The CFPB Wants to Make the Debt Collection Industry Safer for Consumers
In early January of this year, the Consumer Financial Protection Bureau (CFPB) released two new reports on the debt collection industry, and the findings are consistent with older agency reports that have exposed debt collection practices that undermine consumer safety.
One report is the first nationally representative survey of consumer experiences with debt collectors, like how often they were contacted by collectors, whether they disputed a debt, and whether they were sued by a collector trying to collect on a debt. The other report examines the online debt sales industry, a market that buys and sells unpaid debt, along with personal information associated with a debt, including Social Security numbers, addresses and phone numbers of alleged debtors.
The survey revealed that over half the consumers targeted by collectors stated they did not owe the debt, and more than a third were contacted four times or more per week about the alleged debt. The debt sales report reviewed approximately 300 portfolios that carried a collective value of $2 billion, yet the sales price was around $18 million, meaning on average, purchasers were buying portfolios at less than a penny on the dollar.
Fortunately, the Bureau is working on regulations aimed at curbing abuses in the debt collection industry. The latest indication of their current thinking on this subject was shared in an agency outline last summer, and today, Prosperity Now is releasing a high-level summary of these initial proposals. The Bureau will be releasing a more fully baked set of proposed regulations in the near future that will be open to feedback from the public, and Prosperity Now will be sharing them when they are released, as well as recommending ways to make them as strong as possible.
This summary follows the release of a policy brief and the hosting of a webinar on debt collection late last year, and kicks off a new blog series on various aspects of the industry like medical debt and private collectors moving into the tax space, that will be shared over the next few weeks. Going forward, we will continue to engage in this space to share developments related to the industry and advocate for strong protections.