New rules could mean changes in debt col­lec­tors’ meth­ods

The News-Times - - BUSINESS -

The next text mes­sage you re­ceive may not be a funny picture from your mom, or an up­date on how late your friend will be to brunch. It could be a debt col­lec­tor. The Con­sumer Fi­nan­cial Pro­tec­tion Bureau has pro­posed new rules to gov­ern how third-party debt col­lec­tors contact bor­row­ers. The rules are ex­pected to ac­cel­er­ate the in­dus­try’s switch from in­sis­tent phone calls to emails and texts.

Un­der the new rules, third-party debt col­lec­tors would only be able to call a delin­quent bor­rower seven times a week — cur­rently they can call as of­ten as they want. And once they reach a bor­rower by phone, they’ll have to leave them alone for at least a week.

The CFPB is propos­ing no cap on the num­ber of texts or emails a col­lec­tor could send. This has drawn the ire of the con­sumer ad­vo­cacy groups who say it opens the door to al­low­ing debt col­lec­tors to use text mes­sag­ing, What­sApp, Face­book Mes­sen­ger or other text-based mes­sag­ing ser­vices.

“Col­lec­tors will be able to use th­ese types of mes­sages with­out get­ting bor­row­ers to agree to them,” said April Kuehn­hoff, a staff at­tor­ney with the Na­tional Con­sumer Law Cen­ter.

The CFPB has pushed back on the crit­i­cism, say­ing the rules re­quire giv­ing bor­row­ers an opt-out from bill col­lec­tors’ texts and emails. Debt col­lec­tors will also be banned from post­ing pub­lic mes­sages on a per­son’s Twit­ter, Face­book or other so­cial me­dia ac­counts.

Amer­i­cans have lit­tle love for the debt col­lec­tion in­dus­try. Roughly 25 mil­lion Amer­i­cans have debts in col­lec­tions, ac­cord­ing to the Fed­eral Re­serve.

The CFPB re­ceived more than 80,000 com­plaints about debt col­lec­tors last year, and the in­dus­try typ­i­cally ranks high in com­plaints to other fed­eral and state agen­cies like the Fed­eral Trade Com­mis­sion. The rules pro­posed by the CFPB im­pact only what’s known as the third-party debt col­lec­tion in­dus­try — those who typ­i­cally buy old debts at pen­nies on the dol­lar or are con­tracted by an­other lender like a bank to col­lect on an old debt.

The changes the CFPB has pro­posed are a re­flec­tion of how many Amer­i­cans com­mu­ni­cate. Fewer Amer­i­cans have land­line tele­phones, and they speak on the phone less fre­quently than 10 years ago. Tex­ting and email have be­come more

com­mon ways of com­mu­ni­cat­ing with friends or fam­ily.

The debt col­lec­tion in­dus­try has long used email and tex­ting to reach bor­row­ers, but the in­dus­try says it was op­er­at­ing in a le­gal gray area. It isn’t il­le­gal for a debt col­lec­tor to text or email you presently, it just wasn’t as clearly de­fined as the rules for phone calls or let­ters.

“Us­ing email or text mes­sages was ‘use at your own risk,’ ” said Mark Neeb, chief ex­ec­u­tive of ACA In­ter­na­tional,

the lobby group for the debt col­lec­tion in­dus­try.

TrueAc­cord is one Cal­i­for­ni­abased debt col­lec­tor that has fo­cused al­most all of its ef­forts on reach­ing debtors through email or other forms of dig­i­tal com­mu­ni­ca­tion.

“(The CFPB’s pro­pos­als) are a vin­di­ca­tion of our busi­ness model,” said Ohad Samet, CEO of TrueAc­cord.

As debt col­lec­tors rely more on email and tex­ting, ex­pect phone calls to wane in use. The CFPB’s rules would cap the num­ber of calls per ac­count to seven a week. Con­sumer ad­vo­cates ar­gue that fig­ure is still too

high and the “per ac­count” part of the rules mean that col­lec­tors could call a per­son with eight delin­quent ac­counts a max­i­mum of 56 times per week.

The cap will still some­what limit debt col­lec­tors’ phone calls go­ing for­ward. Even debt col­lec­tors like Samet say it’s a good thing there’s a cap.

“This will cause the com­pa­nies who rely too heav­ily on calls to change their busi­ness model. It’s noth­ing less than an earth­quake in the in­dus­try,” he said.

One con­cern for ad­vo­cates is how the changes will im­pact con­sumers

who have lim­ited ac­cess to the in­ter­net. Read­ing doc­u­ments or dis­clo­sures on a cell phone screen can be dif­fi­cult, and those in debt col­lec­tions may not own a home com­puter.

“Peo­ple may have old email ad­dresses, or be un­aware on how to read and re­ply to text mes­sages,” Kuehn­hoff said.

The rules aren’t fi­nal­ized. The CFPB is cur­rently in its 90-day com­ment pe­riod and is ex­pected to fi­nal­ize the rules some time later this year or early next year. Tra­di­tional debt col­lec­tors are lob­by­ing the agency to raise or re­move the cap on calls al­to­gether.

As­so­ci­ated Press

A man checks his phone in an al­ley in down­town Chicago. The Con­sumer Fi­nan­cial Pro­tec­tion Bureau has pro­posed new rules to gov­ern how third-party debt col­lec­tors contact bor­row­ers.

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