Home > Managing Debt > What the CFPB Should Do About Debt Collectors

Comments 4 Comments

On July 21, 2009, the Plain Dealer reported that then-Ohio Attorney General Richard Cordray sued debt collection firm National Enterprise Systems Inc., accusing the firm of violating Ohioans’ rights under the Fair Debt Collection Practices Act (FDCPA) and harassing them over past-due debts. Exactly two years later, the Dodd-Frank Wall Street Reform Act, which lays the groundwork for the new Consumer Financial Protection Bureau, goes into effect and Cordray has been nominated by President Obama to lead the agency. If he is confirmed as head of the CFPB, this gives him the opportunity to protect consumers from overzealous debt collectors on a national scale.

While the new agency will have its work cut out for it, regulating the debt collection industry—especially debt buyers that purchase lots of old debts and then try to collect based on sketchy information—should be near that top of the list. It’s well-known that complaints about the debt collection industry have generated more complaints to the Federal Trade Commission than any other single industry. The FTC, which will share enforcement duties with the CFPB, has laid the groundwork for new rules by holding a series of workshops around the country in which consumer advocates, members of the collection industry and attorneys have weighed in. The CFPB is in a position to write rules to help regulate the industry, something the FTC never could do.

There’s been enough talk on this issue; it’s time for action. Here are six things the Bureau should do:

Create Easy-To-Understand Debt Collection Letters

Here’s the easy-peasy suggestion for the CFPB: Develop uniform standards for the letters debt collectors can send to debtors. Under the FDCPA, collectors are required to send written notice of a debt within five business days of initially contacting a debtor. While the basic elements of that letter are already described in the FDCPA, there’s a lot left out, and too much left to the interpretation of sometimes aggressive collectors who want to scare up payment as quickly as possible.

Much like the mortgage disclosures for which the CFPB has been soliciting comments, a standard collection letter means, “debt collectors can just plug in the numbers,” says Philadelphia-based consumer law attorney Michael Forbes, who has sued debt collectors.

[Resource: What to do if a Debt Collector Calls]

What should go into such a debt collection letter? The basics consumers need to know:

Details of the debt

  • Complete contact information for the current collector
  • Name and address of original creditor
  • The date the original account was opened
  • Date of default date (or perhaps last payment) with the original creditor
  • Charge-off date
  • Amount owed at the time of default or charge-off
  • Interest and fees charged since that date
  • Amount currently owed
  • Clear explanation of right to request verification of the debt, and how to do that
  • Chain of title (list of all firms that have attempted to collect the debt after the original creditor)
  • Credit reporting information (how long it can be reported)

Summary of Consumer Rights

  • Information about the statute of limitations
  • Where to get more information about the consumer’s rights and resources
  • How and where to file a complaint against the collector if necessary

[Resource: 11 Ways A Debt Collector May Be Breaking the Law]

Most importantly, these letters should not include other language designed to intimidate or confuse the debtor. Letters that include veiled threats to “investigate” a consumer for possible fraud, for example, or that look like pseudo-legal or government documents, have no place in the collection process. A standardized format would discourage collectors from trying “creative” approaches that may later be determined to be illegal anyway.

“Why can’t they play it straight?” asks Forbes. “Just tell the consumer exactly what he or she owes, ask them to pay, and if they don’t, they can turn it over for legal action.”

At a minimum, the Bureau should crack down on debt collectors that fail to send this or any notice. The FTC reported last year that nearly 30% of consumer complaints alleged that debt collectors failed to send the notice currently required by law. That’s unacceptable.

Rein in Reckless Debt Buyers »

Image: Quazie, via Flickr.com

Pages: 1 2 3

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • Bob

    Kathy, would you e-mail me at Bob dot Sullivan at msnbc dot com?

  • Pingback: Is the government going to help rein in debt collection abuse? | West Texas Credit Advisors()

  • Pingback: Your Social Security Disability Income Is Probably Safe…For Now()

  • Pingback: The CFPB and Debt Collectors: What Should the Bureau Do? — Troutman Sanders CFPB Team()

  • Kathy S.

    Gerri, I would not only be happy to e-mail you, but also provide you with proof, if necessary, as I am afraid I am not getting either interviews or job offers based upon a combination of my credit history and my age.

  • Pingback: Un-Warrented: American Consumers Lose Their Biggest Defender - Identity Theft 911 Blog()

  • Kathy S.

    What should also take place is that a consumer should not be penalized numerous times on their credit report if multiple collection agencies purchase and/or repurchase the date. For example, if your account with Ace Mastercard was closed due to non-payment in 2006, the drop off year should be in 2013. But collection agencies who purchase & repurchase the debt reset the date of the debt, so it stays current. And you get 2 sometimes three or more collection agencies posting the same debt over & over on your credit report which makes it extremely confusing. And it’s not only credit reports consumers should worry about. Most employers use a service called “The Work Number” that verifies employment history for current & former employers. This is used instead of contacting the former employer. Well, collection agencies are starting to use this as well to report collection accounts. I found that nasty little secret out when I tried to apply for employment, & they needed verification of my employment.

    • http://www.Credit.com Gerri Detweiler


      You are absolutely correct that the way these collection accounts are reported can be a big problem. Legally, collection accounts may be reported for seven and a half years from the date you fell behind with the original creditor. Collection agencies are supposed to accurately report that date. In addition, FICO tells me that the fact that an account was recently placed for collection should “update” the account to make it appear more recent. You are also right that it is not uncommon for multiple collection accounts to be listed for the same debt. When this happens, you should dispute the older ones as duplicates. (I would be interested in hearing what kind of responses you get from the bureaus when you do.)

      I am very interested in learning more about your experience with the collection accounts and the Work Number. Will you email me at creditexperts (at) Credit.com?

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team