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CFPB Considers Proposal to Overhaul Debt Collection Market
Thursday, July 28, 2016 6:35 AM

New Protections Would Limit Collector Contact, Help Ensure Correct Debt Collected

On Wednesday the Consumer Financial Protection Bureau outlined proposals under consideration that would overhaul the debt collection market by capping collector contact attempts and by helping to ensure that companies collect the correct debt.

Under the proposals being considered, debt collectors would be required to have more and better information about the debt before they collect. 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. These requirements and restrictions would follow the debt if it were sold or transferred.

“Today we are considering proposals that would drastically overhaul the debt collection market,” said CFPB Director Richard Cordray. “This is about bringing better accuracy and accountability to a market that desperately needs it.”

View the outline of the proposals under consideration.

Debt collection is a multi-billion dollar industry and affects about 70 million consumers who have debt in collection, some of whom may be wrongly contacted by debt collectors.

Debt collection generates more complaints to the CFPB than any other financial product or service. 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.

Problems with the information that collectors receive when they're hired or purchase debt, combined with the lack of information provided by collectors to consumers during collections, can cause substantial consumer harm. These factors also drive up costs to collectors, which hurts the industry at large. The Bureau’s proposals under consideration would overhaul debt collections from when third-party collectors first examine their portfolios of debt to their last attempts to collect.

Debt Collection Protections

Debt collectors are already prohibited by federal law from harassing, oppressing, or abusing consumers. The main law that governs the industry and protects consumers is the 1977 Fair Debt Collection Practices Act.

Wednesday’s proposals would increase protections pertaining to third-party debt collectors and others covered by the Fair Debt Collection Practices Act, including many debt buyers. As part of its overhaul of the debt collection marketplace, the CFPB plans to address consumer protection issues involving first-party debt collectors and creditors on a separate track.

For more information, please visit the CFPB.

View CFPB report, “Study of Third-Party Debt Collection Operations.”