New regulation allows Consumer Bureau to punish abusive collection methods by banks
The U.S. Consumer Financial Protection Bureau have announced that banks supervised by the bureau may now face penalties if they mistreat clients while collecting debts on loans they themselves extended.
The new regulation, employed as part of the bureau's bank supervision system, will fill the void in a federal anti-harassment law that essentially excluded creditors who have internal debt collection operations.
Richard Cordray, the U.S. Consumer Financial Protection Bureau director, in an e-mail statement to Bloomberg said that it shouldn't matter who is collecting the debt. He pointed out that deceptive, unfair or abusive practices are illegal.
The Fair Debt Collection Practices Act which has been in place since 1977 is a safety measure for consumers against unfair treatment from third-party collectors or companies that buy debts from the original creditors but regulation doesn't usually cover creditors collecting on loans they themselves made. The new regulation takes care of that, Cordray said.
The U.S. Consumer Financial Protection Bureau oversees banking firms with assets over US$10 billion, ranging from a major global player like JPMorgan Chase & Co. to smaller regional players like Lafayette. The Bureau makes sure the companies it supervises comply with federal consumer-protection regulations. The Bureau also supervises non-banking financial firms including credit bureaus, debt collectors and payday lenders.
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