There are few phone calls people want to avoid more than those from a debt collector.
Debt collectors have a reputation for being pushy, demanding, and even threatening. And some use intimidating tactics that may land on the wrong side of debt collection laws as well.
If you have ever dealt with debt collectors, you may be relieved to hear that the Consumer Financial Protection Bureau (CFPB) has outlined new rules to crack down on the very worst debt collection practices.
With 70 million Americans currently dealing with debt collectors, according to the CFPB, the new debt collection laws will most likely impact you or someone you know.
Here are three different ways the new regulations proposed by the CFPB would protect consumers from the worst debt collection practices.
1. Limits on incorrectly assigned debt collection
Under the new regulations, debt collectors would be required to ensure that the debt they are trying to collect actually belongs to the person they are trying to collect it from.
While that seems like a no-brainer, there really aren’t any debt collection laws opposed to just trusting sometimes incomplete or inaccurate information provided by the original debt holder.
For example, say a debt collector is looking to collect on a debt from John J. Smith. Perhaps a debt collector decides to go after John Jacob Smith for a debt that actually belongs to John Jackson Smith.
New CFPB regulations would restrict debt collectors who often times may knowingly call the wrong person just to see if they can collect the debt anyways.
The third party debt collector would have to verify the full name, last-known address, and the amount owed. That way, they have a reasonable level of certainty they are contacting the right person before they attempt to contact them in the first place.
2. Reigning in excessive collection practices
Under current debt collection laws and regulations, debt collectors regularly call, text, and email the same person repeatedly, pressuring them to pay. If no one answers, they just keep contacting them until they get through.
The new proposed debt collector laws would limit third-party debt collectors to six attempts per week to try to reach someone, and three total attempts once the debtor is reached. Those totals include phone calls, emails, and text messages.
Many debt collectors employ practices that are recognized as disruptive and excessive. There are some stories of debt collectors contacting employers saying that they are calling about a debt owed by one of their employees. This strategy is actually against current CFPB regulations.
Stricter rules proposed by the CFPB would limit some of the most excessive behavior seen from the debt collection industry by making it easier to stop debt collectors from calling your place of work.
3. New disclosure requirements
Debt collection laws include a statute of limitations that limits how long a debt can be collected through the court system. This is also known as time-barred debt.
Under current rules, debt collectors can call you about old debts indefinitely, even years after the time-barred debts are no longer enforceable in court.
The new debt collection laws would not stop debt collectors from calling on old debt. However, they would have to disclose if they are contacting you about a debt after the statute of limitations on that specific debt has expired.
Keep in mind though that debt collection laws are different in every state. Some statutes of limitations range from 3 years to 15 years for signed contracts.
In Colorado, for example, the limit is six years for written debt contracts like medical treatment agreements or credit cards issued. Let’s say someone in Colorado went to their doctor and did not pay their bill. The doctor, or any third party debt collector, has up to six years to sue for that debt in court.
After six years, a debt collector can still call you in Colorado. But, under the new rules, they have to tell you it is past the six years and you can’t be sued for it.
It is important to note that just because a debt collector cannot sue you in court does not mean that the debt is discharged or not owed.
If a borrower continues to ignore the debt, it will remain on their credit report and can prevent them from getting a new mortgage, car loan, credit card, or even a job. And if a debt collection shows up incorrectly, it is important to dispute that debt and have it removed.
Great steps forward for debt collection laws
Debt collection practices undoubtedly need some improvements. They were the number one cause of consumer complaints to the Federal Trade Commission in 2015.
That’s why the CFPB is working on the first major overhaul of debt collection laws since the Fair Debt Collection Practices Act of 1977. After forty years, the federal government is working to take steps to better protect consumers from predatory financial practices.
While debt collectors are sure to find new tactics once these are eliminated, debtors will be able to rest easier when these new debt collector laws go into effect. And if you’re looking for a more in-depth look at debt collection laws and practices, check out this great segment on HBO’s Last Week Tonight with John Oliver.
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