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"Today we are considering proposals that would drastically
overhaul the debt collection market," said Consumer Financial
Protection Bureau Director Richard Cordray in a statement. "This
is about bringing better accuracy and accountability to a market
that desperately needs it."
The proposal covers third-party collectors and debt-buyers.
First-party collectors and creditors will be addressed in a
separate rulemaking, the CFPB said.
According to a summary, the proposal would make sure collectors
"substantiate the debt before contacting consumers," by
confirming their identities and the amount owed, as well as
checking for any payments made after a default. Consumers
frequently file complaints at the agency about receiving calls
for debts that do not exist.
In an attempt to "limit excessive contact," the proposal would
cap agencies' calls to debtors to six attempts each week. It
would also create a 30-day waiting period after a person dies
for contacting survivors.
Agencies would have to communicate specific information to
consumers, such as when outstanding debt is too old for a
lawsuit. They would also have to make it easier to both dispute
or pay a debt through tear-off coupons on the bottoms of
collection notices.
A federal law, the Fair Debt Collection Practices Act, already
prohibits collectors from using abusive, unfair or deceptive
practices to recoup money.
The industry has been awaiting the overhaul proposal since 2013
and CFPB had penalized a number of large debt collectors in
recent years. The CFPB receives thousands of complaints each
month about debt collection, more than any other area.
Roughly 13 percent of consumers have a debt currently in
third-party collection, with an average amount of $1,300, data
from the Federal Reserve Bank of New York shows.
In a survey released alongside its proposal, the CFPB found more
than three-quarters of the country's 3,994 debt collection firms
are small, with less than 100 employees. Larger firms pull in
about two-thirds of the industry's $12.18 billion total revenue.
The agency also found credit card, student loan and automobile
debts in collection typically have balances of $2,000 or more.
The proposal now goes to a panel of small business owners for
review.
(Reporting by Lisa Lambert, editing by G Crosse)
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