Bankruptcy Law Blog

Tuesday, August 9, 2016

Consumer Watchdog Reins in Debt Collectors

What is being done about abusive debt collectors?

If you're like many Americans, you have debts that are in collection, and may have been faced with aggressive practice of debt collectors. Now, the Consumer Financial Protection Bureau (CFPB) has announced new rules to curb certain practices of third-party debt collectors that engage in debt collection activities on behalf of creditors or purchase. The new rules are also aimed at reining in debt buyers that purchase consumer debt, often for pennies on the dollar.

This is another step by the CFPB, put in place under the 2010 Dodd-Frank law, to protect credit consumers. We have previously reported that the federal consumer agency intends to regulate payday lenders, and the CFPB has plans to roll out additional initiatives aimed at creditors and first-party collectors later this year.

Moreover, this is the first effort to reform the market since the Fair Debt Collection Practice Act (FDCPA) was enacted in 1977. This law is designed to protect consumers from abusive debt collection practices. Among other abusive practices, the FDCP prohibits debt collectors from making repeated, harassing phones calls, using obscene language, or making threats of violence or harm when attempting to collect a debt.

Some debt collectors have enhanced their compliance and consumer protection policies since the CFPB took the reins of enforcing consumer laws from the Federal Trade Commission. Nonetheless, the agency believes much more needs to be done to protect consumers. The proposed rule is focused on inaccurate and insufficient information often relied on by third-party debt collectors that contact consumers regarding debt that either they do not recognize or that has been eliminated in a bankruptcy.

Under the new rule, debt collection firms must ensure their data is correct and substantiate the debt before contacting a consumer. Once they commence collection activities collectors would also be limited to contacting consumers to 6 times a week. The CFPB also believes consumers are entitled to more information about their debts, and their rights. It should also be easier for consumers to dispute these claims.

This initiative comes after years of expanding consumer debt and mounting defaults, coupled with a wave of complains the CFPB has received about abusive debt collectors. While it remains to be seen how effective these new rules will be, consumers still have rights. If you are struggling with managing your credit, an experienced attorney can help you explore your options.

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