By Michelle Singletary
If you owe a debt, you should make every effort to pay it. After all, you’ve enjoyed the services or goods that your debt bought. And companies have a right to try to collect or even sell that debt to recoup their money. The more they can collect, the less likely they are to pass on their debt troubles to other consumers in the form of higher prices or the cost of credit.
But consumers have a right to accurate documentation to back up the collection efforts. And certainly folks who don’t owe a debt shouldn’t be harassed or bullied because of some computer error or faulty debt data.
And this is where the Consumer Financial Protection Bureau comes in. The watchdog agency is considering rules for the debt collection market, but before it writes any new regulations or strengthens those already on the books, the agency wants the public to weigh in on an array of issues involved in debt collection.
Among the agency’s chief concerns is making sure debt collectors have the correct person, debt and documentation.
“It is widely recognized that problems with the flow of information in the debt collection system are a significant consumer protection concern,” the agency said in its advanced notice of proposed rulemaking.
Often when debt is sold to collectors for pennies on the dollar, the sale doesn’t include a lot of information about the debtor or his or her debt. The documentation might include nothing more than the person’s name, last known address, Social Security number and debt amount. Several states have implemented new laws, court rules or administrative orders requiring more specific proof of debt from companies who sue consumers to collect on outstanding debts.
Even ACA International, a trade group for the consumer debt collection industry, believes some updating is in order. “Current federal debt collection laws are woefully outdated when it comes to areas such as communication, documentation, verification and statutes of limitations,” ACA said in a statement. “We agree that modernizing the nation’s consumer debt collection system is important so long as changes are based on common-sense solutions that preserve balance between consumer protection and the ability of a creditor or debt collector to lawfully recover debts.”
Collectors have a limited number of years in which they can sue someone for payment. After the time runs out, unpaid debts are considered “time-barred,” meaning that collectors can contact you about the old debt but not seek a remedy through the courts.
You may not have the inclination to read the CFPB’s 114-page rule-making proposal. I wouldn’t blame you. It’s pretty dense and includes nine parts with 162 sets of questions about debt collection. Yet the first set of questions in the proposal gets to the heart of this issue for consumers, which is what information is transferred during the sale of debt or the placement of debt with a third-party collector and whether the information transferred varies by type of debt (e.g., credit card, mortgage, student loan, auto loan).
Other questions ask whether the length of time that debt collection records are retained should relate to how long a debt may generally be noted in a consumer report or how long a consumer has to bring private action under the Fair Debt Collection Practices Act, which was enacted in 1977.
I think the core of any rule proposal has to require that when debt is sold or transferred, it should include specific and standardized proof or underlying documents related to someone’s debt as part of the sale.
Consumers can submit comments at Regulations.gov. But a far easier place to learn about the issues and problems with debt collection is RegulationRoom.org, which is not a government-run site. Instead, trained students and staff at Cornell Law School run it. The CFPB is working with Cornell to make it simpler for people to submit comments about debt collection.
Even if you aren’t interested in commenting, you can learn a lot about debt collection practices and your rights. In discussion forums, people can submit comments and moderators keep things civil and provide background information. They also probe, asking follow-up questions to those who submit comments or gripes in order to dig deeper into the issues they face.
Comments submitted at RegulationRoom.org will be summarized and submitted to the CFPB before the end of the official public comment period.
I know you may not think you have a voice. But you do. Here’s your chance to put in your two cents’ worth. What’s been your experience with debt collectors? What changes do you think should be made? Don’t be a spectator in this debate about debt.
Michelle Singletary: firstname.lastname@example.org.
Washington Post Writers Group