The Consumer Financial Protection Bureau (CFPB) has put out a new document with an extensive amount of information that paints the debt collection industry in a new light.
One fact I found exceedingly interesting is the percentages of debts the debt collection industry handles, “medical and other health-related debts (36%), credit card debts (20%), telecom debts (13%), and student loan debts (12%).”
The CFPB also acknowledges the role of negotiated repayment solutions, like debt settlement, which allow a consumer to repay debts they might not have been otherwise able to do. “Collection activities can also lead to repayment plans or debt restructuring that enable consumers to gradually make payments and resolve their debts.”
According to the CFPB, new rules by the CFPB will eliminate the historical loophole left by the Fair Debt Collections Practices Act (FDCPA) which exempted original creditors.
The new proposed rules might even collect up debt relief groups like credit counseling agencies since the CFPB defines debt collectors as, “first-party collectors and third-party collectors who are collecting or attempting to collect on debts that arise out of consumer credit transactions.”
The CFPB appears to be contemplating that consumers should receive a notification when a debt is sold and who it was sold to. Currently no such process exists or is required.
The ability for debt collectors to properly verify the debt is a concern as well. Far too often debt collectors are ambiguous about the amount of debt owed and how that figure was calculated. Consumers have been able to fight many collection actions simply by asking for the debt to be validated. In fact even the CFPB has published debt validation for consumers to use.
One method of allowing consumers to better understand how the amount being collected is calculated is the following suggested formula: (1) the amount of debt at the date of charge-off or default; (2) total of interest added after the date of charge-off or default; (3) total of all fees or other charges added or credits posted after the date of charge-off or default; and (4) any payments or credits received after the date of charge-off or default.
The CFPB document released today certainly puts forward more questions than answers but it is abundantly clear the CFPB is preparing to take broad action to modernize debt collection practices. The include considerations for more modern communication tools like cell phones and email.
If you would like to read the entire 114 page document, be my guest. Feel free to use the link below.
Click here for the CFPB Debt Collection (Regulation F) document.