Debt collectors are bracing for the impact from the latest sweeping new move by the Consumer Financial Protection Bureau, an effort to crack down on harassment and abuses by companies trying to collect from consumers.
The firms that collect outstanding debts on behalf of lenders say they’re worried about the new rules the bureau is proposing, which would limit the ways they can contact debtors and put in new rules to avoid people being hit up for nonexistent debts. The rules would raise compliance costs and would threaten the businesses, especially small businesses, for which collection of outstanding debts means the difference between profitability and failure, they say.
Debt collectors have long been expecting new rules from the bureau, which was created in 2010 and has been getting up to speed in laying out major new rules — just this summer, it has outlined plans to regulate payday lending and arbitration clauses in financial contracts.
Dodging the bullet, for now, are banks and credit unions. The rules outlined by the bureau this week would apply only to third-party collectors. New rules for first-party debt collectors are coming on a separate track.
“Consumers have very different experiences when dealing with banks as opposed to debt collectors,” Consumer Bankers Association head Richard Hunt said in response to the bureau’s announcement, saying that he appreciated that the agency is distinguishing between the two.
In moving toward instituting new rules on debt collectors, the bureau pointed to the high volume of complaints it receives from people who report being annoyed or bullied by debt collection firms. The industry provokes more consumer complaints to the bureau than any other, according to Cordray, about a quarter of the total.
It’s possible to view complaints regarding debt collectors, in redacted form, on the bureau’s website. Many people are simply bothered by companies calling them multiple times a day at home or calling their office. Others have been contacted about debts they say aren’t owed and can’t shake the collector. Some complaints involve collectors garnishing people’s wages.
While collectors are willing to work with the bureau to address the problems, they are also concerned that the outlined rules could hurt the kinds of consumers they are meant to serve, said Cindy Sebrell, a representative for the trade group ACA International.
“Access to credit could be diminished for the very people who need it most,” Sebrell told the Washington Examiner. “If creditors are not able to collect rightfully owed debts, they will be less likely to extend credit to consumers who rely on credit for much-needed goods and services.”
Harvey Moore, president of the National Creditors Bar Association and of his own firm, the Moore Law Group, also warned that curbs on collectors’ communications with debtors could conflict with court orders in situations in which the judge requires them to communicate with the consumers as part of litigation. He gave the example of a situation in which a collector engaged in phone tag with a consumer, and ran into the numerical limits on phone calls the bureau is considering. “We’re going to be in a push-pull situation,” he said, if they are also ordered by a court to be in contact with the consumer.
Companies will have the chance to make their case for “tweaks” to the outlined rules, as Moore called them, before and after the bureau formally proposes them and opens them for public comment.
