Debt collection is big business. It’s worth an estimated $12 billion in the U.S., with nearly 15 percent of all consumer credit reports showing something is “in collection.” How collectors go about getting creditors the money they’re owed is our topic today.
The federal Consumer Financial Protection Bureau, or CFPB, has authority over about 175 companies that do at least $10 million in collections annually. The bureau flexed a little muscle at the industry last week, and some in the industry flexed right back.
Earlier this month, CFPB issued two bulletins on the subject. The first reminds any entity covered by the Consumer Financial Protection Act of 2010 that it must not use unfair, deceptive or abusive means of collecting. That means no false threats of lawsuits, arrest or prosecution; not making false statements about the amount of the debt, who owns it or its legal status; not misrepresenting that a debt would be waived or forgiven if the debtor accepts a settlement offer; and not posting payments to a consumer’s account and then charging late fees.
The second bulletin cautions collectors against making promises that payment will automatically improve a debtor’s credit report, credit score or credit worthiness. CFPB says some of these statements may be deceptive, and the bulletin contains some examples.
The CFPB website also contains what are termed “action letters” that the bureau says consumers might use when dealing with debt collectors. The letters can be used depending on where consumers are in their particular debt process: to ask for more information about the debt, say that they want to dispute a debt, restrict how and when a debt collector can contact them, cut off all contact with a collector, or indicate that they have hired a lawyer.
Consumer advocates say such letters are a big step up from people simply calling a debt collector with a complaint and thinking that will resolve whatever situation they face. Putting things in writing is always a sound move in any dispute. At the very least, it helps organize your thoughts, facts, timelines, etc.
Other voices say that while the CFPB’s heart is in the right place, consumers may need some guidance before they can use the action letters responsibly. Attorney John Culhane Jr. from the national law firm Ballard Spahr LLP wrote in his firm’s blog that one of the letters asks whether a consumer thinks a debt might have outlived the statute of limitations. Culhane suggested the purpose of the letters “is simply to induce the collector to tell the debtor how long to stall to avoid litigation.” He also said requests in the letter for detailed information may or may not align with a particular consumer’s wishes.
Find the sample action letters at CFPB’s website, www.consumerfinance.gov. You can also visit our blog ( https://necontact.wordpress.com) and click on “self-help” to find the sample action letters. There you can also learn about protections afforded under Maine law and find information from the Maine Bureau of Consumer Credit Protection.
Consumer Forum is a collaboration of the Bangor Daily News and Northeast CONTACT, Maine’s all-volunteer, nonprofit consumer organization. For assistance with consumer-related issues, including consumer fraud and identity theft, or for information, write Consumer Forum, P.O. Box 486, Brewer 04412, visit https://necontact.wordpress.com or email firstname.lastname@example.org.