In an effort to rein in the $13.7 billion debt collection industry and improve fairness and transparency in how debt collectors deal with the 70 million Americans with bills in collection, the Consumer Financial Protection Bureau has proposed a new set of regulations that would overhaul the industry.
The proposed rules would not only cap collector contact attempts, putting an end to debt collectors’ sometimes incessant, harassing phone calls, but they also would give consumers more power to dispute their bills.
The CFPB has handled more than 250,000 debt collection complaints from consumers since 2011 — 85,000 of those in 2015 alone.
“We continue to hear about serious problems with debt collection — debiting accounts without authorization, calling at all hours of the day or night, threats of arrest or criminal prosecution, or threats of physical harm to consumers and even their pets,” CFPB director Richard Cordray said in a statement. “Consumers should not be limited to being passive participants in a system they do not trust or understand. We are determined to put the burden of proof on the debt collector and take some of the weight off the consumer.”
The proposed new regulations would affect third-party debt collectors, those who typically purchase big catalogues of past-due accounts for pennies on the dollar.
These are the CFPB’s proposed new regulations:
- Make sure to collect the correct debt: “Collectors would have to scrub their files and substantiate the debt before contacting consumers,” explains the CFPB.
- Cap “excessive or disruptive” communications: This would limit debt collectors’ communication attempts to six per week. It would also make it easier for consumers to put a stop to some of the ways collectors are contacting them. For instance, consumers could request that the collectors not call them at work or during certain hours.
- Provide specific debt details and allow for disputes: This proposal would require collectors to provide specific information about the debt in their initial collection notices to consumers, including consumers’ federal rights. It would also “add a ‘tear-off’ portion to the notice that consumers could send back to the collector to easily dispute the debt, with options for why the consumer thinks the collector’s demand is wrong,” says the CFPB. The collectors would then have to provide a debt report, substantiating the amount, to the consumer.
- Proper documentation required before collecting or suing for debt: If a consumer disputes the validity of a debt, this provision requires that collectors stop attempting to collect the debt until all necessary paperwork and documentation is checked. “Collecting on debt that lacks sufficient evidence would be prohibited,” according to the CFPB. “In addition, collectors that come across any specific warning signs that the information is inaccurate or incomplete would not be able to collect until they resolve the problem.”
- No burying a dispute: Under this proposal, if a collector transfers debt without responding to a consumer dispute, the next debt collector is prohibited from trying to collect until the former dispute is resolved.
The CFPB’s proposals will now undergo a lengthy review process.
If you’re having issues with a debt collection, click here to submit a complaint to the CFPB or call 855-411-2372.
Check out “What to Do If Debt Collectors Come Calling.”
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