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Abusive Debt Collection Practices Have No Place in the Financial Marketplace

Thursday, July 28, 2016
Lisa Stifler
Graciela Aponte-Diaz

Today the Consumer Financial Protection Bureau (CFPB) convened a public hearing in Sacramento on the first look at the agency's proposals to address abusive debt collection. The Center for Responsible Lending (CRL) delivered expert testimony that highlighted how millions Americans are affected by this $13 billion industry.

Equally important, the public hearing also provides the opportunity to offer initial feedback on the proposals as the Bureau begins its related rulemaking process.

"We know from research and enforcement actions in the states that over the past decade debt buyers and other debt collectors have extracted millions of dollars in payments and court judgments from U.S. households for debts that are too old to be sued on, can't be back up with basic documentation like a contract or other proof the consumer actually owes a debt, or where the debt buyers or their attorneys filed false documents in court," noted Graciela Aponte-Diaz, CRL's Director of California Policy.

"Reports have shown that these debt collection activities have a disproportionate impact on communities of color," Aponte-Diaz continued, "majority black neighborhoods are hit twice as hard by debt collection court judgments as majority white neighborhoods, even adjusting for differences in income."

Other CRL research has also found that debt collection tactics often include filing lawsuits that consumers may not have known until judgments are entered and wages deducted. In recent years, California, Maryland, New York and North Carolina are among states that have enacted reforms to end illegal debt collection practices.

Lisa Stifler, Deputy Director of State Policy and leader of CRL's debt collection work provides further assessment: "The CFPB rules should, at minimum, be improved to match these protections, rather than setting weaker standards as outlined in the proposal. We commend the CFPB for seeking reforms to this issue that harms millions of people, particularly low-income consumers and communities of color.

"However, we are concerned that the proposals do not go far enough to protect consumers from unfair collection attempts.  Specifically, the proposal does not go far enough to require that debt collectors adequately document that they are pursuing the right person for the right debt," concluded Stifler.

More information and online resources on debt collection are available at: http://www.responsiblelending.org/issues/debt-collection-settlement.

For more information or to schedule an interview, contact Charlene Crowell at charlene.crowell@responsiblelending.org or 919.313.8523