The Consumer Financial Protection Bureau released an outline of proposals aimed at overhauling debt collection practices yesterday, by “capping collector contact attempts, and by helping to ensure that companies collect the correct debt,” according to the bureau’s press release.
“Under the proposals being considered, debt collectors would be required to have more and better information about the debt before they collect,” the CFPB said in the release. “As they are collecting, companies would be required to limit communications, clearly disclose debt details, and make it easier to dispute the debt. When responding to disputes, collectors would be prohibited from continuing to pursue debt without sufficient evidence.”
Although most revenue is collected by larger firms, most companies are small, with 75% of firms employing fewer than 20 people each. The proposed oversight would apply to small entities in the following categories for debts acquired in default: collection agencies, debt buyers, collection law firms, and loan servicers.
Debt collectors are already prohibited by federal law from harassing, oppressing, or abusing consumers under the 1977 Fair Debt Collection Practices Act. The CFPB’s proposals seek to increase protections under the existing act, specifically aimed at ensuring that debt collectors:
- Collect the correct debt
- Limit excessive or disruptive communications
- Make debt details clear and disputes easy
- Stop collection or suing for debt without proper documentation
- Stop burying the dispute
Debt collection generates more complaints to the CFPB than any other financial product or service, according to the bureau. The most common complaints are about collectors seeking to collect debt from the wrong consumer, for the wrong amount, or debt that could not legally be enforced.
The proposals were released yesterday in preparation for convening a Small Business Review Panel to gather feedback from small industry players, which is the next step in the rulemaking process, according to the CFPB. In addition to consulting with small business representatives, the bureau will continue to seek input from the public, consumer groups, industry, and other stakeholders before continuing the rulemaking process.
The outline of the proposals under consideration can be found here.
