"Get Ready For A Regulatory Crackdown On Abusive Debt Collectors"
The Consumer Financial Protection Bureau (CFPB) is closing in on new rules to crack down on debt collectors, and it wants to hear from borrowers who have had run-ins with collectors as it moves forward. The bureau is launching the next stage of its effort to curb debt collector abuses on Wednesday by seeking public comment on how collectors operate now and how those practices should be reformed.
Wednesday’s announcement is a firmer step than the others that the agency has taken since it first began to examine the debt collection industry at the beginning of 2013. In July, the bureau began accepting formal complaints about debt collector practices and posted five different “action letters” that consumers could use to handle common types of problems with collection agents.
Debt collectors have thrived in recent years at the expense of borrowers. One American out of every seven faced collection claims from a third-party debt collector in 2012 — double the rate from the turn of the century. Consumers filed three times as many complaints about debt collectors in 2010 as they had in 2002. Hundreds of years after the idea of debtor’s prisons went out of fashion, aggressive collection agency practices have once again started to lead to jail time for borrowers.
Those statistics are driving the CFPB’s actions, according to director Richard Cordray. “We want to hear how we can better protect consumers and bring greater accountability to this multibillion-dollar industry without hamstringing legitimate debt-collection activities,” Cordray said according to the Wall Street Journal.
Prior to the CFPB’s efforts, debt collectors have mostly evaded government oversight and existed in what the New York Times called a “regulatory void.” The agency is using authority granted by the Dodd-Frank Wall Street reform law that created it in 2010, and also drawing upon a 1977 law called the Fair Debt Collection Practices Act. While that statute is over 35 years old, “the Bureau is the first Federal agency to possess the authority to issue substantive rules for debt collection” under it, according to Wednesday’s announcement.