CFPB Will Investigate Large Debt Collection Agencies

The Consumer Financial Protection Bureau (CFPB) recently announced that it will begin to supervise large debt collection agencies on January 2, 2013. This is the first time that the federal government has agreed to do on-site investigations of debt collection agencies.

While the investigations would only impact four percent of the consumer debt collection firms in the U.S., these 175 firms are the largest in the nation, representing nearly 63 percent of the market. This includes companies such as West Asset Management, Asset Acceptance Capital Corporation, Asta Funding Inc. and CMI Group.

The Federal Trade Commission (FTC) has authority to investigate debt collection agencies, and has increased its scrutiny in recent years. It cannot, however, write rules to protect consumers or perform on-site investigations. The CFPB, on the other hand "can go in and conduct examinations and find out if a debt collector is breaking the law," the Consumers Union senior policy counsel, Pamela Banks, said.

When Can Debt Collectors Be Held Responsible?

Last Wednesday, the CFPB published a rule that outlined its intent to investigate whether collection agencies and other debt-collection groups are properly responding to consumer complaints as well as informing consumers accurately about the amount of debt they owe and who is collecting the debt.

Some illegal debt collection practices that the agency will investigate include:

  • Threatening arrest
  • Failing to properly identify themselves as creditors, using a false company name or claiming they are government representatives / attorneys
  • Failing to send written statements to debtors regarding how much money they owe
  • Calling a customer before 8 a.m. or after 9 p.m.
  • Giving false credit information about a debtor to other companies
  • Repeatedly calling a debtor to ignore him or her

If you believe you are the victim of creditor harassment, you can call the FTC to lodge a complaint. You can also bring legal action against the creditor. Unfortunately, these actions will not stop legal creditor harassment.

Bankruptcy Stops Creditor Harassment

If you are facing significant debt, consider filing bankruptcy. Bankruptcy puts an automatic stop to all debt collection efforts through what is called an "automatic stay." This means that creditors cannot contact you to collect on the debt as long as you are going through bankruptcy proceedings. Furthermore, it may be the end to all contact from creditors, since you may be able to discharge a majority of your debt through bankruptcy.

Source: The Wall Street Journal, "Consumer Agency Sets Sights on Debt Collectors," Maya Jackson Randall, Oct. 24, 2012

Learn more about bankruptcy by visiting our pages on Minneapolis bankruptcy.

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