On September 15, 2016, a coalition of 59 different consumer advocacy groups
sent the Consumer Financial Protection Bureau a letter detailing their
concerns regarding the CFPB’s proposed debt collection regulations.
The coalition includes, among others, Americans for Financial Reform,
Center for Popular Democracy, NAACP, National Association of Consumer
Bankruptcy Attorneys, and US PIRG. The CFPB issued an outline of proposed
regulations on debt collection on July 28, 2016. The new regulations are
designed to protect consumers more effectively and expand the applicability
of the Fair Debt Collection Practices Act and other statutory authorities.
Debt collection is a multi-billion-dollar industry in the United States.
It includes 6,000 debt collection firms and affects about 70 million consumers.
The outline was issued in response to the number of complaints received
by the CFPB regarding debt collection, which generates more complaints
that any other financial product or service. The most common complaints
to the CFPB are about collectors seeking to collect debt from the wrong
consumer, for the wrong amount, or debt that could not be legally enforced.
The proposal would essentially overhaul debt collections from when third-party
collectors first examine their portfolios of debt to their last attempts
The coalition supports several aspects of the CFPB’s proposal and
states that several of the proposed changes will address certain debt
collector conduct that hurts consumers. The coalition supports the CFPB’s
proposal in that it will: (1) require the transfer of information from
prior attempts to collect the debt; (2) prohibits collectors from “parking
debts on credit reports without informing the consumer about the debt;
(3) require collectors to tell subsequent collectors about unresolved
disputes; and (4) require the resolution of those disputes before collection
activity can continue.
However, the letter sent by the advocacy groups also states, “The
proposal represents a missed opportunity to fundamentally improve protections
for consumers victimized by predatory debt collection practices.”
The letter identifies six significant shortcomings of the CFPB’s
outline. The highlighted issues regarding the proposal include that it:
- Permits collection without sufficient substantiation
- Effectively prevents private enforcement
- Allows disputes to remain inadequately investigated
- Allows lawsuits and default judgements to be obtained based on faulty documentation
- Allows call harassment to continue
- Undermines many of the state protections
It also identifies other concerns regarding abusive debt collection practices.
The letter states that the proposal would allow collectors to leaves messages
with third parties, even though this conduct is illegal under 15 U.S.C.
1692b. Additionally, the letter identifies other concerns including: inadequate
protections for dealing with time-barred debt; confusing validation notices;
failure to prohibit mandatory arbitration clauses; insufficient detail
and clarification on credit bureau reporting; and failure to properly
address language concerns for consumers with limited English proficiency.