The Consumer Financial Protection Bureau (CFPB) is considering major rules for the debt collection market. Through an Advance Notice of Proposed Rulemaking (ANPR) the bureau continues to gather information on a wide array of issues related to debt collection practices, which includes the accuracy of the information used by collectors, making sure consumers know their rights and the communication tactics used to recover debts.
The main law that governs the industry and protects consumers is the 1977 Fair Debt Collection Practices Act (FDCPA). In 2010 the Dodd-Frank Wall Street Reform and Consumer Protection Act revised the FDCPA, making the bureau the first agency with the power to issue substantive rules under the statute.
There are an estimated 4,500 debt collection firms in the Country. The debt collection market includes banks, other original creditors, and third-party debt collectors hired to work on behalf of the original creditor.
Once the CFPB began accepting debt collection complaints in July 2013 it has become one of the highest categories of grievances. The complaints include harassment from debt collectors, amounts demanded that they didn’t owe, threats of jail time if they didn’t pay. This complaint database allows the public to see the complaints and how the company responded. The consumers identity and personal information are not included.
A major area of concern is the transfer of information from the original creditor to third-party debt collection firms and debt buyers and then to credit bureaus. The CFPB is concerned about how records are transferred and the accuracy of that information. Questions raised include having the correct person, correct amount owed and the correct documentation.
The Bureau is also adding consumer complaints about debt collectors to its public Consumer Complaint Database. The CFPB has added nearly 6,000 debt collection complaints in its database. This gives consumers and those in the industry clear information on the type of complaint and the companies response.
The CFPB is concerned that the consumers are treated fairly and with respect regardless of who is collecting the debt. The CFPB will be working on ways to better insure that the information and disclosures provided to consumers are less confusing and complete. Thus consumers will have a clear understanding of their rights in the debt collection process.
The CFPB is currently accepting feedback on whether harmful communications are happening that are not addressed by the FDCPA. The CFPB is working with Cornell University e-Rulemaking initiative to make it easy for the public to comment through a project called the Regulation Room. A report will follow concerning these individual complaints.
The debt collection industry is on par with the Mortgage industry in terms of daily complaint volume with each accounting for nearly 30% of consumer complaints. When the ANPR was announced on November 6th, Director Richard Cordray commented, “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. 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”.