The proposals would require collectors to substantiate a debt prior to collecting on it, would limit collectors to six communication attempts per week, beef up the disclosures provided to individuals when sending collection letters, provide a tear-off sheet with any written notice that allows individuals to request documentation validating the existence of the debt being collected, stop collecting debts when a dispute has been filed, and indicate that a debt is under dispute when transferring from one collector to another.
Issuing the proposals was long expected by the industry following the announcement of a field hearing on the topic of debt collections, scheduled to being at 2pm EDT this afternoon in McClellan Park, Calif. The official next step in the rulemaking process is for the CFPB to hold hearings under the Small Business Regulatory Enforcement Fairness Act, which will bring together small businesses to discuss the proposals under consideration. The SBREFA panel will have 60 days after the conclusion of the hearings to submit its input to the CFPB.
The proposals would only apply to collectors regulated by the Fair Debt Collection Practices Act, mainly third-party collection agencies. Creditors and other first-party collectors would not be subject to these rules. In a copy of the prepared remarks that CFPB Director Richard Cordray will deliver at the hearing, he said that the CFPB will “address” first-party collections, “but on a different track.” Cordray also said in his remarks that the SBREFA hearing will be held “next month.”
Following the SBREFA hearings, the CFPB is expected to develop and issue a proposed rule that would be open for public comment before a final rule is implemented. The final rule is not expected to go into effect until late 2017, at the earliest.
“Companies should not collect debt that is not owed,” Cordray will say, according to an advanced copy of his remarks that have been posted to the CFPB’s website. “They should have more reliable information about the debt before they try to collect. They would have to limit the number of attempts to make contact and should give consumers better information and more control over the process. Collectors also would have to make it easier for consumers to pursue disputes, and they would be barred from collecting on disputed debt that lacks proper documentation. These same requirements would follow along with any debts that are sold or transferred to another collector.
“Both consumers and responsible businesses stand to benefit by improved standards for debt collection. Consumers deserve to be treated with dignity and respect, and businesses should be able to operate fairly and reasonably to collect the debts they are legitimately owed.”
As part of the process, the CFPB also released a study of third-party debt collections. The study is the result of written and phone surveys of collection agencies conducted by the CFPB.
AccountsRecovery.net will have comprehensive coverage of the CFPB’s release and the field hearing.