More than a quarter (27%) of consumers who’ve interacted with debt collectors said they felt threatened by the most recent creditor or collector who contacted them, according to a new survey from the Consumer Finance Protection Bureau (CFPB).
That may not sound surprising, given debt collectors don’t have a reputation for being friendly, but it’s a noteworthy discovery. It’s illegal for debt collectors to harass or verbally abuse consumers.
Under the Fair Debt Collection Practices Act (FDCPA), a debt collector cannot “harass, oppress or abuse any person in connection with the collection of a debt.” That includes things like threatening to hurt or arrest you, using obscene or profane language or using repeated phone calls to annoy you. They’re also not allowed to lie to consumers. The CFPB’s survey results indicate those rules often aren’t being followed.
A bit more on that data: It’s based on survey responses from 2,132 consumers the bureau contacted between December 2014 and March 2015. Of those respondents, 32% (682 people) said they had been contacted by a creditor or debt collector about paying a debt within the last year. The results are weighed to represent “the broader population of consumers with credit records.”
It’s worth noting that consumers saying they felt threatened doesn’t mean the collector they talked to broke the law. Still, 27% is a high occurrence rate of potentially illegal behavior. Additionally, reports of threatening debt collectors wasn’t the only issue raised by survey respondents: About 40% of consumers who’d been contacted about debts in collection said they asked a collector or creditor to stop contacting them and, of those consumers, about 75% said the collector continued to contact them anyway. Legally, a debt collector must stop contacting a consumer if that consumer sent a written request to the collector to stop communicating with them, with a few exceptions.
If you ever find yourself dealing with a debt collector, it’s a good idea to take the time to familiarize yourself with your rights and the rules debt collectors have to follow when contacting you. You can report any issues you encounter to your state’s attorney general, the Federal Trade Commission or the CFPB, and you’ll want to keep an eye on your credit reports and scores to see how the collection account affects you. (You can get a free summary of your credit report, with updates every 14 days, on Credit.com.)
Debt collectors would face strict new limitations on how (and when) they contact consumers under a sweeping proposal announced Thursday by the Consumer Financial Protection Bureau.
Collectors would be limited to 6 contacts per week while attempting to reach consumers, would have to work harder to prove validity of debts they are trying to collect, and they’d have to provide simple “tear-off” instructions for consumers to file disputes.
“Today we are considering proposals that would drastically overhaul the debt collection market,” CFPB Director Richard Cordray said in a press release. “This is about bringing better accuracy and accountability to a market that desperately needs it.”
The bureau has been weighing new debt collection regulations since it issued a notice of proposed rules back in November 2013. More than 35,000 comments piled into the bureau from consumer groups and industry representatives.
There are about 6,000 debt collection firms working in the $13.7 billion industry in the U.S., the CFPB says. But the industry has a bad reputation. Debt collectors attract the most complaints at the CFPB and the Federal Trade Commission every year. Since the bureau began accepting complaints in July 2013, 200,000 consumer complaints were compiled.
Many complaints involve attempts to collect a debt that consumers say they don’t owe. The bureau said about one-third of consumers contacted by debt collection firms claim an attempt to collect the wrong amount. (You can read more on your debt-collection rights here.)
“When consumers are contacted by collectors for debt they do not recognize, they often do not know what to do next,” the CFPB said in its note announcing the new rules. “They may feel pressure to resolve the debt, but do not have a clear understanding of their rights. Sometimes consumers pay a debt they don’t believe is accurate to make the collector stop contacting them. Other times, consumers spend significant time and money to dispute the debt. They may have to dig through old records to prove information to the collector or retain a lawyer.”
The CFPB proposal says the following:
Collectors would have to scrub their files and substantiate the debt before contacting consumers. For example, collectors would have to confirm that they have sufficient information to start collection.
Collectors would be limited to six communication attempts per week through any point of contact before they have reached the consumer.
The CFPB is also considering proposing a 30-day waiting period after a consumer has passed away, during which collectors would be prohibited from communicating with certain parties, like surviving spouses.
Collectors would be required to include more specific information about the debt in the initial collection notices sent to consumers.
