New Restraints On Debt Collectors To Aid Consumers

If you believe a debt collection company is not treating you right, who you gonna call?

As of Jan. 2, 2013, it should be the Consumer Financial Protection Bureau, a federal agency that is expanding its responsibilities to include oversight of debt collectors. Congress has authorized the agency to identify and prevent practices harmful to customers. Previously, the focus of CFPB was primarily on the financial strength of banks. Now, it will look beyond to non-bank companies. The intent of Congress is to provide a stronger tool to combat practices detrimental to those who use the services of these companies. Historically, debt collectors have not been subject to federal scrutiny. CFPB was created after the turn-of-the-century crises that had financial institutions in general in an uproar.

Many borrowers will look upon the added supervision as a good thing. Some debt collectors have used strong-arm tactics to get their due. Calls to the employers of debtors, filing of lawsuits against people who have small balances owing, credit-mangling reports to credit bureaus and other practices have sometimes left consumers feeling stymied. Some of the methods may violate federal disclosure rules, involve unfair fees or other practices not sanctioned by the government.

The new oversight authority will apply only to companies with more than $10 million in annual receipts — about 175 of which have been identified. These companies represent more than 60 percent of the industry’s annual receipts, agency representatives found. Where there are abuses, the agency can file civil charges or take other enforcement measures against those companies that violate consumer laws, even if the offending company is not part of the federal supervisory program.

Agency research shows that About 30 million Americans have, on average, $1,500 in debt that is handled by the debt-collection industry. This branch of the financial family joins mortgage companies, private student lenders and payday lenders who already are under the federal microscope. The 2010 remake of federal financial laws established the CFPB as part of a general move to get more accountability into the institutions that handle Americans’ money. Credit bureaus also preceded debt collectors in the move for oversight.

The new laws for debt collectors allow regulators to demand information even when there is no overt proof of wrong-doing. Supervisors can review marketing materials, phone scripts, consumer disclosures and other aspects of the businesses.

No one likes to be a debtor and no one likes to be pestered with nasty phone calls from creditors. To prevent getting yourself into these situations, make sure you stay on top of your cash flow management strategies.

For best practices concerning your cash flow follow these five steps.

1. Stop regarding your financial management with fear, anxiety, insecurity or some combination of the above. This will paralyze your cash management systems. Create a system that works for you so that you don’t experience these crippling emotions.

2. Cash-flow management is a critical element in every home. When it’s done poorly or not at all, you may find yourself short of cash when it’s time to pay your bills and other crucial expenses. This leads to the use of credit cards and adds to your debt.

3. Keep up with your changing financial needs. Every stage of life will require different types of budgeting and planning. Be flexible and yet keep your long term financial goals in mind. Charles Darwin reminds us that “It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.

4. Avoid spending money you don’t have. Betting on future income is never a good idea. This will only dig you deeper into a financial hole.

5. If you are in debt now, then set the date you will be debt free. Remember Napolean Hill’s words: “Whatever the mind of man can conceive and believe, it can achieve.”