Jul 25, 2013 Philip Burgess
With Richard Cordray's confirmation as director of the Consumer Financial Protection Bureau (CFPB), short term lenders and debt collectors may soon face further governmental restrictions.
Attorney Chi Chi Wu of the National Consumer Law Center recently noted in the New York Times that while the Federal Trade Commission (FTC) lacked the ability to write debt collection rules, the CFPB has the authority to write and enforce new regulations. With advocates like Wu claiming that the industry needs additional scrutiny, firms have a responsibility to understand the issues and the protections afforded to borrowers.
According to Wu, debt collectors are already involved in 40 percent of credit reporting disputes and additional restrictions may only increase this number. The CFPB recently released five template letters for consumers to use when replying to collection agencies. These letters range from requests for more information to informing collectors that a lawyer has been hired. While the CFPB acknowledges that many collection agencies act reasonably with consumers, the actions of some organizations has resulted in the CFPB taking a firmer stance.
In addition to the letters, the CFPB also created a complaint filing system on July 10. This system is meant for consumers to report any trouble they have had with loans and debt collectors. As this data will be shared with state and federal law enforcement, debt collectors and short term lenders should be aware that behavior consumers view as harassing may lead to legal repercussions. According to Wu, the debt collection industry already receives more complaints to the FTC than any other industry.
As the CFPB is a relatively new regulatory agency, the full extent of its reach has yet to affect financial institutions, though its initial steps have given consumers greater ability to contend with debt collectors.