The proposal under consideration would also add a “tear-off” portion to the notice that consumers could send back to the collector to easily dispute the debt, with options for why the consumer thinks the collector’s demand is wrong. The tear-off would also allow consumers to pay the debt.
If a consumer disputes – in any way – the validity of the debt, collectors would have to stop collections until the necessary documentation is checked. Collecting on debt that lacks sufficient evidence would be prohibited.
The rules also deal with a relatively new complaint about collector tactics sometimes called “debt laundering” that Credit.com has covered in the past. Occasionally when consumers dispute a debt, the collector does not respond to the dispute but instead sells the debt to another collector, who begins the process again, requiring the consumer to restart the dispute process. The new CFPB rules would prevent this.
“If debt collectors transfer debt without responding to disputes, the next collector could not try to collect until the dispute is resolved,” the CFPB proposal states.
In responding to the CFPB’s request for comment on rules, industry groups said that consumers dispute only 3.2% of the bills that debt buyers attempt to collect. They also warned that additional regulations could interfere with the credit market.
New rules that would require additional debt validation “would impose significant costs and burdens that would weigh on the cost and availability of credit,” the American Bankers Association and the Financial Services Roundtable said in a letter sent to the CFPB.
The tougher rules are required because debt collection is not a typical industry that responds to consumer dissatisfaction, the bureau argues.
“In the debt collection market, notably, consumers do not have the crucial power of choice over those who do business with them when creditors turn their debts over to third-party collectors. They cannot vote with their feet,” Cordray said in remarks prepared for an event to announce the new rules. “It is not surprising, then, that for many years, the debt collection industry has drawn more complaints than any other.”
As is standard in CFPB rule-making, a panel of small business experts will now convene to review the impact of the regulations on industry. After that panel issues a report, the CFPB will issue its final rules.
Can a debt collector contact family, friends, or co-workers in an attempt to find you?
Yes, yes, and yes. But she or he can’t say very much.
The Fair Debt Collection Practices Act offers consumers a wide set of protections about how collectors can go about their business. But it doesn’t prevent them from contacting whoever they want while looking for you.
There are very strict rules about what they can say, however. The law says collectors can only ask about a debtor’s “location information,” meaning their “place of abode and … telephone number at such place, or … place of employment.”
What Can a Collector Say?
Critically, collectors are not allowed to share any information about the debt with these third parties. Collectors do have to identify their employer if asked, which probably tips off neighbors or relatives that the debtor has money trouble. But otherwise, collectors cannot reveal anything about the debt. Generally, they can’t even leave voicemails requesting callbacks.
The law also only gives collectors one bite of that apple. They can’t call friends, neighbors or co-workers more than once, unless they have some reason to believe there is new information to be gleaned.
Here’s what the law says:
“(A collector can not) communicate with any such person more than once unless requested to do so by such person or unless the debt collector reasonably believes that the earlier response of such person is erroneous or incomplete and that such person now has correct or complete location information.”
A bunch of other rules further limit who debt collectors can contact and how. If a collector knows a debtor can’t take personal calls at work, the collector can’t call their workplace, for example.
And most importantly, once a debtor tells a collector to stop calling third parties, or stop calling the office, those calls must stop. Their only legitimate reason to contact a third party is if collectors have no way to contact the debtor, so a request to stop third parties eliminates the grounds for contacting them.
Also, if a debtor is being represented by an attorney, the collector must contact that attorney instead of the debtor or any third party.
While the law is pretty clear on what is and isn’t permitted, there are ample opportunities for abuse. Collectors who reach family members or friends may hint — or directly express — threats aimed at the debtor. They may even request or demand payment. Those activities are illegal, but it’s easy to see how they can happen.
“If you don’t want your friend to get in serious trouble with the law, make sure you deliver this message,” for example.
A Different Kind of Block Party
Collectors who repeatedly use these tactics with multiple neighbors are conducting what’s known as a “block party.” It’s illegal, and victims can sue collectors for sizable damages when a block party is conducted. A similar tactic, when used to call a debtor’s workplace, is sometimes called an “office party.” That’s also illegal.
Third parties who believe they have been harassed – if stop contact requests aren’t honored, or if they are contacted at inconvenient times – can potentially have their own cause of action against collectors, in addition to potential legal action by the debtor.