[Federal Register Volume 90, Number 151 (Friday, August 8, 2025)]
[Proposed Rules]
[Pages 38418-38421]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-15091]
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CONSUMER FINANCIAL PROTECTION BUREAU
12 CFR Part 1090
[Docket No. CFPB-2025-0030]
RIN 3170-AB51
Defining Larger Participants of the Consumer Debt Collection
Market
AGENCY: Consumer Financial Protection Bureau.
ACTION: Advance notice of proposed rulemaking.
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SUMMARY: The Consumer Financial Protection Bureau (CFPB or Bureau) is
seeking information to assist it in considering whether to propose a
rule to amend the test to define larger participants in the consumer
debt collection market established by the Bureau's Defining Larger
Participants of the Consumer Debt Collection Market Final Rule
published on October 31, 2012 (Consumer Debt Collection Larger
Participant Rule).
DATES: Comments must be received on or before September 22, 2025.
ADDRESSES: You may submit responsive information and other comments,
identified by Docket No. CFPB-2025-0030, by any of the following
methods:
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments.
Email: [email protected]. Include
Docket No. CFPB-2025-0030 in the subject line of the message.
Mail/Hand Delivery/Courier: Comment Intake--Defining
Larger Participants of the Consumer Debt Collection Market 2025, c/o
Legal Division Docket Manager, Consumer Financial Protection Bureau,
1700 G Street NW, Washington, DC 20552.
Instructions: The CFPB encourages the early submission of comments.
All submissions should include the agency name and docket number.
Additionally, where the Bureau has asked for specific comment on a
topic, commenters should seek to highlight the topic to which their
comment is applicable. Because paper mail is subject to delay,
commenters are encouraged to submit comments electronically. In
general, all comments received will be posted without change to https://www.regulations.gov. All submissions, including attachments and other
supporting materials, will become part of the public record and subject
to public disclosure. Proprietary information or sensitive personal
information, such as account numbers or Social Security numbers, or
names of
[[Page 38419]]
other individuals, should not be included. Submissions will not be
edited to remove any identifying or contact information.
FOR FURTHER INFORMATION CONTACT: Dave Gettler, Paralegal, Office of
Regulations, 202-435-7389. If you require this document in an
alternative electronic format, please contact
[email protected].
SUPPLEMENTARY INFORMATION: The Bureau is seeking information in order
to consider whether to propose a rule to amend the test to define
larger participants in the consumer debt collection market. Currently,
a nonbank covered person is a larger participant of the consumer debt
collection market if the person has more than $10 million in annual
receipts resulting from consumer debt collection activities as those
terms are defined in the Consumer Debt Collection Larger Participant
Rule. The Bureau is concerned that the benefits of the current
threshold may not justify the compliance burdens for many of the
entities that are currently considered larger participants in this
market, and that the current threshold may be diverting limited Bureau
resources to determine whom among the universe of providers may be
subject to the Bureau's supervisory authority and whether these
providers should be examined in a particular year.
I. Background
Section 1024 of the CFPA,\1\ codified at 12 U.S.C. 5514, gives the
Bureau supervisory authority over all nonbank covered persons \2\
offering or providing three enumerated types of consumer financial
products or services: (1) origination, brokerage, or servicing of
consumer loans secured by real estate and related mortgage loan
modification or foreclosure relief services; (2) private education
loans; and (3) payday loans.\3\ The Bureau also has supervisory
authority over ``larger participant[s] of a market for other consumer
financial products or services, as defined by rule[s]'' the CFPB
issues.\4\ To date, the Bureau has issued six rules defining larger
participants of markets for consumer financial products and services
for purposes of CFPA section 1024(a)(1)(B).\5\
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\1\ Consumer Financial Protection Act of 2010, title X of the
Dodd-Frank Wall Street Reform and Consumer Protection Act, Public
Law 111-203, 124 Stat. 1376, 1955 (2010) (hereinafter CFPA).
\2\ The provisions of 12 U.S.C. 5514 apply to certain categories
of covered persons, described in section (a)(1), and expressly
excludes from coverage persons described in 12 U.S.C. 5515(a) (very
large insured depository institutions and credit unions and their
affiliates) or 5516(a) (other insured depository institutions and
credit unions). The term ``covered person'' means ``(A) any person
that engages in offering or providing a consumer financial product
or service; and (B) any affiliate of a person described [in (A)] if
such affiliate acts as a service provider to such person.'' 12
U.S.C. 5481(6).
\3\ 12 U.S.C. 5514(a)(1)(A), (D), (E).
\4\ 12 U.S.C. 5514(a)(1)(B), (a)(2); see also 12 U.S.C. 5481(5)
(defining ``consumer financial product or service'').
