On January 2, 2013 the Consumer Financial Protection Bureau (CFPB) will begin its oversight of debt collection in the United States. In connection with the Dodd-Frank Wall Street Reform and Consumer Protection Act, under the Larger Market Participant (LMP) rule released by the CFPB on October 23, 2012, the final rule defines "consumer debt collection" markets and exclusions, explains how to determine if you are an LMP and offers an examination manual.
LMPs will now be subject to comprehensive examinations, as well as mandatory submissions of reports to assess compliance, identify risks to consumers and evaluate systems, policies and procedures. On-site exams will be used to gain insight into collection agencies' systems and procedures, and to determine if violations have occurred.
Collection agency examinations will be broken into seven areas: 1) Business model 2) Communications with the consumer regarding the debt 3) Information sharing, privacy and credit reporting processes 4) Consumer complaints, dispute resolution and debt validation 5) Payment processing and account maintenance 6) Equal Credit Opportunity Act 7) Litigation practices, repossession and time-barred debt
Impact on Medical Bills Although the LMP rule excludes receipts resulting from the collection of medical debt, medical debt that is paid in whole or in part with a credit card is not excluded. In addition, medical debts are subject to regulation if the provider defers payment after the service. Most medical providers and their collection agencies do accept credit cards after treatment.
"Regardless of whether your collection agency is an LMP or not, compliance with the seven areas of examination is imperative," says David Hamilton, CEO of Mnet Financial. He further adds "what may come as a surprise to many creditors that use collection agencies is that the creditors share in the responsibility of protecting consumers and compliance. For example, care must be taken in the way that a consumer's complaint, dispute or validation of debt is handled between the collection agency and the creditor."
Creditors and their agencies must also give attention to reporting accurate information on a consumer's credit. False information could inadvertently be reported when a creditor fails to notify their collection vendor of payments received from the consumer after the account was submitted to the collection agency. This could result in the wrong amount owed appearing on the consumer's credit.
Mnet Financial will be publishing a series of follow-up articles throughout 2013 designed to help keep its readers informed about the CFPB from the perspective of a collection agency. Our goal will be to uncover best practices that will ensure consumers are protected while creditors and collection agency work together to collect debt in a compliant manner.