CFPB Outlines Plans to Consider Debt Collection Rules
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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