\5\ These six rules defined larger participants of markets for
consumer reporting, 77 FR 42874 (July 20, 2012) (Consumer Reporting
Rule); consumer debt collection, 77 FR 65775 (Oct. 31, 2012)
(Consumer Debt Collection Rule); student loan servicing, 78 FR 73383
(Dec. 6, 2013) (Student Loan Servicing Rule); international money
transfers, 79 FR 56631 (Sept. 23, 2014) (International Money
Transfer Rule); automobile financing, 80 FR 37496 (June 30, 2015)
(Automobile Financing Rule); and general-use digital consumer
payment applications, 89 FR 99582 (Dec. 10, 2024) (General-Use
Digital Payment Applications Rule). The Bureau is issuing advance
notices of proposed rulemakings to reconsider the test for defining
larger participants in the consumer reporting, consumer debt
collection, international money transfer, and automobile financing
markets. The Bureau will continue to assess whether it is
appropriate to reconsider the test for the student loan servicing
market. The General-Use Digital Payment Applications Rule was made
ineffective by a joint resolution of disapproval by Congress under
the Congressional Review Act. S.J.Res.28--119th Congress (2025-
2026), Public Law 119-11; see also 5 U.S.C. 801 et seq.
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The Bureau published the Consumer Debt Collection Larger
Participant Rule on October 31, 2012.\6\ The final rule defined a
market for consumer debt collection that covers debt collection
resulting from certain activities that meet the definition of consumer
debt collection and established that nonbank covered persons with more
than $10 million in annual receipts resulting from consumer debt
collection activities would be considered larger participants in this
market.
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\6\ Defining Larger Participants of the Consumer Debt Collection
Market, 77 FR 65775.
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Participants of the consumer debt collection market generally
include different types of consumer debt collection entities such as
third-party debt collectors, debt buyers, and collection attorneys.\7\
Third-party debt collectors primarily collect debt on behalf of
originating creditors or their assignees and typically are compensated
through contingency fees calculated as a percentage of the debt they
recover. Debt buying is another important component of the consumer
debt collection market. Debt buyers purchase debt, either from the
original creditors or from other debt buyers, usually for a fraction of
the balance owed, and profit when their recoveries exceed the direct
and indirect costs of collection. Debt buyers sometimes use third-party
debt collectors or collection attorneys to collect their debts, but
many also undertake their own collection efforts. Debt buyers also may
decide to sell purchased debt to other debt buyers. Additionally,
collection attorneys play a role in the consumer debt collection
market. Collection attorneys undertake traditional collection efforts,
such as contacting consumers by telephone or written communication.
Attorneys also file lawsuits against consumers to collect debts or may
buy debt and collect in their own names.
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\7\ The NAICS code for collections agencies does not distinguish
between different types of debt collectors (e.g., law firms, other
third-party agencies, and debt buyers who are engaged in debt
collection activities). The Bureau lacks data with which to assess
the relative prominence of these firm types in the overall group of
larger participants at different values of the threshold.
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Debt collection is a $15.1 billion industry with about 2,500
collection agencies in the United States.\8\ Debt collection directly
affects a large number of consumers. Nearly one in five people with a
credit report, approximately 20 percent, have had at least one debt in
collections identified on their credit report as of the first quarter
of 2023.\9\ Consumer debt collection plays a role in the functioning of
the consumer credit market--debt collection can reduce creditors'
losses from non-repayment and thereby help to keep credit accessible
and more affordable to consumers.
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\8\ U.S. Census Bureau, 2022 Economic Census: Establishment and
Firm Size Statistics for the U.S,. https://data.census.gov/
table?d=ECN+Core+Statistics+Economic+Census:+Establishment+and+Firm+S
ize+Statistics+for+the+U.S.&codeset=naics~N0600.56.
\9\ https://www.consumerfinance.gov/data-research/research-reports/fair-debt-collection-practices-act-cfpb-annual-report-2024/.
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The Consumer Debt Collection Larger Participant Rule defined a
market for ``consumer debt collection,'' which is among the consumer
financial products or services described in 12 U.S.C. 5481(5)(B) and
(15)(A). Activities covered under these provisions of the CFPA include
``collecting debt related to any consumer financial product or
service.'' Under 12 U.S.C. 5481(5)(B), such activity is a ``consumer
financial product or service'' when ``delivered, offered, or provided
in connection with a consumer financial product or service.'' The
definition of ``consumer debt collection'' in the Consumer Debt
Collection Larger Participant Rule was not meant to track these related
provisions in the CFPA.\10\ The Consumer Debt Collection Larger
Participant Rule definition has a different function. Rather than
describing the scope of a certain consumer financial product or
service, it
[[Page 38420]]
identifies a specific market for such a product or service.
