Protecting families and honest businesses from debt collection abuses

Financial companies that collect and process loan payments play a critical role in consumer finance markets. The Consumer Financial Protection Bureau (CFPB) is the primary federal regulator of the consumer debt collection industry, and today, we submitted our annual report to Congress on the Fair Debt Collection Practices Act (FDCPA).

There has long been a concern about the impact of debt collection on American families and the economy. When passing the FDCPA, Congress noted that “abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.”

Approximately one-third of the 220 million consumers with credit files have collections tradelines (e.g. a bill in collections) on their credit reports. The most common collections tradeline involves allegedly unpaid medical bills. Consumers are far more likely to dispute the accuracy of collections tradelines than of other information contained in their credit reports.

It isn’t just consumers who are harmed by illegal debt collection practices. Congress also intended for the FDCPA to protect law-abiding debt collection businesses, so “debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged.” At the CFPB, we regularly hear from honest debt collection small businesses frustrated that they must compete with bad actors that break the law.

In our annual report, we note that other small businesses are also affected by debt collection harms. During the pandemic, many small businesses struggled to stay afloat, and some were targeted by unscrupulous actors seeking to prey on their desperation. Unfortunately, small businesses can also find themselves facing similar practices by bad actors akin to what is encountered by consumers.

The Federal Trade Commission has taken multiple actions to combat unlawful collections practices that target small businesses. These actions are a reminder that small businesses facing abusive debt collection practices don’t necessarily have the same set of rights as families since many debts may not be covered by the FDCPA.

It is critical that policymakers pay close attention to wrongdoers targeting small businesses and determine whether there should be additional debt collections rights and protections for small businesses and entrepreneurs to protect them.