* CFPB says it will supervise these companies like banks
* CFPB releases proposed rule on supervising the industries
* Rule would cover about 175 debt collectors
By Dave Clarke
WASHINGTON, Feb 16 The new U.S. Consumer
Financial Protection Bureau released a proposal to regulate
about 200 debt collectors and companies that produce credit
reports as part of an effort to extend its oversight beyond the
The agency is charged by the 2010 Dodd-Frank financial
oversight law with overseeing consumer financial products, such
as credit cards and mortgages offered by banks, as well as some
products offered outside the industry, including residential
mortgages and student loans.
It also has the authority to extend its oversight to
companies that are "larger participants" in consumer financial
Debt collectors and credit reporting agencies are the first
industries to be targeted for supervision under this power.
CFPB Director Richard Cordray said these industries were
chosen, in part, because of the increased role they are playing
in consumers' lives following the economic downturn triggered by
the 2007-2009 financial crisis.
Cordray also noted that credit reports now play a bigger
role in whether consumers can get a loan and are also used by
some employers when making hiring decisions.
"This is a very important influence on people's lives,"
Cordray said of the industry. "Often shadowy, often not
understood by them, and that is one of the reasons why we wanted
to make this one of our first priorities."
On Thursday, the agency laid out its plan for overseeing
these markets in a proposed rule that will be out for 60 days of
Under the proposal, the agency would oversee the biggest
players in these markets -- debt collectors with more than $10
million in annual receipts and credit bureaus that bring in more
than $7 million annually.
This would cover about 175 debt collectors and 30 credit
reporting firms, the agency said.
Credit reports quantify a consumer's creditworthiness and
are used by banks and other lenders to determine whether to
provide a loan or what interest rate should be charged.
The largest companies in this industry include Experian
, Equifax and TransUnion.
Equifax spokesman Tim Klein said in an emailed statement
that the company looks forward to working with the CFPB.
Experian spokesman Gerry Tschopp said the company has
been working with the agency since last year and that "we remain
committed to meeting consumers' and clients' needs within
Debt collectors do not use a single business model. Some try
to get money from delinquent customers for a fee, while others
buy customers' debt from lenders and then try to recover what is
The industry is less concentrated than the consumer
reporting market. Among the top companies are Encore Capital
Group Inc and Asset Acceptance Capital Corp.
Debt collection firms are examining the CFPB rule and will
work with the regulator as it puts in place its new supervisory
powers, said a spokesman for ACA International, an industry
CFPB estimates that 30 million U.S. consumers are the
subject of a collection effort, with $1,400 being the average
Cordray said that debt collectors have more complaints
lodged against them by consumers than any other industry in a
database maintained by the Federal Trade Commission.
Some debt collectors have recently run into trouble with
Last month Asset AccepGerance LLC, a division of Asset
Acceptance Capital, agreed to pay a $2.5 million civil penalty
as part of a settlement with the FTC and Justice Department over
charges that it used deceptive collection practices.
The CFPB and FTC have agreed to coordinate oversight of
markets where they both have jurisdiction.
Cordray said that the bureau intends to put out rules that
would allow the agency to supervise other markets under its
"larger participant" authority. He did not provide a time line
for these decisions.
When the agency sought public input in June on what
industries it should oversee, it named prepaid cards and check
cashing services as industries officials wanted to learn more