While Debt Collection Companies and Credit Reporting Agencies are Watching You, Who’s Watching Them?

On May 5, 2011 and June 20 of this year, I wrote about the new Consumer Financial Protection Bureau (CFPB). The anti-big-government contingent in Congress hated the idea of a big bully regulatory agency picking on poor, put-upon, and pitiable financial institutions. Never mind that the new bureau was designed to protect consumers from the types of abuses that contributed to the Great Recession.

Congressional Republicans let it be known that the driving force behind the formation of the CFPB, Elizabeth Warren, would never be approved as bureau director. So Warren decided to turn the tables. While President Obama nominated Richard Cordray to be the CFPB’s director, Warren threw in her hat to run against Republican Senator Scott Brown in Massachusetts.

CFPB Director Richard Cordray

Cordray has been showing that he’s no softy either. The former Ohio attorney general announced on Wednesday that debt collection agencies will come under the scrutiny of the bureau in cases that involve the collection of overdue student loan payments.

According to Edward Wyatt in The New York Times, the U.S. Department of Education holds more than $850 billion in outstanding student loan debt. “Millions of consumers are affected by debt collection, and we want to make sure they are treated fairly,” said Cordray. “We want all companies to realize that the better business choice is to follow the law — not break it.”

You may be familiar with the Dodd-Frank Act (actually, very few folks are all that familiar with it) that attempts to restrain the excesses of the finance industry. Under that legislation, the federal government has the authority to oversee nonbank financial companies.

The CFPB will scrutinize the debt collectors to ensure that they properly identify themselves and accurately disclose the amount of debt owed. The companies must provide a process to resolve any disputes—as well as communicate with consumers–“civilly   and honestly.”

The Federal Trade Commission (FTC) received more than 180,000 complaints against debt collection companies in 2011. The CFPB’s new rules cover approximately 175 companies that each have annual receipts of at least $10 million.  These companies account for almost two-thirds of the $12-billion-plus in annual debt collections of all types.

According to the Times story, a spokesperson for Consumers Union said, “There has been an explosion of shady debt collection tactics in recent years.” She went on to say “Businesses have a right to collect what they are owed but not to harass consumers for debt that has been already paid off or doesn’t belong to them.”

For years, state and local government consumer protection agencies have targeted debt collection agencies. They have accused collectors of abusive practices like harassing them with repeated telephone calls or misleading them by threatening to have them imprisoned for failure to pay debts, which is a nonexistent penalty.

What troubles me is that the while the big boys will come under scrutiny and face penalties, what about those companies that fall under the purview of the law but are too small to rattle the CFPB’s cage? I fear this policy will unintentionally give small offenders the impression that they are getting a free pass.

In any case, if you are in debt and feel you are being harassed or threatened by a collection agency, contact your state attorney general’s office. If the debt is about a student loan, contact the FTC or CFPB (Web site is your best bet). But don’t assume that lets you off the hook if you are in arrears. If you fail to deal with your predicament, you could end up in civil court as the defendant in a lawsuit.

In addition, the CFPB is now accepting complaints about credit reporting agencies, including :

  • Incorrect information on a credit report
  • A consumer reporting agency’s investigation techniques
  • Improper use of a credit report
  • Being unable to get a copy of a credit score or file,      and
  • Problems with credit monitoring or identify      protection services.


Here is a roster of categories that the Consumer Financial Protection Bureau is now covering. If you have a complaint concerning any of these financial areas, go to the CFPB Web site and click the appropriate icon:

  • Mortgages
  • Credit Cards
  • Banking
  • Consumer loans (including vehicles)
  • Student loans
  • Credit reporting