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Curbs on persistent debt collectors offer hope to Americans in the red Curbs on persistent debt collectors offer hope to Americans in the red
(30 days later)
Millions of debt-laden Americans could be given some respite from debt collectors under a new set of proposals being rolled out by the Consumer Financial Protection Bureau (CFPB), a watchdog government agency established in the wake of the 2008 economic crisis.Millions of debt-laden Americans could be given some respite from debt collectors under a new set of proposals being rolled out by the Consumer Financial Protection Bureau (CFPB), a watchdog government agency established in the wake of the 2008 economic crisis.
On Thursday, the CFPB set out proposed new rules for debt collectors to make sure they are collecting “the correct debt” and not harassing consumers.On Thursday, the CFPB set out proposed new rules for debt collectors to make sure they are collecting “the correct debt” and not harassing consumers.
The proposal includes a cap on how many times debt collectors can contact consumers per week. The proposed cap is six times a week.The proposal includes a cap on how many times debt collectors can contact consumers per week. The proposed cap is six times a week.
Debt collection affects about 70 million Americans. According to the CFPB, a bureau established five years ago as part of the Dodd-Frank Act, there are more than 6,000 debt collection firms in the US.Debt collection affects about 70 million Americans. According to the CFPB, a bureau established five years ago as part of the Dodd-Frank Act, there are more than 6,000 debt collection firms in the US.
“Today we are considering proposals that would drastically overhaul the debt collection market,” said Richard Cordray, CFPB director. “This is about bringing better accuracy and accountability to a market that desperately needs it.”“Today we are considering proposals that would drastically overhaul the debt collection market,” said Richard Cordray, CFPB director. “This is about bringing better accuracy and accountability to a market that desperately needs it.”
Consumers complain about debt collectors more than any other industry, according to CFPB.Consumers complain about debt collectors more than any other industry, according to CFPB.
Related: John Oliver buys and forgives $15m worth of medical debt
Predatory debt collection practices came back into the spotlight earlier this year when John Oliver bought $15m worth of medical debt for pennies on a dollar and then forgave it. During his segment, Oliver pointed out that Americans owe about $12tn in debt and that about $436bn is seriously delinquent, meaning it’s more than three months overdue.Predatory debt collection practices came back into the spotlight earlier this year when John Oliver bought $15m worth of medical debt for pennies on a dollar and then forgave it. During his segment, Oliver pointed out that Americans owe about $12tn in debt and that about $436bn is seriously delinquent, meaning it’s more than three months overdue.
The segment focused on debt buying – where debt collection companies buy debt from banks and other companies and then try to collect on it. The way companies pass on information about consumers who owe them money is via spreadsheets, which can contain incorrect information. As a result, some debt collectors attempt to collect on debts that have already been paid.The segment focused on debt buying – where debt collection companies buy debt from banks and other companies and then try to collect on it. The way companies pass on information about consumers who owe them money is via spreadsheets, which can contain incorrect information. As a result, some debt collectors attempt to collect on debts that have already been paid.
“Once the company has bought your debt, whether the information is accurate or not, they are going to try to collect on it,” Oliver explained.“Once the company has bought your debt, whether the information is accurate or not, they are going to try to collect on it,” Oliver explained.
Some collectors have been known to use predatory practices like threats and incessant calls to consumers’ homes and workplace. The six-day cap proposed by the CFPB includes text, emails or in-person visits – not just phone calls.Some collectors have been known to use predatory practices like threats and incessant calls to consumers’ homes and workplace. The six-day cap proposed by the CFPB includes text, emails or in-person visits – not just phone calls.
With the lack of federal regulation on the issue, some states have taken a more proactive approach. For example, Massachusetts allows debt collectors to contact consumers on their private phone number just twice a week – whether it be by text, call or voicemail. Washington state allows debt collectors to contact consumers three times a week.With the lack of federal regulation on the issue, some states have taken a more proactive approach. For example, Massachusetts allows debt collectors to contact consumers on their private phone number just twice a week – whether it be by text, call or voicemail. Washington state allows debt collectors to contact consumers three times a week.
The National Consumer Law Center recommended that the communications be limited to three times a week.The National Consumer Law Center recommended that the communications be limited to three times a week.
The proposal was not well received by everyone. Some claim that the proposed changes could make it difficult for debt collectors to collect on legitimate debt.The proposal was not well received by everyone. Some claim that the proposed changes could make it difficult for debt collectors to collect on legitimate debt.
“If the CFPB adopts a very restrictive attitude with regards to call frequency such that it causes creditors and third-party collectors alike to significantly reduce the frequency of contact they have with consumers who owe money, it may very dramatically affect the success of collection efforts in the sense of dollars that are collected from them,” Christopher Willis, a partner at Ballard Spahr in Atlanta, told Bloomberg BNA before the CFPB announcement. “And that business impact could be larger than the burden of building systems or designing compliance around whatever the CFPB requires.”“If the CFPB adopts a very restrictive attitude with regards to call frequency such that it causes creditors and third-party collectors alike to significantly reduce the frequency of contact they have with consumers who owe money, it may very dramatically affect the success of collection efforts in the sense of dollars that are collected from them,” Christopher Willis, a partner at Ballard Spahr in Atlanta, told Bloomberg BNA before the CFPB announcement. “And that business impact could be larger than the burden of building systems or designing compliance around whatever the CFPB requires.”
The CFPB proposal would also make it easier for consumers to stop debt collectors from contacting them during certain hours or at a certain number, for example during work hours and at work.The CFPB proposal would also make it easier for consumers to stop debt collectors from contacting them during certain hours or at a certain number, for example during work hours and at work.
“The CFPB is also considering proposing a 30-day waiting period after consumer has passed away during which collectors would be prohibited from communicating with certain parties, like surviving spouses,” the agency said in its press release.“The CFPB is also considering proposing a 30-day waiting period after consumer has passed away during which collectors would be prohibited from communicating with certain parties, like surviving spouses,” the agency said in its press release.
The proposal would also make it easier to dispute debt. The collector would not be allowed to collect on the debt until the dispute is resolved. Collectors would also be prohibited from collecting on debt that lacks documentation.The proposal would also make it easier to dispute debt. The collector would not be allowed to collect on the debt until the dispute is resolved. Collectors would also be prohibited from collecting on debt that lacks documentation.
Whenever debt is sold to another debt collection agency, unresolved debt disputes would be transferred to the new collector.Whenever debt is sold to another debt collection agency, unresolved debt disputes would be transferred to the new collector.
“The proposals under consideration also outline information that collectors would have to send when they transfer the debt to another collector so that a consumer does not have to resubmit this information to the new collector,” according to the CFPB.“The proposals under consideration also outline information that collectors would have to send when they transfer the debt to another collector so that a consumer does not have to resubmit this information to the new collector,” according to the CFPB.
The CFPB announcement came just hours before the agency held a field hearing on the issue in Sacramento, California.The CFPB announcement came just hours before the agency held a field hearing on the issue in Sacramento, California.