On May 16, the Supreme Court rejected a challenge that would affect the future of the Consumer Financial Protection Bureau (CFPB). Established in 2011, the CFPB protects consumers from predatory and irresponsible lenders in the financial sector. A group that includes banks, credit card companies, mortgage lenders, other financial companies, and debt collectors.
As a result of the court’s decision, the federal government will continue to oversee the CFPB.
How Does the Consumer Financial Protection Bureau Work?
The CFPB provides guidance and issues rules and regulations that financial companies must adhere to. The CFPB has a regulatory arm to ensure compliance. The agency fines companies that violate the rules, and offers compensation to mistreated consumers.
In addition to educational components for consumers, the CFPB supervises and inspects banks and others to ensure compliance with the rules. If a company breaks the rules, the CFPB can take action against them.
The CFPB’s Effect on the Debt Collection Industry
The CFPB accepts and encourages consumer complaints against collection professionals and others. When it comes to debt collection, the CFPB also:
- Outlines what constitutes appropriate interactions and necessary disclosures
- Responds to harassment, abuse, unfair practices, and false or misleading representations
The education and oversight the CFPB provides helps debt collection professionals as well as consumers. The CFPB establishes expectations and outlines appropriate conduct for debt collectors. The bureau also provides a template for consumer demand letters, which includes all of the necessary disclosures, rules, and regulations. This helps debt collectors comply with the CFPB and avoid violating the Fair Debt Consumer Protection Act (FDCPA) by way of an inconsistency or technical mistake—not harassing or inappropriate behavior towards consumers.
A professional debt collector acts in accordance with state and federal laws governing debt collection. Those who use abusive tactics may be investigated and shut down by the CFPB. This ultimately benefits the debt collection industry, as predatory debt collectors harm creditors’ reputations and tarnish the collection industry. Taking action against unscrupulous collectors affords consumers the resources to satisfy more legitimate debts.
The CFPB collects tens of thousands of debt collection complaints every year. Its staff investigates each claim, and, when warranted, works with the debt collector to fix their behavior and make things right.
The CFPB doesn’t just wait for complaints though. They regularly monitor and supervise bigger debt collection firms to ensure they aren’t systematically violating consumer protection laws. If they find patterns of misconduct, they can take legal action and issue heavy fines. For example, in 2015, the bureau ordered a major debt buyer to pay $61 million in penalties for using deceptive tactics like inflating amounts owed. And, in 2017, they shut down a crooked debt relief scheme that charged illegal fees.
Ultimately, creditors, debtors, collection agencies, and collection attorneys should support continued federal oversight of the Consumer Financial Protection Bureau. Federal oversight is a win for creditors, debtors, and legitimate debt collection professionals alike.
For more debt collection news and best practices, visit the Frank, Frank, Goldstein and Nager blog.
