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New consumer bureau targets bill collectors, credit bureaus

By Tony Pugh, McClatchy Newspapers –

WASHINGTON — The Consumer Financial Protection Bureau wants to place debt collectors and credit bureaus under federal supervision for the first time, after an explosion in complaints about their practices.

The bureau announced a proposed rule Thursday that would make the largest debt collection agencies and credit reporting agencies — including Experian, Equifax and TransUnion — subject to the same oversight process that banks are. It’s the agency’s most ambitious proposal since its creation under the controversial 2010 Wall Street Reform and Consumer Protection Act.

“Consumer financial products and services have become more complex over the years and they have expanded well beyond traditional banks,” said Richard Cordray, the bureau’s director. “This oversight would help restore confidence that the federal government is standing beside the American consumer.”

Under the proposal, about 175 debt collection agencies that each hold more than $10 million in annual collection receipts would be subject to bureau oversight. Those agencies make up only about 4 percent of all collection firms, but they account for 63 percent of annual debt collection receipts.

Only about 30 credit reporting agencies with more than $7 million in annual receipts from reporting activities would face supervision under the proposal. These firms make up about 7 percent of the industry, but they account for nearly 94 percent of industry revenue.

Since the Great Recession hit in 2007, federal consumer lawsuits filed under the Fair Debt Collection Practices Act have more than doubled and complaints about problem collectors have skyrocketed. The 144,000 complaints about debt collectors that the Federal Trade Commission fielded in 2010 were second only to identity theft as the most common consumer complaint category.

A record 11,811 federal consumer lawsuits were filed last year under the Fair Debt Collection Practices Act, up from 4,372 in 2007. The lawsuits and complaints about bill collectors allege illegal contacts with consumers, overly aggressive collection agents and mistaken identities of debtors.

Mark Schiffman, the public affairs director for ACA International, the Association of Credit and Collection Professionals, said the trade group would use the rule’s 60-day comment period to review the bureau’s oversight plan before making public comments.

He said industry leaders wanted to see how their companies would be affected and to make sure the guidelines weren’t “overly burdensome.”

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