debt collection is likely to become more expensive and time consuming for everyone.  Again, credit unions are not subject to these regulations, but there are already plenty of state laws on the books and the more requirements placed on the means that can be used to collect a debt, the more expensive it will be for everyone.  For example, I recently highlighted a case involving an unsuccessful attempt to collect a delinquent student loan on a person who had declared bankruptcy almost a decade ago.  The court’s ruling that the debt collector acted improperly in seeking to recoup the debt is the type of thing that makes it more expensive for everyone to collect a debt whether or not you are a debt collector.
  • Without defending some of the more heinous debt collection activities that you hear about, it is important to remember that the simplest way to avoid any of these problems is for consumers to pay off their debts in a timely manner and at the very least to reach out and work with their lenders when they are unable to do so.  Let’s not forget that the consumer has some responsibilities here.

Entry filed under: General.

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1 Comment Add your own

  • 1. Michael Murrock  |  October 24, 2012 at 9:46 am

    Obviously the courts have forgotton that “the consumer has some responsibilities here.”

    Reply

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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