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.