Debt collectors have long been accused of brass-knuckle tactics, now they'll answer to Uncle Sam as the CFPB begins a crack down in January.
For the first time, federal regulators are going to crack down on debt collectors who have as many as 30 million Americans currently in their crosshairs.
The Consumer Financial Protection Board announced Wednesday it is extending its regulatory reach to surveil the day-to-day practices of large debt collectors, its latest expansion of its regulatory reach.
The new oversight will start in January and affect collectors who have more than $10 million a year in revenues, the agency said.
The agency, cheered by consumer advocates, was set up after the financial crisis to protect Americans from misleading marketing, unfair fees and other harmful practices, but has become a pariah of conservatives who see it as a symbol of overreaching government.
Debt collectors have long been criticized for hard-knuckled tactics like calling the employers of people who fail to repay debts or filing lawsuits against people who owe relatively little money. Some of the practices may violate federal disclosure rules and protections against harassment and intimidation.
About 30 million Americans have, on average, $1,500 of debt that is subject to the debt-collection industry, the agency said. That information often is reported to credit bureaus, so debt collectors can affect a person's ability to finance a car or the rate one pays on a mortgage.
The bureau already supervises mortgage companies, private student lenders and payday lenders. Those industries were placed under its watch in the 2010 overhaul of financial laws, which established the agency.
Debt collectors are the second group, after credit bureaus, that the agency is choosing to include in its supervision program. The CFPB started overseeing credit bureaus earlier this month.
Under the program of ongoing supervision, regulators can demand information from any larger company, even when there is no indication that the company did something wrong. Supervisors and examiners can review marketing materials, phone scripts, consumer disclosures and other aspects of a business, The Associated Press reports.
Before the CFPB was created, banks faced similar routine oversight by other regulators that focused mainly on their financial strength. In granting the consumer bureau the authority to supervise non-bank companies, Congress vastly strengthened the federal government's tools for identifying and preventing practices deemed harmful to consumers.
The agency can file civil charges or take enforcement action against any company that violates consumer laws, even if the company is not part of its supervision program.
Supervision of debt collectors will begin Jan. 2. Only companies with more than $10 million in annual receipts will be subject to the heightened scrutiny. That includes about 175 debt collectors that account for more than 60 percent of the industry's annual receipts, the agency said.
The Associated Press contributed to this report.
The Consumer Financial Protection Board, or CFPB, was created by Congress after the 2008 financial crisis to police the financial industry against practices deemed abusive to consumers.