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From Banking and Finance Law Daily, November 6, 2013

CFPB advances in mission to quell unacceptable debt collection practices

By Katalina M. Bianco, J.D.

The Consumer Financial Protection Bureau is one step closer to a rulemaking that would target issues in the debt collection market that the bureau sees as problematic for consumers. A newly-issued Advance Notice of Proposed Rulemaking (ANPR) seeks input from consumers on a number of debt collection issues, including the “accuracy of information used by debt collectors, how to ensure consumers know their rights, and the communication tactics collectors employ to recover debts,” the bureau said in its announcement. In addition to the ANPR, the CFPB announced that it will begin adding consumer complaints regarding debt collection to its Consumer Complaint Database.

Cordray remarks. “For decades, many consumers have reported various unacceptable practices in the debt collection industry. Today’s action will allow us to hear from the public as we consider what rules are needed,” CFPB Director Richard Cordray said in a press call. “We want to ensure that all players in the industry are working with correct information, that consumers are fully informed, and that consumers are treated fairly and with dignity.”

The director noted that in the wake of the financial crisis, the debt collection industry “has more salience today than perhaps at any time in our country’s history.” He explained that many consumers ended up with a lot of debt, unable to pay bills because of having lost jobs, their savings, and sometimes their homes. “The best estimates are that 30 million Americans—nearly one out of every ten of us—came out of the financial crisis with one or more debts in collection, for amounts that average about $1,400 per person,” he said.

Response by ACA International. ACA International released a statement in response to the bureau’s announcement. ACA International is the largest trade group for the consumer debt collection industry.

“ACA anticipated the CFPB’s plans to make rules regarding the collection of consumer debt and will continue to proactively work with the Bureau to include the insightful perspective of the Accounts Receivables Management (ARM) industry. We intend to carefully review the ANPR and provide relevant comments based on the insights of our membership within the defined 90-day timeframe for submission,” the ACA said in its statement.

The trade group conceded that “Current federal debt collection laws are woefully outdated when it comes to areas such as communication, documentation, verification and statutes of limitations,” and noted that the Fair Debt Collection Practices Act [FDCPA], enacted in 1978, and the Telephone Consumer Protection Act, enacted in 1991, have not been “substantively updated despite significant changes in American culture, technology and communication preferences. As a result, these laws create uncertainty and leave consumers and the industry susceptible to unnecessary litigation.” ACA International said that its members “advocate for clear definitions to collection laws to help ensure compliance while reducing unproductive litigation.”

Need for information. The CFPB issued the ANPR to request comments, data, and information from the public on debt collection practices so as to develop proposed rules. Comments will be due 90 days from the date of publication in the Federal Register.

The bureau specifically is seeking feedback on:

  • Accuracy of information—the bureau wants to know how documents and records currently are transferred from an original creditor to third-party debt collection firms and debt buyers, and from those parties to other debt collectors and credit bureaus. The bureau also wants feedback on how the accuracy of those documents can be improved. Among the questions the ANPR raises is how federal rules could better ensure that debt collectors have the correct person, correct amount, and correct documentation.

  • Informed consumers—the CFPB is concerned that the disclosures and information that are currently provided to consumers may be confusing or incomplete and wants feedback on whether federal rules can ensure that consumers receive clear information about their debts and adequate information about their legal rights.

  • Communication tactics—debt buyers and third-party debt collectors generally are prohibited from engaging in acts that annoy, abuse, or harass consumers under the FDCPA. The CFPB is asking for feedback on whether harmful communication tactics are occurring that are not specifically addressed in the FDCPA and specifically raises the question of how federal rules can better regulate: the frequency of contact made by debt collectors; the contact methods that are used; and claims made by collectors when contacting consumers, such as falsely threatening to initiate a lawsuit or criminal prosecution, garnish wages, or seize property, among other things.

Debt collection complaints. The CFPB began accepting debt collection complaints on July 10, 2013. To date, the bureau has received, and companies have responded to, approximately 5,000 consumer complaints. The bureau now will add those complaints to its Consumer Complaint Database.

The bureau noted that among the complaints made by consumers are collection activities, failure of debt collectors to provide verification of the underlying debt, and becoming aware of a collection account only after finding it on their credit reports.

Companies: ACA International.

MainStory: TopStory CFPB DebtCollection

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