Summary of the Latest Proposed CFPB Rules

On July 28 2016, the Consumer Financial Protection Bureau (CFPB) released an outline of proposed new rules designed to prevent aggressive debt-collection practices. These actions are among a series of initiatives the CFPB is taking this year to suppress industry practices it sees as harmful.

The proposed regulations initially focus on rules pertinent to collection agencies and debt buyers. Rules relevant to creditors and first-party collectors will be addressed at a later date. The crackdown could also impact big banks.

Under the proposed regulations, debt collection companies will have to more fully document the debt they are trying to collect, make it clear how a consumer can dispute the debt and observe state statutes of limitations that bar them from legally pursuing older debts. CFPB officials have said they are particularly concerned about inaccurate and insufficient information used by debt collectors, which leads to consumers being contacted for debts they do not recognize.

The new rules are a response to consumer complaints. In 2015, the agency received more than 85,000 complaints about debt collection, making it the largest source of consumer complaints among the sectors the CFPB oversees. The student-loan market in particular is growing quickly, with the CFPB estimating that nearly eight million borrowers are in default and the combined balance totals $110 billion.

Under the proposed regulations, the collection agencies would be required to clean and update their files regularly and substantiate the debt before contacting the consumer. Once the collection process begins, collection agencies would be limited to six communication attempts per week to reach the consumer. The new rules would also make it easier for consumers to request to not be contacted at work or during certain hours.

Included in the rules proposal is a waiting period; after a consumer’s death the collection agency must wait 30 days before the agency can contact surviving family members. The proposal would also clarify that it is generally permissible for collection agencies to contact surviving spouses, parents of deceased minors and individuals who are designated as personal representatives of an estate under state law.

The proposed rules are now going to committee for discussion. Here is a link to the entire proposed CFPB regulations (pdf file, 117 pages). Below is a summary of the CFPB’s proposed rules.

  • Collectors must collect the correct debt. Collectors must confirm names, addresses, phone numbers and the amount owed before contacting consumers.
  • Collectors must limit excessive communications. Collection agencies would be limited to six communications attempts per week before they reach the consumer.
  • The debt details must be clear. Collection agencies would have to disclose to the consumer if the debt was too old for a lawsuit. They must also include a written method for consumers to dispute the debt.
  • Documentation of the debt in the case of disputes. If any written dispute is returned to the collection agency within 30 days of the initial collection notice, the agency would have to provide a report substantiating the debt and stop collection efforts until the report was sent to the consumer.
  • Stop collecting without documents. If a consumer disputes the debt, the agency would have to stop collection efforts until the necessary documentation was checked.
  • Collection disputes cannot be hidden. If the debt is sold to a new agency, the new collector can not start collection efforts until any outstanding consumer dispute is resolved.

BillingTree takes CFPB compliance very seriously. BillingTree’s systems and software are audited and certified to ensure complete compliance annually. In addition, we have a free resource for our clients: Compliance Central. Compliance Central is an online knowledge portal that provides a one-stop resource for timely payment compliance news, information, analysis, tools and templates. For more information please contact one of our representatives today.