Recently, the Consumer Financial Protection Bureau (CFPB) outlined several sweeping proposals to revamp the debt collection industry. Under these proposals, debt collectors would be required to have more accurate information about the debt before collection. These new requirements and restrictions would also apply to the debt upon sale or transfer.
During the collection process, collectors would be required to limit communications with debtors, while clearly disclosing the details of the debt and providing easier mechanisms for disputing the debt. When a debt is disputed, collectors would be prohibited from continuing to pursue payment of the debt without sufficient evidence.
“Today we are considering proposals that would drastically overhaul the debt collection market,” said CFPB Director Richard Cordray. “This is about bringing better accuracy and accountability to a market that desperately needs it.”
The proposals under consideration would increase protections related to third-party debt collectors and other parties covered by the Fair Debt Collection Practices Act, including debt purchasers. The CFPB plans to address consumer protection issues involving first-party debt collectors and creditors separately. The new protections are aimed at ensuring that debt collectors:
- Collect the correct debt: Collectors would have to substantiate any debt before contacting an alleged debtor.
- Limit excessive communications: Collectors would be limited to six communication attempts per week through any means of contact. In addition, if a consumer wants to stop specific ways collectors are contacting them, the new rules would facilitate this.
- Make details clearer regarding the debt: Collectors would be required to include more specific information about the debt in the initial collection notices sent to consumers, including the consumer’s rights under federal laws.
- Make it easier to dispute the debt: The CFNB proposal would add a “tear-off” portion to the notice that consumers could send back to the collector to easily dispute the debt, with options indicating the reason that the consumer believes that the collector’s demand is incorrect. The tear-off would also allow consumers to pay the debt. The consumer could also verbally question the debt’s validity at any time, thus re-initiating the requirement that the collector substantiate the debt.
- Document a disputed debt on demand: If the tear-off sheet or any written notice is returned within 30 days of the initial collection notice, the collector would have to provide a debt report that included written information substantiating the debt to the consumer. The collector could not continue to pursue the debt until this report is completed and mailed.
- Stop collecting or suing on a debt without proper documentation: If a consumer disputes the validity of the debt, collectors would have to stop collections until the necessary documentation is reviewed. This is based upon the proposal's prohibition against collecting on a debt without sufficient underlying evidence. Also, debt collectors that encounter specific warning signs that the information related to the debt is inaccurate or incomplete would not be able to collect until resolution of any doubt created by such warning signs.
- Don't avoid a dispute by transferring the debt: If debt collectors transfer debt without responding to disputes, the next collector may not attempt to collect the debt until resolution of the dispute.
The outline of the proposals under consideration is in preparation for convening a review panel to collect feedback from those in the industry, which is the next step in the rulemaking process. Stay tuned for more on this as it develops!The experienced South Florida defense attorneys at Loan Lawyers are here to review a difficult financial situation to assess all of your available options. To schedule a free consultation at any of our three conveniently located offices, contact Loan Lawyers today by calling (888) FIGHT-13 (344-4813).