Debt collectors will face new federal rules aimed at preventing abuse of consumers, the Consumer Financial Protection Bureau will announce Thursday.
The bureau is considering proposals to “drastically overhaul” the $13.7 billion debt-collection industry, including measures to make sure that the companies ascertain that the debt is still owed before trying to collect it, Director Richard Cordray plans to say in a scheduled speech in Sacramento, Calif.
The planned regulation of debt collectors is the latest of a series of major new rules proposed by the agency, including a sweeping set of changes to payday lenders introduced in June.
Cordray justified the latest regulatory push on the grounds that debt-collection problems are among consumers’ most frequent complaints. About 70 million people were contacted by a debt collector within the last year, according to the bureau.
The debt-collection industry provokes more consumer complaints to the bureau than any other industry, according to Cordray, about a quarter of the total. The biggest complaint was that a collector was bothering a consumer for a debt that had already been repaid.
Debt collectors are already prohibited by federal law from harassing consumers. The bureau is considering additional rules for third-party debt collectors, which are companies that buy unpaid debts from businesses that have failed to collect them, with plans for a separate set of regulations for first-party collectors.
Top among the requirements would be a mandate that collectors make sure that the debt is legitimate before trying to collect it.
Then, there would be curbs on the methods they use to get consumers to pay up. They would be limited to contacting the consumer only six times per week, with the consumer being able to prevent certain types of inquiries, such as calls at work. The bureau is also weighing a grace period before companies can try to collect from the relatives of a recently deceased debtor.
The collectors would have to provide more and clearer documentation on request, and the bureau is also considering requiring them to provide information about the consumers’ options, including contacting the bureau.
