Help Advocate for a Strong Debt Collection Rule!
The Consumer Financial Protection Bureau’s Debt Collection Rulemaking
In May of this year, the Consumer Financial Protection Bureau (CFPB) fulfilled a promise made in the fall of last year about the debt collection market by releasing a set of proposed rules aimed at regulating the industry. Sensible regulations that can put a stop to the most predatory practices that debt collectors engage in are long-awaited and much needed. And while we are grateful the Bureau decided to make addressing the excesses of this market a priority this year, what they are currently proposing is not going to get the job done.
For example, the proposal places no limits on the number of times a collector can attempt to contact a consumer by electronic means like text message or email and allows seven attempts each week by phone per debt rather than per consumer. This approach will not help curb predatory communication practices.
Unpacking Our Recommendations
In response to this and other issues in the proposal, we wrote a comment letter outlining ways to make the rule more effective and are looking for additional organizations to express their support by signing onto the letter.
Major recommendations in the letter include:
- Limiting the number of times a collector can attempt to contact a consumer by phone about debt to three times a week per consumer
- Prohibiting electronic communications such as emails or text messages unless a consumer expressly consents to receive them
- Removing proposals that would allow attorneys to file lawsuits to collect on debts without consulting original account-level documentation
- Barring the collection of expired debts
- Requiring written notification of important disclosures about debts
Click here to read a more detailed summary and access the full letter.
The Impact of the Debt Collection Marketplace
Every year, the debt collection industry generates more consumer complaints than virtually any other financial market. In recent years, both state and federal regulators have brought numerous enforcement and supervisory actions for unfair, deceptive and abusive practices against predatory collectors. Complaints range from material errors like targeting the wrong person for payment or collecting the wrong amount to more aggressive practices like the use of abusive language, lying about who they are and threatening to sue if a consumer doesn’t pay up.
In this marketplace, debt buyers purchase debt for rock bottom prices—less than a penny per dollar of debt on average—then collect on the full value of the debt without having to establish its validity beforehand and without returning any of the collected debt to the original creditor. This is also an industry where collectors take advantage of a lax court system that is not willing to take the time to do minimal assessments to determine whether a collector’s case has merit. These types of practices flourish because there are no requirements to keep and pass along original account-level documentation.
With a substantial number of consumers carrying debt—particularly low-income families and households of color who are more greatly affected by these outcomes—it is important to have strong regulations in place that will put a stop to the worst abuses in this marketplace, improve financial security and help working families survive and thrive.
To help support a strong and effective rule that protects consumers, please sign your organization on to our letter. The more organizations that sign on, the greater the impact. The deadline for submissions is September 18, 2019. Thank you for your advocacy!