If a company qualifies as a “larger participant” in the debt collection market, it will be under CFPB supervision for at least two years, according to the final rule on debt collection supervision published Wednesday.

Supervision, as defined in the Final Consumer Debt Collection Rule, will require covered companies to submit reports to the CFPB and subject their businesses to examinations by CFPB staff. The examinations will be looking to (1) assess compliance with Federal consumer financial law; (2) obtain information about activities and compliance systems or procedures; and (3) detect and assess risks to consumers and consumer financial markets. Examinations will be on-site at covered companies and will adhere to the guidelines published in the final debt collection examination procedures field guide.

The final rule describes what the CFPB expects the examination process to look like:

in an on-site examination, generally, Bureau examiners begin by contacting the entity for an initial conference with management. That initial contact is often accompanied by a request for information or records. Based on the discussion with management and an initial review of the information received, examiners will determine the scope of the on-site exam. While on-site, examiners will spend some time in further conversation with management about the entity’s processes and procedures. The examiners will also review documents, records, and accounts to assess the entity’s compliance and evaluate the entity’s compliance management systems. As with the Bureau’s bank examinations, examinations of nonbank covered persons will involve issuing confidential examination reports and compliance ratings.

In response to comments received about the proposed rule, the CFPB quantified the financial impact of ARM companies that fall under supervision. The agency estimates that a typical examination will take around eight weeks to complete, with an additional two weeks of preparation time on the company’s part, bringing total company cost of an examination to under $20,000. For companies near the middle and lower end of the revenue range, the CFPB anticipates examinations every five years.

But the largest companies under supervision can expect examinations every two years, at a rough cost of around $68,000 each. And the CFPB concedes that the exams might take much longer, up to four months. So for the largest 16 or so collection agencies, executives can expect roughly four months of active examination every two years at a cost of around $68,000.

The CFPB will be holding a field hearing in Seattle today to discuss the final supervision rule. The event will start at 10am Pacific time.

Read how the CFPB will define revenue rules for larger participants at “CFPB Large Company Rule Clarifies Definition of Revenues for Debt Collectors.”


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