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CFPB rules fail to protect consumers from abusive debt collection harassment

New rules don’t require debt collectors to document a debt is owed and allow unlimited text, email, and direct messages on social media to consumers

WASHINGTON, D.C. – New rules issued today by the Consumer Financial Protection Bureau won’t protect consumers from common debt collection abuses, according to Consumer Reports.  Under the new regulations, debt collectors will now be able to send unlimited text messages, emails, and direct messages on social media to consumers and won’t be required to substantiate the debt before attempting to collect it.

“Debt collectors are notorious for hounding consumers and filing lawsuits about debts that have already been paid off or never owed in the first place,” said Suzanne Martindale, senior policy counsel and western states legislative manager for Consumer Reports.  “The CFPB’s new rules do nothing about this egregious practice and fail to ensure that debt collectors can prove that money is actually owed and they have the legal right to pursue the debt.  Consumers will continue to face harassment because the CFPB has failed to address this central problem with our broken debt collection system.”

Consumer Reports previously urged the CFPB to require debt collectors to document the name of the original creditor and an itemized record of the total principal, interest, fees, and other charges that have been added to the debt, when they sue over a debt.  CR has also called on the CFPB to make it illegal to sell or attempt to collect debt that is more than seven years old, which is too old to be reported on a credit report under the federal Fair Credit Reporting Act.

Originally, the CFPB proposed a bright line rule limiting the number of times a debt collector is allowed to contact a consumer over the phone to seven attempted calls and one actual conversation per week for each debt owed. However, the final rule stepped away from providing clear standards and instead adopted a rebuttable presumption that favors debt collectors.

Under the new regulations, it is presumed lawful for debt collectors to contact consumers by phone up to seven times a week about each debt.  These limits fall short of what is needed because many consumers in collection have more than one debt, which means debt collectors could contact them as many as seven times every week for each one.  Consumer advocates had urged the CFPB to limit the number of calls to three per week per consumer.

The new rules also allow debt collectors to send unlimited texts, emails, and social media direct messages without getting a consumer’s consent or any assurance that the consumer can access the information.  This is particularly troubling since debt collectors could use these channels to send legally required notices, which consumers could miss if those accounts are not active or checked on a regular basis.  The CFPB rule gives consumers the right to opt-out of these electronic communications, but fails to provide strict guidelines to ensure it will be easy for them  to do so.  CR had urged the CFPB to require debt collectors to get a consumer’s opt-in consent before contacting them using email and text messages and supports a ban on using social media platforms to contact consumers.

Earlier this year, the CFPB and the Federal Trade Commission issued a report analyzing nearly 75,200 consumer complaints about debt collection in 2019.  It found that the most common complaint was about attempts to collect a debt that is not owed, followed by complaints about the failure of debt collectors to provide proper notice documenting the debt or informing the consumer of their rights.  Tied for third were complaints about debt collectors threatening to take legal action and complaints about abusive communication tactics, including frequent or repeated phone calls and the failure of debt collectors to stop calling after the consumer requested them to stop.

“Today’s action by the CFPB is another disappointing example of how the bureau has stepped back from enacting strong rules to protect consumers,” said Antonio Carrejo, policy counsel for Consumer Reports.  “Congress and the states should fill the void and take action to stop abusive debt collection practices and other financial scams.”

California Governor Gavin Newsom recently signed legislation that requires licensing for all debt collectors operating in the state and a separate bill that creates a state version of the CFPB.  The new law transforms California’s existing financial regulator into a more robust watchdog with more resources and broader authority to protect consumers, including oversight of debt collectors.

Michael McCauley: michael.mccauley@consumer.org, 415-902-9537