In late July, the Consumer Financial Protection Bureau (CFPB) released an outline of its proposal to tighten up the highly regulated debt collection industry. These recommendations are mostly targeted at the debt buying industry where debt can be bought and sold many times over, thus moving it further and further away from the original debt owner. The document also addresses third-party debt collection agencies that are contracted by debt owners to collect for a contingency fee or via flat rate.
The CFPB will seek input from other agencies including the Federal Trade Commission, Federal Communications Commission and the Office of the Comptroller of the Currency. It will also solicit feedback from the public and a panel of small businesses in the debt collection industry.
The proposal underscores the fact that full compliance with all federal and state regulations is the most effective way of collecting debt while maintaining maximum brand protection. Optio is committed to such compliance while fulfilling first- or third-party debt collection efforts for its clients.
CFPB’s Interest in Third-Party Debt Collection
The CFPB spends considerable resources watching over debt collections, an industry that accounts for over one third of the complaints that it receives. The bureau has filed several debt collection cases against first- and third-party collectors since its formation in 2011, citing violations of the Fair Debt Collection Practices Act (FDCPA) and Dodd-Frank Act because of “unfair, deceptive and abusive” practices that have resulted in civil penalties and restitution.
Relevant Content of the Proposal
The 117-page proposal contains a handful of components directly impacting debt collection agencies.
- Section III. Information Integrity and Related Concerns discusses the quality of information related to the debt.
“First, there are often substantial deficiencies in the quality and quantity of information collectors receive at placement or sale of the debt that frequently result in collectors contacting the wrong consumers, for the wrong amount, or for debts that the collector is not entitled to collect.
“Second, the Bureau is concerned that the information that consumers receive in initial notices required under the FDCPA lack critical elements that would help consumers recognize whether the debt is in fact theirs, which may lead to more consumer complaints, a lack of response by consumers, or both.”
The CFPB proposes that debt collectors fully substantiate claims of indebtedness, and it also provides pages of detailed recommendations about the clarity of claims, missing information and handling disputes.
Section IV. (B) Time-barred Debt and Obsolete Debt focuses on “out of statute debt” or debt “which the statute of limitations has expired.”
“In a few states, collectors are affirmatively prohibited from bringing suit on time-barred debt under state law, but the more common rule is that courts will dismiss lawsuits filed on such debt if the consumer proves the statute of limitations as an affirmative defense. Most statutes of limitation fall in the three-to-six-year range, although in some jurisdictions they may extend to fifteen years for certain types of debt.
“A related issue is obsolete debt, which is debt that, because of its age, is generally barred from appearing on credit reports under the Fair Credit Reporting Act.”
The CFPB is considering to “prohibit suit and threats of suit on time-barred debt” and “to require disclosures, and to waive revival, in connection with the collection of time-barred debt and obsolete debt.”
- Section V. Collector Communication Practices is a response to the CFPB’s second largest source of complaints — communication practices.
“Although the FDCPA has established multiple protections and requirements regarding debt collection communications throughout the debt collection lifecycle, consumers consistently complain about frequent or repeated collections telephone calls, disclosures of debts to third parties, and other concerns related to debt collection communications. Communications-related conduct also drives a substantial number of FDCPA lawsuits.
“The Bureau believes that improving the quality of information in the debt collection system and providing consumers with the initial disclosures discussed in part III might decrease the amount of time and effort that collectors spend trying to locate and initiate contact with consumers.”
Its proposal includes:
– Regulations to govern contact frequency and the leaving of messages
– Regulations to govern the time, place, and manner of collector contacts
– Regulations relating to situations in which the consumer alleged to owe the debt dies (decedent debt).
Summary
The debt collection industry has made great strides in compliance while attempting to stay ahead of the law via self-regulation. Trade organizations such as ACA International have been instrumental in providing recommendations for maintaining full compliance, certification and training. Learn more about Optio compliance and certification by visiting our dedicated page.
Optio offers first- and third-party debt collection solutions in areas such as automotive, commercial enterprise, education and student loans, financial, healthcare, retail, telecommunications and energy-utilities. Contact us today to discuss an individualized program for your company.
