Too far or not far enough? The Consumer Financial Protection Bureau’s plans to limit how often debt collectors can reach out to consumers received mixed responses from consumer and trade groups this week.
The process of debt collection—a bread-and-butter task for many businesses, albeit one associated with controversial methods—could change significantly, thanks to a new set of proposed federal rules.
Those rules, being considered by the Consumer Financial Protection Bureau this week, may limit the number of times a collector could contact a debtor and may restrict the methods used to collect a debt. The effects could be widespread—especially as more than 70 million people deal with debt collectors, according to CFPB statistics.
CFPB Director Richard Cordray noted that the rules were specifically targeted at third-party debt collectors, who tend to be more aggressive in their communication tactics.
“This is because they are typically paid based on the amount they collect,” Cordray said in prepared remarks released Thursday. “The relationship may be fleeting, and the more distant risk of being called to account later may not outweigh the immediate urgency of getting paid today.”
Consumer groups were quick to praise the proposed rule changes, but ACA International, the trade group that represents collection agencies, was more measured in its response.
“It is critical that the CFPB listen to industry professionals and small businesses and get this right,” ACA International CEO Patrick J. Morris said in a statement. “ACA supports rules that will ensure consumers are treated respectfully and fairly; but if the CFPB does not take the unique perspective of small business debt collectors and the diversity of the industry into consideration, a rule intended to help consumers may instead end up harming them, as well as other small businesses and the overall economy.”
In comments to the Los Angeles Times, ACA International spokeswoman Cindy Sebrell added that rules that limit debt collection could cause problems for creditors. “If creditors are not able to collect rightfully owed debts, they will be less likely to extend credit to consumers,” she said.
The Center for Responsible Lending, meanwhile, was generally positive about the proposed changes, telling the Detroit Free Press that many consumers are targeted using debt-collection tactics that make consumers unaware of them until legal actions have been taken, and that minorities face a “disproportionate impact” from debt collectors.
“Majority black neighborhoods are hit twice as hard by debt collection court judgments as majority white neighborhoods, even adjusting for differences in income,” CRL Director of California Policy Graciela Aponte-Diaz told the newspaper.
The National Consumer Law Center, which spoke to the L.A. Times, viewed the rule change as a good starting point but said the the proposed standards for contacting a consumer were confusing. NCLC attorney Margot Saunders said the group would like to see a shorter statute of limitations on debt-collection practices.
“Most statutes of limitation are five, six, seven years. That leaves plenty of time for the debt to be collected,” Saunders told the Times.