Is Everybody A Debt Collector? CFPB Proposes New Rules That Could Subject Creditors That Collect On Their Own Debts To New Debt Collection Rules

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The Consumer Financial Protection Bureau is considering new rules to govern debt collection practices that could radically change the debt collection regulatory landscape and for the first time include creditors that are collecting their own debt. Third-party debt collectors are currently subject to the Fair Debt Collection Practices Act, but this law does not apply to creditors that originate and collect their own debt.

On November 6, 2013, the agency announced an advance notice of proposed rulemaking that seeks public comment on how to regulate the debt collection industry that regulators have said is beset with problems. The CFPB is looking to write rules that may establish new restrictions on originating creditors, require accuracy of documents shared between all collection parties, and update rules on how collectors communicate with consumers, including through text messages. The CFPB is currently considering whether creditors that collect their own debt should be subject to the same rules that govern third party debt collectors, or face separate rules.

The CFPB started taking consumer complaints on debt collection in July, and plans to begin making them public in the very near future. The agency has collected 5,000 complaints to which collectors have responded, which has played a big role in the agency’s decision to seek further rules. CFPB officials have indicated that they are considering rules with respect to creditors that collect their own debts because they have received a significant number of complaints that were directed at those creditors.

The CFPB is particularly concerned about the lack of data and wrong account information that creditors are passing on to debt collection firms and debt buyers. The proposed rules may likely require some form of updated disclosures so consumers know exactly how much they owe and to what company in addition to clarifications on their legal rights.

The CFPB is also seeking to expand the Fair Debt Collection Practices Act to include new restrictions on how collectors contact a borrower, particularly through mobile phones and other advanced technologies since the law was enacted in the 1970’s.