The Consumer Financial Protection Bureau Wednesday issued guidance on unfair business practices for debt collection agencies and creditors. The release corresponded with the opening of the CFPB’s complaints database to debt collection complaints, a move long anticipated by the industry.
But the surprise of the day came in the form of five form letter templates the CFPB made available to consumers to use in their communications with debt collectors. The Bureau also asserted that it has the power to regulate creditor debt collection in addition to third party companies.
The two bulletins directly address practices the CFPB considers abusive, unfair, and/or illegal.
The first bulletin makes clear that any entity subject to the Consumer Financial Protection Act of 2010, whether a third-party collector or a creditor collecting its own debts, can be held accountable for any unfair, deceptive, or abusive practices in collecting a consumer’s debts. It enumerates 10 separate tactics the Bureau will focus on, such as disclosing a debt to a third party or falsely representing the character, amount, or legal status of the debt.
The second bulletin drills down on a specific issue by warning companies to avoid deceptive statements concerning the impact of paying a debt on a consumer’s credit score, credit report, or creditworthiness. The Bureau said it is concerned that some of these statements – like telling consumers that paying a debt would improve their credit score – may be deceptive. The bulletin highlights examples of potentially deceptive claims debt collectors may be making to consumers about their credit reports and credit scores.
“These bulletins make clear that it doesn’t matter who is collecting the debt — unfair, deceptive, or abusive practices are illegal,” said CFPB Director Richard Cordray at a field hearing in Portland, Maine. “Consumers need options to help them secure fair and respectful treatment from those debt collectors that fail to abide by the law. They can protect themselves by using our action letters to communicate with debt collectors and by submitting a complaint to us if they believe they are harmed by illegal conduct.”
In addition to the bulletins and the official launch of debt collection complaint intake, the CFPB Wednesday announced the release of five “action letters” that consumers can use to reply to debt collectors. The documents are essentially form letters that consumers can personalize.
The action letters address five different scenarios when a consumer would need to respond to a collector in writing:
- Needs more information on the debt: The first letter is for consumers who need more information about a debt the collector has told them that they owe. The letter states that the consumer is disputing the charges until the debt collector answers specific questions about what is owed. This letter may be useful, for example, for a consumer who may not immediately recognize the debt as their own or for those who want to find out more about the debt before they pay it. View “more information” letter.
- Wants to dispute the debt and for the debt collector to prove responsibility or stop communication: This letter tells the collector that the consumer is disputing the debt and instructs the debt collector to stop contacting the consumer until they provide evidence that the consumer is responsible for that debt. For example, consumers who do not want to discuss the debt until they have additional information verifying the debt might use this template. View “dispute and proof” letter.
- Wants to restrict how and when a debt collector can contact them: The FDCPA prohibits debt collectors from contacting a consumer about a debt at a time or place they should know is inconvenient. With this letter, the consumer is able to tell the debt collector how they would like to be contacted. This may be a useful option for a consumer who wants to work with a collector to resolve their debt. View the “contact restriction” letter.
- Has hired a lawyer: If a consumer has hired a lawyer, generally, the debt collector should be contacting the lawyer instead of the consumer. This letter template provides a way for the consumer to give the debt collector the lawyer’s information and instruct the collector to contact only the lawyer. View the “hired a lawyer” letter.
- Wants the debt collector to stop any and all contact: Consumers have the right to tell a debt collector to stop all communication. It is important, however, to note that stopping contact from a debt collector does not cancel the debt or prohibit the collector from potentially pursuing other remedies, such as filing a lawsuit. This letter template could be beneficial for those consumers who feel they are being harassed by a collector’s communications. View the “stop contact” letter.
All of the documents referenced in this article can be found on insideARM’s CFPB Resources page, in addition to many other official documents published by the CFPB relating to debt collection. Visit anytime by clicking the “CFPB Resources” tab in our main navigation bar at the top of any page.
- Free Webinar: 5 Stages of CFPB Readiness (Thursday, July 11)
- Payment Compliance: Same Rules, Different Game
- Compliance Guide: Payment Card Industry Data Security Standard (PCI DSS)
- The Debt Collection Compliance Handbook