Banking and Finance Law Daily Lawmakers ask CFPB to reconsider amending debt collection practices reg
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Monday, June 10, 2019

Lawmakers ask CFPB to reconsider amending debt collection practices reg

By Colleen M. Svelnis, J.D.

A group of Democratic Senators have submitted a letter to the CFPB that is critical of the Bureau’s proposal to amend the Fair Debt Collection Practices Act.

Twenty-six U.S. Senators have signed a letter sent to Consumer Financial Protection Bureau Director Kathy Kraninger, asking her to reverse the Bureau’s proposed rule to amend Regulation F (12 CFR Part 1006), which implements the Fair Debt Collection Practices Act, and would, for the first time, allow debt collection companies to send unlimited texts and e-mails to consumers. According to the letter, debt collector abuses "consistently rank as a top issue" in the Bureau’s consumer complaint database, with the CFPB receiving 81,500 complaints about debt collection in 2018. The Senators called on Kraninger to reconsider the rulemaking and to "pursue more meaningful reforms that put consumers, not the debt collection industry, first."

CFPB Proposal. Last month, the Bureau issued a proposal to amend Regulation F, which implements the Fair Debt Collection Practices Act, to provide clearer rules regarding debtor harassment, communications with debtors, and new options to address or dispute debts. The proposal seeks to provide clearer rules for consumers with respect to communications from collectors and options for consumers to address or dispute debts. The proposed rule would address how often and under what means of communication a collector may attempt to contact a debtor. It would modernize the law by providing clarification on how debt collectors may use newer technologies, such as voicemails, emails, and text messages, that have emerged since the FDCPA’s passage in 1977 (see Banking and Finance Law Daily, May 7, 2019).

Senators’ letter. According to the lawmakers’ letter, the proposed debt collection rule will "exacerbate and increase troubling harassment tactics." The letter expressed concern that the proposed rule "effectively permits debt collectors to inundate consumers with calls," because it allows a debt collector to call a consumer seven time a week "per debt." The letter states that the rule weakens protections for consumers whose debts are no longer enforceable under state or federal law, providing a loophole for collectors to mislead borrowers into unknowingly accepting liability for those debts. The proposal only prohibits filing or threatening a lawsuit if the collector "knows or should know" that the debt is not enforceable. This lack of a verification and substantiation requirement, say the Senators, "could encourage collectors to practice willful ignorance about the status of the debts they collect."

The letter highlighted past cases where the Bureau went after debt collectors for their deceptive practices and FDCPA violations, including a case against the country’s largest debt buyers, Encore Capital Group and Portfolio Recovery Associates, that showed their failure to verify the accuracy of the debt information they purchase. According to the Bureau’s consent order, Encore purchased portfolios of old consumer debt from some of the nation's largest consumer finance and telecommunications companies, and from other debt buyers, for pennies on the dollar. According to the CFPB, the debt buyers bought debts that were "potentially inaccurate, lacking documentation, or unenforceable" (see Banking and Finance Law Daily, Sept. 9, 2015).

The letter also objects to allowing debt collectors to contact consumers by text messaging. "By allowing debt collectors to send consumers unlimited text messages and e-mails without first receiving affirmative consent for such a method of communication, the proposed rule permits collectors to overwhelm consumers with intrusive communications," the senators wrote. The legislators stressed that the CFPB is "placing the cost burden of text messaging on the consumer" by not requiring use of free-to-end-user text messaging.

Additionally, because the proposed allows a debt collector to call a consumer seven times a week per debt, "for a consumer with six medical debts, the proposed rule means that the consumer could receive up to 42 calls per week," according to the letter. The lawmakers also raised security concerns with asking consumers to click on hyperlinks in electronic communications from unknown parties.

The letter also stressed to Kraninger that attorneys who engage in debt collection "must be held to a higher standard," as in a recent enforcement action against the debt collection law firm, Forster & Garbus. The Bureau alleged that Forster & Garbus violated the FDCPA and the Consumer Financial Protection Act’s prohibition against deceptive acts and practices by representing to consumers that attorneys were meaningfully involved in its lawsuits when, in fact, attorneys were not meaningfully involved in preparing or filing them. The Bureau complaint against Forster & Garbus stated the debt collection law firm filed suits against purported debtors on behalf of creditors without investigating or verifying the summary information that served as the basis for those lawsuits. The CFPB also alleged that Forster & Garbus was generally not sufficiently familiar with its clients’ contracts and practices to reasonably rely on the limited summary information that its clients provide (See Banking and Finance Law Daily, May 20, 2019).

The letter concluded by noting the "number of American families harmed by abusive debt collection practices," and requesting that the Bureau "reconsider this rulemaking and pursue more meaningful reforms that put consumers, not the debt collection industry, first."

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