Consumers on the receiving end of debt collection calls may soon have more protections under proposed Consumer Financial Protection Bureau rules unveiled Thursday.
Roughly 1 in 3 consumers has been contacted in the past year by a creditor or collector trying to recover a debt, according to the CFPB. Despite existing laws, complaints about debt collection account for a quarter of all the grievances the agency has received to date — more than any other industry.
"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.
Under the proposed regulations, debt collectors would need to undertake additional due diligence to make sure they are collecting on a legitimate debt. (A third of consumers contacted about a debt report that collectors had the wrong amount, according to the CFPB.)
Collectors would need to confirm they have accurate information on the debt before contacting a consumer or pursuing action in court and provide such details in collection notices sent to consumers. If a consumer disputes the debt's validity, collectors would need to stop their efforts until they review and reconfirm their documentation.
"This is about bringing better accuracy and accountability to a market that desperately needs it," Cordray said in the statement.
Collectors would also face caps on their number of weekly attempts to reach a consumer. The CFPB is proposing rules that make it easier for consumers to stop collectors from contacting them at inconvenient hours and locations (say, late at night or while you're at work), as well as limitations on collection efforts within 30 days of a consumer's death.
Thursday's announcement is just one more step in the rule-making process. The CFPB will next convene a small-business review panel, and seek more input from the public before issuing final regulations. But there could be a more immediate impact.
"Every time the CFPB gives us an idea of what the rule-making is going to look like, it gives debt collectors more of an idea of how they can get ahead of compliance," said April Kuehnhoff, a staff attorney with the National Consumer Law Center. "Consumers could see some benefits."
In the meantime, consumers should be smart about how they manage calls from debt collectors:
"The very first thing I would recommend people do is take time and familiarize themselves with the Fair Debt Collection Practices Act," said Bruce McClary, a spokesman for the National Foundation for Credit Counseling. He recommends the Federal Trade Commission's plain-language explainer.
"You can see exactly how you're protected as a consumer when a debt collector calls," said McClary.
Then make sure on the next call you receive to tell the collector that you're aware of your rights under the FDCPA, he said. It may influence their behavior.
Debt collectors are legally required to follow up their call with a written notice detailing the debt, said Kuehnhoff. Ask for that information.
"Understand that just because somebody is calling to collect a debt, that the consumer doesn't need to pay right away," she said.
There are debt collection scams, so it's important to verify that both the debt and the collector are legit before making any arrangements to pay, she said. Make sure the debt isn't so-called zombie debt that's past the statute of limitations in your state.
Log every contact from the collector, including the agency, the number they called, the time of the call and the representative you spoke with, McClary said. Take notes on what was said. That record-keeping can prove helpful if you need to file a complaint about the collector's behavior.
Complain to the CFPB and your state attorney general about any debt collection abuses you encounter, said Kuehnhoff. There have been several recent cases where the government has taken action against bad practices.
"It's encouraging now to see there's some attention being paid to these practices," McClary said.