Improving the Debt Collection Market for Consumers

In a recent press release, the Consumer Financial Protection Bureau announced that it is considering a proposal to strengthen protections for consumers in the debt collection market. Its reasons for turning a magnifying glass to the debt collection industry have to do with how many complaints the CFPB has received, and how many consumers are likely to be affected at one point or another with a call from a debt collector.

Read the CFPB’s article here.

The CFPB noted that the bulk of the complaints it receives has to do with debt collectors calling consumers about debts that were already paid off, discharged in bankruptcy, or wasn’t their debt in the first place. Not surprising there.

Sometimes it seems like the CFPB is more awestruck with the highest number it can boast on its website – like telling us that more than 70 million consumers were contacted by a debt collector within the past year. Or that, because of CFPB’s enforcement actions against creditors and debt collectors, they’ve gotten hundreds of millions of dollars refunded to consumers.

That’s great and all, but what are they proposing to do about tightening up the debt collection industry? Turns out, the million dollar numbers the CFPB likes to brag about is a lot more concrete than the proposals of tightening up the debt collecting industry:

  1. Capping collector contact attempts;
  2. Making sure that companies collect the correct debt – which means collectors would have to have more information and more accurate information on debtors before they start collecting;
  3. Collection companies would have to make it easier for consumers to dispute a debt.

I understand and really appreciate what the CFPB is trying to do here. But what I’d like to see more of is hard and fast rules about how many “contact attempts” are too many, and exactly how much information is enough to move forward with collecting a debt. It’s not surprising at all to me that the bulk of complaints the CFPB receives is about debt collectors – it’s a tough and underhanded business meant to make the consumer feel bad, confused, and frustrated.

Indeed, the CFPB notes, like the Bad Paper book, that often the original creditor only gives names and debt amounts to a debt collector, in exchange for a nominal sum of money for each account. Given how loose and fast the original creditor and debt collectors play with consumers’ information, I’m surprised there aren’t more complaints filed with the CFPB.