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CFPB Proposed Debt Collection Rule Shortchanges Consumers

Tuesday, May 7, 2019
Melissa Stegman
Lisa Stifler

WASHINGTON, D.C. - Today, Kathy Kraninger, the Director of the Consumer Financial Protection Bureau (CFPB), announced a long-awaited proposed rule governing the $11.5 billion debt collection industry that includes 7,700 collection agencies nationwide. It is also an industry that ranks among those most reported complaints received by the CFPB and the Federal Trade Commission (FTC).

As announced, debt collectors would be able to place up to seven unanswered calls each week to consumers. Once that limit is reached, the collector could not resume communications until a week had passed. If more than one debt collector is contacting a given consumer, the number of authorized communications would be multiplied per collector. Secondly, collectors are explicitly authorized to expand their consumer communications to add both text messages and email. Debt collectors would also send a new disclosure form to consumers, identifying how debts could be paid or disputed.

The proposed rule will be open for public comment for 90 days.

In response, the Center for Responsible Lending (CRL) released the following statements:

"With an estimated 620,000 debt collection complaints recorded every year, we had hoped for a rule that would effectively halt illegal and harassing industry practices,” said Melissa Stegman, a senior policy counsel. “Instead, the agency is again catering to businesses instead of consumers. Harassing communications from debt collectors has occurred for years with phone calls to homes and even places of work. With today’s actions, CFPB is expanding the authorized ways debt collectors can communicate by adding text messages and email. Consumers will now bear the burden of opting out of these new communications. Real reform could call for consumers to opt in, not out."

For Lisa Stifler, CRL’s deputy director of state policy, the rule now runs the risk of compromising state laws already enacted.

“The best consumer protections utilize a combination of state and federal enforcement,” stated Stifler. “But in the Trump Administration, federal agencies are frequently failing to regulate, or secure restitution for harmed consumers while hamstringing states that can and should act in defense of their consumers and residents.

“Regarding debt collectors’ ability to sue or threaten to sue on time-barred debt, we are disappointed in the weakening of the proposal since the outline released two years ago. The CFPB should out right prohibit lawsuits or threats to sue on debt that has passed the statute of limitations, as they proposed in their Small Business Review Panel proposals. The CFPB should extend this prohibition to any attempts to collect on time-barred debt. CRL is concerned that a time-barred debt disclosure, as the agency indicates it has plans to test in the future, will not be sufficient.

“Instead of protections, the proposal will harm people who are impacted by the most abusive and deceptive debt collection practices: communities of color, older Americans, and service members. Today’s proposed rule will widen the berth given to bad actors with a nodding approval by the one agency created to solely protect consumers: CFPB,” concluded Stifler.

For more information, or to arrange an interview with a CRL spokesperson on this issue, please contact Charlene Crowell at charlene.crowell@responsiblelending.org.