How Consumers think New Debt Collection Rules Should Look

Late last year, the Consumer Financial Protection Bureau announced that it would be writing new rules to govern the practices of debt collectors. The subsequent advance notice of proposed rulemaking (ANPR) afforded groups and individuals on all sides of the collection equation the opportunity to chime in on what direction they felt the CFPB should take with new rules.

While the debt collection industry and the organizations that represent it put in some overtime in getting in their responses, the vast majority of responses received by the CFPB were from consumers. But most were very brief anecdotes from individuals, as we noted in the last issue of Know Your Debtor.

Now that the comment period has closed, we thought we’d take a look at some of the more organized responses from consumers and their advocates.

The National Consumer Law Center (NCLC) submitted a 200+ page response on behalf of its organization and many other consumer advocacy groups. The NCLC and its coalition makes recommendations that fall outside of what the debt collection industry would like to see, to say the least.

On the issue of call volume and frequency, the NCLC calls for specific call limitation standards in new debt collection rules. “The CFPB should limit [collection] calls to three per week and actual contact to once a week,” the group writes. “Calls that are more frequent can have no purpose other than harassment.”

The group also takes a hard line on the collection of time-barred debt. It makes a recommendation to completely outlaw any collection activity on accounts beyond the statute of limitations, writing, “the CFPB should go further and prohibit all efforts to collect old debt that is beyond the statute of limitations. The collector could be permitted to accept a voluntary, unsolicited payment, but no affirmative collection activities should be permitted.”

The response seemingly concedes that this is unlikely noting that if the CFPB continues to allow non-court collection on time-barred debt, it should be “only under strict rules,” including the banning of “re-aging” if a consumer makes a payment on the debt. In addition, it recommends blunt language on collection letters for time-barred accounts, including disclosures of “We CANNOT SUE YOU to collect this debt, because it is too old” and “This debt is too old to be included in your credit report. Paying this debt will not help your credit record or score.”

While the ARM industry might not approve of some of the recommendations, there was some common ground.

The NCLC response is comprehensive, but there is a lot of focus on the data used within the debt collection system, specifically, the information passed from original creditor to third party collectors, debt buyers, and attorneys. With the attention being paid to account information on the part of regulators and concessions made by all of the ARM industry responses, it seems very likely that account-level information required will be codified in new debt collection rules. Responses from consumer and industry groups roughly align on this matter.

The NCLC also recognized that newer and emerging communication technologies might have more appeal to consumers. It writes, “Text messages and emails should be treated as telephone calls – and allowable times should be governed by the statutory restrictions in [the FDCPA].”

The focus on account-level information within the debt collection system and new communication technologies was echoed in the ANPR response from state attorneys general. A group of 31 state AGs submitted a joint response on behalf of consumers to the CFPB rulemaking proposal.

In it, the AGs recommended new disclosure requirements for account verification, like the NCLC. The attorneys general did not go as far as the consumer group did on time-barred debt. They instead want stronger disclaimers concerning out-of-statute debt made to consumers regarding their rights under the law.

But the nation’s leading state law enforcement officials do want much stricter rules for ARM firms’ use of the courts to collect, especially debt buyers. In noting that “information accompanying debt collection pleadings tends to be minimal and boilerplate,” the response says that “Robust, complete, and reliable account-level documentation, such as original agreements, account statements, and dispute history, should accompany the debt, without additional charge, through the life of a debt.”

The state AGs note a few benchmark-worthy requirements in certain states, chief among them North Carolina. That state requires debt buyers to provide at the time a lawsuit is filed:

1. the original account number;
2. the original creditor;
3. the amount of the original debt;
4. an itemization of the charges and fees that are owed;
5. the original charge-off balance, or if the balance has not been charged off, an explanation of how the balance was calculated;
6. an itemization of post charge-off additions;
7. the date of last payment; and
8. the amount of interest claimed and the basis for the interest charged

The CFPB’s rulemaking process for debt collection is expected to take many months and probably longer. But in reading the responses from organized and respected consumer groups, ARM companies can at least prepare themselves for new requirements coming into force over the next couple of years.

This article originally appeared in the latest issue of Know Your Debtor, a free quarterly newsletter focused on the U.S. consumer environment. Make sure you’re registered to receive insideARM’s newsletters on your User Profile page.