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 alleged abusive collectors. 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 to 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 startits own collection efforts until any outstanding consumer dispute is resolved.