CFPB: How About Letters for Debt Collectors to Send Consumers?

Stephanie Eidelman

Yesterday, the Consumer Financial Protection Bureau (CFPB) released a series of letters that consumers can use to communicate with debt collectors to request more information, inform them they are disputing a debt, and other topics.

One may or may not have issues with the exact language of the letters, but the spirit of offering them to consumers who may either be unsophisticated or simply lack the confidence to draft such letters seems to me a good step.

On the other side of the coin, how about issuing model letters for debt collectors to send to consumers for standard communications? In this case the reason wouldn’t be lack of sophistication, but to resolve the myriad gray areas that exist between laws about what can and cannot be included in a letter.

It seems to me that those same collection firms that CFPB Director Cordray says have nothing to worry about because they follow the laws, maintain compliance, and treat consumers with respect, would greatly benefit from knowing that a simple letter is guaranteed to be an acceptable form of communication in the eyes of regulators.

A debt collector’s goals in sending a letter is to receive a call from a consumer in order to:

1. ensure they are communicating with the right party,
2. resolve any questions about the debt,
3. make payment arrangements appropriate for the consumer’s situation (even if that means no payment)

One of the main problems the collection industry has is that a very small percentage of consumers make that call. Many are likely afraid. Many have been “trained” by consumer attorneys or others not to return a debt collector’s call. Unfortunately this leaves collectors – or their clients who own the debt – with only one option, to file a law suit (if they are able to).  This is expensive for everyone, clogs the courts, and in most cases, isn’t preferable for the consumer.

If the CFPB could help to standardize what a legitimate collector “looks like,” that would help consumers differentiate between a reputable business and a scam, and may open the door to better communication and faster resolution of debts. One way the Bureau could do this is to establish a set of clear and simple standard letters, then educate consumers about what to do when they receive one of these letters, and what to do when they receive a letter that appears suspicious.