The Consumer Financial Protection Bureau will announce the rules for debt collection in a few weeks, the agency director said on Wednesday, which could trigger a battle over industry tactics and consumer rights.
The proposal, which would be the first update of the Federal Debt Collection Practices Act in more than 40 years, will address the frequency with which debt collectors can call someone and the use of emails or text messages from the industry. said CFPB Director Kathy Kraninger.
The CFPB "will modernize the legal regime for debt collection," Kraninger said in her first major speech since becoming the office's director in December.
The $ 11 billion industry has been eagerly awaiting the proposal, hoping that the Trump administration will establish clear rules, including the possibility for debt collectors to send emails and text messages to consumers. Meanwhile, consumer advocates have asked the CFPB to stop debt collectors from harassing consumers and collecting "zombie" debts.
The proposal is presented when the CFPB undergoes a radical renovation under the administration of Trump. The number of cases filed against financial companies has plummeted, and the office has begun to reverse some regulations, especially in payday lenders.
Kraninger on Wednesday presented a business vision for the CFPB to a crowded crowd at the Bipartisan Policy Center, which includes a focus on educating consumers to make better decisions and reduce "unjustified" regulatory burdens. The CFPB "can not be everywhere, with everyone, in every transaction, nor should it be," Kraninger said. "Empower consumers to help themselves and protect their own interests. . . It is vital to prevent consumer harm and build financial well-being. "
Under Kraninger, the CFPB has already proposed reversing the rules that require payday lenders to verify that customers can pay their loans, which is a major victory for the industry. He also endorsed a decision by Mick Mulvaney, his predecessor and current White House chief of staff, which ended the office's practice of pre-emptively verifying that companies comply with the Military Loan Act, which protects the military and its families of financial fraud.
The proposal on debt collection rules is expected to launch another major fight. The country has more than 7,000 debt collectors, who earned more than $ 11 billion combined last year, according to data from industry researcher IBISWorld. The CFPB said it received approximately 81,500 complaints about debt collectors in 2018, which makes the industry one of the most common sources of consumer complaints. But debt collectors say they have already been hampered by CFPB oversight and disparate court decisions about the aggressiveness with which they can pursue consumer debts.
The industry wants "clear lines of what we should be doing and not doing," said Leah Dempsey, senior adviser to ACA International, a large industry lobby.
For example, courts have divided over whether debt collectors can leave consumers' voice mail messages, Dempsey said. The existing law was drafted before email and text messages became standard forms of communication, he said.
"Millennials like me do not answer your phone," he said. "Respectful communication in a way that is useful to the consumer will benefit both parties."
Consumer advocates say they are concerned that the CFPB is trying to weaken the existing law in favor of an industry that accumulates thousands of complaints to regulators every year. Debt collectors should not be able to call consumers more than once a week, contact them on social networks like Facebook or through work email addresses, advocates say.
"Consumer privacy should be a key concern for the CFPB," said Christine Hines, legislative director of the National Association of Consumer Advocates.
The office must also prohibit the industry from trying to collect the old debts, according to the defenders. Consumers are not always aware that some state laws protect them from having to pay "zombie" debts and that they could damage their cases if they pay even a small amount to stop harassing phone calls, they say.
"The purpose of statutory limitations is to prevent cases where evidence is no longer available," said Lisa Stifler, deputy director of state policy for the Center for Responsible Lending.
How those appointed by Trump stopped a consumer protection agency abhorred by the Republican Party
How did an expert in the payday loan industry lean academic research in their favor?