After giving consumers tools to help them deal with unfair credit card, credit reporting, mortgage, banking and private student loan practices, the Consumer Financial Protection Bureau (CFPB) is now tackling the issue of debt collection to protect consumers from harmful debt collection practices.
This month, the CFPB issued two bulletins to companies about harmful debt collection practices. When you're in debt to a bank or credit card company, that company, you may not have to deal directly with that company to arrange for debt repayment. While banks and other creditors, such as credit card issuers may take on the responsibility of collecting the debt consumers owe them, they're also allowed to sell that debt to third party debt buyers. Sometimes these buyers collect the debt themselves, or they may resell the debt to another collector. This can lead to a situation where the original creditor may not handle a debt that's in collection, and it could be a company that uses unfair practices to prey on consumers to collect on that debt.
The first bulletin, 2013-07, covers unfair, deceptive, or abusive acts or practices (known as UDAAPs) that violate the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). This bulletin prohibits collection agencies from engaging in practices that cause significant financial injury, destroy consumer confidence and try to get rid of fair competition in the market. This would include harassment, false representation with regards to debt collection or unfair or unconscionable means to collect or attempt to collect debt.
In its second bulletin, 2013-08, the CFPB discusses the Fair Debt Collection Practices Act (FDCPA), which makes it illegal for debt collectors to "use any false, deceptive, or misleading representation or means in connection with the collection of any debt." This act, along with the Dodd-Frank Act, prohibits debt collectors from using deceptive practices as a means of collecting on consumer debt. These practices include making statements about paying debts in collection and improving a consumer's credit report, credit score, creditworthiness or the likelihood of receiving credit or more favorable credit terms.
Additionally, the CPFB released five action letters for consumers to use when they want to get information from debt collectors about the debts being collected. The collection of letters includes: • A letter requesting more information about the debt. This letter allows consumers to dispute a charge until the collector specifies what the debt is for. • A letter to cease contact until the debt collector provides evidence showing the consumer is responsible for the debt. • A letter to work out communications between the consumer and collector that comply with the Fair Debt Collection Practices Act and restrict communications to convenient times. • A letter to inform debt collectors the consumer has hired a lawyer, and all contact regarding the debt should go through the lawyer. • A letter to stop communications. While this doesn't erase the debt, the consumer still has the right to tell a debt collector to stop contacting them, particularly if they're feeling harassed by the collector.
Each downloadable "Debt collector response template" file states when and how consumers should use the template, gives background on the subject at hand and provides a letter template that the consumer can fill in with their personal details and send to a debt collector.
The CFPB has also opened up a complaint database for consumers to submit issues they've had with debit collection that's related to all consumer debt, including credit card debt. Consumers can submit their complaints at the CFPB's website. The CFPB requires companies to respond to a complaint within 15 days with an action plan to resolve it. Most complaints should be resolved within 60 days.
