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Verifying the gravity of CFPB exams

Apr 05, 2013 Philip Burgess

The debt collection industry continues to expand, with more agencies beginning to take part in associated activities as a result of the monumental volume of outstanding loans currently held by businesses and consumers today. This trend has given rise to a variety of concerns on behalf of consumers, federal officials and even long-standing debt collection agencies.

As part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Consumer Financial Protection Bureau was established. This entity, in many ways, supplements the Federal Trade Commission and Better Business Bureau in combating abusive or fraudulent debt collection agencies, while its powers in the industry continue to expand.

For example, the CFPB was recently given jurisdiction over the biggest debt collection agencies in the United States, while the agency also proposed a law in March that would allow it to oversee the non-bank student loan industry. Now, a new report has raised a variety of questions related to the upcoming CFPB exams.

A false alarm?
InsideARM recently reported that a story in American Banker which asserted the new CFPB exams would be relatively revolutionary might have been inaccurate. CFPB exams can include information related to everything from the Equal Credit Opportunity Act and communications in connection with debt collection to payment processing and consumer complaints.

The examinations aim to improve the legitimacy of the debt collection agency through assessments and other oversight activities. According the source, the American Bank story purported that the CFPB is just now beginning to "'target'" large, non-bank debt collection agencies, though these entities understand that they have been under the jurisdiction of the agency for months.

More importantly, InsideARM pointed out that the American Banker story drew an inaccurate connection between verified and unverified complaints issued to the FTC. The FTC fields hundreds of thousands of complaints every year, and debt collection-related claims were the second most prevalent in 2012. However, this does not accurately characterize the number of complaints that were made in earnest and corrected.

The source suggested that too many analysts are trying to go a step ahead of the CFPB, and its future rollout of new laws and oversight capabilities. InsideARM asserted that debt collection agencies should simply follow the rules as explained in the Fair Debt Collection Practices Act, and potentially take a step beyond for total quality management of customer relations.

How the best get better
The Portland Business Journal recently explained some of the finer points of excellence in the debt collection industry, stating that some of the most successful and reliable agencies are those that hone in on hiring and training practices. According to the source, one debt collector who has been in the industry for more than two decades takes a pro-consumer approach to all actions.

The news provider noted that establishing a rapport with debtors and building a strong brand image is not the most common thing in the industry, but doing so will often lead to stronger profits and improved customer satisfaction.