A big part of the Consumer Financial Protection Bureau’s potential to help consumers is its ability to supervise nonbank participants in the financial industry. This far-ranging swath of companies includes some that have been the subject of consumer complaints in the past, such as debt collectors and credit reporting agencies. Today, the CFPB proposed a rule that would give it specific oversight of the largest players in these categories. Under the proposed rule, “Debt collectors and credit reporting agencies that qualify as larger participants are subject to the same supervision process that we apply to the banks,” CFPB director Richard Cordray said in a statement on the agency’s website.
Last summer, the CFPB sought public feedback about what kinds of nonbank companies Americans want the government to step in and police. The draft rule announced by Cordray defines exactly what qualifies a debt collection or credit reporting firm as a “larger participant” in the nonbank arena. The proposed rule is subject to a 60-day comment period during which individuals or companies can weigh in; a final version will be issued by July.
Debt collectors that earn more than $10 million a year would be subject to supervision, as per the rule. The CFPB says this covers only 4% of companies in the debt collection business, but that this subset of the industry is responsible for 63% of all the consumer debts collected every year. Today, 30 million Americans have a debt in collections.
Three billion credit reports are issued every year in the U.S. Credit reporting agencies that earn more than $7 million a year would fall under the CFPB’s supervision. As with collection firms, this represents a very small slice of the market — only 7%— but these 30 or so companies are responsible for 94% of all the credit reporting business, according to the CFPB.
It’s probable that during the comment period, these companies and their trade associations will object to the rule or push for more exemptions, but controversy has been par for the course for the agency since its creation in the wake of the financial crisis. Although the CFPB began operations last July, it was without a director until January, the result of a Congressional filibuster brought by House Republicans who objected to the bureau’s structure and the scope of its powers. The bitter standoff came to a head in January, when President Obama formally appointed Cordray during a Congressional recess.