Debt collectors and their aggressive collection practices have attracted
the attention of federal and state regulatory agencies over the past year
because of an excessive amount of consumer complaints and blatant violations
of the FDCPA. The debt collection industry encompasses approximately 9,000
businesses and generates approximately $13.7 billion in revenue annually.
It affects about 70 million Americans who have debts in collection. In
2015, over 85,200 complaints were received by the Consumer Financial Protection
Bureau regarding the aggressive and abusive practices of debt collectors
across the nation.
To further combat these behaviors, the Consumer Financial Protection Bureau
revealed an outline of new debt collection rules on Thursday, July 28.
The new rules would be the first regulatory overhaul of the debt collection
market since the enactment of the Fair Debt Collection Practices Act in
1977. The outline released by the CFPB focuses on rules that will effect
third-party debt collectors and debt buyers. These rules are intended
to rein in aggressive debt collection practices and allow the federal
government to oversee the debt-collection market for the first time in
over forty years.
These rules are the latest step in a series of attempts taken by the CFPB
this year to curb abusive behaviors and practices in the debt collection
industry. The agency also proposed federal regulation of payday lenders
in June and intends to propose new rules governing bank overdraft fees
and prepaid cards in the upcoming months. Additionally, the CFPB proposed
a rule in May that would restrict the use of arbitration clauses in consumer
financial contracts, ranging from credit cards to bank accounts to private
student loans. The main focus of these rules is to ensure that debt collection
companies are well informed about the debts they collect. According to
CFPB Director Richard Cordray, “Companies should not collect debt
that is not owed. They would have to limit the number of attempts to make
contact [with consumers] and should give consumers better information
and more control over the process.”
The CFPB’s outline details the industry practices that it intends
to address in the new rules. For example, the CFPB intends to ensure that
collection firms are collecting only on up-to-date and accurate debt.
Companies would be required to “scrub their files” and verify
the debt before contacting the consumer. If the debt was proven to be
accurate and valid, the collectors would be allowed to begin the debt
collection process. However, debt collectors would be limited to six communication
attempts a week to reach the consumer. Consumers will also be allowed
to request that collectors do not contact them at work or during certain
hours. A second example of a new rule under consideration is requiring
a 30-day waiting period following a customer’s death before collectors
can contact surviving family members.