The nation's new cop on the consumer-finance beat is zeroing in on debt collectors and credit reporting companies.
The Consumer Financial Protection Bureau said Thursday that it wants to add debt collectors and credit bureaus to the list of industries that agency officials can supervise in person.
The agency has already started supervising payday lenders, mortgage companies and private student lenders. It gained that power last month after President Barack Obama installed its director.
The CFPB also can write rules to supervise big companies in other industries. Thursday's announcement was a first step in defining which industries the CFPB wants to scrutinize.
The housing bust and recession have transformed debt-collection and credit-reporting companies, making them a much bigger part of consumers' lives, agency Director Richard Cordray told reporters.
More people have overdue debts that have been handed to collection agencies, he said, and many people's credit scores have been hit by foreclosures, a lost job or a family member hurt by the recession, he said.
About 30 million Americans have debts in collection, Cordray said. He said debt collectors receive more complaints than any other industry, according to a Federal Trade Commission database.
Consumers are vulnerable to abuse by debt collectors and faulty credit reports because they can't take their business elsewhere, Cordray noted.
CFPB oversight will help companies follow the rules by clarifying how they will be enforced, one industry executive said.
Under Thursday's proposal, debt collectors with more than $10 million in annual receipts and consumer reporting agencies with more than $7 million in consumer-data revenue would be subject to supervision. The agency estimates that it will cover firms that do 63 percent of the nation's debt collection and generate 94 percent of the consumer credit revenue.
"Agencies like ourselves are really hoping that the CFPB, if they're going to have increased regulation of the collection world, they'll provide clarity on what you can and can't do," said Tim Smith, senior vice president of banking and financial services at Firstsource Solutions. Smith's division collects debt for many of the nation's biggest credit-card issuers.
Firstsource and competitors expect the CFPB to cause major changes over the next year, and many are ramping up internal controls and audits to prepare, he said.
Banks are subject to scrutiny by regulators focused on their safety and financial stability. Yet much of the abusive lending that inflated the housing bubble occurred far from that spotlight because the lenders were not subject to bank oversight.
The CFPB was created in part to close the regulatory gap. Its officials can visit, inspect and collect information from a broad slice of the financial-services market that previously lacked such oversight.
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