We’ve all heard the horror stories about consumers being terrorized by unethical debt collectors. From threats of being tossed into jail to embarrassing Facebook wall postings, up until now, it was the wild west and the debt collectors were policing themselves. Now, though, the Consumer Financial Protection Bureau has laid down the law.
The message is simple: no more abusive practices. And the mode of transportation for that message is a series of what CFPB refers to as “special bulletins”. These new rules come as CFPB is now accepting consumer complaints on the tactics these agencies use. It issued new and quite detailed guidelines that consumers can refer to and if the collectors opt to ignore them, the repercussions will be swift. In fact, the consumer watchdog group has even posted sample letters for use when dealing with unscrupulous debt collectors.
Debt Collectors Hit with Record Civil Penalty
These changes have been a long time coming, but it wasn’t until news broke that the Federal Trade Commission had ordered the largest debt collector company to pay a massive $3.2 million civil penalty. This is a record amount, too. Expert Global Solutions was found to have encouraged its employees to ignore consumer requests to not make contact with them on their jobs. The company even directed employees to not believe anyone who said the number was wrong. The employees continued to call, regardless of how many times they were told they were dialing wrong numbers. Soon, the company was found to have been contacting consumers outside the legal parameters of time. Some called as late as 11 p.m. and as early as 6 a.m.
Legally, a debt collector cannot contact a consumer between 8 p.m. and 8 a.m. and they cannot continue to call a person’s employer if they’ve been told not to.
Not only that, the company must also assume the person on the other end of the line is telling the truth about the collector reaching a wrong number until it can be proven otherwise. The collectors may not communicate with other companies about any outstanding debt, either. At least 75 percent of the phone calls made by employees must be recorded and maintained for at least 90 days. Keep in mind, these are just requirements put into place by FTC.
Now that CFPB has weighed in, it looks like the debt collectors have no other alternative but to fall in line with the new rules and laws. The first CFPB bulletin requires any collection agency to acknowledge it can be “held accountable for any unfair, deceptive, or abusive practices in collecting a consumer’s debts.” The second bulletin reiterates that, but also prohibits deception in conversations, including the impact of not paying on the debtor’s credit reports.
These bulletins make clear that it doesn’t matter who is collecting the debt – unfair, deceptive, or abusive practices are illegal,
said CFPB Director Richard Cordray. He goes on to say,
Consumers need options to help them secure fair and respectful treatment from those debt collectors that fail to abide by the law.
With close to 5,000 debt or collection agencies in the U.S., it’s sure to present a challenge for any government agency to oversee. That, along with the fact that 30 million consumer credit reports show activity from collection agencies illustrate further challenges.
CFPB Action Letters
For now, action letters for consumers to use when communicating with various debt collectors are available on the CFPB website. They can help ensure the consumers get all of the required information to either dispute the claim or at least have the information memorialized for their own protection. One letter requests more information on the debt the collection agency claims is owed. The second letter is acknowledgment that the consumer plans to dispute the debt in its entirety and is requesting proof that the debt is actually owed. This will also put a halt to further communications from the debt collector until that proof has been provided.
The third letter allows a consumer to memorialize their requests to not contact them at work or to not contact them at all. The Fair Debt Collection Practices Act prohibits debt collectors from contacting a consumer about a debt at a time or place they should know is inconvenient. Alternatively, the consumer can provide guidelines on when the agency may make contact. And finally, the fifth letter demands the agency cease any communication efforts. Cordray reminds consumers that if they take that drastic measure and the debt is verified, the agency can then file suit. On the other hand, for those being harassed, this can serve as powerful documentation should they have to prove their case.
As if FTC and CFPB weren’t big enough players to change the game, there’s a third government agency involved. The Office of the Comptroller of the Currency continues its investigations into several of the nation’s biggest banks. It is trying to uncover many problems surrounded credit card debt collections. Specifically, the agency is looking at the years 2009, 2010 and 2011 and already, 10 percent of those audits have revealed problems.
For those who have struggled to keep these collectors at bay, these new rules will ease the overwhelming burden and aggression that’s typical with debt collectors. Many consumers say they do owe the money, but are being harassed to the level that it’s affecting their health, which leads to lost days on their jobs.
Not only that, but many of those with past due debt are trying to pick up the pieces after the recession.
I have every intention of paying that balance off, but I can’t do anything until I can get back to work and the woman who calls me five or six times a day knows I don’t have a job. I don’t know why she won’t back off,
said one woman we spoke with. She owes $443 on a Discover credit card that she’s had since college. The account has since been closed by the card company, and that, she explains, is the worst part of it.
I was a loyal Discover user for years. I hit a rough spot and my credit tanks, the card company bails and I’m left with the debt collectors who make sure I get no peace.
This is a common sentiment but one that should be shifting now that the new guidelines are in place.