Making Sure Debt Collectors Have the Correct Person, Debt, and Documentation among CFPB’s Chief Concerns

Nearly a year ago, the Federal Trade Commission (FTC) completed a lengthy investigation into debt-buyers. Some of the more interesting findings of the study include the following: • Debt buyers only pay about $0.04 per dollar on the accounts they purchase; • Debt buyers are not being told by the seller if the debt has been challenged; • Debt buyers are rarely given a breakdown of principal, interest, and fees; • Debt buyers are rarely provided supporting documents by the sellers. Moreover, sellers generally disclaim all representations and warranties with regard to the accuracy of the information provided; • At least 500,000 disputed debts go unverified each year.

It is no surprise then that among the Consumer Financial Protection Bureau’s (CFPB) chief concerns is making sure debt collectors have the correct person, debt, and documentation. In its recent notice of proposed rulemaking, the CFPB noted: “It is widely recognized that problems with the flow of information in the debt collection system is a significant consumer protection concern.” As explained in the FTC study, often when a debt is sold for pennies on the dollar, the sale doesn’t include a lot of information about the debtor or his debt. In fact, the documentation might include nothing more than the person’s name, last known address, social security number, and amount of debt. Even ACA International, a trade group for the consumer debt collection industry, believes some updating of the collection laws is in order, stating: “Current federal debt collection laws are woefully outdated when it comes to areas such as communication, documentation, verification, and statutes of limitation.”

To combat the issue, the CFPB is currently considering rules for the debt collection market. Ultimately, it appears, the CFPB is looking to require specific and standardized proof as part of the sale of debt. But before it writes any new regulations or strengthens current legislation, the agency wants the public to weigh in. The first set of questions contained in the agency’s 114-page rulemaking proposal, seems to get to the heart of the issue for consumers, which is: what information is transferred during the sale of debt or the placement of debt with a third-party collector?

Consumers can submit comments at Regulations.gov. Consumers may also learn about the issues and submit comments at RegulationRoom.org, which is run by the students and staff at Cornell Law School. The CFPB is working with Cornell Law School to make it simpler for people to learn about the rulemaking proposal and submit comments. Comments submitted to RegulationRoom.org will be summarized and submitted to the CFPB at the end of the official public comment period.

For more information about the CFPB’s rulemaking proposal, please contact Katherine Olson at 312-334-3444 or kolson@messerstrickler.com.