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\10\ 77 FR 65775 at 65781.
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The Bureau selected annual receipts as the criterion for
determining larger participant status in the Consumer Debt Collection
Larger Participant Rule because it believed annual receipts were a
meaningful measure of the level of a consumer debt collector's
participation in the consumer debt collection market and the consumer
debt collector's corresponding impact on consumers. For example, third-
party collectors, debt buyers, and collection law firms earn income
from recovering consumer debt. Those recoveries are the result of
market participation, either through traditional collection means or
litigation. Thus, the level of a person's market participation,
according to the Bureau, was reflected by the amount of that person's
annual receipts.\11\ The Bureau set the threshold at $10 million in
annual receipts because it believed that threshold would cover a
sufficient number of market participants to enable the Bureau
effectively to assess compliance and identify and assess risks to
consumers, but at the same time cover only consumer debt collectors
that can reasonably be considered ``larger'' participants in the
market. Thus, although with a threshold of $10 million the Bureau's
supervision program would cover only a small percentage of firms in the
market (which the Bureau estimated to be about four percent of debt
collectors, or about 175 out of 4,500 entities engaged in debt
collection at the time of the Consumer Debt Collection Larger
Participant Rule), the Bureau determined that it would have supervisory
authority over nonbank entities interacting with a significant portion
of consumers with debt under collection.
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\11\ To prevent the larger participant test from imposing the
potential burden of assessing whether particular medical debts
resulted from extensions of credit, receipts from medical debt
collection do not count toward the threshold. See 12 CFR
1090.105(a)(iii)(E) (definition of ``annual receipts'' excluding
receipts from collection of debt originally owed to a medical
provider); 77 FR 65775 at 65779-80 (explaining nature of such
burden).
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Some of the facts that were used to justify a threshold of $10
million have changed in the intervening years. In 2013, the Small
Business Administration (SBA) classified a debt collection agency as a
small business concern if its annual receipts were less than $7
million. Thus, when the Bureau established the threshold of $10 million
to define larger participants, it was choosing a definition that would
exclude small business concerns and as well as smaller entities that
are not small business concerns.\12\ However, the SBA size standard for
collections agencies has increased over time, most recently to $19.5
million, almost twice the Bureau's threshold.\13\ There are thus a
number of collection agencies that are small businesses according to
the SBA, but are larger participants according to the Bureau.
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\12\ See 77 FR 65775 at 65789 (noting, for that reason, that
``no businesses that qualify as small businesses for SBA purposes
would ordinarily be classified as larger participants'' under the
$10 million annual receipts test).
\13\ See Small Business Administration, Table of Small Business
Size Standards at 30 (Mar. 17, 2023). https://www.sba.gov/sites/default/files/2023-06/Table%20of%20Size%20Standards_Effective%20March%2017%2C%202023%20%282%29.pdf.
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In addition, the potential data sources have evolved. When the
Consumer Debt Collection Larger Participant Rule was issued in 2012,
the Bureau analyzed Economic Census data. Since then, the U.S. Census
Bureau in cooperation with the Small Business Administration Office of
Advocacy has developed an additional potentially relevant data source
called Statistics of U.S. Businesses (SUSB), described in more detail
at https://www.census.gov/programs-surveys/susb/about.html. Below, this
notice describes data from both sources and solicits public input on
the relevance of these data and sources, including analysis by
commenters of the significance for this potential rulemaking of any
differences in the data and sources.
Both sources indicate that the collections industry has
consolidated significantly since the Consumer Debt Collection Larger
Participant Rule was issued in 2012. As noted above, at the time, the
Bureau estimated there were approximately 4,500 entities engaged in
debt collection, based on data from the 2007 Economic Census, of which
approximately 175, about four percent, had annual receipts exceeding
$10 million. Based on the most recent available data from the 2022
Economic Census and the SUSB data, there are now about 2,500 to 3,000
entities engaged in debt collection, of which around 200 to 250, about
seven to ten percent, have annual receipts exceeding $10 million. Of
those firms with over $10 million in revenues, roughly half have annual
receipts between $10 million and $25 million, most of which are likely
small business concerns as defined by the SBA. Thus, increasing the
annual receipts threshold to $25 million would result in roughly 100 to
125 larger participants who have between roughly 55 and 70 percent of
the total revenues reported for NAICS code 561440. The Economic Census
and the SUSB data are more divergent at potentially higher thresholds.
