The economy may be in recovery mode, but many consumers are still struggling to pay off debts. According to the Federal Reserve, consumers hold an average $22,899 in debt per household, while total consumer debt is approaching $3 trillion.
With mounting debt becoming difficult for some consumers to manage comes the leering eyes of debt collectors, breathing down the necks of indebted consumers.
Long known as the top offender on the FTC’s most wanted list, debt collectors are notorious for harassing and threatening consumers for failure to pay debts. But recent news from the CFPB could provide a sigh of relief for consumers.
CFPB Takes on Debt Collectors
Recently, the CFPB announced they will begin regulating debt collection agencies, starting as early as January 2013.
“We now find that debt collection is a central issue of our times,” said director Richard Cordray.
Debt collection companies are estimated to bring in nearly $13 billion in revenue by the end of this year. The CFPB estimates that nearly 30 million Americans, one in 10 consumers, owe an average of $1,500 to debt collectors.
“Some collectors harass and threaten consumers, demand larger payments than the law allows, refuse to verify disputed debts, and disclose debts to consumers’ employers, co-workers, family members and friends,” reported the FTC.
Although the CFPB already oversees many collection practices of large bank and nonbank lenders, the CFPB plans to move into other aspects of the industry including:
- Necessary Disclosure – The bureau will investigate whether debt collectors are providing all necessary disclosures such as identification and amount of debt owed.
- Information Accuracy – The CFPB will make sure collectors are using accurate information when pursuing collection of debts.
- Dispute Resolution – The agency will explore whether or not debt collectors have a process for handling borrower complaints and a process for resolving disputes.
- Consumer Communication – The CFPB will evaluate how collectors conduct communication with consumers and determine whether debt collectors have harassed or deceived consumers while pursuing debt.
Further, the CFPB plans to examine several types of debt collection, including many abuses involving the court system.
Earlier this year, a judge who presides mainly over collection cases told the New York Times that in 90 percent of cases, the creditor fails to provide proof of debt owed by the accused debtor in the dispute.
According to Jan Kruse, National Consumer Law Center’s Director of Communication, debt collectors sue almost one million consumers every year for debts ranging from credit cards to medical expenses, but debt collectors often neglect to document the debts properly.
The CFPB plans to narrow their focus on 175 of the industry’s largest collection companies, which make up 60 percent of the market. These agencies in question hold $10 million in annual receipts from consumer debt collections.
Although Cordray does acknowledge that many debt collectors do follow the law and collect only what debtors owe, others practice more malicious collection tricks. Threats against medical care or impending jail time over only a few hundred dollars in outstanding debt, are hardly justifiable and illicit a need for change.
Tags: CFPB, debt collections