WASHINGTON, D.C. -

Last week, the Consumer Financial Protection Bureau said it took the first step toward considering consumer protection rules for the debt collection market.

Through its Advance Notice of Proposed Rulemaking (ANPR), the bureau is collecting information on a wide array of issues, including:

—The accuracy of information used by debt collectors

—How to ensure consumers know their rights

—The communication tactics collectors employ to recover debts

The bureau also announced that it will begin adding consumer complaints about debt collections to its public Consumer Complaint Database.

“For decades, many consumers have reported various unacceptable practices in the debt collection industry. This action will allow us to hear from the public as we consider what rules are needed,” CFPB director Richard Cordray said.

“We want to ensure that all players in the industry are working with correct information, that consumers are fully informed and that consumers are treated fairly and with dignity,” Cordray continued.

The CFPB acknowledged there are many businesses in the debt collection market, including forwarding companies and repossession agents. Banks and other original creditors may collect their own debts or hire third-party debt collectors.

Original creditors and other owners of debts also may sell their debts to debt buyers, who may collect on the purchased debts or hire third-party debt collectors to recover them.

It is estimated that there are more than 4,500 debt collection firms in the U.S. 

The main law that governs the industry and protects consumers is the 1977 Fair Debt Collection Practices Act (FDCPA).

In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act revised the FDCPA, making the Bureau the first agency with the power to issue substantive rules under the statute.

Debt Collection Consumer Protections

Debt collection has long been one of the most complained about subject areas to government regulators, including the Federal Trade Commission.

In July, the CFPB began accepting debt collection complaints and it has quickly become one of the highest categories of grievances. Consumers say that some collectors harass them, demand amounts they do not owe and threaten dire circumstances if they don’t pay, such as jail.

The CFPB said it is concerned about the transfer of information from an original creditor to third-party debt collection firms and debt buyers, and from those parties to other debt collectors and credit bureaus.

The bureau wants to know how documents and records are currently transferred and how to improve the accuracy of that information.

Regulators believe that ensuring the integrity of information within the debt collection system is critically important.

Among the questions the ANPR raises is how federal rules could better ensure that debt collectors have the:

—Correct person: The CFPB is concerned that debt collectors may try to collect money for debts from the wrong consumers. The bureau contends debt collectors have been known to send a notice of debt to the wrong address and, in some cases, to incorrectly furnish information to credit bureaus on the wrong person.

The ANPR asks for feedback on how debt collectors identify account holders, how they make sure they are pursuing the correct person, what means they use to verify someone’s identity, and how they respond when a consumer says they have the wrong person.

—Correct amount: The CFPB is concerned that debt collectors may try to collect more than what the consumer owes on a debt.

The bureau indicated that it has heard reports that sometimes the consumer already paid off the debt in part or in whole, but the collector’s records do not accurately reflect the consumer’s payments. The CFPB is interested in knowing more about how debt collectors ensure they are seeking to recoup accurate sums.

—Correct documentation: The CFPB is concerned that debt collectors do not always have adequate or accurate paperwork or data to support their claims about a consumer’s indebtedness. This lack of information can make it harder for the debt collector to provide the consumer with information to identify the debt or resolve disputes.

The ANPR asks for feedback on what documents get sold with a debt, what documents consumers should have access to, and what documents collectors should be required to provide to a consumer.

Communication Tactics

The CFPB wants to make sure that consumers are treated fairly and with respect by all debt collectors, regardless of whether the collector is the creditor, a collector working on behalf of the creditor, or a debt buyer or third-party debt collector.

Debt buyers and third-party debt collectors are already, generally, prohibited from engaging in acts that annoy, abuse, or harass consumers under the FDCPA.

In the ANPR, the CFPB is asking for feedback on whether harmful communication tactics are happening that are not specifically addressed in the FDCPA. Among the issues the ANPR raises is how federal rules can better regulate:

—Contact frequency: The CFPB is concerned about some debt collectors continuously calling consumers. Consumers have also complained about calling hours and collectors reaching them at their workplace. The ANPR asks for feedback on whether new federal rules should limit debt collector contact, and, if so, how to do so appropriately.

—Contact methods: When Congress passed the FDCPA in 1977, the means of reaching a consumer were limited. Today, debt collectors can communicate with consumers by using email, smartphones, fax machines, and social media. The ANPR seeks feedback on the potential harms or benefits from a debt collector using these modern technologies.

—Contact claims: The CFPB is concerned about some debt collectors falsely threatening to initiate a lawsuit or criminal prosecution, garnish wages, damage or ruin a consumer’s credit rating, seize property, get the consumer fired from their job, or have a consumer jailed. The ANPR seeks feedback on the prevalence of such false threats and their impact on consumers.

Public Debt Collection Complaints

Last week, the CFPB added approximately 5,000 consumer debt collection complaints to its Consumer Complaint Database. These are complaints that the CFPB has received and that companies have responded to since the CFPB began accepting debt collection complaints in July.

Currently, debt collection is on par with mortgages in terms of daily complaint volume with both accounting for approximately 30 percent of consumer grievances, according to regulators.

Among the topics consumers are contacting the CPFB about:

—Collection activities: Consumers are complaining about harassing or unwanted phone calls; the frequency of collection activities, including the number of phone calls and other contacts; not receiving a notice of the debt; and where the notice of the debt was sent.

—The underlying debt: Consumers are complaining about collectors not providing verification of the debt, and being contacted about debt that has already been paid off or debt that doesn’t belong to them. 

—Credit reporting: Consumers are complaining about only becoming aware of a collection account when they find it on their credit report, and being unable to remove a collection item from their credit report.

The Consumer Complaint Database allows the public to see:

—What consumers complained about

—Why, how and when the company in question responded

—Whether the response was timely.

A consumer’s identity and other personal information are not included. The database currently contains more than 155,000 complaints on a wide variety of financial consumer issues, including mortgages, student loans, and credit cards.

The expanded Consumer Complaint Database can be found at www.consumerfinance.gov/complaintdatabase.

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