For example, increasing the annual receipts threshold to $50 million
would result in between roughly 60 (Economic Census) and 90 (SUSB)
larger participants who have between roughly 41 percent (Economic
Census) and 58 percent (SUSB) of the total revenues reported for NAICS
code 561440. Increasing the annual receipts threshold to $100 million
would result in between roughly 11 (Economic Census) and 64 (SUSB)
larger participants who have between roughly 18 percent (Economic
Census) and 51 percent (SUSB) of the total revenues.\14\
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\14\ The estimates are preliminary, are based on limited data,
and do not include adjustments, for example, to account for the
exclusion of receipts from collection of medical debts from the
calculation of annual receipts for purposes of the larger
participant test at 12 CFR 1090.105(a) (subparagraph (iii)(E) of
definition of ``annual receipts''). These estimates may change in
any future rulemaking.
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II. Executive Order 12866
The Office of Information and Regulatory Affairs within the Office
of Management and Budget (OMB) has determined that this action is a
``significant regulatory action'' under Executive Order 12866, as
amended. Accordingly, OMB has reviewed this action.
III. Questions
As discussed above, the Bureau is concerned that the benefits of
supervisory authority over nonbank covered persons with more than $10
million in annual receipts resulting from consumer debt collection
activities may not justify the costs of increased compliance burdens
for many entities that are considered larger participants under the
current test.\15\ The Bureau is particularly concerned that smaller
businesses that currently qualify as larger participants are being
disproportionately impacted by the current threshold. The Bureau is
also concerned that the pool of entities subject to supervision may be
too broad and is potentially diverting limited Bureau resources to
determine who is a larger participant and whether an entity should be
examined in a particular year. Finally, the Bureau notes that it has
not evaluated whether changes in the consumer debt collection market
call for updating the test to define larger participants since it
published the Consumer Debt Collection Larger
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Participant Rule over twelve years ago. The Bureau therefore seeks
comment on the topics and questions listed below in light of the
Bureau's intent to propose amending the test to define larger
participants in the consumer debt collection market.
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\15\ For a discussion of compliance burdens, see generally
section IV.B of the Consumer Debt Collection Larger Participant Rule
(describing costs of increased compliance, costs of supervisory
activity, and costs of assessing larger participant status). 77 FR
65775 at 65791-94.
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1. Is $10 million in annual receipts an appropriate threshold for
determining which entities should be considered larger participants in
the consumer debt collection market? If not, what annual receipts
threshold or other criterion and associated threshold would be more
appropriate and why?
2. How would consumers be impacted by a potential increase in the
threshold? Submissions of data related to the benefits or costs to
consumers of the current rule and any particular change to the
threshold are encouraged.
3. How would changing the current threshold for larger participants
alter the behavior of participants in the consumer debt collection
market? How would these changes benefit or harm consumers and
participants? Would those changes in behavior have impacts beyond this
specific market?
4. How would changing the current threshold for larger participants
affect the Bureau's ability to address potential market failures in the
consumer debt collection market and related areas?
5. What are the costs to covered entities that are specific to the
Bureau's supervisory authority for larger participants in the consumer
debt collection market? Specific figures as to staffing, staff time,
and other resources are encouraged. How often are these costs incurred
for larger participants under the current rule who are close to the
current threshold for being larger participants?
6. What are the costs to covered persons that are not specific to
the Bureau's supervisory authority, but are specific to being a larger
participant in the consumer debt collection market? For instance, are
there costs of monitoring status as a larger participant, or costs
related to complying with relevant Federal statutes and regulations
beyond what the firm would find reasonable absent the possibility of
supervision?
7. Are there costs to covered persons from the current larger
participant rule that specifically apply to firms whose annual receipts
are lower than, but close to, the threshold?
8. Are there costs or benefits to consumers, including rural
consumers, servicemembers, and veterans, of raising the larger
participant threshold?
9. Do small business concerns, as defined by the SBA, or other
smaller- or mid-size entities qualify as larger participants under the
current threshold in the consumer debt collection market? Do these
entities incur costs of compliance with their larger participant status
that are not in proportion to their size relative to other larger
participants in the consumer debt collection market?
10. Should the Bureau's test for defining larger participants in
the consumer debt collection market account for the SBA's size
standards? If so, how?
11. Are there significant recordkeeping requirements that would be
reduced by raising the larger participant threshold?
12. What other specific costs or benefits, not mentioned above,
would a change in the larger participant threshold have for consumers
and covered persons?
13. Should the Bureau rely upon Economic Census data, SUSB data, or
other sources of data to inform estimates of the current size of the
firms in the consumer debt collection market and the number of firms
that qualify as larger participants? What additional sources of data,
if any, can reliably inform such estimates?
Russell Vought,
Acting Director, Consumer Financial Protection Bureau.
[FR Doc. 2025-15091 Filed 8-7-25; 8:45 am]
BILLING CODE 4810-AM-P