Government Considers Proposal To Overhaul Debt Collection Practices

Friday, August 19th, 2016
Updated: August 19th, 2016
The content is accurate at the time of publication and is subject to change.

The Consumer Financial Protection Bureau (CFPB) is considering a proposal that would change the way debt collectors operate in the United States. The new guidelines would limit the ways collection agents can contact people with debt, and ensure that the correct amount of debt is collected.

Currently, there is some concern about the way debt collectors practice. This proposal would require collection agents to have more information about the debts they are attempting to collect, as well as limiting the communications they are allowed to have with debtors. DFPB Director Richard Cordray said the proposal “is about bringing better accuracy and accountability to a market that desperately needs it.”

The CFPB release says that 70 million consumers currently have debts that are in collections; this happens when payments aren’t’ made in time and banks hand accounts over to collections agents. Sometimes banks collect their own debts, and sometimes they hire third-party debt collectors. Other times, they may sell the debt to buyers who use their own methods to collect the debt. The CFPB estimates that there are over 6,000 debt collection companies in the United States.

A recent study by the CFPB sowed that one in three people have been contacted by a creditor trying to collect a debt within the past twelve months. One-third of those said that the amount the collector was contacting them about wasn’t even correct. Debt collection is the number one thing people file complaints about to the CFPB. Complaints include that the debt collectors are seeking the wrong amount or have the wrong person.

Consumers pay debts they don’t owe in order to stop contact

Sometimes, people will pay a debt they do not owe, simply to stop the debt collector from contacting them further. In other cases, they spend time and money trying to dispute the debt.

The proposal under consideration would help ensure that debt collectors:

• Collect the correct amount from the correct person. Collectors would be required to substantiate the amount of debt and the individual who owed it before initiating contact. They would need to confirm the person’s name, address, phone number, account number, date of default, amount owed, and dates of payments.

• Limit communications. Collectors could only attempt six contacts per week, through any channel, when trying to reach a debtor.

• Make it easier for consumers to dispute debts they don’t believe they owe.

• Establish a 30-day waiting period before collectors can contact survivors of a person who has passed away and owes a debt.

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