The United State’s consumer finance watchdog agency (The CFPB) will now monitor the day-to-day operations of collection agencies and junk debt buyers.
This is the first time that collection agencies’ day to day business practices have been subjected to federal scrutiny since the 1980’s.
This expands the oversight of the Consumer Financial Protection Bureau (CFPB). The agency was set up after the financial crisis of 2008 to protect consumers from misleading marketing, unfair fees, and other harmful practices.
Collection agencies have long been criticized for unethical business practices like calling employers, friends, or relatives of debtors and disclosing private financial information in order to embarrass the debtor into paying the debt. Some of the practices violate federal laws like the FDCPA which provide protection against harassment and intimidation.
About 30 million Americans have, on average, $1,500 of debt that is in collections. That information is then reported to credit bureaus (Equifax, Experian, and TransUnion), which lowers consumer’s credit scores. Collection agencies have the power to affect a person’s ability to finance a car, home, or even get a job.
The CFPB already supervises mortgage companies, private student lenders and payday lenders. Those industries were placed under its watch in the 2010 overhaul of financial laws, which established the agency.
Collection agencies are a part of the second group, after the credit bureaus, that the agency is choosing to include in its supervision program. The CFPB started overseeing the credit bureaus last month.