The Consumer Financial Protection Bureau, under President Trump, already has moved to make life easier for payday lenders. It’s expected any day now to do the same for debt collectors.
The bureau will unveil proposed rule changes that are likely to include explicit permission for debt collectors to contact people via text and email (and maybe social media).
The new rules also may provide greater latitude for bothering people by phone and limits on people’s ability to challenge financial obligations.
In other words, more rights for debt collectors, fewer rights for consumers.
“The agency that Congress created to look out for consumers is now looking out for debt collectors and payday lenders,” said Chris Peterson, director of financial services for the Consumer Federation of America.
He said debt collectors were pressuring the CFPB “to provide greater clarity that would allow them to be more aggressive.”
The question, Peterson told me, “is whether that’s something consumers want, particularly allowing them to contact us via text and email. My guess is no.”
The CFPB is certainly aware that consumers don’t care much for how debt collectors operate.
In a recent report to Congress, it said about 81,500 complaints about debt collectors were lodged last year, “making debt collection one of the most prevalent topics of consumer complaints about financial products and services received by the bureau.”
The bureau patted itself on the back for having “engaged in six public enforcement actions” related to alleged violations of the Fair Debt Collection Practices Act last year.
But that’s potentially misleading. What the CFPB didn’t say was who originated those enforcement actions. In all likelihood, consumer advocates say, they began under the Obama administration.
Moreover, according to the Consumer Federation of America, the CFPB generated almost $3 million a week in restitution for consumers through enforcement of the Fair Debt Collection Practices Act while Obama was in office.
Since Trump’s appointees took over, weekly restitution under the law has totaled $0, the federation says.
A spokeswoman for the bureau didn’t respond to repeated requests for comment.
In a recent speech, CFPB Director Kathy Kraninger noted that the Fair Debt Collection Practices Act hasn’t been updated since 1977 — “the same year that Steve Jobs introduced the world to the idea of a personal computer with the design of the Apple II ... and cellphones were not even imaginable.”
“The bureau will propose clarifying rules to better enable the use of modern communications technology in collections activity,” she said. “We will propose to provide clarity on how collectors may communicate via newer technology such as email or text messages.”
Many debt collectors don’t currently send texts or emails because they’re unsure of the law. The CFPB’s proposed rule likely will spell out that such forms of communication are acceptable and perhaps allow multiple messages every day.
But that’s not all debt collectors are seeking.
In a recent letter to Congress, the industry’s main trade group, the Assn. of Credit and Collection Professionals, said it also wanted more leeway in leaving messages on people’s answering machines and limits on debt collectors’ legal obligation to furnish proof of obligations to consumers.
They want permission to leave ambiguous messages designed not to embarrass people if overheard by others. Such messages would be considered exempt from the Fair Debt Collection Practices Act and thus wouldn’t require clear disclosure that they’re from a debt collector.
Needless to say, that would increase the likelihood you’ll call back.
The industry also wants stricter criteria for when it would have to go to the trouble and expense of providing proof of a debt. It would prefer a formal process that includes written requests from consumers, rather than the current practice of accommodating people’s verbal queries.
“The Fair Debt Collection Practices Act is over four decades old,” said Mark Neeb, chief executive of the Assn. of Credit and Collection Professionals, also known as ACA International. “When it became the law of the land, I don’t think the fax machine had even been invented yet.”
In fact, Xerox patented what many consider to be the first commercial fax machine in 1964, but point taken. Fax machines didn’t become ubiquitous among businesses and households until the 1980s.
Neeb said debt collectors merely wanted the law updated to reflect “modern methods of communication,” so that consumers are more comfortable attending to their finances. That might include texts and emails at the moment, he observed. “Five years from now, it could be something else.”
The CFPB’s Kraninger seems to have gotten the message. “As the CFPB moves to modernize the legal regime for debt collection, we are keenly interested in the views of stakeholders,” she said in her speech.
Consumer advocates interpret that as a willingness, even eagerness, to do the bidding of an $11-billion industry that isn’t shy about flexing its political muscle.
“We have definite concerns that the proposed rulemaking will be weaker than what we’d like to see,” said Lisa Stifler, deputy director of state policy for the Center for Responsible Lending.
“Certainly the world is different today than it was in the late 1970s,” she told me. “However, we need to make sure that any changes to the Fair Debt Collection Practices Act continue to reflect the purpose of the law, which is to prevent abusive practices.”
Here’s how we could do that:
Yes, allow text and email message from debt collectors, but only if consumers opt in to such communications. If not, debt collectors would have to stick to phone calls and letters.
Even if a consumer authorizes a collector’s digital outreach, approval should be limited to that one collection agency. If the debt is sold or transferred to another collector — a common practice — a new opt-in should be required.
No exemptions from the current law regarding a collector’s requirement to clearly identify the purpose of getting in touch. No voice messages that fail to meet that standard in the name of sparing the recipient embarrassment.
No tightening of requirements for obtaining proof of a debt. Requesting such proof by phone should remain sufficient.
Neeb at the Assn. of Credit and Collection Professionals didn’t like those ideas.
He told me the more industry-friendly changes proposed by debt collectors, rather than the consumer-friendly suggestions I’d made, would better protect people and would safeguard the industry from “frivolous lawsuits.”
When the CFPB unveils its proposed rule changes, likely this week or next, it will begin a comment period before issuing a final rule. You can be sure debt collectors will file voluminous comments in support of their stance.