On July 28, the Consumer Financial Protection Bureau (CFPB) outlined proposals which would overhaul the debt collection market by capping collector contact attempts and imposing information collection requirements to ensure collectors are collecting the correct debt. If adopted, these proposals would increase protections pertaining to third-party debt collectors and others covered by the Fair Debt Collection Practices Act, including more than 6,000 U.S. debt collection firms. The proposals will soon be examined by a Small Business Review Panel to gather feedback from small industry players. Although no date is currently set, the Bureau will open the public comment period after that panel convenes.
The proposals outline several requirements and restrictions for debt collectors under the proposals. These requirements would follow the debt even if it were sold or transferred. The primary proposals are as follows:
- Before collection: Debt collectors would be required to have more and better information about the debt before collecting.
- During collection: Companies would be required to limit communications, clearly disclose debt details, and make it easier to dispute debt.
- When responding to disputes: Collectors would be prohibited from continuing to pursue debt without sufficient evidence.
The CFPB plans to address consumer protection issues involving first-party debt collectors and creditors on a separate track. Specifically, the new protections are aimed at ensuring that debt collectors:
- Collect the correct debt: Collectors would be required to scrub their files and substantiate debt before contacting consumers. Collectors would have to confirm that they have sufficient information—such as the full name, last known address, and more—in order to start collection.
- Limit excessive or disruptive communications: Collectors would only be allowed six communication attempts per week through any point of contact before they have reached the consumer. Additionally, consumers may request to prohibit collectors from contacting them in specific ways —for example on a particular phone line, while they are at work, or during certain hours. The CFPB is also considering proposing a 30-day communication waiting period after a consumer’s death, during which time collectors would be prohibited from contacting certain parties, like surviving spouses.
- Make debt details clear and disputes easy: Collectors would be required to include more specific information about the debt in the initial collection notices sent to consumers, including information about the consumer’s federal rights. Consumers could question the debt’s validity via a “tear-off” sheet attached to a written notice. Debt could also be verbally questioned at any time, prompting the collector to check its files again.
- Document debt on demand for disputes: If any written notice is sent back within 30 days of the initial collection notice, the collector would have to provide a debt report – written information substantiating the debt – back to the consumer. The collector could not continue to pursue the debt until the report and verification are sent.
- Stop collecting or suing for debt without proper documentation: If a consumer disputes the validity of the debt, collectors would have to stop collections until the necessary documentation is checked. Further, if collectors discover specific warning signs that the information is inaccurate or incomplete — i.e., a portfolio with a high rate of disputes or the inability to obtain underlying documents to respond to specific disputes—collection must cease until the problem is resolved. Collectors also would be required to check a debt’s documentation before pursuing action against a consumer in court.
- Stop burying the dispute: If debt collectors transfer debt without responding to disputes, the next collector could not try to collect until the dispute is resolved. When they transfer the debt, collectors would be required to send information about disputes to the new collector so that the consumer would not have to resubmit it.
The outline of the proposals under consideration can be found at: http://files.consumerfinance.gov/f/documents/20160727_cfpb_Outline_of_proposals.pdf.