As of July 2016, the Consumer Financial Protection Bureau announced that
it intends to overhaul the debt collection market by capping collector
contact attempts and by ensuring that companies have more and better information
about a debt before they attempt to collect. Under its proposal, the CFPB
would require companies to limit communications, clearly disclose debt
details, and make it easier for consumers to dispute a debt. Additionally,
collectors would be prohibited from continuing to pursue a debt without
sufficient evidence. These proposed requirements and restrictions would
follow a debt, even if the it is sold or transferred to another company.
The Consumer Financial Protection Bureau receives more complaints about
debt collection than any other financial product that it currently tracks.
Approximately 30% of CFPB complaints involve debt collection. In the United
States, debt collection is a multi-billion-dollar industry and affects
approximately 70 million consumers. An estimated 6,000 debt collection
companies currently operate and 76% of these firms have fewer than 20
In many cases, consumers are wrongly contacted by debt collectors for debts
they do not owe or for amounts higher than the actual debt owed. Banks
and other original creditors may collect their own debts or hire third-party
collectors to collect the debts owed. In the case of third party collectors,
original creditors sell their consumer debts to these third parties, who
may then in turn collect on the purchased debts. According to a recent
study conducted by the CFPB, one in three consumers has been contacted
by a creditor or collector trying to collect a debt within the past year.
Additionally, approximately one-third of consumers who had been contacted
about a debt reported that the debt alleged was in the wrong amount.
The proposals offered by the CFPB are aimed at increasing the protections
pertaining to third-party debt collectors and others covered by the Fair
Debt Collection Practices Act. The new protections are aimed at ensuring
that debt collectors: (1) collect the correct debt; (2) limit excessive
or disruptive communications; (3) make debt details clear and allow consumers
to easily dispute collection claims; (4) document debt on demand for disputes;
(5) stop collecting or suing for debt without proper documentation; and
(6) stop burying the dispute.
While an overhaul of the debt collection industry is important to improve
consumer protections, consumers must also be educated of their rights
and the remedies available to them should they be wrongly contacted by
a debt collector. Many consumers are unaware of the obligations and responsibilities
imposed upon debt collectors by existing legislation such as the Fair
Debt Collection Practice Act or the Dodd-Frank Wall Street Reform and
Consumer Protection Act. This lack of knowledge allows debt collection
companies to maintain the upper hand in collection attempts and allow
them to pressure consumers into paying debts that are greater than actually
owed or are not owed at all. Many consumers pay inaccurate debts in an
effort to stop collectors from contacting them or out of fear of the consequences
of non-payment. Providing consumers with easily accessible information
about debt collection and their rights could improve their ability to
defend themselves from unwarranted debt collection attempts.