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An Examination of New CFPB Debt Collection Rules

Written by Steve Rhode

The Consumer Financial Protection Bureau (CFPB) has released new rules that will give it the authority to supervise the activities and actions of the nations largest debt collection agencies. While supervision does not extend to all debt collection groups, the lessons learned will.

The CFPB stated that the purpose of this action and regulations of the debt collection industry was to make sure consumers are treated fairly. As the CFPB Director, Richard Cordray, said, “Today we are announcing that we will be supervising the larger debt collectors in the market for the first time at the federal level. We want all companies to realize that the better business choice is to follow the law — not break it.”

The basic tenants of this new supervision certainly seem logical and fair to both consumers and debt collection companies. It’s hard to argue that it is burdensome on collection agencies to treat consumers with civility and honesty, that they must provide accurate information, and they should provide required disclosures.

The CFPB has made public their examination guide they will be using in reviewing the activities of debt collection agencies. What follows is a review of the guide and the more interesting specifics mentioned.

CFPB Debt Collection Examination Procedures

The 29 page guide put out by the CFPB provides direction to examiners on a number of subjects related to the review of debt collection agencies.

Information Disputes

For consumers that dispute the validity of a debt directly with the debt buyer or debt collector, the company will be examined to see if they have complied with the following rules and guidance.

  • Determine whether the entity has policies and procedures for properly identifying a direct dispute as such. (12 CFR 1022.41, 1022.43).
  • Determine whether the furnisher conducts reasonable investigations of direct disputes from consumers where required, including a review of all relevant information provided by the consumer. (12 CFR 1022.43(a)-(b), (e)(1), (2)).
  • Determine whether the furnisher completes the investigation and reports the results to the consumer within the required time frame (12 CFR 1022.43(e)(3)).
  • Determine whether the furnisher notifies and provides corrected information to the consumer reporting agencies when the results of its investigation finds that inaccurate information was furnished to the consumer reporting agencies (12 CFR 1022.43(e)(4)).
  • If the furnisher declines to investigate a direct dispute on the ground that it is frivolous or irrelevant, determine whether the furnisher:
    • Has reasonably determined that the dispute is frivolous or irrelevant. A dispute qualifies as “frivolous or irrelevant” if:
      • The consumer did not provide sufficient information to investigate the disputed information;
      • The direct dispute is substantially the same as a dispute previously submitted by or on behalf of the consumer, and the dispute is one with respect to which the furnisher already has complied with the statutory or regulatory requirements (provided, however, that a direct dispute would not be “substantially the same” as the one previously submitted if the dispute includes new information required by Regulation V to be provided to the furnisher, but that had not previously been provided to the furnisher); or
      • The furnisher is not required to investigate the direct dispute because one or more of the exceptions listed in 12 CFR 1022.43(b) is applicable (12 CFR
    • Notifies the consumer within five business days after finding the dispute frivolous or
      irrelevant (12 CFR 1022.43(f)(2)); and
    • Includes in the consumer notification the reasons for the findings and the information
      necessary to investigate the disputed information (12 CFR 1022.43(f)(3)).
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The most relevant portions of this section for consumers is the burden put on debt collectors to actually investigate disputed debt and if they avoid doing so the consumer may file an additional dispute with new information and the new request must be investigated. If the debt collector feels the dispute request is frivolous then it must let the consumer know promptly.

The CFPB examiner will be looking at the reasonableness of the investigation process.

Credit Report Bureau Disputes

If a consumer disputes an item on their consumer credit report and the collector is notified by the credit reporting agency the rules provide for less of an ability to dodge such a request. The frivolous exception is not listed.

The debt collector and debt buyer will be reviewed by the CFPB examiner to make sure they have done the following:

  • Conduct an investigation with respect to the disputed information
  • Review all relevant information provided by the consumer reporting agency
  • Report the results of the investigation to the consumer reporting agency
  • Report the results of the investigation to all other nationwide consumer reporting agencies to which the information was furnished if the investigation finds that the furnished information was inaccurate or incomplete
  • Modify, delete, or permanently block the furnishing of information that is found to be inaccurate or incomplete or could not be verified; and
  • Complete the required investigations, reviews, and reports within applicable time limits

As part of the debt collection examination, the CFPB examiner may listen to love and taped calls and interview consumers that have previously filed complaints. This will give the examiner potential clues to uncover consumer disputes that were dismissed without investigation.

Time-Barred Debt

Debt collectors and debt buyers are required to have a policy in place to deal with debt that may be time-barred or expired under the statute of limitations.

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Collectors will be examined to see if they have threatened to sue on time-barred debt or debt expired under the statute of limitations.

But most importantly, the collector must make it clear that any time-barred debt has a different status.

If the entity demands payment on time-barred debt other than through litigation, where permissible, determine what representations, if any, the entity makes in its written and oral communications with consumers regarding the time-barred nature of the debt and its ability to sue on the debt.

That’s an important point to point to inform consumers about. It’s also an important point to educate debt relief agencies about if they put time-barred debt into a debt repayment plan.

If you would like to read the entire examination manual, you can do so here.


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About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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