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.

What is the Consumer Financial Protection Bureau?

Consumer Financial Protection Bureau website.


A relatively new government beast, the Consumer Financial Protection Bureau (or CFPB, for short) was created in response to the 2008 financial shakedown of American consumers. It’s basically the arm of government meant to give some teeth to the federal consumer laws, like the Fair Credit Reporting Act and the Fair Debt Collection Practices Act.


If you look around its website, you’ll quickly see that it considers its powers to be threefold:

  1. “Empower”
  2. “Enforce”
  3. “Educate”


“Empower” and “Educate” kind of seem like the same thing to me – aren’t you empowered when you are educated? Or something like that? I guess as an attorney I should be able to appreciate the subtle nuanced differences they make between “empower” (create tools, answer questions, provide tips) and “educate” (encourage financial education, publish research, educate financial companies on their responsibilities), but it really all seems like it could belong in one big group.


So if you have questions about getting a mortgage, or are wondering what your rights are as a consumer under federal law, the CFPB website is the place to be.


The “enforcement” wing of CFPB’s powers is more exciting – the CFPB can bring actions against financial companies for violations against consumers. In briefly looking over the cases the CFPB lists on its website, the cases seem like class action cases. Where there are enough consumers harmed, there is enough initiative to yank the leash and harness the wrongdoing financial company. For instance, one class of victims was entitled to compensation out of a $14M pool of money from Amerisave Mortgage Corporation and Novo Appraisal Management Corp.


The weird part is that there’s only 17 cases listed for “payments to harmed consumers.” The CFPB touts that it was won back billions of dollars for consumers who have been mistreated in some way by financial companies, and it makes sense if they’re getting millions of dollars in one settlement. But how do they find their class of victims, and do the funds get appropriately distributed? How much of the CFPB’s budget is dedicated to enforcement, and how much is applied towards empowering/educating consumers?


Providing consumers the opportunity to file a complaint against a financial institution seems to be the main focus of CFPB for now. They have a huge 2015 report of all the complaints they’ve received, even breaking them down by type of complaint, such as mortgage complaints and credit card complaints.


So if you have questions about your mortgage, your credit card, student loans, payday loans, prepaid cards, financial services, money transfers, consumer loans, bank account and service, credit reporting, or debt collection, the CFPB should be one of the first places you look to see what your rights are. It is pretty exciting that there’s actually a government agency that handles consumer law from every angle instead of a piecemeal approach from several different agencies.
Now the question is: do consumers know about the CFPB, and is the CFPB, in its own words “Helping you live a smarter, healthier financial life”?