*Editorial Note: This content is not provided or commissioned by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by the credit card issuer. This site may be compensated through a credit card issuer partnership.
This article was last updated Oct 09, 2017, but some terms and conditions may have changed or are no longer available. For the most accurate and up to date information please consult the terms and conditions found on the issuer website.
Ever since Richard Cordray was assigned the first official CFPB Director, the bureau has been all over the news. Most recently, the Consumer Financial Protection Bureau (CFPB) just published a long list of debt collection complaints that it has been compiling for the past five months. The report reveals that more than 1,000 consumer complaints per month have been registered with the CFPB. Some people within the credit industry consider that number to be relatively low, considering the size of the U.S. population; however the Federal Trade Commission (FTC) has also been averaging another 15,000 complaints per month.
All totaled, there are currently 30 million or more Americans involved in some form of debt collection activity. That includes people dealing with collection agencies over debts that were erroneously attributed to them by oversight, bad data, or mistaken identity. Many consumers who complain to the FTC or CFPB are still being hounded by collectors for debts that they already repaid, and there are lots of complaints about agencies and collectors who fail to follow the law regarding collection methods and procedures. The worst offenders are collectors that fraudulently and deliberately try to pester consumers into handing over money that they do not even owe.
Who Generates the Most Complaints
About 24% of the complaints listed are related to credit card accounts, and the companies that are the subject of the complaints include everything from payday lenders and debt collectors to collection attorneys and major banks. The CFPB is taking special steps to crack down on payday lenders, though, as evidenced by the fact that after this new list of information was released, the CFPB also launched a brand new complaint tool specifically designed for exclusively receiving and responding to payday loan debt collection complaints.
A big Crackdown is in the Works
The report is connected to a potentially groundbreaking development within the collection industry, too, because it represents just one part of a much bigger initiative on behalf of the CFPB. When they released their data related to complaints, for example, the CFPB announced that it is soliciting input in regards to how they should write new debt collection regulations. Lately, the bureau has been very active in its pursuit of the collection industry offenders, and may be in the process of totally revamping and updating the rules and regulations that govern collectors and collection agencies. That includes more stringent monitoring of everyone from creditors to people who buy debt as investors, as well as to individual collectors and attorneys who represent collection companies.
What the Collection Industry has to say
For its part, the debt collection industry has so far expressed support for the regulatory changes. Many within the industry believe this kind of effort by the CFPB will help to remove the “bad apples” from the business, which will be a good thing for those debt collectors who remain after the shake-out occurs. Their hope is that when the unscrupulous collectors are eliminated, it will leave those who follow the rules with a larger, more lucrative market share. It is also common for major players like banks to sell their uncollected debt to the highest bidder. Those who buy these loans then pursue the consumer who owes the money in order to collect it and earn their profits. If those collectors resort to unethical and illegal practices, however, it can create blowback for the banks – especially if the CFPB writes new regulations that hold those original lenders responsible. As the CEO of the debt collection firm CFS II told reporters, “Banks are going to be cautious about selling loans to a buyer who has a litigation-heavy model.”
Major Banks in the Mix
Clear evidence that said changes may be on the horizon came when JP Morgan Chase and Wells Fargo – two of the most powerful banks in the country – both recently halted the sale of their unpaid debts. JP Morgan Chase also closed down a department it used to have that managed litigation services related to debt collection. Most experts believe that these moves by big financial institutions are a tactical retreat. They will pull back, stop selling their debt, and then wait to see what kinds of regulations the CFPB imposes. Once they understand the new rules of the game they will likely reenter the market. In the meantime, just to play it safe and avoid getting embroiled in a potentially damaging CFPB investigation, they will sit on the sidelines.
Updating the Rules of the Game
The CFPB is also considering ways to modernize regulations to keep pace with the digital, electronic age. The primary set of rules now on the books to police the debt collection industry is the Fair Debt Collection Practices Act, which was written in the late 1970’s and amended in the 1990’s. That legislation is considered a legislative dinosaur because it does nothing to address many issues related to such things as email and mobile phone communications rules or violations.
The Bottom Line for Consumers
What this all means to the average consumer is that the CFPB has made a bold statement that there is now a new sheriff in town. Debt collectors will no longer be able to get away with the kind of harassment that is generating thousands of complaints a month, and those who skirt the law will be dealt with severely. There have already been major legal actions against debt collectors and lawyers who pursue debt collection, and the payday loan industry is under extreme scrutiny.
Consumers who are being bothered by debt collectors in ways that they consider wrong, unfair, or illegal should not hesitate to contact the CFPB, the FTC, and their state Attorney General to register a formal complaint. Help is on the way, and industry insiders predict that within the next year the hammer will come down hard on those who do not play by the rules.
*The content in this article is accurate at the publishing date, and may be subject to changes per the card issuer.