Next text could be from debt col­lec­tor

CFPB mulls rule change dur­ing makeover

Chicago Tribune (Sunday) - - INVESTING - By Re­nae Merle

The Con­sumer Fi­nan­cial Pro­tec­tion Bureau will un­veil new debt col­lec­tion rules in a few weeks, the agency’s di­rec­tor said last week, po­ten­tially un­leash­ing a bat­tle over the in­dus­try’s tac­tics and con­sumers’ rights.

The pro­posal, which would be the first update to the Fed­eral Debt Col­lec­tion Prac­tices Act in more than 40 years, will address how of­ten debt col­lec­tors can call some­one and the in­dus­try’s use of emails or text mes­sages, said CFPB di­rec­tor Kathy Kraninger.

The CFPB will “mod­ern­ize the le­gal regime for debt col­lec­tion,” Kraninger said in her first ma­jor speech since be­com­ing the bureau’s di­rec­tor in De­cem­ber.

The $11 bil­lion debt col­lec­tion in­dus­try has been anx­iously await­ing the pro­posal, hope­ful that the Trump ad­min­is­tra­tion would set out clear rules mak­ing it eas­ier for debt col­lec­tors to avoid fines and law­suits. Con­sumer ad­vo­cates, mean­while, have asked the CFPB to stop debt col­lec­tors from ha­rass­ing con­sumers and col­lect­ing on “zombie” debts.

The pro­posal comes as the CFPB un­der­goes a rad­i­cal makeover un­der the Trump ad­min­is­tra­tion. The num­ber of cases filed against fi­nan­cial com­pa­nies has plum­meted and the bureau has started rolling back some reg­u­la­tions — par­tic­u­larly on pay­day lenders.

Kraninger laid out a busi­ness-friendly vision for the CFPB be­fore a packed crowd at the Bi­par­ti­san Policy Cen­ter Wed­nes­day, in­clud­ing a fo­cus on ed­u­cat­ing con­sumers to make bet­ter de­ci­sions and re­duc­ing “un­war­ranted” reg­u­la­tory bur­dens. The CFPB “can­not be everywhere, with every­one, at ev­ery trans­ac­tion — nor should it try to be,” Kraninger said.

Un­der Kraninger, the CFPB has already pro­posed rolling back rules re­quir­ing pay­day lenders to ver­ify cus­tomers can af­ford their loans — a ma­jor in­dus­try win.

She has also en­dorsed a de­ci­sion by Mick Mul­vaney, her pre­de­ces­sor and cur­rent act­ing White House chief of staff, end­ing the bureau’s prac­tice of pre­emp­tively ver­i­fy­ing that com­pa­nies are com­ply­ing with the Mil­i­tary Lend­ing Act, which pro­tects mil­i­tary mem­bers and their fam­i­lies from fi­nan­cial fraud.

The pro­posal on debt col­lec­tion rules is ex­pected to launch an­other ma­jor fight. The country has more than 7,000 debt col­lec­tors who made over $1 bil­lion com­bined last year, ac­cord­ing to data from in­dus­try re­searcher IBISWorld. In 2018, the CFPB said it re­ceived about 81,500 com­plaints about debt col­lec­tors, mak­ing the in­dus­try one of the most com­mon sources of con­sumer com­plaints. But debt col­lec­tors say they have already been ham­pered by CFPB over­sight and dis­parate court rul­ings on how aggressive­ly they can go af­ter con­sumer debts.

The in­dus­try wants “clear lines of what we should be do­ing and not do­ing,” said Leah Dempsey, se­nior coun­sel for ACA In­ter­na­tional, a large in­dus­try lob­by­ing group.

For ex­am­ple, courts have split on whether debt col­lec­tors can leave con­sumer voice mail mes­sages, Dempsey said. And the ex­ist­ing law was writ­ten be­fore email and text mes­sages be­came stan­dard ways to com­mu­ni­cate, she said.

“Mil­len­ni­als like me don’t answer their phone,” she said. “Re­spect­ful com­mu­ni­ca­tion in a way that is help­ful to the con­sumer will ben­e­fit both par­ties.”

Con­sumer ad­vo­cates say they are con­cerned the CFPB will at­tempt to weaken ex­ist­ing law, in fa­vor of an in­dus­try that racks up thou­sands of com­plaints to reg­u­la­tors ev­ery year. Debt col­lec­tors shouldn’t be able to call con­sumers more than once a week, contact them on so­cial media such as Face­book or through work email ad­dresses, ad­vo­cates say.

The bureau should also pro­hibit the in­dus­try from at­tempt­ing to col­lect on old debts, ac­cord­ing to ad­vo­cates. Con­sumers are not al­ways aware that some state laws pro­tect them from hav­ing to pay “zombie” debts, and that they could harm their cases if they pay even a small amount to stop ha­rass­ing phone calls, they say.

AN­DREW HAR­RER/BLOOMBERG NEWS

Kathy Kraninger, di­rec­tor of the Con­sumer Fi­nan­cial Pro­tec­tion Bureau, plans to update debt col­lec­tion rules.

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