With its nonbank supervision program finally underway, the Consumer Financial Protection Bureau wants to bring debt collectors and consumer reporting firms under its oversight umbrella.
The agency released a proposal this week that would subject "larger participants" in those two markets to federal supervision for the first time. Observers said the proposal is yet another sign that CFPB intends to focus on markets, products and services that have the broadest impact on consumers, especially in the wake of the financial crisis.
"I think it's pretty clear that they were looking for industries that touched the largest number of Americans, which goes along with what I think has been their public relations strategy from the beginning," said Isaac Boltansky, an analyst with Compass Point Research & Trading. "They want to sell themselves as the protector of the working class in America. And an easy way to do so is to focus on debt collectors, given 30 million Americans have debt under collection."
The two industries are the first to be identified by the bureau for inclusion in its nonbank supervision program, which launched Jan. 5. Under Dodd-Frank, the bureau already has the authority to supervise mortgage, payday and student lenders of any size, but must establish parameters for identifying "larger participants" in other consumer markets.
The proposal must be finalized by July 21, and the comment period will be open for 60 days.
At a press briefing Thursday, CFPB officials said the proposal is only the first in a series of rulemakings – to be released on a rolling basis – that will identify other markets for supervision.
But it's no surprise they focused on debt collection and credit reporting first, said Alan Kaplinsky, a partner with the law firm Ballard Spahr, which represents some debt collection firms.
"I think what they did here is they honed in on two industries that I think are certainly going to be a priority for them to scrutinize," he said. "And remarks that Director [Richard] Cordray has made for the last several months and other people at the bureau, it became pretty clear to me that those two industries were a very high priority."
Cordray told reporters Thursday that debt collection and consumer reporting, in particular, have been greatly affected by the lingering economic downturn.
"It means many more people now have debts that are being collected against them than was true before and many people have more dollars in debt that are being collected against them," he said. "So the impact of the debt collection industry on America is … considerably greater in 2012 than it may have been in 2002."
The same is true of credit reporting agencies, which have grown larger and collected more information at a time when people are more likely to face adverse actions on their credit reports, such as a foreclosure, debt or unemployment.
"Coming out of the crisis, both of these industries are areas of particular focus because of their impact on the consumer, and I think that's relevant to our choices here," Cordray said.
Under the proposal, debt collectors with more than $10 million in annual receipts from debt collection activities would be subject to supervision. Credit reporting firms with more than $7 million in annual receipts would also be supervised.
The firms would be subject to the same supervision process that the bureau applies to banks, Cordray said.
