A new set of regulations for debt collectors finally addresses longstanding questions about the use of calls, emails, and texts, but consumer advocates say they miss the mark, failing to effectively protect debtors from harassment and notably neglecting to require that the debts have been verified before a lawsuit is filed.
In regulatory revisions issued last week, the Consumer Financial Protection Bureau (CFPB) clarified how the Fair Debt Collection Practices Act (FDCPA), passed in 1977, applies to today’s technology.
It quantified how often phone calls can be made (no more than seven times within a seven-day period) and specified that collectors can use emails, texts, and social media messages to contact debtors as long as they give them a way to opt-out of receiving that type of communication in the future. The previous guidelines didn’t specify how many calls would “annoy, abuse, or harass” people and made no mention of digital communication.
“Unfortunately, I don’t see a lot of things that I think are really positive for consumers,” said April Kuehnhoff, an attorney for the National Consumer Law Center who advocates for fair debt collection. “The takeaway is that consumers are going to need to be very proactive.”
- New regulations address longstanding questions about what constitutes harassment by debt collectors.
- Collectors are allowed to call up to seven times in seven days, and there are no specific limits on emails, texts, or social media contact.
- The rules had not been updated since 1977, contributing to thousands of lawsuits.
- Consumer advocates say the new rules continue a pattern from the Trump administration of weakening consumer protections and helping businesses.
- An estimated 30% of adults in the U.S.—68 million people—had debt collections on their credit report even before the pandemic, and the pandemic is likely to add to that number.
The new guidelines—seven years in the making—are intended to dispel the legal morass created by the vague wording of the original law, which left the courts to determine exactly what constituted the prohibited harassment of debtors within individual lawsuits.
But consumer watchdogs say the rules protect abusive debt collection companies more than the general public and continue a pattern at the CFPB of weakening consumer safeguards. Some blame Republican President Donald Trump, who vowed to roll back “job-killing regulations,” and who has installed the most recent two directors of the agency.
“We have seen one action after another by federal regulators to ease up on regulations for industry,” said Rachel Gittleman, financial services outreach manager for the Consumer Federation of America, citing the CFPB’s actions this summer to roll back restrictions on payday lenders.
A Debt Collection Pandemic?
Meanwhile, the COVID-19 crisis threatens to become a “debt collection pandemic,” legal scholars said in a paper published by the California Law Review in May. Even before the outbreak, about 30% of adults in the U.S.—some 68 million people—had debt collections on their credit report, researchers at the Urban Institute estimated, and people living in communities of color were vastly more likely than those living in White communities to have debt in collections.
“By consistently appeasing industry, consumers, particularly those in communities of color who are disproportionately impacted by debt collection, are left without a strong consumer protection agency much needed in the middle of a public health and economic crisis,” Antonio Carrejo, policy counsel for Consumer Reports, wrote in an email. “This trend has ignored the fundamental purpose of the CFPB and as a result consumers are suffering.”
Consumer Reports, a not-for-profit media and advocacy group, had urged the CFPB to require debt collectors to document the creditor and the amount of money owed before suing over a debt, saying people are often pursued when they don’t owe money or have already paid it off. But nothing in the final rules would require the collector to substantiate the debt.
The new rules also don’t impose a specific limit on texts or emails, partly because few collectors use electronic communications, according to the CFPB.
“Even if, as a result of this final rule, debt collectors choose to send electronic communications more frequently than they currently do, the Bureau does not believe that sending excessive electronic communications, including by programming systems to send multiple emails per second, generally would be a profitable strategy for debt collectors,” the new rules say.
Consumer advocates disagree, and note that debt collectors can even call multiple times per day if multiple debts are owed, since the seven-call-per-week limit applies to a single debt.
“The rule does allow for collectors to harass consumers via the phone,” Gittleman said. “If you owe multiple debts, you can get harassed numerous times per day. And it will result in a large increase in unwelcome emails, text, social media direct messages, and other forms of electronic communication.”
Advocates acknowledge the CFPB’s revised rules could have been much worse. One proposed “safe harbor” provision, which was stricken from the final version amid opposition, would have protected attorneys who took people to court without making sure they were suing the correct person for the correct amount, Kuehnhoff said.
Another axed provision would have allowed collectors to leave messages with people who might answer a debtor’s home, work, or cell phone. And the final rules do give consumers more control over how debt collectors contact them, allowing debtors to forbid specific methods of communication.
The new rules, which won’t go into effect until a year after they are published in the Federal Register, pull the standards out of a “time warp,” better protecting consumers and providing clearer operating procedures for collectors, CFPB Director Kathleen Kraninger said in a blog post.
Besides the seven times in seven days rule, collectors will now be violating the law if they call a debtor within seven consecutive days of having had a phone conversation with them about a specific debt, she noted.
The CFPB said that the unclear nature of the original rules has contributed to a flood of legal disputes. Since 2010, consumers have filed 8,000 to 12,000 lawsuits a year under the FDCPA, according to the agency.
One such legal battle ended up in a federal appeals court in 2018, after a woman sued a debt collector who had tried to get her to pay a $268 phone bill under an erroneous account number. Amy Coney Barrett, who has since been appointed to the Supreme Court, was part of an appeals court panel that ruled against the woman, saying it would be “burdensome” to interpret the law as requiring collectors to investigate the validity of the debts they are collecting.
An investigation by the nonprofit news outlet ProPublica back in June found that some debt collectors have continued to file lawsuits against debtors by the thousands during the pandemic.
Some Democratic lawmakers attempted to curb collectors’ tactics during the crisis, but their bills have languished in committees. A bill introduced by Senator Sherrod Brown of Ohio in March would prohibit lawsuits attempting to collect on debts while the pandemic lasts. Another bill introduced by Congresswoman Joyce Beatty in July would forbid creditors from using repossession, eviction, or threats of wage garnishment during the pandemic or other national emergency.