In 2017, The Urban Institute found that 71 million consumers had a debt collection in their credit reports. By 2018, 620,800 debt collection complaints were filed. Of these, 475,000 were brought to the attention of the Federal Trade Commission (FTC).
At the Consumer Financial Protection Bureau (CFPB), 80 percent of last year’s debt collection complaints focused on one of three concerns: collector calls persisting after “stop calling” notices (29 percent), repeated phone calls (27 percent), and false representation about debt (24 percent).
Communities of color are disproportionately affected. By the CFPB’s own survey on debt collection experiences, 44 percent of consumers of color reported contact by a debt collector, compared to only 29 percent of whites.
This finding of racial disparity was consistent with a report by the Urban Institute that analyzed location as a factor in debt collection. That report revealed that 45 percent of consumers in communities of color had a debt in collection, compared to 27 percent of consumers in predominantly white areas. Further, an investigative report by ProPublica found that in Chicago, Newark and St. Louis, the risk of collection lawsuits, judgments and wage garnishments were twice as high in black census tracts as it was in white ones.
So, when the CFPB proposed a new rule on debt collection on May 7, a swarm of interest emerged.
“Last year, the Consumer Bureau received about 81,500 consumer complaints regarding predatory debt collection practices, which disproportionately affect minority and low-income consumers,” said U.S. Rep. Maxine Waters (D-California), chair of the House Financial Services Committee.
“This proposed rule does not come close to protecting consumers from predatory behavior. Instead, it allows debt collectors to needlessly harass and threaten consumers by sending unlimited emails and text messages and calling them seven times a week to collect debts. Hardworking Americans deserve better than this.”
As announced, the proposed rule would allow debt collectors to place up to seven unanswered calls each week to consumers. Once that limit is reached, the collector could not resume communications until the following week. However, if more than one debt collector was contacting a given consumer, the number of authorized communications would be multiplied per collector.
Secondly, debt collectors are explicitly authorized to have unlimited text messages, emails, and social media communications.
Thirdly, debt collectors would now send consumers a new disclosure form identifying how debts could be paid or disputed.
“Seven calls per debt per week is simply too many, especially when combined with unlimited emails and texts,” said April Kuehnhoff, an attorney at the National Consumer Law Center (NCLC) who focuses on debt collection.
“A student with eight loans could receive 56 calls per week. The proposed rule would also allow for critical notice to consumers to be provided by email or text message without a consumer’s consent as required by federal law. Other emails and text messages have no limits unless the consumer opts out.”
Further, she said, protections from time-barred “zombie” debts would be limited to prohibiting lawsuits and threats of suits on such debts, so consumer will face continued collection attempts out of court.
“And the proposed rule allows critical notices to be sent by email to consumers who may not have regular internet access,” said Margot Saunders, also an NCLC attorney. “They may not be able to use their phones to read emails, open attachments, and click on hyperlinks to see critical disclosures.”
Melissa Stegman, a senior policy counsel with the Center for Responsible Lending, said the watchdog agency had hoped for a rule that would effectively halt illegal and harassing industry practices. “Instead,” she said, “the agency is again catering to businesses instead of consumers.”
Stegman said CFPB is wrong to expand 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,” she said. “Real reform could call for consumers to opt in, not out.”
Lisa Stifler, CRL’s State Policy deputy director said that the best consumer protections utilize a combination of state and federal enforcement.
“But in the Trump Administration, federal agencies are frequently failing to regulate, or secure restitution for harmed consumers while hamstringing states that can and should act in defense of their consumers and residents,” Stifler said.
“Instead of protections, the proposal will harm people who are impacted by the most abusive and deceptive debt collection practices: communities of color, older Americans, and service members. Today’s proposed rule will widen the berth given to bad actors with a nodding approval by the one agency created to solely protect consumers: CFPB.”
Charlene Crowell is the Communications deputy director with the Center for Responsible Lending. She can be reached at Charlene.crowell@responsiblelending.org.
