Nearly a third of Americans with a credit file have some type of debt that's in collections, which typically means they'd receive phone calls about their outstanding balance. However, new rules released Friday give debt collectors explicit permission to use a wide range of communication methods to interact with consumers, including texting and social media messaging.
The Consumer Financial Protection Bureau on Friday issued a final rule that essentially updates the rules outlined in the Fair Debt Collection Practices Act, which prohibited debt collectors from using harassing, abusive or unfair practices. The law, which was passed in 1977, is silent on collection agencies' use of e-communications because they simply didn't exist then. Friday's rule updates that, ruling that collection agencies can interact with consumers across all forms of electronic communications.
"No matter the reason a consumer has a debt in collection, we want to make sure there are clear rules of the road for debt collectors to follow the law and alongside that, swift action against those who flout the law," CFPB director Kathleen Kraninger said in a blog post published on Friday.
Among some of the updates made by the new rules, the CFPB explicitly says debt collectors can send text messages, emails and direct messages on social media platforms to consumers. The rule does not specify a limit for these communications, but the CFPB does note that it does not permit "excessive" communications would harass, oppress, or abuse consumers and therefore violate both the FDCPA and the new rules. When it comes to phone calls, collection agencies can contact consumers up to seven times a week about each debt that they may have outstanding.
In a move opposed by consumer advocates, debt collectors won't be required to confirm that they have accurate details of the debt — such as the identity of the debtor and the amount owed — before attempting to collect it.
"Debt collectors are notorious for hounding consumers and filing lawsuits about debts that have already been paid off or never owed in the first place," Suzanne Martindale, senior policy counsel and western states legislative manager for Consumer Reports, said in a statement. "The CFPB's new rules do nothing about this egregious practice and fail to ensure that debt collectors can prove that money is actually owed and they have the legal right to pursue the debt."
The CFPB's new 653-page rule does specify, however, that if a consumer tells a debt collector to "stop calling," they are barred from calling them. Additionally, the rule requires that debt collectors who use electronic messaging — such as texting, emailing or direct messaging on social media — need to provide a simple method for consumers to opt out.
The rulemaking process is not over. The CFPB said Friday that it intends to issue a second debt collection rule in December that will include new rules around so-called "zombie" debt, which is typically older debt that's fallen off a credit report or is being erroneously pursued, either because it's already paid off or it actually belongs to someone else.
Consumer Reports has urged the CFPB to make it illegal to sell or attempt to collect on debt that is more than seven years old, which is when a debt becomes too old to report to a credit bureau.
ACA International, the association of credit and collection professionals, called Friday's rule a "small step forward" in updating collections practices. "Consumers in the collections process deserve to be on a level playing field with others in the financial services marketplace with recognition of their preference to use email and text messaging over other outdated methods, such as faxes, as outlined in the current law," the organization said in a statement.
Consumer advocacy groups called Friday's rule a "mixed bag," with many concerned that the rule did not place enough limits on how much debt collectors can communicate with consumers — especially as the Covid-19 pandemic is creating additional financial burdens for Americans.
"With millions of Americans scraping by amid the economic fallout from a global pandemic, the rule still allows debt collectors to make excessive, harassing calls," April Kuehnhoff, an attorney with the National Consumer Law Center, said Friday. "The last thing struggling families need right now is to be harassed by a debt collector."
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