The Consumer Financial Protection Bureau (CFPB) is taking new steps to protect consumers who have been subject to harassment or abusive practices from debt collectors over credit card, mortgage, or student loan debts.
Some debt collectors aren’t doing enough to make sure that the people they’re calling actually owe money. Many debt buyers purchase debt for pennies on the dollar, then make a profit by collecting on that debt. Often, they haven’t correctly identified the debtor or the amount of debt owed.
Today, the CFPB unveiled a new set of tools to empower consumers dealing with debt collectors. It also provided debt collectors with guidance on how to fairly and legally work with consumers to recover debt.
Tools for Consumers:
- Consumers who are being contacted by debt collectors can use “action letters,” or sample letters developed by the CFPB, to correspond effectively with collection agents. This will help consumers take advantage of all of the protections afforded to them under the law.
- Consumers can file a complaint with the CFPB about debt collectors if the consumer believes they are behaving unlawfully. The CFPB will pursue a response from the debt collector on behalf of the consumer.
Guidance to Debt Collectors:
- Debt collectors must not engage in Unfair, Deceptive, and/or Abusive Acts or Practices (UDAAP), such as making false statements to consumers.
- The CFPB warned debt collectors that they cannot suggest to consumers that paying the debt will improve their credit report or credit score if it will not.
Why should consumers care about debt collection? According to the CFPB’s March report, about one in ten Americans are currently being contacted by collectors. A January report from the FTC showed that many debt buyers failed to verify the accuracy of the debt being collected.
As the CFPB points out, accuracy in debt collection is particularly important because collections are noted on credit reports and significantly lower credit scores. Credit reports – and credit scores, which are derived from credit reports – are used by lenders to determine how much you’ll pay to borrow money. Credit reports are even used in many non-lending situations such as employment decisions, by landlords when evaluating potential renters, and even by insurance companies in setting rates.
Richard Cordray and the CFPB have been doing excellent work to help consumers while reining in abusive debt collectors. Unfortunately, Cordray has been prevented from getting a confirmation vote in the Senate. His nomination is currently under attack by Senators opposed to the structure and authority of the Bureau. Consumers Union, along with other consumer groups like U.S. PIRG and Americans for Financial Reform, are strongly in support of Cordray’s confirmation. Join us and demand that your Senators confirm Cordray to lead the CFPB!