The New York Law Blog: Legal News: Federal Government Considering New Debt Collection Rules
Subscribe | LinkedIn Group

Thursday, July 28, 2016

Legal News: Federal Government Considering New Debt Collection Rules

Photo Courtesy of www.consumerfinance.gov 
For the first time in nearly 40 years, the Consumer Financial Protection Bureau is proposing new rules that govern debt collection in an effort to clamp down on abusive collectors who frequently contact consumers, many of whom may not even owe money.

Debt collection is a multi-billion dollar industry.  According to the Urban Institute, one in three American adults, have a report of debt in collections. That equals over 77 millions Americans. The average debt owed is over $5,000 and typically involves a credit card balance, medical or utility bill  more than 180 days past due.  The CFPB has fielded over 250,000 complaints since 2011.

According to the CFPB, the safeguards suggested are those that debt collection companies frequently ignore, raising the specter of the prototypical company aggressively chasing customers.  The rules should also bring some consistency to what is now a hodge-podge of local, state and federal rules and regulations.

Under the proposed rules:
  • Collectors must confirm consumers' names, addresses, phone numbers and the amount owed before contacting them;

  • Collectors must disclose if the debt it is attempting to collect is too old for a lawsuit; 

  • Collector must add a “tear-off” notice so consumers can dispute the alleged debt. If the consumer sends a written dispute back to the company within 30 days of the initial collection notice, then the collector must provide a report substantiating the debt, and stop all collection efforts until all documentation is checked and the report is sent;

  • Collectors must limit attempts to reach a consumer to six communications attempts a week; and,

  • If the debt is sold to a new collector, the new collector cannot start collection its own collection efforts until any outstanding consumer dispute is resolved.
These proposed rules are a long way from becoming enacted.  The agency has a short and contentious history politically, as the Republican Party in the U.S. called it a “rogue agency” that should be abolished, according to the New York Times

So what does this mean for debt collection companies and consumers?  For companies, the process for collecting a debt may become streamlined, and some debts that are beyond an applicable statute of limitations may not be collectible.  For consumers, the proposed rules, if enacted, will provide additional avenues outside of court to dispute a debt and prevent unwanted and harassing phone contacts. 
_____
*Gene Berardelli may be contacted at: GeneBerardelli@ipglegal.com.

Gene is a New York street-smart attorney with an extreme passion for success. Gene specializes in litigation, arbitration and general corporate law for New York-based and international clients. He, also, is the host of a popular New York talk radio program.