The Consumer Financial Protection Bureau (CFPB) on February 16, 2011 announced a
proposed rule to include debt collectors and consumer reporting agencies under its nonbank
Created by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB is
authorized to supervise nonbanks in the specific markets of residential mortgage, payday
lending, and private education lending. For other nonbank markets of consumer financial
products or services, the CFPB must define “larger participants” by rule, which is due on
July 21, 2012.
Three types of debt collection agencies dominate the market: firms that collect debt owned
by another company for a fee, firms that buy debt and collect the proceeds for themselves,
and attorneys and law firms that collect debt through litigation. A single company may be
collecting through any or all of these activities. Under the proposed rule, debt collectors
with more than $10 million in annual receipts from collection activities would be subject to
supervision. The CFPB estimates that the proposed rule would cover approximately 175 debt
collection firms (or 4% of debt collection firms) which account for 63% of annual receipts
from the debt collection market.
The CFPB’s proposal also takes aim at the largest credit bureaus selling comprehensive
consumer reports, consumer report resellers, and specialty consumer reporting agencies.
Defined as companies that make more than $7 million annually from their consumer
business, the rule would affect 30 companies, and firms like Experian, TransUnion and
Equifax, that account for 94% of the industry’s business.
This is the CFPB’s first in a series of rulemakings to define larger participants. The CFPB
chose annual receipts as the criterion for both debt collection and consumer reporting
because it approximates participation in these two markets.
The proposed rule is open for comment for 60 days after the rule is published in the Federal