Advocates Share Feelings About Provisions of Part II of CFPB Debt Collection Rule

Now that Part II of the Consumer Financial Protection Bureau’s debt collection rule has been released, consumer advocates can finally get a fuller sense of what protections are being put in place for consumers, and they are having no problem sharing how they really feel about the provisions of the rule.

“CFPB’s Debt Collection Rule Fails to Prevent Unfair Practices,” reads the headline of a press release from one advocacy group. “CFPB’s Debt Collection Rule Misses Critical Opportunities to Protect Consumers” reads another.

Advocates and lawmakers were critical of the CFPB when it released Part I of the rule back in October. This time around, advocates were largely focused on the provisions regarding the collection of time-barred debt. Many advocacy groups want the collection of time-barred debt to be completely outlawed.

While acknowledging that there were certain provisions removed the proposed rule that would have further “weakened consumer protections” dealing with time-barred debt, the rule “still allows for the collection of such debt,” noted Lucy Baker of the U.S. Public Interest Research Group (PIRG).

Under the provisions of the rule that was released last Friday, collectors do not have to disclose that a debt is time-barred nor do they have to disclose that a partial payment will revive the statute of limitations when communicating with consumers. However, the rule does say that its provisions are superceded by any state law requirements regarding time-barred debt collection.

“The Consumer Financial Protection Bureau could have put an end to zombie debt once and for all but didn’t,” she said in a statement. “While the CFPB’s final rule no longer includes the more egregious debt collector friendly provisions that were in the draft, it’s a far cry from the protections consumers need. Debt collectors can still pursue debt that has exceeded its statute of limitations, known as time-barred debt or “zombie debt”. That’s a big problem because consumers who make partial payments on time-barred debt can be held liable for the entire debt all over again. The CFPB should have just outright banned the collection of time-barred debt. That would have been the far better outcome, especially during a pandemic that has harmed consumer and family finances.”

Other groups echoed Baker’s comments about the collection of time-barred debt.

“As we face a dire and worsening economic crisis, allowing collectors to collect ‘zombie debt’ could leave consumers more vulnerable to deception and harassment,” said Linda Jun, senior policy counsel at Americans for Financial Reform Education Fund, in a statement. “Collectors should not be allowed to bring expired debt back to life by luring people into making a small payment that revives a debt that would otherwise be past the timeline for a lawsuit.”

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