New Federal Rules Spell Out What Debt Collectors Can and Cannot Do
Last updated December 1, 2021
New debt collection regulations that will impact at least 78 million Americans took effect at the end of November. The new rules from the Consumer Financial Protection Bureau (CFPB) focus on communications and disclosures from debt collectors, including what a collector can say, how often they can contact the consumer, what information must be provided, and what qualifies as harassment.
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These are the first comprehensive regulations based on the Fair Debt Collection Practices Act since it was passed more than 40 years ago. They cover communications by phone, as well as email and text messages.
Consumer advocates did not get everything they wanted, and neither did the debt collection industry. The National Consumer Law Center (NCLC) called the new rules “flawed,” and said they would “be harmful” to consumers. In a news release, the NCLC called on the CFPB to make changes that would prevent what it called “concerning practices” that are still allowed under the new rules.
The Association of Credit and Collection Professionals (ACA International) said it would continue to support efforts to “weed out…bad actors engaging in activities that harm consumers.” But in a letter to the CFPB, ACA International suggested the new policy decisions were based on information that was “one-sided, or embellished upon by certain groups,” and as a result negatively impacted the industry.
What the New Rules Will Do
Clearly, creditors have the right to collect unpaid debts, whether they do it themselves or use a collection agency. The Fair Debt Collection Practices Act, enacted in 1977, limits practices by debt collectors that are unfair, misleading, or abusive. The new rules expand those protections. Here are a few key changes:
- Phone Calls: While this is no hard limit on the frequency of calls, making more than seven “attempts” to call the consumer within seven consecutive days about a specific debt is presumed to be harassment. An attempted call includes calls that were not answered or leaving a voicemail.
- Phone Conversations: Collectors should wait a week after speaking to a consumer about a debt before calling again.
- Ability to Stop Communications: If a consumer asks a collector to stop specific types of communications—such as all phone calls, calls to a cellphone, texts, or email—the collector must comply. This can be done orally over the phone. Collectors are required to notify consumers of the right to opt-out of electronic communications and provide a simple method to do so. To stop all contact, the consumer must make that request in writing. If the collector accepts emails from consumers, the consumer can send a request to stop all contacts by email.
- Provide More Information: Debt collection notices must provide more than just the balance owed on a certain date. They need to show an itemized list of all fees, interest, and credits. This should make it easier for the consumer to identify the alleged debt or exercise their debt collection rights if they believe the information is inaccurate.
- Preconditions for Reporting Alleged Debt to Credit Bureaus: A debt collector must speak to a consumer, or send a letter or electronic message about an alleged debt, before reporting the account to a credit bureau. The goal is to decrease the likelihood that a consumer learns about an alleged debt when they try to access credit, or when an employer does a credit check for a new job.
- Time-Barred Debt: Collectors cannot threaten to sue or take legal action against a consumer with debt that’s passed the statute of limitations, so-called “time-barred” debt. But, as NCLC cautions, they can “pressure people to make payments using tactics that are likely to confuse people.” A partial payment or even acknowledgement of the debt might restart the clock on the statute of limitations, enabling the collector to sue.
Note: The new federal rules do not preempt state laws that provide greater debt collection rights.
Disappointment That More Wasn’t Done
The CFPB’s new rules give consumers some new protections against harassment and make it easier to limit specific types of communications from a collector. Even so, the NCLC found a few flaws it would like to see fixed:
The Way Communications Are Limited
The new guidance as to when the number of phone calls may become abusive is determined on “per debt” basis, not on how many calls the collection agency makes to that consumer.
“And that’s an important distinction,” said Andrea Bopp Stark, a staff attorney at NCLC. “If a debt collector is collecting on three separate debts from the same person, for example, they could call three times every day within that seven-day period, one for each particular debt, so it could add up to 21 calls a week.”
Collectors are allowed to provide required information verbally. In the past, details about the alleged debt and the consumer’s legal rights had to be in writing. Now, collectors can do this over the phone.
“The required disclosure is pretty technical,” Bopp Stark told Checkbook. “It’s asking a lot for someone to try and absorb all that information over the phone, rather than having it in writing in front of them.”
Ask for a written or electronic copy of the validation notice if it’s provided over the phone. Having the information in writing will make it easier to review your rights, consider the information about the alleged debt, and potentially consult other people before deciding what to do next.
Collectors can use email to contact the consumer, unless they are told to stop. NCLC believes making this an opt-out rather than opt-in situation increases the likelihood of missed messages—for example, if a collector uses an old email address or messages are sent to spam.
Collectors can also contact consumers via social media direct messages, but they cannot communicate in a way that would be viewable to the general public or the consumers' social media contacts. Collectors can also ask to join consumers' social media networks, but they must disclose they are debt collectors when sending friend requests.
A Final Thought
Stopping all communications with a debt collector does not make the debt go away, and doesn’t remove erroneous information, even if the debt isn’t yours. It could lead to more problems, such as ruined credit or a lawsuit.
“Without communication, you can’t come to a resolution,” said Jack Brown III, president of Gulf Coast Collection Bureau in Sarasota, Fla., and an ACA International vice president. “Whatever the issue is, communication helps; rather than pushing it down the road or hiding from it.”
Scam Alert: Bogus Debt Collectors
Telephone con artists often pretend to be debt collectors trying to collect a debt you don’t owe. These bogus debt collectors can be quite abusive.
Callers from Critical Resolution Mediation, a debt collection company based in Atlanta, posed as police officers, attorneys, mediators, or process servers to fool people, according to a Federal Trade Commission lawsuit.
Company agents “threatened consumers with arrest and imprisonment,” the FTC complaint alleged, and tried to collect on so-called “phantom debt”—debt that was never owed, has already been discharged, or has been illegally inflated.
Critical Resolution Mediation and its owners are now permanently banned from the debt collection industry, but many other crooks are still working the phone lines. Don’t give into threats. The FTC has advice on how to spot fake and abusive debt collectors.
Bogus debt collection is also being done via email, so don’t assume a debt collection notice is legit just because it was sent electronically.
The CFPB has a website designed to help consumers understand how debt collection works and your rights under the law.
Read the agency’s Debt Collection FAQs for how the new rules will be implemented.
Contributing editor Herb Weisbaum (“The ConsumerMan”) is an Emmy award-winning broadcaster and one of America's top consumer experts. He is also the consumer reporter for KOMO radio in Seattle. You can also find him on Facebook, Twitter, and at ConsumerMan.com.