Consumers Have a New Friend to Help Fight Unfair Debt Collection
Since 1977, the Fair Debt Collection Practices Act (FDCPA) has been a powerful tool for consumers to fight creditor harassment and unfair debt collections practices. The FDCPA tells bill collectors when they can and cannot contact consumers about a debt and regulates their behavior, prohibiting them from lying, threatening, or abuse behavior. Consumers can even sue the collections agencies for violating the FDCPA, potentially collecting thousands of dollars in damages and putting a stop to harassing, abusive conduct.
One drawback of the FDCPA is that it only applies to debt collection agencies and not to the original creditor. The debt you owe originally belongs to some other party, such as a doctor or hospital; a credit card company; a bank which made you a loan; or a finance company which financed your purchase of a car, appliance or other major purchase. The FDCPA does not apply to these creditors. It is only when they sell or assign the debt to a bill collector or hire a collection agency to collect the debt for them that the FDCPA comes into play against these third parties. As long as the creditor remains in charge of the debt, it may engage in all types of harassing conduct that would be prohibited to a bill collector under the FDCPA.
There’s a New Kid in Town Protecting People in Debt
That situation may soon change. In 2010, Congress created the Consumer Finance Protection Bureau (CFPB) as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The CFPB now has most of the Federal consumer financial protection authority under its wing. Although much of the attention of Dodd-Frank and the CFPB has been on predatory lending practices, mortgage disclosures and credit discrimination surrounding home buying, it appears that the CFPB is now primed to take on debt collection. The CFPB has released an Advance Notice of Proposed Rulemaking on debt collection, signaling its intention to step in and regulate this area. After more than 25 years, CFPB is the first Federal agency to have authority to issue rules for debt collection under the FDCPA. In addition, the Bureau also has authority under Dodd-Frank to issue regulations concerning unfair, deceptive, and abusive acts or practices.
The CFPB seems poised to use its rulemaking authority to strengthen the FDCPA and expand its scope to cover first party, original creditors in their actions to collect debts in their own names. The Bureau is currently seeking input from the public on how best to address these issues. It will be interesting to see what final action the CFPB takes to further protect the American public from creditor harassment and unfair debt collection.