The CFBP’s proposed update to the Fair Debt Collection Practices Act takes into account the impact of newer communications technology, but consumer advocates warn it does not offer adequate protection.
Even as the Consumer Financial Protection Bureau (CFPB) moves to update the Fair Debt Collection Practices Act of 1977 to better reflect the impact of newer communications technology, some consumer advocates point to the inadequacy of the proposed measures.
The consumer protection agency has invited public comment on the proposed update, which would set up rules on how debt collectors could use newer technologies – including social media, text messages and emails – to interact with debtors, such as those delinquent on credit card debt. It would also require enhanced disclosures from debt collectors about the debt, and collection procedures.
The FDCPA was originally enacted taking into account “abundant evidence of the use of abusive, deceptive and unfair debt collection practices by many debt collectors.” According to consumer advocates, debt collector abuses are regularly among the leading consumer complaints to both the CFPB and the Federal Trade Commission (FTC).
“The Bureau is taking the next step in the rulemaking process to ensure we have clear rules of the road where consumers know their rights and debt collectors know their limitations,” said CFPB Director Kathleen Kraninger in a press release.
See related: Survey: Debt collection problems widespread
Debt collection guidelines for the digital age
The proposals the CFPB is considering include:
- Limiting the number of debt collector attempts to call a debtor on the phone about any specific debt to seven a week. And after a debt collector has a telephone conversation with a debtor, they would have to wait at least a week before attempting to make telephone contact again.
- Addressing how debt collectors could use voice mails, emails and text messages to reach consumers. Those who don’t want to receive communications through these technologies could opt out of such communication with the debt collectors.
- Allowing consumers to specify if they don’t want to receive calls at certain numbers, such as a work number, or at certain times. Collectors would also need explicit permission to initiate contact with debtors on their work emails.
- Prohibiting contact on public social media platforms, except for direct messages that only the debtor can access.
- Asking collectors to send adequate disclosures on the debt and consumer protections. Additionally, prompts would be provided that make it easier for consumers to take additional action, such as disputing the debt, or asking for more information.
- Prohibiting collectors from threatening to sue, or actually suing, consumers on debts that the collectors know, or should know, are old enough to be past a statute of limitations.
- Requiring collectors not to send information about a debt to a credit bureau without first communicating with the debtor.
In case any state law offers greater protection than the CFPB proposals, debt collectors would not be exempt from the state law requirements.
Opt-out guidelines could be onerous
At least two consumer advocates – the Center for Responsible Lending and the National Consumer Law Center – have expressed doubts about how effective these proposed measures will be in protecting debtors from debt collector harassment.
“CFPB is expanding the authorized ways debt collectors can communicate by adding text messages and email. Consumers will now bear the burden of opting out of these new communications. Real reform could call for consumers to opt in, not out,” Melissa Stegman, senior policy counsel at the Center for Responsible Lending, said in a press release.
April Kuehnhoff, a staff attorney at the National Consumer Law Center, voiced similar concerns. According to her, debt collectors could make it difficult for consumers to opt out of specific communication methods by asking them to send a snail mail to a specific address.
Moreover, she said in emailed comments, “Collectors would not have to comply with the E-Sign Act before sending required notices electronically to ensure that consumers can actually access critical information sent by email or hyperlinks via email or text.”
For instance, some people may not have a computer at home, and smartphone access may be inadequate for those with limited data plans, budget phones or spotty internet access.
Phone, text, email contact attempt limits could be too high
The NCLC also sees the seven-call-a-week limit on phone contact as too high, considering this applies on a per-debt basis, so that anyone with more than one debt could end up receiving a higher volume of calls.
Also, the limit would apply both to calls to the debtor and to calls to friends or family members the collector contacts in an attempt to locate the consumer. Moreover, there are no explicit limits on the contact attempts by email, text or social media direct messages.
This could impose costs on those without unlimited text messaging plans. The proposal does, however, count a telephone call that results in a “voicemail drop” toward the limited calls.
Limits on contact attempts remain a gray area. David N. Anthony, an attorney at the law firm of Troutman Sanders who has represented debt collectors in lawsuits, pointed out that courts have found a higher volume of calls than the proposal sets to be acceptable under the FDCPA.
“The CFPB’s proposed call frequency limits appear to be an attempt to strike a balance between the competing interests of consumers in not being harassed over their debts and creditors in being able to collect on their accounts. However, this issue is one of the most hotly contested to come out of the proposed rule,” Anthony said in emailed comments.
Thus, he sees “a strong likelihood” that the CFPB will make revisions to the call frequency limits before issuing a final rule.
And a spokesman for the Consumer Bankers Association noted in an e-mail, “Different customers with different debts need tailored and individualized solutions. One-size-fits-all contact caps could interfere with consumers’ financial stability.”
Social media restrictions
While the proposal does not allow debt collectors to communicate with debtors publicly via social media, they can still reach them through direct messages on such platforms, even without the consumer’s consent.
The NCLC believes this could result in the message’s reaching another person with the same name, particularly in the case of common names.
See related: Watch what you post! Collectors turn to social media
Time-barred debt communications may not go far enough
Another concern for consumer watchdogs is the disclosures relating to time-barred debts, which they don’t consider sufficient.
The NCLC would like the CFPB to hold a collector responsible for knowing that a debt is too old to initiate a lawsuit. The consumer advocate organization also believes consumers could be tricked into restarting a statute of limitations on the debt, just by making a small payment.
A group of 24 senators led by Bob Menendez (D-NJ) and Sherrod Brown (D-OH), who is ranking member of the Senate Banking Committee, has also voiced concerns about these proposals.
“Given the number of American families harmed by abusive debt collection practices, we request that you reconsider this rulemaking and pursue more meaningful reforms that put consumers, not the debt collection industry, first,” the group of senators said in a letter to CFPB director Kathleen Kraninger.
Attorney Anthony noted the CFPB’s proposed rule attempts to provide more clarity on matters such as required disclosures that have become more ambiguous in the last 20 years.
“Methods of debt collection communication, frequency of communications and validation notices and disclosures have been particular areas of uncertainty that debt collectors have had to navigate through with little, or often-times conflicting, guidance from the CFPB or the courts,” he said.
The CFPB is accepting comments from consumers on these proposed changes until September 18.