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Wednesday, October 24, 2012

CFPB Issues Second Larger Participant Rule

The CFPB published a rule today that will allow the CFPB to supervise the larger consumer debt collectors. The CFPB also released the field guide that examiners will use to ensure that companies and banks engaging in debt collection are following the law.

According to the CFPB, approximately 30 million Americans have, on average, $1,500 of debt subject to collection.

The consumer debt collection market covered by the rule includes three main types of debt collection: firms that may buy defaulted debt and collect the proceeds for themselves; firms that may collect defaulted debt owned by another company in return for a fee; and debt collection attorneys that collect through litigation.

By expanding the supervision program to oversee nonbanks that are larger participants in the consumer debt collection market, the CFPB will now be able to supervise every stage of the process—from the origination of credit to debt collection.

The CFPB’s supervision authority over these entities will begin when the rule takes effect on January 2, 2013. Under the rule, any firm that has more than $10 million in annual receipts from consumer debt collection activities will be subject to the CFPB’s supervisory authority. The CFPB has noted this authority will extend to about 175 debt collectors, which account for over 60% of the industry’s annual receipts in the consumer debt collection market.

Read the rule.
View the field guide for examination procedures.

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